Australian Competition and Consumer Commission v Sensaslim Australia Pty Ltd

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1163 of 2011

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

AND: SENSASLIM AUSTRALIA PTY LTD (IN LIQUIDATION) ACN 140 333 133

JUDGE: YATES J DATE: 26 OCTOBER 2012 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 The second respondent has filed an interlocutory application in which he seeks leave "to file written submissions relating to this matter even though the hearing of this matter has concluded".

Background 2 The principal proceeding concerns allegations of contravention of the Trade Practices Act 1974 (Cth) and the Australian Consumer Law in relation to the establishment of franchises for the sale and distribution of a weight loss product in the form of an intra-oral spray marketed under the brand "Sensaslim". The alleged contraventions involve various instances of conduct said to have been misleading or deceptive or to be constituted by representations which are said to have been made falsely. 3 The proceeding was commenced on 15 July 2011. Since that time it has been closely case-managed. To that end a series of directions hearings were held at which time orders were made providing for the timetabling of a number of important steps so that the matter could be brought to hearing as soon as possible. 4 On 14 March 2012 I ordered that the proceeding be provisionally set down for hearing commencing on 3 September 2012. 5 On 3 August 2012 I ordered that the proceeding be heard in the Queensland Registry of the Court at Brisbane. The reason for making that order was that the second respondent was subject to bail conditions imposed upon him in contempt proceedings presently before the Court which would prevent him from being personally present in Sydney where the proceeding would otherwise have been heard: QUD 252 of 2001 - Australian Competition and Consumer Commission v Chaste Corporation Pty Ltd (Deregistered). 6 On 24 August 2012 the second respondent filed an interlocutory application seeking an order that the hearing of the proceeding be adjourned until further order. 7 On 30 August 2012 I dismissed his application for an adjournment: see Australian Competition and Consumer Commission v Sensaslim Australia Pty Ltd (In Liquidation) (No 3) [2012] FCA 939. In those reasons (which I will call "the adjournment reasons") I discussed in detail a number of background matters concerning the conduct of the proceeding so far as they concern the second respondent. I will not repeat that discussion in these reasons. The adjournment reasons should be considered, however, with these reasons. 8 On 31 August 2012 the second respondent filed an application for leave to appeal from that dismissal and sought an interim stay of the hearing that was to commence on 3 September 2012. The second respondent's application for leave to appeal and for a stay was dismissed on 2 September 2012: Foster v Australian Competition and Consumer Commission [2012] FCA 953. 9 When the principal proceeding was called on for hearing in Brisbane on 3 September 2012, the second respondent did not appear. Apart from the appearance by the applicant, the only other appearance, at that time, was by the fifth respondent. 10 On the morning of 3 September 2012, after the hearing had commenced, my Associate received an email from the second respondent, which attached a letter from him. That letter, which was adduced by the second respondent in this application, made it clear that he would not be attending the hearing of the proceeding in Brisbane. In that letter he gave his reasons for his decision. 11 The hearing continued, therefore, in the second respondent's absence. The hearing occupied seven days. It concluded on 13 September 2012. Submissions were made on behalf of the applicant and the fifth respondent. The submissions were advanced by written documents to which oral argument was directed. I reserved my decision at the end of the oral argument. 12 On the afternoon of 14 September 2012, the day following the conclusion of the hearing, the second respondent sent an email to my Associate stating that he wished to "make written submissions". He was informed, by reply, that the hearing had concluded on 13 September 2012 and that my decision stood reserved from that time. After further correspondence the second respondent was informed on 20 September 2012 that if he wished to file written submissions it would be necessary for him to seek leave to do so. The present application is the second respondent's response to that communication. His interlocutory application was filed on 11 October 2012. 13 I should state at the outset that I do not understand it to be a controversial proposition that the hearing of a proceeding is the time to present argument, whether it be wholly oral argument or oral argument supplemented by written submissions: Carr v Finance Corporation of Australia Limited (No 1) (1981) 147 CLR 246 at 258. 14 In Eastman v Director of Public Prosecutions of the Australian Capital Territory (2003) 214 CLR 318 at [29], McHugh J referred to a principle which I take to be one of equal and general application in this Court. His Honour said: Parties to matters before the Court need to understand that, once a hearing in the Court has concluded, only in very exceptional circumstances, if at all, will the Court later give leave to a party to supplement submissions. Parties have a legal right to present their arguments at the hearing. If a new point arises at the hearing, the Court will usually give leave to the parties to file further written submissions within a short period of the hearing - ordinarily seven to fourteen days. But a party has no legal right to continue to put submissions to the Court after the hearing. In so far as the rules of natural justice require that a party be given an opportunity to put his or her case, that opportunity is given at the hearing. 15 This principle was affirmed by the plurality in NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 at [192].

The basis on which the second respondent advanced his application 16 In an affidavit made in support of his application, the second respondent said that the "written submissions" he wishes to file in this matter consist of: (a) A document titled "Submissions for the Second Defendant". (b) A transcript of his evidence in the contempt proceeding, when it becomes available. (c) A copy of an affidavit made by him and filed in the contempt proceeding. I observe that this affidavit was apparently made on 20 June 2012, well before the commencement of the hearing of the present proceeding on 3 September 2012. (d) A transcript of evidence given by Robin Reichelt in the contempt proceeding, when it becomes available. (e) A copy of Mr Reichelt's affidavit of 10 September 2012 filed in the contempt proceeding. (f) A copy of his counsel's closing submissions in the contempt proceeding. (g) A transcript of his counsel's closing oral submissions in the contempt proceeding, when it becomes available. (h) A copy of an affidavit made by his solicitor, Terrence Fisher, filed in the contempt proceeding. 17 Copies of the documents identified in (e) and (f) were annexed to the second respondent's affidavit. Copies of the documents identified in (a), (c) and (h) were not annexed to his affidavit or otherwise made available to the Court on the hearing of the application. Copies of the documents identified in (b), (d) and (g) are not apparently available to the second respondent at the present time and, presumably for that reason, were not otherwise made available to the Court on the hearing of the application. 18 It can be seen from this list that the second respondent seeks to do more than file written submissions in this proceeding: he seeks to adduce evidence (being part of the evidence adduced in the contempt proceeding) and to file the written and oral submissions made on his behalf in the contempt proceeding. Although the second respondent has used the word "file" in relation to the documents identified in (b) - (e) and (h), it would seem that he intends that those documents be tendered and, in that form, stand as evidence in his case. 19 In his affidavit the second respondent canvassed his "objectives" in making the adjournment application and the reasons why he says he should be given leave to file and rely upon the documents identified above. 20 I do not propose to permit the present application to be used as a vehicle to re-agitate matters that have already been decided in the adjournment application and in respect of which leave to appeal has been refused. Nevertheless, there is one matter raised in the second respondent's affidavit in that regard that should not be left without comment. The second respondent says that one of his objectives in making the adjournment application was as follows: I wanted to avoid the situation of either me or my other witnesses having to give evidence or file affidavits (and thus disclose defence material) in this matter prior to the conclusion of the contempt matter as I did not want to prejudice my defence in the contempt case where, unlike this matter, I face the probability of gaol should I lose that case. This was particularly so as the basic facts and allegations against me were the same in both the civil and contempt cases. I needed to keep my powder dry for the contempt case so to speak. The evidence of Robin Reichelt was crucial to my defence as he was my key witness as he could give evidence independent of me. 21 The second respondent has also raised the same matter as one of the reasons why the leave he seeks should be granted. 22 I wish to make it clear that this objective was not advanced by the second respondent in support of his adjournment application before me or at any other time, until now. The second respondent was represented at the hearing of his adjournment application by an experienced legal practitioner. She made oral submissions and relied upon her own affidavit which stood, in part, as the written submissions made in support of the adjournment application: see [1], [23] and [24] of the adjournment reasons. This objective found no expression in those submissions. Had this objective been a matter of substance and of real concern, I would have expected it to have been at the forefront of the second respondent's adjournment application. It was not raised at all. Indeed, it was not even raised in the second respondent's letter of 3 September 2012 (see [10] above) which continued to state his desire to procure legal representation and funds as the reason why he had sought an adjournment. 23 Moreover, at the time when the present proceeding was set down for hearing the second respondent urged on me his desire that it take place expeditiously and, if possible, before the hearing of the contempt proceeding. The same desire was expressed in the contempt proceeding itself by the second respondent applying unsuccessfully to have that proceeding heard after the present proceeding. No suggestion was made at that time that, for the purposes of the present proceeding, the second respondent needed to "keep his powder dry" for the contempt proceeding. Indeed, at the directions hearing held in this proceeding on 10 February 2012, after the application to defer the hearing of the contempt proceeding was dismissed, the second respondent informed me that he "intend[ed] to take every opportunity to dissect every piece of evidence presented against me …". 24 The objective now advanced is plainly inconsistent with the second respondent's position previously represented to the Court in both this proceeding and in the contempt proceeding. For this reason it is not a matter on which I place any weight. 25 Further, the question of any evidence to be given by Mr Reichelt was addressed by me in the adjournment reasons: see [35] and [36]. It was also a matter addressed by Perram J when refusing leave to the second respondent to appeal against my dismissal of the adjournment application: see Foster at [9]-[14]. 26 Apart from the matter I have just dealt with, the second respondent advanced the following in his affidavit as reasons why the leave he seeks should be granted. 27 First, he pointed to the fact that he had no legal representation. The fact that the second respondent was without legal representation was addressed by me in the adjournment reasons. 28 Secondly, he said that he was unable to drive to and from his home on the Gold Coast and the Court at Brisbane every day "for three or four weeks and pay for parking". He also said that he could not afford to pay for hotel accommodation to stay in Brisbane "during the three or four week trial". This evidence is unconvincing and I place no weight on it. It was not a matter advanced on behalf of the second respondent in the adjournment application. Further, there is evidence before me that the second respondent was in attendance at the Court in Brisbane for most of the hearing days in the contempt proceeding and gave evidence in that proceeding. Moreover, the hearing in the present case occupied seven days, not three or four weeks. There is no reason why the second respondent could not have made, during the course of that hearing, any application he wished to make. Indeed, at a directions hearing on 2 July 2012 I specifically raised the possibility that, in the course of the hearing to commence on 3 September 2012, the second respondent might make an application to defer the presentation of his defence until a time after the applicant's case had concluded. At that time the following exchange occurred: HIS HONOUR: I think what I will do is this - it's not entirely satisfactory. I am able to make available the week of 22 October and possibly some part of the week of 29 October. I need to check on that. I think what I will do is, in fact, not alter the hearing dates in the matter before me. In other words, we will commence on 3 September. Mr Foster, you should be prepared to commence your defence at the conclusion of the Commission's case. However, I will entertain any application that might be made at that time for … your defence to be deferred until the week of 22 October. So what will happen is that the proceeding will commence as provisionally set down. There will be some extra time in the week of 22 October and possibly the week of 29 October if that time is needed to complete the matter. Now, is that sufficiently clear? MR FOSTER: Your Honour, the concern I have is how I attend in Sydney on 3 September when I'm subject to daily reporting and not allowed to leave Queensland. HIS HONOUR: Well, that is not so much a problem in the sense that I can sit in Queensland so there will be no need for you to travel to New South Wales. I will simply make arrangements to sit in Queensland. So just to repeat, that's what will happen. We will commence on the 3rd. I have reserved some extra time. If there is some particular difficulty in relation to the presentation of your case, Mr Foster, you can make an application at the conclusion of the Commission's case. I'm not foreshadowing how that will be dealt with at all. I will just deal with the matter at the time. So I will make no variation, then, to the orders that I made on 14 March 2012 … 29 There can be no misunderstanding about the observations I made on 2 July 2012. The second respondent denied himself the opportunity to make any such application by simply absenting himself from the hearing. That was his decision. As his letter of 3 September 2012 makes clear, this was largely because of his dissatisfaction with the outcome of his adjournment application. 30 Thirdly, the second respondent called in aid the fact that, during the hearing, I granted the fifth respondent leave to provide me with a note of transcript references after the conclusion of the hearing. The extent of this leave should not be misunderstood. The fifth respondent attended the hearing and was represented by counsel who cross-examined witnesses and made extensive written and oral submissions. The leave that I granted to the fifth respondent was to supplement those submissions with transcript references because the fifth respondent, at that time, did not have access to the transcript. The leave I granted was not to advance new and additional submissions beyond the provision of appropriate transcript references for the submissions that had already been made. As matters have turned out, the fifth respondent has informed the Court that he does not propose to avail himself of the leave that was granted. 31 In oral argument the second respondent stated that he relied principally on the matters stated in his affidavit as the reasons why the leave he seeks should be granted. He referred to considerations of fairness and the difficulties of being unrepresented. He made an attack on the credit of some of the witnesses who gave evidence in this proceeding. He also made certain observations about the fifth respondent's conduct. He said that if I were to read the transcript of the evidence in the contempt proceeding I would form a very different view of the evidence given in this proceeding, which he said had "turned out to be quite a farce". He said that he had "always said that the court schedule was unacceptable given the contempt proceedings". This was a reference to the matters of timing addressed and determined by me in dismissing the adjournment application: see [5], [17], [18], [28] and [34] of the adjournment reasons. He said that "what is happening here [is] un-Australian, it's not fair. Everyone should be given a fair go".

The applicant's position 32 The applicant did not consent to or oppose the second respondent's application in so far as it concerned the filing of written submissions, provided those submissions were filed within a short timeframe (namely, a short time after 24 October 2012) and the applicant was given an opportunity to respond to them. The applicant did oppose, however, the second respondent's application in so far as it extended to the tender of evidence and his intended reliance on submissions that had been made in the contempt proceeding. 33 In support of its opposition, the applicant made the following general submissions. 34 First, the second respondent had not put forward any valid explanation as to why he did not attend the hearing in this matter. Any suggestion that he was unable to attend because of scheduling difficulties involving the contempt proceeding should be rejected. The Court had moved the hearing to Brisbane to accommodate the second respondent in circumstances where the only other active parties in the proceeding at that time had legal representation based in Sydney. The assertion that the second respondent was unable to attend the hearing in Brisbane for financial reasons should be given little weight. 35 Secondly, the second respondent has been given more than a reasonable opportunity to prepare his defence and to put forward his case. Affording procedural fairness to a litigant only requires a court to provide a reasonable opportunity to be heard. Natural justice considerations require a court to weigh up the justice to all parties as well as considerations of delay and expense in the resolution of proceedings: Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 at 212-213. In light of the ample time the second respondent had to prepare his case and the accommodations made to him, he has been given more than a reasonable opportunity to tender evidence in support of his defence. 36 Thirdly, the present application is, in substance, no more than an attempt by the second respondent to achieve by alternative means what he had failed to achieve by his unsuccessful adjournment application, namely to delay the final resolution of the matter. Compelling reasons must be established before the Court would permit a party, while judgment is reserved, to re-open its case to tender evidence. No such case has been demonstrated. 37 Fourthly, if the second respondent were permitted to tender evidence now, the applicant, and indeed the fifth respondent, may seek to cross-examine those witnesses and to call further evidence in answer. Such an outcome, if permitted, would cause the applicant and the fifth respondent to incur further legal costs and would delay the finalisation of the proceeding. This is contrary to the interests of the other parties and of others who have an interest in the outcome of the proceeding, including approximately 85 Sensaslim franchisees who are creditors of the first respondent (now in liquidation) and in whose interest compensation orders are sought in the proceeding. 38 More specifically, the applicant objected to the inadmissible hearsay nature of the evidence which the second respondent seeks to adduce. It also pointed to the prejudice it would suffer given that, in relation to the evidence given by both the second respondent and Mr Reichelt in the contempt proceeding, certificates under s 128 of the Evidence Act 1995 (Cth) (the Evidence Act) had been issued. It submitted that, even if it were to be afforded an opportunity to cross-examine the second respondent and Mr Reichelt in this proceeding in relation to statements made in their affidavits or given orally by them in the contempt proceeding, it may be met with the objection that, by doing so, it was seeking to use that evidence contrary to the prohibition in s 128(7) of the Evidence Act. The applicant also pointed to the irrelevance to this proceeding of submissions made in the contempt proceeding.

Consideration 39 I accept the applicant's submission that the second respondent has been given more than a reasonable opportunity to prepare his defence and to put forward his case. I also accept its submission that the second respondent had not put forward any valid explanation as to why he did not attend the hearing in this matter. The second respondent has made clear his dissatisfaction with the dismissal of his adjournment application on 30 August 2012. But the plain fact of the matter is that, in the face of that dismissal, he chose to absent himself from the hearing and to play no role in it. His attitude to the hearing was made clear by the final paragraphs of his letter of 3 September 2012, which read as follows: All up, it doesn't seem worth it to come to your court every day. The ACCC is just going to railroad me anyway as I can't defend myself. Even more basically, I can't afford the petrol and parking money to drive to and from the Gold Coast to Brisbane and back every day for a few weeks to attend court, let alone a lawyer. I can't afford to stay in Brisbane at a hotel either. So I must respectfully apologise as I just can't come to court every day just to sit there like a dummy and be shafted by the ACCC with their QC and everything [sic] twisting all my words beyond recognition. Thank you, Justice Yates. 40 By making the present application the second respondent now seeks to avoid the consequences of his decision. His oral submissions seem to assume that, in relation to the documents identified in (b) - (e) and (h) above, all he is asking the Court to do, by considering this material, is to look at "two sides of the story". In my view to permit the second respondent to adduce the evidence he now seeks to tender would constitute a substantial unravelling of the trial process that would most likely operate to the prejudice of those parties who have participated in that process. 41 First, there is now a substantial body of evidence before the Court. Some of it is subject to rulings on admissibility. Some of it has been tested in cross-examination by the fifth respondent. I have no doubt that forensic decisions have been made by both the applicant and the fifth respondent based on the state of that evidence and that they have made closing submissions accordingly. I can see no reason why, in the particular circumstances of this case, the second respondent should now be permitted to disrupt that state of affairs just because he chose not to attend the hearing. It is not simply a question of looking at "two sides of the story", as he would have it. It is nothing less than an attempt by the second respondent to rely on evidence which he could have called at the hearing in September (for example, his own affidavit) or in respect of which, if need be, he could have made an application of the kind that I had foreshadowed at the directions hearing on 2 July 2012. It is also evidence which, had it been admitted at that time, may have caused both the applicant and the fifth respondent to make forensic decisions different to those they have in fact made. Apart from anything else, they may have taken steps to meet that evidence or to qualify it. 42 Secondly, and in any event, the material which the second respondent seeks to tender is plainly hearsay in character and objectionable for that reason. The applicant has already made that objection in the course of this application. 43 Thirdly, and relatedly, neither the applicant nor the fifth respondent should be burdened with material in the form proposed by the second respondent. Apart from Mr Reichelt's affidavit, I simply have no idea of the content of the second respondent's affidavit or of the transcript of both the second respondent's and Mr Reichelt's oral evidence. That, on its own, is a cogent reason why leave should not be granted in respect of that particular material. However, assuming that material to be relevant to the issues in this proceeding, I can also assume that aspects of it are likely to be contentious. Indeed, that is the reason why the second respondent seeks to advance it: as he would have it, the Court should now look at "two sides of the story". With my knowledge of the evidence that has been admitted at the hearing of the proceeding, I am able to identify a number of statements made in Mr Reichelt's affidavit that are likely to be contentious, at least so far as the applicant is concerned. Neither the applicant nor the fifth respondent should now be presented with evidence that, for whatever reason, they are not able to test in this proceeding. 44 Fourthly, even if the second respondent were to be permitted to adduce evidence of the kind foreshadowed by acceptable means and in acceptable form - so that it is properly admissible in this proceeding and the applicant and the fifth respondent are afforded a full and complete opportunity to test it - such a step would be another manifestation of what would be a substantial unravelling of the trial process. Indeed, it would be a completely unjustified dislocation of that process that would lead to an unwarranted prolongation of the hearing and its final disposition. 45 Therefore I am not prepared to grant the second respondent leave to "file" the documents identified in (b) - (e) and (h) above. 46 Similarly, I am not prepared to grant leave to the second respondent to file and rely on the submissions that have been made in the contempt proceeding. I do not know what evidence has been adduced in that proceeding or the basis on which it has been admitted. Although I have been informed that common facts are involved in each proceeding, each case has taken its own path and involves different legal issues. I cannot see how I can possibly be assisted by submissions made in the contempt proceeding regarding the evidence in that case in respect of the particular issues there before the Court. 47 However, I am prepared to allow the second respondent an opportunity to file and rely on written submissions. I do so not because of the inherent merits of his application but because my present hearing commitments are such that I am not in a position to give judgment in this matter in the immediate future. That being the case, the giving of judgment will not be substantially delayed by affording the second respondent that opportunity. Furthermore, the applicant has advanced no positive objection to the second respondent filing written submissions as such. 48 The granting of that leave will involve some disruption and inconvenience. Apart from the applicant, the fifth respondent might also wish to respond to those submissions. Given certain statements made by the second respondent in the course of his oral submissions, I can only proceed on the basis that he and the fifth respondent are not in the same interest. I am also of the view that fairness would require the same opportunity to be afforded to the fourth respondent who appeared by a solicitor on the penultimate day of the hearing and who made a similar application. In the circumstances existing at that time, I granted the fourth respondent a limited indulgence in respect of the making of submissions, which his solicitor elected not to pursue. In light of the present changed circumstances, I propose to revisit that decision and grant the fourth respondent the same opportunity to make submissions that will be extended to the second respondent. On the other hand, I can see no reason why, absent his own application, the third respondent should be granted the same opportunity. He has played no active role in this proceeding since its commencement on 15 July 2011. I will order, however, that he be informed of the orders I now propose to make. 49 The leave that I will grant will be subject to the following limitations. The first will be that the submissions should not exceed 40 pages in length. I am of the view that submissions of this length will be more than adequate to address the case brought by the applicant whose own written submissions against all respondents were slightly less than 40 pages. The second limitation will be that the submissions must be responsive to the case brought by the applicant in this proceeding as reflected in its written and oral submissions delivered at the hearing. I feel compelled to make that requirement explicit in light of the second respondent's belief that I would be assisted by submissions that have been made in the contempt proceeding. The third limitation will be that the submissions must be filed by no later than 23 November 2012. I will allow the fifth respondent the opportunity to file any answering submissions by 14 December 2012 with a further week (21 December 2012) to be given to the applicant to file its answering submissions. In my view no greater time for the second respondent is warranted in all the circumstances. In any event, having regard to the orderly disposition of this and other cases in my docket, it is essential that submissions conclude before the end of this year. The time limits I will impose will ensure that that is done. 50 The second respondent should pay the applicant's costs of this application. I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.