Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd

1. Upon condition that the applicant will not seek to enforce any monetary judgment which it may obtain against the first respondent and subject to order 2, the applicant be granted leave pursuant to s 500(2) of the Corporations Act 2001 (Cth), to proceed with this proceeding against the first respondent, such leave to operate and be effective from 13 March 2020.
2. Subject to any further grant of leave, the claims which may be made by the applicant against the first respondent pursuant to the leave granted by these orders shall be confined to those claims made to support the making of orders in terms of the minute of proposed orders appended to the applicant's outline of submissions filed in these proceedings on 5 March 2020 and any further orders fixing the quantum of any penalty to be paid by the first respondent.
3. The costs of and incidental to the application for leave to proceed against the first respondent be costs in the proceeding as between the applicant and the first respondent. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

COLVIN J: 1 The Commonwealth Government established the National Rental Affordability Scheme (NRAS) in 2008. It offers long term financial incentives to build and offer houses at affordable rents. The incentives are payable annually. One way for an investor to participate in the NRAS is by purchasing a property from an approved participant. 2 Quantum Housing Group Pty Ltd (Quantum) has been an approved participant in the NRAS. In April 2019, the Australian Competition and Consumer Commission (ACCC) commenced proceedings against Quantum and its sole director Ms Cheryl Howe concerning alleged conduct relating to the NRAS and the way properties sold to investors were managed. The ACCC alleged that Quantum and Ms Howe had engaged in misleading and deceptive conduct and in unconscionable conduct. In February this year the parties filed an agreed statement of facts concerning the claims made by the ACCC. They also agreed on the terms of proposed relief save for the amount of a proposed pecuniary penalty to be paid by Quantum. A hearing to determine appropriate relief on the basis of the agreed facts has been listed for 17 April 2020. 3 On 13 March 2020, Quantum was placed into liquidation by way of creditors' voluntary winding up. Mr Gregory Andrews was appointed as liquidator of Quantum. The ACCC seeks leave to proceed against Quantum. If leave is granted, the ACCC proposes to enforce any non-monetary relief against Quantum. The only relief of that character that is proposed is an order that would require Quantum to send notices in a specified form to about 1,200 investors. As noted, the ACCC also proposes relief against Quantum that would require it to pay a pecuniary penalty. The ACCC also seeks an order for costs against Quantum. Otherwise it is proposed that the orders against Quantum are by way of declaratory relief. 4 However, if leave is granted the ACCC will undertake (or submit to a condition on any relief granted) that no action be taken to enforce monetary orders against Quantum without a further grant of leave to enable it to proceed against Quantum in that way. Therefore, at this stage the only issue is whether there should be leave to seek the proposed relief. 5 Mr Andrews as liquidator neither consents to nor opposes the application for leave to proceed. He has informed the Court that he also does not wish to participate in the future conduct of these proceedings. 6 The principles to be applied where leave is sought by the ACCC to proceed against a company to seek relief in the public interest were summarised recently by Jackson J in Australian Competition and Consumer Commission v Smart Corporation Pty Ltd (No 2) [2020] FCA 284 at [8]-[10]. Applying that approach, for the following reasons I am satisfied that there should be leave to the ACCC to proceed against Quantum. 7 First, there is a serious question to be tried. It is demonstrated by the approach that was taken in the conduct of the proceedings before the liquidation of Quantum. In effect, prior to liquidation it was conceded that there had been contravening conduct and it was appropriate for relief to be granted. 8 Second, part of the relief sought would facilitate notification to investors by Quantum. Relief of that kind as well as the declaratory relief sought is not relief of a kind that might be pursued through the proof of debt procedure available in the winding up. 9 Third, to the extent that interests of creditors may be affected by any monetary orders, the requirement for further leave to be obtained before that can occur protects the interests of creditors and enables that aspect to be evaluated at a later stage, if necessary. 10 Fourth, it is in the public interest for the ACCC to be able to proceed to seek declaratory and other relief of the kind that is proposed. It is well established that it may be appropriate in the public interest to grant such relief against a company in liquidation: see, for example, Australian Competition and Consumer Commission v Australia Institute of Professional Education Pty Ltd (in liq) [2017] FCA 521 at [26] (Bromwich J); and Australian Competition and Consumer Commission v Cornerstone Investment Aust Pty Ltd (in liq) (No 5) [2019] FCA 1544 at [31]-[36] (Gleeson J). Whether it is appropriate in this case will be a matter for later consideration, but it is in the public interest that the ACCC should be able to make the case for the grant of such relief. 11 Fifth, the proceedings are at a stage where the parties have identified both the issues and (save only for the quantum of any penalty to be ordered as against Quantum) the relief that they submit should be granted. Therefore, the Court is able to ascertain the scope of any further proceedings with some certainty. In the particular circumstances of this case it is possible to confine the leave to proceed in a way that reflects the extent of agreement that has been reached. There should be orders to confine the leave accordingly. 12 Sixth, the completion of the proceedings by an adjudication as against Quantum is a matter in which a large number of investors would be interested. 13 Therefore, I am satisfied that there should be orders of the kind sought on the application conditioned in the manner I have indicated. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Colvin.