Australian Competition & Consumer Commission v StoresOnline International Inc

REASONS FOR JUDGMENT 1 This is a motion on notice filed on 12 June 2009 ('the notice of motion') whereby the respondents (together 'StoresOnline') moved the Court for a direction that, pursuant to s 47A of the Federal Court of Australia Act 1976 (Cth) ('the Act'), the testimony of some 12 witnesses, all of whom live in the United States, be given by video-link ('the direction'). 2 The direction is opposed by the applicant ('the ACCC'). 3 In support of the direction, there was filed in Court an affidavit of Mr Stephen Klotz, the solicitor for StoresOnline, affirmed on 23 June 2009 ('the supporting affidavit'). 4 In the supporting affidavit, Mr Klotz deposed to the following matters as providing the context in which the direction is sought and, indeed, as supporting the direction being made: (1) At para 17 of its fourth further amended statement of claim filed on 12 September 2008, the ACCC alleges that StoresOnline failed to make known to a purchaser or purchasers at the time of purchase that any cooling off period applied when StoresOnline sold their packages in Australia at certain specified Workshops (as that term is defined in the fourth further amended statement of claim). (2) StoresOnline, at para 20 of their second amended defence filed on 30 April 2009, deny the allegations made in para 17 of the fourth further amended statement of claim. (3) StoresOnline propose to adduce the evidence of the 12 witnesses, hereinafter referred to as the 'Cooling Off Witnesses', in support of para 20 of their second amended defence. (4) StoresOnline does not propose to adduce the evidence of the Cooling Off Witnesses for any other purpose. (5) A Mr Hoopes and a Mr Unfried were, at the time of the Workshops, employed by StoresOnline as Workshop managers. A Mr Hellbush was, at the time of the Workshops, an independent contractor engaged by StoresOnline as a Workshop manager. (6) In broad terms, the evidence of each of Mr Hoopes, Mr Unfried and Mr Hellbush is that they: (a) Were Workshop managers at certain of the Workshops; (b) were instructed by Mr Clint Sanderson, the then Senior Vice-President of Sales, to ensure that the three day cooling off period was disclosed to attendees at the Workshops; and (c) instructed Workshop sales staff to disclose the three day cooling off period to Workshop attendees at the point of sale. (7) The balance of the Cooling Off Witnesses were, at the time of the Workshops, employed by StoresOnline as Workshop sales staff ('Sales Staff'). (8) In broad terms, the evidence of the Sales Staff is that they: (a) Were responsible, at certain of the Workshops, for informing purchasers of the StoresOnline packages about the three day cooling off period at the point of sale; (b) received training about their responsibility to disclose the three day cooling off period before participating in Workshops in Australia; (c) participated in the sales of StoresOnline packages to certain of the ACCC's witnesses (those witnesses are identified by each of the Sales Staff); and (d) each had a practice of disclosing the three day cooling off period to customers at Workshops in March 2007 (those practices are described by each of the Sales Staff). (9) Apparently, Mr Hoopes and two of the Sales Staff are no longer employed by StoresOnline. 5 In the supporting affidavit, Mr Klotz further deposed to the following considerations as being relevant to the exercise of the Court's discretion in relation to the direction and, indeed, as supporting the direction being made: (1) The total cost to StoresOnline of arranging for the Cooling Off Witnesses: (a) Return flights from Salt Lake City to Sydney; (b) accommodation and meals in Sydney for one night and one day and taxi transfers to and from Sydney airport would be between AUD$52,278.46 and AUD$80,558.50. (2) If the Cooling Off Witnesses are required to attend a trial in Sydney: (a) To the extent that they would otherwise (during the period when they are travelling to and from Sydney) have been participating in the conduct of Workshops, they will be prevented from participating in those Workshops; and (b) they will lose the opportunity to earn any commission at any Workshops they are prevented from attending. (3) Potential disruption to StoresOnline's business was cast in the following way: (a) StoresOnline conducts presentations throughout the year save for a period of approximately two weeks starting on or about 25 December and a period of approximately two weeks starting on 1 July. (b) generally speaking, throughout the year, the practice of Workshop teams (including the Cooling Off Witnesses) is to work for two weeks and then take one week's leave; (c) all of the Cooling Off Witnesses (assuming they continue to be employed or engaged by StoresOnline) will be involved in Workshop presentations in the United States in November and December of 2009 and will be involved in Workshop presentations in the United States and, possibly elsewhere in the world, in March and April of 2010; and (d) if the Cooling Off Witnesses were to attend the trial in Sydney, it is likely that StoresOnline would be required to cancel or re-schedule certain of the Workshops that would be scheduled to take place during the period while the Cooling Off Witnesses were travelling to Sydney, giving evidence at the trial and returning to the United States. (4) There are numerous videoconference facilities in the United States. The cost of hiring videoconference facilities for the estimated duration of the cross-examination of the Cooling Off Witnesses was less than 15% of the total cost of bringing them to Australia. (5) StoresOnline is prepared to make all necessary arrangements and bear the cost of making those arrangements for the effective taking of the evidence of the Cooling Off Witnesses via a videoconference facility or facilities. 6 In addition, senior counsel for StoresOnline made the following oral submissions in support of the direction being made: (1) The evidence of the Cooling Off Witnesses only goes to a business practice which StoresOnline had in place; their evidence is 'not purporting directly to contradict' the ACCC's witnesses. (2) That he had personal experience of cross-examining witnesses, not only in this Court but in other courts, for up to a couple of days over videolink and there had not been demonstrated in the experience of the courts any difficulty about following this method, even where large volumes of documents were involved; and here, three of the Cooling Off Witnesses are only required for three hours each and the other nine Sales Staff over a total period of three days (two hours each). (3) To require the Cooling Off Witnesses to travel so far for such short periods of time is an enormous imposition involving them in financial detriment as indicated in the supporting affidavit; and they have not been tested by StoresOnline up to this point as to whether they are willing to come here - they are not compellable, any of them, even the ones who still work for StoresOnline. On the other hand, as senior counsel for the ACCC pointed out, it was significant that there was no evidence that any of the Cooling Off Witnesses are not prepared to come to Sydney for the time they are required during the hearing. (4) That for a full week, StoresOnline's business would be completely compromised in the United States by the loss of an entire sales team. Indeed, it was suggested that StoresOnline's business 'would be stopped for a week'; although senior counsel for StoresOnline subsequently resiled from this position in the face of senior counsel for the ACCC pointing out StoresOnline 'has literally dozens and dozens and dozens of employees who fly around the world conducting these Workshops'. (5) That the evidence of the Cooling Off Witnesses was not 'centrally important evidence' to the determination of the case although, as indicated below, this was also disputed by senior counsel for the ACCC. (6) That the anticipated cross-examination of the Cooling Off Witnesses did not fit into the category of being '… lengthy and complex … in modern litigation'. 7 In opposing the making of the direction, the ACCC made the following submissions going to the context in which the direction is sought: (1) There are three categories of issue central to the case: (a) Whether StoresOnline breached various provisions of the Section 87B (of the Trade Practices Act 1974 (Cth)) Undertaking given to the ACCC; (b) whether StoresOnline made misrepresentations about price and other matters in selling their services in Australia; (c) whether the internal compliance systems of StoresOnline were and are adequate to provide assurance that contraventions of the kind alleged will not recur. The cross examination of the Cooling Off Witnesses will go to the first and third of those issues. (2) It is common ground that it was a term of the Section 87B Undertaking that StoresOnline: [W]ill make known to any person who purchases any StoresOnline packages in Australia, both before and at the time of purchase, that any purchaser who contacts [StoresOnline] in writing by email or facsimile within three business days of purchasing any StoresOnline package will be allowed to return the product for a full refund. (3) The ACCC has filed and served affidavits from 15 purchasers of StoresOnline packages in Australia who say that they made their purchase without any cooling off arrangements having been made known to them. StoresOnline has served affidavits from the Cooling Off Witnesses, on which StoresOnline proposes to rely, on the issue of whether the cooling off provision of the Undertaking was breached. If the evidence of StoresOnline on that question is accepted it would follow that the evidence of the ACCC's witnesses would not be believed. For example, Norman Scott Alger says that he was the Table Closer responsible for assisting sales consultants by verifying all sales processes had been completed according to guidelines at various Workshops. He refers to a list of Workshops and identifies the Workshops at which he was a sales closer. He identifies those Workshops by reference to a document which he was told by an in-house lawyer, was exhibited by another of StoresOnline's witnesses. The Workshops attended by Mr Alger include those attended by the ACCC's witnesses Antony Dean, Dominica Cecilia Smith, Jill Foster and Ali Haddad. He says that he was the sales representative who closed the sale with Dominica Smith. He annexes a copy of the business to business order form signed by Ms Smith and he says initialled by him. He describes a practice which he says was his practice in relation to all sales in March 2007, being the month in which the four witnesses of the ACCC identified above made their purchases. He says that part of that practice was that he said the following words to the Workshop attendee: On the back of this form is your three day right to cancel. Also, if you want to cancel you must do so by the date stamped right here. [Referring to the standard order form] The Court cannot accept the affidavit of both Ms Smith and Mr Alger. The Court is unlikely to accept the evidence of Antony Dean, Jill Foster or Ali Haddad if it accepts the evidence of Scott Alger. Conversely, it is unlikely to accept the evidence of Scott Alger if it accepts the evidence of the ACCC's witnesses. Nine of StoresOnline's witnesses have sworn affidavits in substantially the same form and terms as that of Mr Alger. (4) Each of the remaining Cooling Off Witnesses is said to be a workshop manager responsible for managing the team of workshop Sales Staff and ensuring compliance by that team with all legal and ethical obligations. The affidavit of each is substantially in the same form and each is to the effect that they operated a compliance system such that their teams were unlikely to have failed to make known the cooling off periods. Each will be cross-examined at length on the StoresOnline compliance systems, including but not limited to the cooling off period. The cross-examination of each will involve putting to each of the three workshop managers a large number of documents. For example, each of those witnesses may be taken to each of the very many scripts produced by StoresOnline as being the scripts controlling the presentation of Workshops in Australia during the relevant periods; to the detailed evidence of other witnesses of StoresOnline as to the systems for ensuring that Workshop presentations occurred substantially in accordance with those scripts, the numerous transcripts of presentations in fact given by each of those presenters and the extensive evidence filed by StoresOnline on their compliance systems. There are currently 23 full thickness ring binders constituting what will become the Court Book. Each of these three witnesses could be taken to documents occupying at least half of that Court Book and certain documents not in the Court Book. In each case some of the documents to which the witness will be taken will be original documents. (5) Further, the nine other Cooling Off Witnesses will be cross-examined on each aspect of the compliance systems of which they were aware or which impacted on the performance of their roles. Each may be taken to documents occupying up to five volumes of the Court Book and certain documents not in the Court Book. In each case some of the documents to which the witness will be taken will be original documents. 8 The ACCC then made the following submissions as to the general principles against which the motion should be determined: (1) The power to make the direction is conferred by s 47A(1) of the Act. That subsection provides: The Court or a Judge may, for the purpose of any proceeding, direct or allow testimony to be given by videolink, audiolink or other appropriate means. (2) Section 47C provides: (1) The Court or a Judge must not exercise the power conferred by subsection 47A(1) or section 47B in relation to a video link unless the Court or the Judge is satisfied that the following conditions are met in relation to the video link: … (b) the place at which the remote person is located is equipped with facilities (for example, television monitors) that enable all eligible persons present in that place to see and hear each eligible person who is present in the courtroom or other place where the Court or the Judge is sitting; … (6) For the purposes of the application of this section to a particular proceeding, eligible persons are such persons as the Court or a Judge considers should be treated as eligible persons for the purposes of that proceeding. (Emphasis in original) (3) The discretion in s 47A is to be exercised judicially. (4) It is to be exercised recognising 'that there are deficiencies when evidence is taken by videolink when compared with evidence given viva voce' per Spender J in Australian Competition and Consumer Commission v World Netsafe (No. 1) (2002) 119 FCR 303 at 305. His Honour continued by quoting from Giles CJ of the Commercial Division of the Supreme Court of New South Wales, in Sunstate Airlines (Qld) Pty Ltd v First Chicago Australia Securities Ltd (unreported, NSWSC, 11 March 1997) at [4]: Cross-examination may be more difficult when video evidence is taken because documents have to be transmitted or produced in an unfamiliar manner, because of the delay in voice transmission, or for other reasons and the effectiveness of cross-examination as a weapon in the fight for truth should not be unduly hindered. And in many cases the court is assisted in fact by observance of what is misleadingly called the demeanour of the witnesses upon which the taking of video evidence may impact. Those observations of Spender J were cited with approval by a Full Court of this Court in Odhiambo v Minister for Immigration & Multicultural Affairs (2002) 122 FCR 29 at [97]. 9 The ACCC then made the following submissions in relation to the application of these general principles to the context recounted in [7] above: (1) The ACCC will not be constrained to cross-examining the Cooling Off Witnesses on the cooling off period issue; they will also be cross-examined in relation to the other allegations of breach contained in the statement of claim, as well as on the systems and procedures in place in relation to ensuring compliance with the Undertaking. In those circumstances, it is apparent that even in determining the narrow question of breach of the cooling off provision of the Undertaking, the Court will be called on to determine a question of the credit of the nine Sales Staff. It is also apparent that in any cross-examination going to that credit it is likely that each of those witnesses will be taken to the various documents to which they refer in their affidavits, including to their physical form and the manner in which reference was made to them. (2) That cross-examination will involve very substantial documentation being put to witnesses, some of it being original documents. In those circumstances, cross-examination will require the attendance in each remote location of an agent of the ACCC who will need to have available the whole 23 volume Court Book and certain other documents. The cross-examination on documents through use of an agent will be substantially slower than if it were conducted viva voce. There will also be the obvious risk of confusion as to documents arising in the context of a remote agent being required to identify the documents to which cross-examining counsel are referring. (3) Mr Klotz, in the supporting affidavit at [12], refers to the ACCC's estimate that the Cooling Off Witnesses will be required for cross-examination totalling about a week. That estimate was an estimate of cross-examination viva voce. The time required for cross-examination will be greater if done by videoconference for the reasons outlined above. Further, Mr Klotz at [39] sets out the time differences to apply. For case management purposes the Court would need to proceed on the basis that if it were to take the evidence by videoconference it would do so for half a day each day. Mr Klotz makes clear that the witnesses would be spread around the United States and appearing at numerous videoconferencing facilities (at [38]). It is inevitable that delays will occur as examination at one facility finishes and switchovers occur to other facilities. The combination of taking longer in cross-examination and the difficulties of timetabling more than five full days of evidence across a series of half days to numerous videoconferencing facilities raises the obvious prospect of an increase in the length of the trial by at least a week. While the ACCC does not know the costs incurred by StoresOnline, the Court could readily conclude that the professional costs of the parties represented by four counsel and solicitors for a week will substantially exceed the cost difference estimated by Mr Klotz, being the costs of viva voce cross-examination as compared to videolink at $52,278 - $7,472 = $44,806 (Klotz at [13] and [36]). (4) Further, StoresOnline assumes that the ACCC would be able to cross examine the Cooling Off Witnesses with them sitting in a videoconference facility accompanied only by a person with a Bible or alternative (Klotz at [38]). That assumption is wrong. In each case it will be necessary for the ACCC to have an agent in attendance with the 23 volume Court Book and certain other documents. The prospects of logistically achieving that at locations across the United States without interruption to the Court's program are very slight. If numerous agents are required, the costs, not considered by Mr Klotz in his calculations, would be substantial. 10 In conclusion, the ACCC submitted that the motion should be refused, with costs because: (1) The cross-examination of witnesses on credit issues and on voluminous documents will be inadequate if done by videolink; (2) StoresOnline's proposal for videoconferencing at numerous locations across the United States is impracticable when the ACCC will be putting numerous documents to witnesses in cross-examination; (3) the risks of a substantial blow-out in the length of the trial are substantial - meaning the savings identified by StoresOnline may be illusory; and the public interest in the efficient use of court time will be damaged. In any event, the savings identified by StoresOnline fail to account for the potentially substantial costs of the ACCC's agents who will be required at each videoconference venue.