Australian Competition and Consumer Commission v Unique International College

Federal Court of Australia|2017-11-08|Before: Perram J

During the period from 1 July 2014 to 30 September 2015 (relevant period), Unique engaged in a system of conduct and a pattern of behaviour in connection with the supply or possible supply, or marketing of the supply, of online vocational education courses (courses) to consumers in New South Wales that was unconscionable within the meaning of s 21 of the Australian Consumer Law (ACL), by: 1.1. targeting disadvantaged people by reference to indigeneity, remoteness and social disadvantage; 1.2. offering gifts of laptops and iPads (or loan computers after 31 March 2015) to consumers to sign up; 1.3. providing financial incentives to its sales representatives to encourage them to sign up consumers; and 1.4. holding sign-up meetings.

Natasha Paudel 2. On or around 10 October 2014, at a group sign-up meeting in Walgett, New South Wales (Walgett Sign-up Meeting), Unique, in the course of an enrolment process that was completed within 15 minutes: 2.1. did not properly inform Natasha Paudel, in writing and before she agreed to enrol in Unique's course: 2.1.1. that she was entitled to terminate the enrolment agreement prior to the end of the termination period; and 2.1.2. the way in which that termination right could be exercised, in contravention of s 76 of the ACL; 2.2. did not give Natasha Paudel a copy of the enrolment agreement which she had signed, in contravention of s 78 of the ACL; and 2.3. failed to include in the enrolment agreement: 2.3.1. a notice that conspicuously and prominently informed Natasha Paudel of her right to terminate the enrolment agreement; and 2.3.2. a notice which she could use to terminate the enrolment agreement, in contravention of s 79 of the ACL.

Tre Simpson 3. On or around 30 March 2015, at a Sign-up Meeting in Tolland, New South Wales (Tolland Sign-up Meeting), Unique: 3.1. failed to inform Tre Simpson, or his guardian Margaret Simpson that Tre Simpson was enrolling in a course: and thereby engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s 18 of the ACL; 3.2. failed to inform Tre Simpson or Margaret Simpson of the cost of the course, and thereby engaged in conduct that was: 3.2.1. misleading or deceptive or likely to mislead or deceive, in contravention of s 18 of the ACL; and 3.2.2. false or misleading with respect to the price of the course, in contravention of s 29(1)(i) of the ACL; and 3.3. failed to inform Tre Simpson or Margaret Simpson that Tre Simpson would incur substantial debt unless he cancelled his enrolment in the course before the census date, and thereby engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s 18 of the ACL. 4. At the at the Tolland Sign-up Meeting, Unique: 4.1. did not properly inform Tre Simpson, in writing and before he agreed to sign up to Unique's course: 4.1.1. that he was entitled to terminate the enrolment agreement prior to the end of the termination period; and 4.1.2. the way in which that termination right could be exercised, in contravention of s 76 of the ACL; 4.2. did not give Tre Simpson a copy of the enrolment agreement which he had signed, in contravention of s 78 of the ACL, in circumstances where parts of his enrolment agreement were completed by Unique's employees; and 4.3. failed to include in the enrolment agreement: 4.3.1. a notice that conspicuously and prominently informed Tre Simpson of his right to terminate the enrolment agreement; and 4.3.2. a notice which he could use to terminate the enrolment agreement, in contravention of s 79 of the ACL. 5. Unique's conduct towards Tre Simpson at the Tolland Sign-up Meeting: 5.1. involved the exploitation of Tre Simpson, an Indigenous person who, at the time of the conduct: 5.1.1. was 19 years old; 5.1.2. suffered from a number of health conditions that significantly limited his intellectual capacities; 5.1.3. had no formal education beyond year 10; 5.1.4. had never had a job; 5.1.5. was cared for by his grandmother (Margaret Simpson) because he was unable to look after himself; and 5.1.6. did not understand the nature of the agreement he was making; 5.2. involved the contraventions of the ACL referred to in the declarations at paragraphs 3 and 4 above; 5.3. was carried out in circumstances where the Unique employees present: 5.3.1. did not explain to Tre Simpson or Margaret Simpson: 5.3.1.1. any aspects of the course or the VET FEE-HELP system; 5.3.1.2. the obligations arising from the enrolment forms; 5.3.1.3. that Tre Simpson could cancel or terminate his enrolment in the course by the census date; 5.3.2. were: 5.3.2.1. entirely indifferent as to Tre Simpson's suitability for the course; and 5.3.2.2. interested only in making sure he was enrolled, was unconscionable, in contravention of s 21 of the ACL.

Kylie Simpson 6. On or around 30 March 2015, at the Tolland Sign-up Meeting, Unique: 6.1. did not inform Kylie Simpson, in writing and before she agreed to enrol in Unique's course: 6.1.1. that she was entitled to terminate the enrolment agreement prior to the end of the termination period; and 6.1.2. the way in which that termination right could be exercised, in contravention of s 76 of the ACL; 6.2. did not give Kylie Simpson a copy of the enrolment agreement which she had signed, in contravention of s 78 of the ACL; and 6.3. failed to include in the enrolment agreement: 6.3.1. a notice that conspicuously and prominently informed Kylie Simpson of her right to terminate the enrolment agreement; and 6.3.2. a notice which she could use to terminate the enrolment agreement, in contravention of s 79 of the ACL. 7. Unique's conduct towards Kylie Simpson at the Tolland Sign-up Meeting: 7.1. involved the exploitation of Kylie Simpson, an Indigenous person who: 7.1.1. had limited education; 7.1.2. had limited ability to read and write; 7.1.3. had learning disabilities; 7.1.4. had never had a job; 7.1.5. did not have an internet connection at her home which would permit her to do an on-line course; 7.1.6. whose intellectual impairments would have made her appear as patently unsuitable for the course for which she was enrolling; 7.2. involved the contraventions of the ACL referred to in the declaration at paragraph 6 above; 7.3. was carried out in circumstances where it was entirely obvious to the Unique representatives present that Kylie Simpson was totally unable to understand what she was doing, was unconscionable, in contravention of s 21 of the ACL.

Jaycee Edwards 8. In or about June 2015, in Bourke, New South Wales (Bourke Sign-up Meeting), Unique: 8.1. failed to inform Jaycee Edwards that she would have to pay for the course, and thereby engaged in conduct that was; 8.1.1. misleading and deceptive or likely to mislead or deceive, in contravention of s 18 of the ACL; and 8.1.2. false or misleading with respect to the price of the course, in contravention of 29(1)(i) of the ACL; 8.2. failed to inform Jaycee Edwards of the cost of the course, and thereby engaged in conduct that was: 8.2.1. misleading or deceptive or likely to mislead or deceive, in contravention of s 18 of the ACL; 8.2.2. false or misleading with respect to the price of the course, in contravention of s 29(1)(i) of the ACL; and 8.3. failed to inform Jaycee Edwards that she would incur a debt unless she cancelled her enrolment in the course before the census date and thereby engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s 18 of the ACL. 9. Unique's conduct towards Jaycee Edwards in or about June 2015: 9.1. involved the exploitation of Jaycee Edwards, an Indigenous person who: 9.1.1. was 18 years old; 9.1.2. struggled with reading and writing; 9.1.3. was told by Unique's representatives that she would receive a 'free' laptop for signing up, when the laptop was not in fact free; 9.1.4. was told by Unique's representatives that the course would be paid for by Unique; 9.1.5. did not have a computer or internet connection at her home which would permit her to do an on-line course, 9.2. involved the contraventions of the ACL referred to in the declaration at paragraph 8 above; 9.3. was carried out in the context of an enrolment process during which Unique's representative(s): 9.3.1. took Jaycee Edwards through enrolment forms quickly, told her to sign the form at various locations marked with an X, and gave her no explanation as to what she was signing up to; and 9.3.2. failed to inform Jaycee Edwards that she could cancel or terminate her enrolment in the course by the census date, was unconscionable, in contravention of s 21 of the ACL.

Fiona Smith 10. In or around June 2015, at the Bourke Sign-up Meeting, Unique: 10.1. failed to inform Fiona Smith that she would have to pay for the course, and thereby engaged in conduct that was: 10.1.1. misleading or deceptive or likely to mislead or deceive, in contravention of s 18 of the ACL; and 10.1.2. was false or misleading with respect to the price of the course, in contravention of s29(1)(i) of the ACL; 10.2. failed to inform Fiona Smith of the cost of the course, and thereby engaged in conduct that was: 10.2.1. misleading or deceptive or likely to mislead or deceive, in contravention of s 18 of the ACL; 10.2.2. false or misleading with respect to the price of the course, in contravention of s 29(1)(i) of the ACL; and 10.3. failed to inform Fiona Smith that she would incur a debt unless she cancelled her enrolment in the course before the census date and thereby engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s 18 of the ACL. 11. At the Bourke Sign-up Meeting, Unique: 11.1. did not properly inform Fiona Smith, in writing and before she agreed to sign up to Unique's course: 11.1.1. that she was entitled to terminate the enrolment agreement prior to the end of the termination period; and 11.1.2. the way in which that termination right could be exercised, in contravention of s 76 of the ACL; 11.2. did not give Fiona Smith a copy of the enrolment agreement which she had signed, in contravention of s 78 of the ACL; 11.3. failed to include in the enrolment agreement: 11.3.1 a notice that conspicuously and prominently informed Fiona Smith of her right to terminate the enrolment agreement; and 11.3.2. a notice which she could use to terminate the enrolment agreement, in contravention of s 79 of the ACL. 12. Unique's conduct towards Fiona Smith at the Bourke Sign-up Meeting: 12.1. involved the exploitation of Fiona Smith, an Indigenous person who: 12.1.1. did not have an internet connection at her home which would permit her to do an on-line course; 12.1.2. had limited computer literacy and had not previously had a computer until Unique gave or lent one to her; 12.2. involved the contraventions of the ACL referred to in the declarations at paragraphs 10 and 11 above; 12.3. was carried out in the context of an enrolment process during which Unique's representative(s): 12.3.1. told Fiona Smith that she would receive a 'free' laptop for signing up, when the laptop was not in fact free; 12.3.2. told Fiona Smith that the course would be paid for by Unique; 12.3.3. took Fiona Smith through enrolment forms quickly, told her to sign the form at various locations marked with an X, and gave her no explanation as to what she was signing up to; and 12.3.4. failed to inform Fiona Smith that she could cancel or terminate her enrolment in the course by the census date, was unconscionable, in contravention of s 21 of the ACL.

June Smith 13. In or around June 2015, at the Bourke Sign-up Meeting, Unique: 13.1. failed to inform June Smith that she would have to pay for the course, and thereby engaged in conduct that was: 13.1.1. misleading or deceptive or likely to mislead or deceive, in contravention of s 18 of the ACL; and 13.1.2. was false or misleading with respect to the price of the course, in contravention of s29(1)(i) of the ACL; 13.2. failed to inform June Smith of the cost of the course, and thereby engaged in conduct that was: 13.2.1. misleading or deceptive or likely to mislead or deceive, in contravention of s 18 of the ACL; 13.2.2. false or misleading with respect to the price of the course, in contravention of s 29(1)(i) of the ACL; and 13.3. failed to inform June Smith that she would incur a debt unless she cancelled her enrolment in the course before the census date and thereby engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s 18 of the ACL. 14. At the Bourke Sign-up Meeting, Unique: 14.1. did not properly inform June Smith, in writing and before she agreed to sign up to Unique's course: 14.1.1. that she was entitled to terminate the enrolment agreement prior to the end of the termination period; and 14.1.2. the way in which that termination right could be exercised, in contravention of s 76 of the ACL; 14.2. did not give June Smith a copy of the enrolment agreement which she had signed, in contravention of s 78 of the ACL; 14.3. failed to include: 14.3.1. a notice that conspicuously and prominently informed June Smith of her right to terminate the enrolment agreement; and 14.3.2. a notice which she could use to terminate the enrolment agreement, in contravention of s 79 of the ACL. 15. Unique's conduct towards June Smith at the Bourke Sign-up Meeting: 15.1. involved the exploitation of June Smith, an Indigenous person who at the time of the meeting: 15.1.1. was 66 years old; 15.1.2. had left school at age 12 or 13; 15.1.3. had acquired basic literacy skills only in 2013; 15.1.4. did not have a computer or an internet connection at her home which would permit her to do an on-line course; 15.2. involved the contraventions of the ACL referred to in the declarations at paragraphs 13 and 14 above; 15.3. was carried out in the context of an enrolment process during which Unique's representative(s): 15.3.1. told June Smith that she would receive a 'free' laptop for signing up, when the laptop was not in fact free; and 15.3.2. told June Smith that the course would be paid for by Unique; 15.3.3. presented June Smith with forms, told her where to sign and gave her no explanation as to what she was signing up to; and 15.3.4. failed to inform June Smith that she could cancel or terminate her enrolment in the course by the census date, was unconscionable, in contravention of s 21 of the ACL.

THE COURT ORDERS THAT: 16. The matter be listed for a further case management hearing on Monday, 13 November 2017 at 9:30am. 17. Costs be reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 The principal question which now arises is whether I should make declarations in the long form proposed by the Applicants or the short form proposed by the Respondent. Before dealing with that issue, it is necessary to set out my reasons for concluding, over objection, on 28 July 2017 that I would proceed to grant declaratory relief at this stage even though there is still likely to be a further hearing on relief.

Declarations before relief hearing? 2 The Applicants submitted that in a case such as the present, where orders have previously been made 'splitting' the proceeding into two components - one, a hearing on liability; the other, a hearing on relief - there is authority in this Court that suggests that the making of any declarations arising from the Court's reasons on liability ought be deferred until after the hearing on relief. That was certainly the approach taken by Edelman J in Australian Competition and Consumer Commission v Valve Corporation (No 4) [2016] FCA 382 ('Valve'). It was submitted by the Applicants that any declarations made before the hearing on relief would only serve to multiply the costs of litigation for both parties since those declarations might be subject to an appeal. There was also the prospect of another appeal further down the track after the hearing on relief had taken place. On this view, making declarations before the hearing on relief was only likely to increase cost and expense. 3 The Respondent, on the other hand, submitted that costs might in fact be saved if declarations were made at this stage of the proceeding. This was because, until declarations were made by the Court, there would be no avenue for the Respondent to appeal against the Court's findings on liability. Since any successful appeal on liability would render unnecessary a hearing on relief, it was desirable that the declarations should be made now. It was further submitted that it would be a miscarriage of the Court's declaratory powers if they were exercised in such a way that sought expressly to deny a party the possibility of a right of appeal. 4 At the case management hearing on 28 July 2017, I largely accepted the Respondent's submissions about this. In the circumstances of this case which include, importantly, the possibility of further discovery between the parties and the real likelihood of a lengthy and complicated hearing on relief, the Respondent's approach is to be preferred. 5 In Valve, Edelman J outlined some nine reasons for refusing to make declarations before a hearing on relief in that case. Some of those reasons included: an apparent misconception on the respondent's part that making declarations would have the effect of staying the hearing on relief until its appeal rights had been exhausted when that may not necessarily be so (see Australian Securities and Investments Commission v Edwards (2005) 56 ACSR 290; [2005] NSWSC 1278 at 294 [18] per Barrett J); the difficulty associated with making declarations independently of other remedies; the fact that the High Court has cautioned against lower courts hearing only one subset of triable issues at a time in Tepko Pty Ltd v Water Board [2001] HCA 19, (2001) 206 CLR 1 ('Tepko'); the fact that splitting a hearing gives rise to the potential for further appeals than would otherwise be the case; and, that difficulties might inure if the High Court were asked to consider a special leave application before a hearing on penalties had taken place (see Baxter Healthcare Pty Ltd v Australian Competition and Consumer Commission [2009] HCATrans 20). 6 The approach taken by Edelman J in Valve was a product of the circumstances of that case. I cannot see those same difficulties arising in the case presently before me. 7 First, I accept, with respect, that there is force in Edelman J's observation at [7] of Valve that an appeal from any declarations made by this Court would not automatically have the effect of staying the hearing on relief. On the other hand, regardless of whether there is a grant of leave to appeal in this case or not, I will not be able to hear the balance of the relief claims until the second half of 2018. Although it may well be the case that no stay will be granted, nor may one be necessary in that circumstance. 8 Secondly, paraphrasing Edelman J in Valve, counsel for the Applicants submitted there was utility in all relief issues being dealt with together because of the overlap involved in the Court making declarations, granting injunctive relief and issuing other related orders. However, in the circumstances of this case I do not see this as an issue. There is no dispute about the injunctions and other related orders. The substantive principal dispute concerns the proposed third party redress orders. There is no overlap between those orders and what is now proposed. 9 Thirdly, in Tepko, Kirby and Callinan JJ observed at 55 [168]-[170] that the attraction of trials of separate issues were often chimerical. However, often does not mean always. I have concluded that this is not such a case. Split trials are commonplace in intellectual property and Part IV cases. Obviously, caution needs to be exercised in this area but I think it would be a mistake to launch into the complex issues arising from the proposed third party redress orders whilst the correctness of my liability findings has not been tested on appeal. Relevant to that finding is my view that the conclusions which I have reached seem to me to be reasonably contestable. I do not regard any appeal as frivolous. 10 Fourthly, Valve was a case which was heard by his Honour over three days. The issues in dispute were of relatively short compass. Valve Corporation, the respondent, operated an online game distribution network which customers used to buy or download online video games. The ACCC, in that case, alleged that the respondent had made misrepresentations in relation to the acceptable quality guarantee in s 54 of the Australian Consumer Law and had further contravened ss 18(1) and 29(1)(m) by making various misleading representations to consumers. At the heart of those alleged misrepresentations were statements contained in the terms and conditions on the respondent's website. The hearing on relief was a one-day affair: Australian Competition and Consumer Commissioner v Valve Corporation (No 7) [2016] FCA 1553. 11 In contrast, the reasons I delivered in Australian Competition and Consumer Commission v Unique International College [2017] FCA 727 ('ACCC v Unique') followed an expedited sixteen-day trial sitting on many days longer than usual Court hours. The judgment is some 779 paragraphs in length. It was a complex case. The way the ACCC's case was pleaded - namely both as a system and individual consumer case - makes it likely that the hearing on relief will be a complicated matter too. 12 Ultimately, I do not consider that the interests of justice would be best served in this case by proceeding with the hearing on relief, absent the declarations, when the Respondent has indicated that it intends to seek leave to appeal against the decision I made in ACCC v Unique. 13 It was in those circumstances that I concluded that declarations should be made before the hearing on relief.

Form of Declaration 14 The parties were in agreement on the form of the first declaration which related to the Applicants' system case. They disagreed about the appropriate form of declaration for each of the individual consumers. The scope of the disagreement can be discerned from considering the position of just one of the named consumers. 15 In the case of Natasha Paudel, the Applicants sought this declaration: '2. On or around 10 October 2014, at a group sign-up meeting in Walgett, New South Wales (Walgett Sign-up Meeting), Unique, in the course of an enrolment process that was completed within 15 minutes: 2.1. did not properly inform Natasha Paudel, in writing and before she agreed to enrol in Unique's course: 2.1.1. that she was entitled to terminate the enrolment agreement prior to the end of the termination period; and 2.1.2 the way in which that termination right could be exercised; in contravention of s 76 of the ACL; 2.2. did not give Natasha Paudel a copy of the enrolment agreement which she had signed, in contravention of s 78 of the ACL; and 2.3. failed to include the enrolment agreement: 2.3.1. a notice that conspicuously and prominently informed Natasha Paudel of her right to terminate the enrolment agreement; and 2.3.2. a notice which she could use to terminate the enrolment agreement, in contravention of s 70 of the ACL.' 16 By contrast, the Respondent submitted that the declaration should be as follows: '2. On or around 10 October 2014, Unique breached ss 76, 78 and 79 of the ACL when enrolling Natasha Paudel in Walgett, New South Wales.' 17 In Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53; [2003] HCA 75 ('Rural Press') at 91 [89]-[90] three Justices of the High Court said this: 'Orders 89 The trial judge's orders. The trial judge made declarations that Rural Press and Bridge had contravened s 46; that Rural Press, Bridge and Waikerie Printing had contravened s 45; that McAuliffe and Law were directly or indirectly knowingly concerned in the contraventions by Rural Press and Bridge of ss 45 and 46; and that Paul Taylor was directly or indirectly knowingly concerned in the contraventions by Waikerie Printing of s 45. The Rural Press parties made no complaint about these declarations to the Full Federal Court or to this Court. The declarations spoke merely of "an arrangement" having a purpose and effect, without giving any content to that expression and without indicating the gist of the findings of the primary judge identifying the arrangement. 90 These declarations provide a bad precedent and were of a kind which the trial judge should not have agreed to make even if urged to do so by the parties. Close attention to the form of proposed declarations, particularly those "by consent", should be paid by primary judges.' [footnotes omitted] 18 Their Honours then proceeded to make, inter alia, this declaration at 93 [99]: '3. The orders made by the Federal Court on 23 March 2001 be set aside and in lieu thereof, order that the following orders be made: (a) A declaration that the first, second and fifth respondents contravened s 45(2) of the Trade Practices Act by making and giving effect to an arrangement that contained provisions under which: (i) the fifth respondent agreed to cease soliciting advertising and newsworthy information from the Mannum area for inclusion in its regional newspaper, the River News, and to cease promoting the sale of the River News in the Mannum area; and (ii) the first and second respondents agreed not to publish a regional newspaper in the Riverland area…' 19 According to Rural Press, it is necessary to identify 'the gist of the findings' in the declarations. However, the Full Court of this Court has held that the 'remedy of a declaration is not an appropriate way of recording in a summary form, conclusions reached by the Court in reasons for judgment': Warramunda Village Inc v Pryde (2001) 105 FCR 437; [2001] FCA 61 ('Warramunda') at 440 [8]. The declarations which the Full Court disapproved in Warramunda were in this form (I set out only one here): 'It is declared that the respondent committed a breach or non-observance of the Health Services Union of Australia (Victoria-Private Sector) Interim Award 1993 (the 1993 Award) by failing to pay the applicants whilst engaged on sleepover duties in accordance with the terms of the Health and Allied Services Award of the Industrial Relations Commission of Victoria (the State Award) in respect of: • ordinary time rates of pay • week day ordinary hours • week day overtime • weekend ordinary hours • weekend overtime • public holidays, and • failure to pay the correct wages arrears at times required by the State Award.' 20 The Full Court went on to say this at [10]: '10 In the present case, the trial judge did not proceed by making an order for the decision of any question separately from any other question, pursuant to O 29 r 2. The parties did not invite his Honour to take that course and he did not take it of his own motion. Instead, he chose to attempt to express his conclusions about certain issues in the form of the declarations that appear in his order of 15 September 2000. We do not think that this was an appropriate use of the power to make binding declarations of right. The declarations do no more than set out in summary form conclusions that his Honour had reached in his reasons for judgment. They do not purport to declare the rights of the parties in any respect. Nor do they purport to declare the meaning of any term of an award upon the proper construction of that term.' 21 It is true that this declaration did not identify which clause of the agreement had been breached. Apart from that, however, it is difficult to see what the difference is between what a majority of the High Court said should be done in Rural Press and what the Full Court said should not be done in Warramunda. It is possible that the Full Court's observations about the form of the declarations was actually unnecessary to its conclusions. In that case, the matter was not finalised and no party had asked the judge to make the declarations. The real problem may not have been the form of the declarations but rather the procedure they represented. Nevertheless, the statements about form were made and I do not think myself at liberty to ignore them. 22 In any event, regardless of what Warramunda requires it seems that Rural Press requires one to reject the Respondent's proposed form of declaration. Assuming Warramunda is not contrary to Rural Press, it is necessary therefore to identify the 'gist' of the factual findings (Rural Press) without 'recording in summary form' (Warramunda) the conclusions I reached in the primary judgment. In my opinion, the form of declaration proposed by the Applicants achieves the identification of the gist without indulging in impermissible summary. 23 Accordingly, the form of declaration will be as the Applicants suggest. Costs will be reserved. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.

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