Australian Competition and Consumer Commission v True Alliance Trading Pty Ltd

MCKERRACHER J: 1 These are reasons for orders I made on 3 August 2017. True Alliance Trading Pty Ltd (formerly, Reebok Australia Pty Ltd) applies to amend of the Court's final orders dated 22 October 2014 in respect of the proceedings known as Australian Competition and Consumer Commission v Reebok Australia Pty Ltd (WAD 483 of 2013). The amendment is reflected in the orders now made. 2 True Alliance applies pursuant to r 39.05 of the Federal Court Rules 2011 (Cth) (FCR) to amend para 9.1 and para 9.2.2 of the final orders so that the respondent's obligation to maintain a Competition and Consumer Law Compliance Program is effectively reduced from 3 years to 2 years. 3 The Australian Competition and Consumer Commission (ACCC) consents to the proposed amendment. 4 True Alliance relies on two affidavits in support of the interlocutory application: (a) the first affidavit of Mr Ronald Hyam Perlov affirmed 6 June 2017 (first Perlov affidavit); and (b) the second affidavit of Mr Perlov affirmed 25 July 2017 (second Perlov affidavit).

Background to the interlocutory application 5 On 22 October 2014, the final orders were made by consent, including findings that the respondent had in trade or commerce, on various different occasions, breached certain provisions of Sch 2 of the Competition and Consumer Act 2010 (Cth), Australian Consumer Law (ACL). 6 Pursuant to para 9.1 and para 9.2 of the final orders the respondent was to establish, or (in the case of already having established) amend, a Compliance Program in accordance with Annexure A of the final orders and maintain the Compliance Program for 3 years from the date on which it was established or amended in accordance with Annexure A of the final orders. 7 The affidavit material establishes the following matters: (a) the respondent has to date complied with the final orders as reflected in para 5 of the first Perlov affidavit, which sets out the details; (b) on 31 December 2016, the distribution agreement with adidas International Trading B.V. (aITBV) dated 1 January 2014 (Distribution Agreement) expired and was not renewed. Accordingly, as of 1 January 2017, the respondent was no longer the Australian distributor of Reebok branded products in Australia; (c) the respondent did not seek to renew the Distribution Agreement; (d) on 15 December 2016 and in anticipation of the expiration of the Distribution Agreement, the respondent changed its company name to 'True Alliance Trading Pty Ltd', thereby having no association with the Reebok brand. The respondent has never been and is not related to aITBV or its related companies including Reebok International Limited (Reebok International); and (e) as of 31 December 2016, the respondent ceased all trade and remains a dormant or inoperative entity. It does not employ any personnel or carry on a business, nor does it have any intention to do so in the foreseeable future. 8 There is no practical benefit in maintaining the Compliance Program for the third and final year as set out in para 9 of the final orders. 9 True Alliance submits that in light of this information, the maintenance of the Compliance Program beyond its practical application will result in wasted time and resources, which is not in the public interest and does not reflect the intention of the final orders. 10 Therefore, True Alliance contends that the Court's discretion to vary orders by consent, under r 39.05 FCR should be exercised to rectify the now unintended operation of the final orders and in a manner that is consistent with the inherent jurisdiction of the Court to set aside or vary a judgment or final order by consent of the parties.

Relevant consideration 11 Rule 39.05(f) provides that the Court may vary or set aside a judgment or order after it has been entered if the party in whose favour it was made consents. 12 In determining to exercise a discretion under r 39.05(f), relevant considerations include: (a) the scope of the power to vary or set aside an order or judgment after entry is more circumscribed than that provided for in relation to the pre-entry situation. It should be exercised with caution and in exceptional circumstances, mindful of the overarching principle of the finality of litigation: Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 4) [2013] FCA 318 (at [6]); (b) the discretion to vary an order under r 39.05 FCR is not confined, but must be exercised judicially and the Court must have regard to all the evidence and arguments before it at the time of the application: Campaign Master (UK) Limited v Forty Two International Pty Ltd (No 4) [2010] FCA 398 (at [68]); (c) the power conferred under r 39.05 FCR must be exercised in a way that best promotes the overarching purpose identified in s 37M of the Federal Court of Australia Act 1976 (Cth), of facilitating the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible; and (d) the Court must also consider the rights and interests of third parties. Orders may be varied or set aside where the party in whose favour the order was made consents, provided that doing so will not detrimentally affect the rights or interests of third parties: Australian Securities and Investments Commission v Yandal Gold [2003] FCA 77 (at [23]); Perre v Apand [2004] FCA 1220 (at [10]-[11]). 13 In my view, as outlined below, these requirements are satisfied.

Exceptional circumstances 14 I am satisfied that there are exceptional circumstances in the present instance that justify the exercise of r 39.05(f) FCR by the Court. The meaning of 'exceptional circumstances' has been explored in various cases, for example, in WATI v Minister for Immigration & Multicultural Affairs (1997) 78 FCR 543, exceptional circumstances included situations of 'manifest unfairness' or injustice. In Wentworth v Attorney-General (NSW) (1984) 154 CLR 518 (at 526), the exceptional circumstances involved a situation where the orders, if carried out, 'would ultimately result in futility'. 15 In the present case, the continued maintenance of the Compliance Program, pursuant to the final orders (Compliance Orders), would result in an irrational situation where a dormant, inoperative entity with no employees will be required to carry out training and reporting on staff and business operations, that do not exist. Essentially, it would involve maintaining a Compliance Program in respect of non-existent business activity. This will place an unnecessary financial burden on the respondent and will ultimately be an unfair and futile exercise. 16 There has been a significant change in circumstances, which if known before the Compliance Orders were made would have led to different final orders. This includes the cessation of the very business to which the Compliance Orders were directed. Indeed, there is no longer an active and operating entity to carry out the Compliance Orders or any purpose for the Compliance Orders to be carried out.

The Federal Court Act 17 The power conferred by r 39.05 FCR must be carried out in a way that best promotes the purpose of the Federal Court Act of 'facilitating the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible'. 18 The variation of the final orders is the most practical, efficient and inexpensive way to deal with the application. It would be unjust to require the respondent to maintain the Compliance Program for the third and final year. It would also be an impractical, inefficient and expensive outcome.

Third Parties 19 The Court may decline to vary an order if a third party would suffer particular injury by the varying of that order. There is no third party that or who could possibly suffer injury as a result of the proposed variation to the final orders. 20 The Compliance Program was ultimately designed to benefit the public by ensuring that the respondent and its staff were made aware of their obligations under the ACL and carried out those obligations by requiring them to participate in ongoing training and reporting. However, as there are now no staff employed by the respondent and no business operations or activity, there is: (a) no subject of compliance; and (b) no risk of a breach of the ACL. Therefore, the maintenance of the Compliance Program for the third year is a futile exercise. 21 It is significant and helpful that the ACCC, acting as the regulator in the public interest, now consents to the proposed variation of the final orders. In Yandal Gold orders had been made that conferred a benefit on third parties. A variation to the orders was sought to deprive individuals of the rights conferred upon them. The Australian Securities and Investments Commission (ASIC) consented to this variation as 'the purposes sought to be achieved by those orders were no longer achievable' and for those orders to still remain operative would 'create a mischief, which was inconsistent with the intent and purpose of the remedial orders'. The Court (Merkel J) placed emphasis on the fact that ASIC had consented to the variation. The application to vary the orders was allowed, in order to 'rectify the unintended operation' of the orders. 22 In this instance, there is no evidence that any third party could or would be injured as a result of the proposed variation of the final orders. 23 The purposes sought to be achieved by the Compliance Orders are 'no longer achievable' and, therefore, the power under r 39.05 FCR will be exercised. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.