Australian Competition & Consumer Commission v Emerald Ocean Distributors... [2004] FCA 303 | Case summary

REASONS FOR JUDGMENT 1 The applicant seeks leave to further re-amend its application. The original application was filed on 19 July 2000. It sought certain declarations in connection with the supply and promotion by the respondents of certain products described as the 'Slendertone Products'. These comprise items known as the Sequence 16; the Supreme; the Top Tone 12 and Gymbody 8. The declarations sought are that the respondents engaged in misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) ('the Act') and made false representations contrary to s 53(c) of the Act. 2 Paragraph 7 of the original application read: '7. An order that the Respondent refund any monies paid by members of the public to the Respondent to purchase any one or more of the Slendertone Products who: 7.1 believe that they have been misled or deceived by the Respondent in the promotion or supply of the Slendertone Products; and/or 7.2 contact either the Applicant or the Respondent in response to one or more of the corrective advertisements placed by the Respondent and request a refund of any monies paid by him or her or them to purchase one or more of the Slendertone Products from the Respondent.' That paragraph became par 9 ('existing par 9') in the further amended application. 3 The present application proposes two substantive amendments to the further amended application, namely, the deletion of existing par 9 in the above terms and the insertion of a new par 9 reading: '9. Findings of fact pursuant to Section 83 of the Trade Practices Act 1974 (Cth).'

relevant statutory framework 4 Subject to certain limited qualifications, s 80 of the Act gives to the Court, on the application of the Commission or any other person, power to grant an injunction in such terms as the Court determines to be appropriate where the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute a contravention of certain provisions of the Act or an attempt at such a contravention or involvement in other ways such as aiding, abetting or conspiring towards such a contravention. 5 Section 87(1A) provides, without limiting the generality of s 80, that the Court may, on the application of a person who has suffered, or is likely to suffer, loss or damage by contravening conduct or on the application of the Commission on behalf of such a person or two or more such persons, make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or was involved in the contravention if it is considered that the order or orders concerned will compensate the person who made the application, or the person or any of the persons on whose behalf the application was made, in whole or in part for the loss or damage, or will prevent or reduce the loss or damage suffered, or likely to be suffered, by such a person. Section 87(1B) provides that in a proceeding instituted by the Commission or the Minister under s 80, a person is found to have engaged in contravening conduct, the Commission may make an application under subs (1A) on behalf of one or more persons identified in the application who have suffered, or are likely to suffer, loss or damage by the conduct, but the Commission shall not make such an application except with the consent in writing given by the person, or by each of the persons, on whose behalf the application is made, before the application is made. It will be observed in relation to s 87(1B) that it is a precondition to the making of an application by the Commission under subs (1A) through the authority of subs (1B) that a person has been found to have engaged in contravening conduct of the relevant kind. Consequently, the requirement for obtaining the consent in writing of the person or persons to whom the application relates is one which would not arise until after such a finding had been made. 6 Prior to 13 September 2002 the Federal Court had, on a number of occasions, made orders having the effect of redressing wrongs brought about by contraventions of the relevant provisions of the Act. Such orders included mandatory injunctions against a contravener under s 80 of the Act, requiring the contravener to refund monies paid: Medibank Private Ltd v Cassidy (2002) 124 FCR 40 at [46]. On 13 September 2002 the Full Court of this Court decided that, as a matter of statutory construction, and in view of the operation of s 87 of the Act, s 80 could not be interpreted as giving the Court power to order compensation in favour of non-parties: Medibank Private at [32]. An application for special leave to the High Court in Medibank Private was refused on 20 June 2003. The existing par 9 was formulated prior to the decision of the Full Court in Medibank Private and, as a consequence of the Full Court decision, it is now apparent that the Court does not have the power to make the order sought in that paragraph. For that reason the applicant seeks its deletion. 7 On 12 March 2003, and as a consequence of the decision of the Full Court in Medibank Private, the applicant sought leave to amend its further amended application in terms of a minute of proposed further re-amended application bearing that date. The amendments sought were the deletion of the existing par 9; the insertion of new pars 10, 11 and 12 applying under s 87(1B) of the Act for compensation orders under s 87(1A); and insertion of a new par 9 in terms of the proposed new paragraph seeking findings of fact pursuant to s 83 of the Act. 8 On that occasion counsel for the respondents advised the Court that he did not object to the application for leave to amend. However, the cross-respondent reserved its position so that the issue was held over. The result was that the applicant closed its case subject to obtaining leave to amend the further amended application in the terms proposed. Closure occurred on that date. 9 Subsequently it became apparent to the applicant that it would be premature to apply under s 87(1B) of the Act for orders under s 87(1A) by reason that the Court had not yet made a finding of a relevant contravention. Accordingly, on 17 December 2003 the applicant pressed the application for leave to amend the further amended application held over from 12 March 2003 but did so in terms of a substituted minute of proposed further re-amended application bearing that date. The orders sought in the substituted minute are identical to the orders proposed on 12 March 2003 save that the insertion of the pars 10, 11 and 12 is no longer sought by reason that the Court has not yet made a finding of a relevant contravention. 10 For the respondents the application is now opposed. It is said initially that there is no evidence of any written consent, or any consent, of any person to take the action claiming compensation of the sort claimed in par 9. I agree with the submission for the applicant that it is premature for such consent to be required, as the provisions of s 87(1B) considered above make apparent. 11 Then various aspects of prejudice are contended as being present if the amendment is allowed. When it is appreciated that the proposed amendment to the further amended application bears no relation to the operation of s 87(1A) or s 87(1B) of the Act, the contentions for the respondents in this respect largely fall away. It is not the case that the amendment sought seeks to amend the pleadings or to alter the nature of the case against the respondents. The timing of the application was neither belated nor prejudicial; notice of it was given on 12 March 2003 and the application was made within an arguably reasonable time of the handing down of the decision of the Full Court in the Medibank Private case. Furthermore, the amendment has been made necessary by an unforeseen matter wholly outside the control of the applicant, namely, a change of law resulting from the decision of a higher court. The amendment of itself would not give rise to uncertainty or unlimited legal proceedings for an unlimited time because the safeguards in s 87(1B) must be observed, namely, there must be an adverse finding of fact and the requisite consent. Additionally, the application by the applicant of 12 March 2003 to insert new pars 10, 11 and 12 remains on foot and has not been withdrawn. Any prejudice arising from the application of the section in its terms results from those terms as determined by the Parliament and not from the conduct of the applicant. 12 The submissions for the respondents also rely upon Henderson v Henderson [1843-60] All ER 378 where it was stated by Wigram VC at 381: '… where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matters that might have been brought forwards as part of the subject in contest, but which was not brought forward only because they have, from negligence, inadvertence, or even accident, omitted part of their case.' 13 However, those principles cannot assist the respondents here. The appropriate time for the applicant to make an application under s 87(1B) of the Act is upon a determination being made by the Court that a respondent has contravened a relevant provision of the Act. Further, the cause of action under that subsection does not accrue until the necessary findings of a contravention has been made. 14 The opposition for the cross-respondent is firstly based on a contention that the necessity of the amendments sought by the applicant should be weighed against the injustice which they would cause. In the absence of the applicant seeking the insertion of the new pars 10,11 and 12 referred in its application of 12 March 2003, it cannot be said that discretion should be exercised against granting leave for the proposed amendments because they do not outweigh injustice caused by them. 15 Next it is said for the cross-respondent that in Australian Competition & Consumer Commission v Giraffe World Australia Pty Ltd (1998) 84 FCR 512 at 524 - 526 Lindgren J, adopting the observations made by Drummond J in Australian Competition & Consumer Commission v Shell Company of Australia Ltd (1997) 72 FCR 386, agreed that an application under s 87(1A) and s 87(1B) did not require the commencement of fresh proceeding but could be brought in due course by motion in the proceeding in which relief under s 80 is sought. It is submitted, accordingly, that there is no impediment to the applicant seeking the relief it presently seeks subject to the applicant having the prior consent. It is said, therefore, the only reasonable inference is that the applicant does not have the prior consent and is seeking to discontinue the present claim and institute a new claim once it has that prior written consent. There is no evidence that the applicant has determined to make any such application by notice of motion and I do not regard the inference as reasonably open. Furthermore, it is patent from the wording of s 87(1B) that the time for obtaining the consent has not yet arrived. This, therefore, is not a case where a party has failed to bring forward the whole case on a matter. Furthermore, in Shell Company of Australia the court held that, although the ACCC was not required to claim relief under s 87(1A) of the Act by taking separate proceedings, it did not become entitled to file a motion in that proceeding for such an order until a finding of contravening conduct had been made and the ACCC was not entitled to include a claim for relief under that subsection in the originating application in which it sought relief under s 80. It is clear that issues as to the applicant's entitlement to apply for orders under s 87(1A) of the Act will arise for consideration only if, and when, there has been a finding of contravention and the applicant applies under s 87(1B) for orders under that former subsection. 16 It is important also to note in relation to such submissions that irrespective of any such application by the applicant, consumers who may have suffered loss or damage as a result of the alleged contraventions (and who have not previously been identified in any application by the applicant) will also be entitled to apply for compensatory orders under s 87(1A) of the Act. 17 Finally, in relation to the proposed terms of the new par 9 it was accepted by Davies J in Jones v Sterling [1982] 63 FLR 216 at 221 that the ordinary place for the statement of a finding of fact made by a court is in reasons for judgment and that every finding of fact which the reasons contain is one for the purposes of s 83 of the Act. In Australian Competition & Consumer Commission v Health Partners Incorporated (1998) ATPR 41-604 Mansfield J formally recorded findings of fact. Such an approach reduces the difficulty facing courts in subsequent proceedings of determining whether a particular passage appearing the reasons for judgment contains a finding of fact. The possibility of subsequent proceedings is one which is governed by the statutory provisions determined by the Parliament and is ex post facto the making of any adverse findings as a consequence of the case now brought on behalf of the applicant. 18 Therefore, I do not accept the submission made on behalf of the cross-respondent that the proposed amendment is for the purpose of the applicant itself commencing further proceedings which could, and should, have been brought in these proceedings. 19 Therefore, I consider for these reasons that the leave should be given to amend the further amended application. In so deciding, I do not accept that the grant of such leave would have prejudicial consequences suggested in the submissions for the respondents. I do not regard the application as giving rise to a fundamental change to the pleadings or as having deprived the respondents of the opportunity to consider their position at an earlier and reasonable time on the basis of the proposed changes and of the possibility of conceding the case at the outset or making a payment into court. The content of the relevant statutory provisions has been available to the respondents from the outset and the findings of fact required to be made on the application and the evidentiary base to do it are in no way presently affected by the allowance of the application. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice RD Nicholson .

Australian Competition & Consumer Commission v Emerald Ocean Distributors Pty Ltd

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