Australian Securities and Investments Commission v Kobelt

IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION SAD 100 of 2014

BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

JUDGE: WHITE J DATE: 10 October 2014 PLACE: ADELAIDE

EX TEMPORE REASONS FOR JUDGMENT 1 In this action, the Australian Securities and Investments Commission (ASIC) alleges unconscionable conduct by the respondent in the manner of his provision of credit to customers in relation to the sale of motor vehicles or other goods and services. That conduct is said to have involved the respondent taking possession of customers' debit cards, requiring the disclosure by them to him of their personal identification numbers and, from time to time, deducting amounts from their accounts in repayment of the debts owed to him. ASIC's claims against the respondent include an allegation that he has contravened s 29 of the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act), which proscribes a person engaging in "credit activity" if the person does not hold a licence authorising the person to engage in the credit activity. 2 ASIC's allegations relate to the respondent's conduct in relation to 117 members of the communities living on the APY Lands in the far north of South Australia. The respondent conducts a general store at Mintabie on those Lands. 3 On 26 June 2014, I dealt with an application by the respondent for further and better particulars of ASIC's statement of claim: Australian Securities and Investments Commission v Kobelt [2014] FCA 737. I rejected the application for further and better particulars in respect of several pleas but ordered that particulars be provided in relation to two paragraphs. In addition, ASIC had undertaken voluntarily to provide further and better particulars of other paragraphs. 4 I directed that ASIC provide both the ordered and volunteered particulars by filing an amended statement of claim. ASIC now seeks the vacation of that order, and instead seeks leave to file and serve an amended originating application and an amended statement of claim which departs from that originally filed. The amended statement of claim recasts, in some respects, ASIC's claim and some of the pleas which had been impugned by the respondent previously and, in other respects, provides further particulars of ASIC's claim. 5 The respondent opposes a grant of leave to ASIC to amend the statement of claim in the form proposed. He challenges five principal pleadings in the proposed document. 6 In dealing with the application, I keep in mind the provisions in r 16.02 of the Federal Court Rules 2011 (Cth), in particular, the requirement in r 16.02(1)(d) that a pleading state the material facts upon which a party relies which are necessary to give the opposing party fair notice of the case to be made against that party at trial, but not the evidence, and the requirement in r 16.02(2) that a pleading not be evasive or ambiguous or be likely to cause prejudice, embarrassment or delay in the proceedings. I also keep in mind the requirements of r 16.45, which concerns the circumstances in which the Court may make an order for the provision of particulars. 7 As I indicated in the decision on 26 June, I consider that the Rules evince an intention that interlocutory activity concerning the adequacy of pleadings should be kept to a minimum. The Court does not encourage the focus on pleadings which may have been a feature of the conduct of civil litigation in times gone by. It is well understood that an undue focus on pleadings can be both productive of unnecessary delay and wasteful of costs. That does not mean, of course, that applicants and, one might say, applicants who are regulators in particular, should be spared their obligation to put forward a pleading in proper form. But, nevertheless, it is appropriate for the Court not to take an unduly technical view about pleadings if the primary purpose of the pleading stated in r 16.02 is satisfied, namely, stating sufficient material facts to give the opposing party fair notice of the case to be made against the party at trial and the avoidance of prejudice, embarrassment or delay by an evasive or ambiguous pleading. 8 Against that background, I turn to the particular paragraphs which are challenged by the respondent. In [6] of the proposed amended statement of claim, ASIC alleges that by the respondent's agreeing to defer all or part of the payment for cars which he sold to customers, he had provided credit to those customers within the meaning of s 3(1) of the National Credit Code (contained in Sch 1 to the NCCP Act), had entered into contracts with those purchasers pursuant to which credit to which the Code applies was provided and that he was a "credit provider" within the meaning of s 204 of the Code and for the purposes of s 6(1) of the NCCP Act. 9 The respondent contends that the pleading in [6] does not allege all the material facts necessary and is, accordingly, defective. I reject this contention for a number of reasons. First, the applicant is not seeking presently to amend [6]. It is in the same form now as it was in the statement of claim originally filed and considered by the Court on 26 June 2014. At that hearing, the respondent challenged only the adequacy of [6.2]. That challenge failed. 10 It might be said that, strictly speaking, the present challenge is different from the challenge made on 26 June 2014. To my mind however, the present challenge differs in only minor respects and, in any event, involves the respondent arguing the same matters which he advanced on 26 June 2014. It is not appropriate for there to be a seriatim challenge to pleadings of this kind. 11 If, contrary to the view I have just expressed, there is a material difference in the respondent's challenge to [6] then it fails for a further reason, namely that that separate challenge should have been brought forward at the hearing of 26 June 2014. The considerations which underpinned the decision in Port of Melbourne Authority v Anshun Pty Ltd (1980) 147 CLR 589 apply as much in this context as they do in others. 12 Next, the respondent challenges the pleading in proposed [13] and [13A]. Paragraph [13] of the statement of claim in its original form was a plea about the circumstances in which the respondent had provided credit, as pleaded in [4] of the statement of claim and defined as "Nobby's Credit Facility." Paragraph [13] in the proposed amended statement of claim is a slightly different plea. It is a plea about the circumstances of the persons defined as Nobby's customers (being the 117 persons listed in Schedule A to the statement of claim to whom it is said that the respondent had provided credit). Further, it is a plea about the characteristics of those persons as a class rather than, as previously appeared to be the case, a plea about the circumstances of each individual provision of credit to a customer. 13 Further still, the characteristics of the class are particularised by the new plea in [13A]. This plea is also challenged by the respondent. The pleading in [13A] confirms the impression that [13] is a plea about a class rather than about particular individuals. Mr Duggan SC for ASIC explained that the pleas in [13] and [13A] are to support ASIC's claim of unconscionable conduct in contravention of s 12CB(1) of the Australian Securities and Investments Commission Act 2001 (Cth) and, in particular, to support reliance on s 12CB(4)(b). Sections 12CB(1) and (4)(b) provide: (1) A person must not, in trade or commerce, in connection with: (a) the supply or possible supply of financial services to a person (other than a listed public company); or (b) the acquisition or possible acquisition of financial services from a person (other than a listed public company); engage in conduct that is, in all the circumstances, unconscionable. … (4) It is the intention of the Parliament that: … (b) this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour. 14 ASIC's reliance on these provisions is not new, but it is now clearer that ASIC is not making two alternative claims, one of unconscionability by a system of conduct, and one of unconscionability in relation to individuals. That being so, I do not accept the respondent's submission that the proposed pleading of [13] and [13A] fails to comply with the Court's order of 26 June 2014. The changed thrust of ASIC's pleading means that it is no longer necessary for the respondent to ascertain for himself which of the 117 customers had the characteristics pleaded in the former [13]. 15 I also add that the Court did not, on 26 June 2014, order further and better particulars of the allegation in the former [13.3.2] and [13.3.3] which are now substantially repeated in [13.1] and [13.2] of the proposed pleading. It is not inappropriate, therefore, for ASIC to have repeated without amendment those paragraphs in the current proposed pleading. 16 The respondent makes some criticisms of the particulars provided in [13A]. I consider, with respect, that some of these are unmeritorious, for example, the submission that the particulars do not satisfy the requirements of the Court's order of 26 June 2014 and do not address the mischief to which that order was directed. I also consider that a submission made by the respondent about the form of one particular ([13A(a)(iii)]) is unmeritorious. 17 In my opinion, the question of whether there is merit in the remainder of the respondent's criticisms of the particulars in [13A] need not be determined for the purpose of deciding whether ASIC should be permitted to file the amended statement of claim. I say that because, having regard to the primary purposes of pleading, [13] and [13A] give the respondent adequate notice of the claim which he has to meet, and they are not ambiguous, or evasive, or likely to cause prejudice, embarrassment, or delay. It is not necessary to decide presently whether, as the respondent submits, the pleaded matters will not assist ASIC to prove the matters which it presently contends. 18 Next, the respondent challenged proposed [21]. That paragraph contains a plea that, by three categories of conduct, the respondent's conduct was unconscionable. The first was the issuing of the credit described as Nobby's Credit Facility. The second was the provision of "additional credit" to customers, and the third is described as the engagement in "withdrawal conduct", namely, the respondent's practice of withdrawing money from customers' accounts from time to time in repayment of the debts owed to him. 19 The respondent claims that this pleading is deficient, because it does not allege that the respondent's conduct involved a high degree of moral obloquy. He refers to the decision of the Full Court in New South Wales in Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 in which Allsop P said that, for conduct to be held unconscionable, the court has to be satisfied that it demonstrated a high degree of moral obloquy. However, in my respectful opinion, in making that statement, Allsop P was not making a point about material facts or pleading requirements, but about the way in which a respondent's conduct had ultimately to be characterised in order for it to be held as unconscionable. Moral obloquy in other words is a matter for evaluation, not a material fact to be pleaded. 20 In any event, the respondent knows that at the trial ASIC will be alleging that his conduct had the necessary quality of moral obloquy. He knows the matters upon which ASIC relies for that conclusion, so that it cannot be said that a further pleading is necessary in order to give him fair notice of the case which ASIC makes. 21 The respondent's second point was that the pleaded withdrawal conduct is not capable of supporting a conclusion of unconscionable conduct. In my opinion, the plea should not be disallowed on that basis. All of the conduct of the respondent in combination will have to be considered. It would be inappropriate now, on the basis of a bare pleading, to form the view that one particular item of the alleged conduct is not capable of adding to the unconscionability alleged against the respondent. 22 The respondent submitted that [74] of the proposed amended statement of claim lacked proper particulars. Paragraph 74 contains an allegation that the respondent continues to engage in the pleaded conduct in contravention of s 29(1) of the NCCP Act and that, unless restrained, he will continue to contravene that Act. It then provides particulars. 23 Initially, the respondent submitted that there was no reasonable basis for one of the particulars provided, but having heard the applicant's submissions, did not press that contention. It is accordingly unnecessary to express a view about that. 24 His second complaint related to two of the particulars, namely the plea that, as at 25 October 2013, the respondent continued to sell cars in the manner pleaded in [4] to [6] of the statement of claim and the plea that, as at April 2014, he continued to engage in that conduct. The respondent complains that he does not know the conduct relied on for these allegations. Junior counsel for ASIC explained that those allegations had not been further particularised because of ASIC's view that to do so would amount to a pleading of evidence in contravention of r 16.02(1)(d) of the Federal Court Rules 2011. 25 As I endeavoured to explain on 26 June 2014, proper particulars must be given even if, on occasion, doing so will involve some pleading of evidence. The fact that particulars of an allegation can be given only by also identifying the evidence by which the allegation may be proved does not relieve the party from the fundamental requirement of giving the other adequate notice of the case which he or she has to meet. The Full Court of the Supreme Court of South Australia referred to this issue in H Stanke & Sons Pty Ltd v O'Meara [2007] SASC 246; (2007) 98 SASR 450 at [78]: … The distinction between material facts and the evidence relied upon to prove those facts is not always easy to maintain. There are cases in which it is difficult to plead the material facts giving rise to a claim without, in effect, pleading the evidence by which those facts will be proved. It can, for example, be difficult to plead the material facts relied upon for the existence of a particular title or interest derived from documents without pleading the very documents which will be relied upon to establish that title or interest. Phillips v Phillips provides an example. There may also be cases in which the one fact may be both a material fact, and evidence of another fact. … (Citations omitted) 26 That being so, ASIC's explanation for not providing proper particulars of these allegations should not, to my mind, be accepted as justifying the absence of proper particulars. 27 ASIC makes a serious allegation in [74.2(d)] and [74.2(e)]. The respondent is entitled to know the conduct alleged against him which is said to amount to a continuance of the conduct pleaded in [4] to [6]. He is entitled to know that by the best particulars ASIC is able to provide, even if those particulars will also disclose the means (for example, an admission) by which ASIC will endeavour to prove that fact. I uphold, therefore, the respondent's objections with respect to [74.2(d)] and [74.2(e)] in the proposed amended statement of claim. 28 For these reasons, I grant leave to ASIC to file and serve the statement of claim in the form proposed, subject however, to ASIC particularising appropriately the pleas in [74.2(d)] and [74.2(e)]. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice White.