CONSIDERATION
152153 Put in composite form the ACCC's case is that Radio Rentals and Walkers Stores knew or ought to have known or were recklessly indifferent to the circumstances that, from how Mr Groth presented and from its own records, he suffered significant and serious disadvantages such that it was unlikely to be in his best interests to enter into his various agreements with Radio Rentals and Walker Stores and that incurring his monthly liabilities to them resulted in financial hardship.
153154 It is generally contended that he presented as childlike and the Radio Rentals sales personnel ought to have been aware of this. Dr Wood's assessment of Mr Groth, it is said, should be accepted as accurate. Apart from the circumstances of his entry into the rental, loan and service agreements, aspects of Mr Groth's other dealings with Radio Rentals (in relation to service calls for minor user problems, phone calls generally and overpayments of monthly liability) or Radio Rentals own records of those dealings (especially in his credit histories and service records) were out of the ordinary and ought to have alerted Radio Rentals both to his inability to conserve his own interests and to the financial hardship he suffered. As to the last of these, reliance is placed on the various calculations relating to his financial circumstances contained in Schedules C and E to the applicant's pleadings.
154155 The respondents' case, in contrast, was that Mr Groth's presentation and verbal skills as revealed in court and to the medical witness were such that his disability was not apparent. Neither was it, nor ought it to have been, known by Radio Rentals' employees. Reliance is placed upon Professor Goldney's opinion as to the importance of context in making judgments about a person's capacities. Further, it is said, there is no evidence that the terms of the agreements were inherently unfair or burdensome or that Radio Rentals staff took unconscientious advantage of Mr Groth. The case of financial hardship is not supported by the evidence. The contentions as to allegedly unrealistic information in the credit applications and to inadequate monthly surpluses do not have a foundation in the evidence for a finding of unconscionable conduct by reason of the approval of credit based on the information supplied by Mr Groth. It was not open on the pleadings to challenge Radio Rentals' credit application and approval procedures as being inappropriate. Even accepting the figures in Schedule C, Mr Groth had surplus funds available for expenditure. He only fell into financial difficulties in early 2002 when he began to spend significant sums on his other credit cards.
155156 My own views are as follows. I am satisfied that Mr Groth suffers both from schizophrenia and intellectual retardation which is at least borderline. I similarly am satisfied that his reading, spelling and mathematical abilities are quite limited and that while he has some capacity to operate ordinary machines and appliances, it is nonetheless fairly limited. Having said this I do not unqualifiedly accept Dr Wood's assessment of him. It involves judgments as to Mr Groth's oral expression, comprehension, memory and capacity to compensate for his disability which are inconsistent both with my own appreciation of him from his court appearance and with what is revealed in aspects of the evidence before me.
156157 It is unnecessary that I express a definitive view on the precise extent of Mr Groth's disability. The issue before me is not whether he had the capacity to contract. Rather it is with whether those who contracted with him would have known, or ought to have known, that he was specially disadvantaged. This places the focus upon what was, or ought to have been, evident to those dealing with him about his disabilities and incapacities.
157158 Necessarily, I observed Mr Groth closely when he gave evidence. As I earlier indicated, while his speech was somewhat slow and his diction slightly distinctive, he was fluent and clear in what he said. His language was not that of an educated person but neither was it childlike. His dress was neat. His manner courteous. In some matters he displayed a considerable memory. While he gave evidence of his own limitations, I do not consider that he obviously or immediately presented as being mentally retarded by virtue of his appearance, speech or manner of communication. I thus agree with Professor Goldney's appreciation both of how Mr Groth could present and of his speech. I clearly disagree both with Dr Wood's views as to his language use, presentation, memory and capacity to comprehend concepts and with the ACCC's characterisation of Mr Groth's performance before me.
158159 I accept Professor Goldney's opinion that Mr Groth's history in general medical settings indicated that at times he was well able to present himself in a manner which did not immediately suggest he was markedly intellectually disabled. I consider that this clearly occurred in some of his dealings with Radio Rentals personnel as I will indicate. I equally accept Professor Goldney's opinion that assessments of Mr Groth's capacities are likely to be affected by the context in which an assessment is to be made. I do not consider that his disabilities are so evident as to invite suspicion as of course, whatever the setting.
159160 Turning to Mr Groth's dealings with Radio Rentals personnel, it is significant that none of the salespersons who were called and who had a memory of him knew or suspected he was intellectually disabled. The evidence of what transpired as each agreement was made - to the extent that there is evidence at all - is not particularly reliable and often somewhat contradictory. Memories are unreliable and what may in fact have been reconstructed can assume the character of reality. Having said this I accept the evidence of the salespersons' perceptions of Mr Groth. What they said is consistent with the view I arrived at after close observation of him. I should add, because of the attention paid to this matter by the ACCC in its cross-examination of the salespersons, that the types of encounters they had with Mr Groth on the sales floor were not such as would necessarily or at all invite suspicion about his intellectual capacity. If on occasion protracted because of the time involved in obtaining credit approvals, the various encounters appear to have been routine and perfunctory in a setting which would not naturally invite critical appraisal of a person such as Mr Groth.
160161 On a number of occasions, Mr Groth explained to the salesperson the reasons for his wanting a particular appliance; on others, he specified the make of appliance he wanted; and again, on several occasions, he made prior phone contact concerning an appliance after which he saw the salesperson to whom he spoke. His conduct on such occasions was consistent with the projection to those with whom he dealt of an ability to determine, and to make choices about, what was in his own interests even if such was not in fact the case.
161162 Equally Mr Groth's politeness and evident attentiveness were themselves together probably capable of conveying comprehension of explanations given to him when the contrary may well have been the case.
162163 While the ACCC placed considerable emphasis upon Mr Groth's inability to read and understand the terms and conditions of his various agreements, it does concede (in the particulars to par 95.3 of the Further Amended Statement of Claim) that he understood what I would regard as the central characteristics of the agreements into which he entered. Though the Radio Rentals salespersons gave evidence of their "usual practice" in explaining agreements to customers - evidence necessitated by a lack of memory of what they actually did with Mr Groth - it seems likely that, with Mr Groth being a regular rental customer, such explanation as was given of the general, as opposed to the specific and distinctive terms, of the various agreements he entered into was attenuated because of an assumed, though incorrect, understanding attributed to him.
163164 The manner in which the credit applications were filled out and the figures contained in them were generated have to be considered in the light of what I have already said. If Mr Groth had not otherwise given the salespersons reason to suspect his disabilities, did his various credit applications do this? I limit the inquiry to his disabilities because knowledge of them is intrinsic to the ACCC's composite claim.
164165 By way of preface to answering this I should make the following comments. I am satisfied that the living expenses and monthly income figures that appeared in the credit applications were ultimately based upon information supplied by Mr Groth save where they were default figures (I except the twentieth and twenty-third agreements from this). I say "ultimately" for this reason. I consider it likely that in the "manual" application period, the living expenses figure was often carried forward from one agreement to the next. I am not prepared to infer that Radio Rentals' salespersons routinely put figures into the credit applications without Mr Groth's involvement in the process. It may well have been the case that the carry forward occurred with Mr Groth's knowledge at the time because he had been asked on each occasion whether his expenses had changed. I consider a like-process probably explains the carry forward of the default figures.
165166 It is clear from their evidence that the salespersons called regarded themselves as amanuenses in the filling out of the application forms. Others, not they, were responsible for determining whether the application made should be approved. If they did not consider themselves the gatekeepers of the approval process, it is unsurprising they seemed not to have scrutinised critically the figures in the credit applications. I should add I do not consider the cross-examination of them on the issues of living expenses and monthly surpluses as being of assistance for present purposes. They did what they did in a particular setting on a particular basis. The cross-examination, in effect, asked them to venture opinions on matters in which they did not see themselves at the relevant time as having any real function although there is some inconsistent evidence about the querying of low living expenses figures.
166167 If the credit application forms were capable at all of generating suspicions with anyone in Radio Rentals, it could only have been with the credit assessment personnel. I will deal with them later.
167168 The final matter concerning the applications to which I need presently refer concerns the twentieth and twenty-third agreements. I do not consider that the two credit applications made for the twentieth agreement have probative value in this proceeding. The monthly income figure given is clearly inaccurate. There is sufficient uncertainty about the accuracy of the living expenses figure for me not to be able to conclude that it is accurate. It is not a default figure; it deviates significantly from what preceded it in earlier agreements; and it could, along with the monthly income figure, be ascribable to human error.
168169 I conclude, then, in relation to the Radio Rentals sales personnel who gave evidence that Mr Groth's disabilities and incapacities were not sufficiently evident to any of them as to fix Radio Rentals with knowledge of those disabilities and incapacities.
169170 As I have foreshadowed when dealing with their evidence, I have reached a like conclusion in relation to the service technicians who gave evidence. The only additional comment I would make is that Mr Smith and Mr Richards both emphasised that their calls to Mr Groth's unit were for problems which were not out of the ordinary compared with other Radio Rentals customers. An inability to set clocks and timers on electrical appliances is not necessarily suggestive of mental incapacity.
170171 I likewise accept the evidence of the two witnesses from the call centre who gave evidence - Mrs Karutz and Mrs Lawrence - that they had no reason to suspect he suffered the disabilities with which this proceeding is concerned.
171172 There is then no basis for finding that any of Radio Rentals personnel who actually dealt with Mr Groth knew or ought to have known that he was in a position of special disadvantage when entering into the various agreements.
172173 When one turns to the case as pleaded against Radio Rentals and Walker Stores, I would, in consequence, be compelled to reject one of the foundations of the ACCC's case. This is, that when the companies entered into their agreements with Mr Groth they knew or ought to have known "from Mr Groth's presentation and verbal skills" that he was a person with an intellectual disability; he could not read the agreements; he could not understand all the terms and conditions of the agreements; he was unable to understand all the rights etc he had under the agreements; and he was unable to make a worthwhile judgment about whether entering into the agreements was in his best interests: see Further Amended Statement of Claim pars 95.1-95.5 and 97.1-97.5. The evidence simply does not support a finding that Mr Groth's presentation and verbal skills made those matters "sufficiently evident" (to use Deane J's shorthand description in Amadio) to the two companies.
173174 It is then unsurprising, as the respondents have noted in final address, that the ACCC's case during cross-examination became focused on Radio Rentals records concerning Mr Groth and on the alleged financial hardship suffered by him. So emphatic was this that, as I earlier noted, the ACCC sought in oral submissions to propound a stand alone case that the respondents took advantage of Mr Groth because it knew his financial circumstances and in particular that he had an inadequate monthly surplus.
174175 The use the ACCC seeks to make of Radio Rentals' records is somewhat more expansive than the Further Amended Statement of Claim would mandate. Be this as it may the telephone records reveal 329 calls to Radio Rentals' various phone numbers between February 1998 and November 2001. It is submitted that this was an extraordinary number of calls which must have placed Radio Rentals on notice that Mr Groth was unable to operate the goods he was renting or was unable to manage his money. The ACCC contends that the Service department records which record that 73 faults were reported by Mr Groth during the period December 1996 and May 2002 took, reveal the former of these incapacities; the credit histories, insofar as they disclose both Mr Groth's frequent inquiries concerning both where he was up to in repaying his accounts and his regular overpayments, disclose the latter.
175176 I have a variety of difficulties with these contentions. The various communications made by Mr Groth to the call centre which were entered in Mr Groth's credit and service histories were made by individual Radio Rentals employees. The submission does not suggest that any individual operator had or ought to have had the knowledge that the ACCC ascribes to Radio Rentals, although that operator did have at least the knowledge of what was entered at the time of its entry. Rather it seems to be based on an aggregation of what was so known by each individual call centre operator, with Radio Rentals being ascribed such knowledge about Mr Groth as that aggregated information might reveal.
176177 In support of this somewhat startling proposition, the ACCC relies upon the observation made in the joint judgment of the High Court in Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 582-583:
"As Bright J said in Brambles Holdings Ltd v Carey [(1976) 15 SASR 270 at 279]:
'Always, when beliefs or opinions or states of mind are attributed to a company it is necessary to specify some person or persons so closely and relevantly connected with the company that the state of mind of that person or those persons can be treated as being identified with the company so that their state of mind can be treated as being the state of mind of the company. This process is often necessary in cases in which companies are charged with offences such as conspiracy to defraud.'
A division of function among officers of a corporation responsible for different aspects of the one transaction does not relieve the corporation from responsibility determined by reference to the knowledge possessed by each of them …"
177178 I would note a like submission in the Victorian Court of Appeal in Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 in reliance on the above passage to aggregate certain facts known to various company servants and agents so as to give rise to a factual totality from which a dishonest intent, held by none of the individuals, might be inferred. The submission was rejected. In the words of Tadgell JA at 145; see also Ashley AJA at 160-161:
"Neither that passage in Krakowski nor any other principle justifies the simple aggregation of the knowledge of a number of persons individually unaware of fraud, or facts which ought to disclose it, to create a notional person with a dishonest intent. The High Court in Krakowski was not purporting in the passage relied on to lay down any such principle but to authorise a consideration of the knowledge and circumstances of all relevant persons - including what may properly be inferred - in order to ascertain the mind of the corporation."
178179 In my view the situation is no different where the aggregated knowledge to be attributed to a company is a prerequisite to a finding that it engaged in unconscionable conduct (or an equitable fraud). The present submission cannot properly be characterised as one in which the individual operators who recorded entries etc were involved in "different aspects of one transaction". The records embody unrelated events, transactions and communications. There has not been - and on the state of the pleading could not be - any suggestion that the records sought to be aggregated have been contrivedly or artificially kept in a disaggregated form. There is, I would add, no evidence either that it was the duty of any Radio Rentals employee to monitor customer records to discern suspicious or out of the ordinary occurrences in those records or that any employee actually interrogated records in circumstances that would have alerted a reasonable person to suspicious or out of the ordinary occurrences in the records interrogated. In such circumstances, the state of mind to be attributed to Radio Rentals can be no different from, and no less innocent than that of, the personnel who made the entries in its records.
180 Mr Groth's pattern of overpayment may well have invited suspicion in the context of the other matters relied upon in the composite claim, had those other matters been established. Of itself, it cannot sustain the burden the ACCC imposes on it. A practice which results in the early payment out of a rental agreement and an accelerated opportunity to purchase the appliance in question is too neutral in character for it to be able to be said, reasonably, that it made Mr Groth's inability to conserve his own interests sufficiently evident, especially in a context in which he sustainedly met his obligations to the respondents. The overpayment on service agreements appears, as will later be seen, to have led to the raising of seven further such agreements without Mr Groth's consent. These are dealt with separately below. Further, while the records can be said to show the pattern relied upon, that of itself does not establish that Radio Rentals can be imputed with knowledge of that pattern and of its possible consequences for him in light of what his credit applications revealed, for the reasons I have given above in relation to aggregation of information.
179181 If the ACCC's submission were to be accepted to its full extent as put, it would have potentially alarming consequences for large, multi-function, corporations. It could also raise, potentially, rather significant privacy issues.
180182 In rejecting the submission in the circumstances of this matter I am not suggesting that in no circumstances can or should disaggregated information be aggregated. While I express no concluded view on this matter, I incline as have others to the view that separate information held by an officer or agent of a corporation can be aggregated with information held by another at least where the first such person has "the duty and the opportunity to communicate it to the other": Re Chisum Services Pty Ltd (1982) 1 ACLC 292 at 298; see also Macquarie Bank Ltd, at 161-2.
181183 The final comment I would make is this. The contexts can vary widely in which the question of attribution of knowledge to a corporation can arise in virtue of knowledge possessed by one or more of its officers and agents: cf for example, Beach Petroleum N L v Johnson (1993) 115 ALR 411 at 566; Dunlop v Woollahra Municipal Council [1975] 2 NSWLR 447 at 484-485; Elliot v Nanda (2000) 111 FCR 240. Here I confine myself to circumstances in which what is sought by the aggregation of the knowledge is to alter the character of that knowledge when it is attributed to the employer corporation where no justification for the aggregation (e.g. participation by several employees in the same transaction) has been made out.
184 There are twois one distinct matters concerning Radio Rentals' records that requires mention. First, I have earlier referred to instances of inconsistencies and errors in some number of the credit applications submitted for approval. The ACCC has pleaded that Radio Rentals knew or ought to have known from its records that some credit applications submitted by its employees contained information that was incorrect, unrealistic and inadequate. Insofar as this claim relates simply to a failure to detect errors of calculation in respect of Mr Groth's actual monthly rental liability and misstatements of Mr Groth's monthly income, the submission is without substance. While the evidence discloses instances of human error, there is no suggestion the credit application and approval procedures were inadequate or inappropriate in the circumstances. There is no evidence in any instance of the credit approval personnel being put on inquiry by the terms of a credit application itself. There is no evidence to suggest that any particular employee had a duty to check the applications against Radio Rentals records. This is simply no justification advanced for the submission that the respective bodies of information are able to be aggregated so as to disclose these errors. Secondly, at the risk of undue repetition, the credit histories revealing overpayments by Mr Groth cannot properly be aggregated with the individual credit applications to impute a knowledge to Radio Rentals that his actual circumstances were different from, and worse than, the position stated in the application.
185 To the extent that the ACCC's complaint is that the credit applications revealed unrealistic and inadequate living expenses and monthly surpluses from time to time, it is, in essence, one of knowledge of financial hardship.
184186 As I have earlier indicated, the ACCC at the end of oral submissions sought to put its case on either of two bases. The first was the composite case which focussed primarily upon what Radio Rentals knew or ought to have known of Mr Groth from his presentation and verbal skills but which focussed as well on the financial hardship Mr Groth experienced because of the level of his monthly rental liability from time to time as revealed in his credit applications. The second was a stand alone case of taking advantage of Mr Groth because it knew of his financial circumstances.
185187 The respondents have objected, properly in my view, to the ACCC now seeking to make out the stand alone case. It was not pleaded as such. I have already referred to the scorecards system for the grant of credit approval used by Radio Rentals and to the fact that approvals were given to Mr Groth's rental and loan applications. The stand alone case, as best I understand it, necessarily involves an attack on Radio Rentals credit application and approval procedures. Yet it has not led evidence to this end. There is nothing to suggest that these procedures were inappropriate, uncommercial or inconsistent with ordinary credit approval practices in the period from 1996 to 2002. Neither, given the manner in which the case was pleaded and opened, were the respondents given appropriate notice of the stand alone case and the corresponding opportunity to justify its credit approval procedures and the setting, for example, of minimum monthly surpluses and of default figures for living expenses.
186188 A case of inflicting financial hardship alone is a quite different one raising a quite different inquiry from one in which financial hardship is relied upon to demonstrate advantage taking where the cause of the disadvantaged position of the person suffering hardship is separately identified and is relied upon, as here, to establish why a particular person was known, or ought to have been known to be, unable to conserve his or her own interests.
187189 In a stand alone case, where all that is seemingly relied upon to prove unconscionable conduct is that the allegedly disadvantaged person overcommits himself or herself, questions of individual autonomy and of the extent of one's responsibility to one's neighbour loom large. Such issues have not been seriously agitated in the ACCC's late discovered case.
188190 If that case had been properly pleaded and pursued, this would have been a very different proceeding from that which I entertained. As I foreshadowed, it is far too late and unfair for the ACCC to be allowed to run it now.
189191 My earlier findings in relation to what Radio Rentals knew or ought to have known from Mr Groth's presentation and verbal skills and from its records other than from what was revealed in the credit application, leaves the ACCC, for practical purpose, relying upon the allegation of known financial hardship in circumstances where I have rejected the balance of their composite case. This, in my view, dooms the case as pleaded to failure in any event.
190192 Nonetheless I will make the following observations on financial hardship in the context of the composite case. If, contrary to my findings referred to above, the ACCC had established that Radio Rentals knew or ought to have known of Mr Groth's inability to conserve his own interests, the hardship part of that case would itself have been given colour and significance by that factual setting and by what Radio Rentals otherwise knew or ought to have known about Mr Groth. Stripped of that setting and knowledge, it necessarily wears a somewhat different complexion.
191193 Considered from Radio Rentals standpoint, Mr Groth becomes a customer whose credit applications and the approval process reveal as being prepared to submit a significant percentage of his income from time to time to the renting and purchasing appliances from Radio Rentals. For more than five years he maintained an exemplary credit. And in respect of each application he satisfied Radio Rentals minimum monthly surplus requirement. Even accepting that the figures given for living expenses could be said on occasion to be unrealistically low (at least before the advent of the default figure), a hardship case necessarily had to demonstrate that a person in Mr Groth's position, having his circumstances and needs, would generally be unable to afford the basic necessities of living from the sum represented from time to time by the aggregate of the living expenses and monthly surplus disclosed in the credit applications. Proof of that was a matter of evidence, not of judicial notice. I would note in passing that in the schedule relied upon by the ACCC to demonstrate financial hardship based on Mr Groth's monthly liabilities (Schedule C), that aggregate figure at its highest is $507.20; at its lowest is $350.54; and is on average $414.68.
192194 I have excluded from the above any discounting of the aggregate sum because Mr Groth regularly paid Radio Rentals more than his actual liability. I have done this because, as I have earlier indicated, I do not consider that that information can simply be aggregated with the information contained in the individual credit applications to fix Radio Rentals with knowledge that Mr Groth's actual financial circumstances might be worse than revealed in his credit applications when processing those applications.
193195 The evidence that Mr Groth actually experienced financial hardship because of his monthly rental and loan liabilities to the respondents is quite unsatisfactory. The evidence establishes he was single; he went out only very occasionally; and he did not socialise. His needs, apparently, were few. But if, as Mr Groth said in evidence, he spent $30 to $40 a week on food - "[t]hat was only left" - there is little by way of explanation of how he spent the balance of the aggregate sums to which I have referred (beyond his regular overpayments to Radio Rentals which clearly reduced his available monthly funds but for which Radio Rentals bore no knowing responsibility). To the extent that there is evidence that Mr Groth fell into actual financial difficulties, this occurred in early 2002 after he made substantial commitments on his charge cards with other retailers. His actions at that time again demonstrated his inability in fact to conserve his own interests. But those difficulties were not the consequence of unconscionable conduct on the respondents' part. I should add that I have derived little assistance in this matter from Mrs Vickers' evidence of the extent to which she supported Mr Groth in the second half of 2002. His inability to manage his finances by that time had clearly manifested itself and led in time to the unravelling of his relationship with Radio Rentals after it was put on notice of his disability.
194196 Mr Groth's actual circumstances may have bordered on the straitened. But I am not satisfied on the evidence that the ACCC has made out its case of financial hardship in fact of which Radio Rentals was or ought to have been aware and for which it bore responsibility.