Commissioner for Fair Trading v Rowland Thomas & Ors

Supreme Court of NSW|2004-06-03|Before: Shaw J, Greg James J, Kirby J, Barr J

CITATION : Commissioner for Fair Trading v Rowland Thomas & Ors [2004] NSWSC 479 HEARING DATE(S) : 27/04/01 JUDGMENT DATE : 3 June 2004

JUDGMENT OF : Shaw J at 1 DECISION : See paragraphs 62 - 65 of judgment

CATCHWORDS : Establishment of trust fund - Consumer protection - Fair Trading - Loss or Damage Credit (Finance Brokers) Act 1984, s 86B LEGISLATION CITED : Fair Trading Act 1987, ss 65, 65(1), 67, 68, 72, 72(1) Trade Practices Act 1974 (Cth), ss 87, 87(1), 87(1A)(a) Alan Raymond Ducret v Colourshot Pty Limited (1981) ATPR 40 - 196 Cauvin v Phillip Morris Ltd [2002] NSWSC 736; [2004] HCATrans 93 Director-General, Department of Fair Trading v Infinity Forms of Yellow Remember Pty Ltd (unreported, 29 October, 2003, Greg James J) Director-General of the Department of Fair Trading v Rowland Thomas (unreported 13 December 2002, Kirby J), (17 December 2002, Barr J) CASES CITED : Ho v Powell (2001) 51 NSWLR 572 576, 578 Jones v Dunkel (1959) 101 CLR 298 R v Fagher (1989) 16 NSWLR 67 80 Thomas v Ducret (1983) ATPR 40-359, 40- 60; (1984) 153 CLR 506 Thomas v Quarmby (1983) ATPR 40-357 Commissioner for Fair Trading (Plaintiff) Rowland William Thomas (First Defendant) PARTIES : Helen Elizabeth Topalov (Second Defendant) David Anthony Ross (Third Defendant) Michael Paul Carney (Fourth Defendant) FILE NUMBER(S) : SC 13356/02 P Singleton (Plaintiff) COUNSEL : A Martin (Sol) (First Defendant) Fourth Defendant (Self-represented) SOLICITORS : Gibsons Lawyers (First Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

13356 of 2002 Commissoner for Fair Trading

Rowland William Thomas (First Defendant) Helen Elizabeth Topalov (Second Defendant) David Anthony Ross (Third Defendant) Michael Paul Carney (Fourth Defendant)

JUDGMENT 1 Shaw J: In this matter the plaintiff (the Commissioner for Fair Trading, Department of Commerce) seeks by way of an amended summons filed on 28 April 2003, and further amended (in minor punctuation respects) during the course of the hearings before me, the following orders against the defendants: 1 An order pursuant to s 65 of the Fair Trading Act 1987 that each defendant be permanently restrained from conducting or being engaged in (whether [without in any way limiting the scope of the foregoing] in a personal capacity, as a sole trader, in a partnership, as an employee, through another person, through the agency of another person, through the agency of a chain of other persons, through a company [whether or not that company is one of which the defendant is an officer and whether or not that company is one of which the defendant is an officer and whether or not that company is one of which the defendant is a shareholder], through the agency of a company [whether or not that company is one of which the defendant is an officer and whether or not that company is one of which the defendant is a shareholder], or otherwise) any of the following types of businesses: (a) the business of finance broking within the meaning of the Credit (Finance Brokers) Act 1984; (b) the business of arranging for other persons any form of credit or loan; (c) the business of assisting other persons to apply for or obtain credit or loans; (d) the business of advising other persons in respect of obtaining credit or loans; (e) the business of liasing, acting as an intermediary, or communicating between providers of credit or loans and people applying for or wishing to obtain credit or loans; (f) the business of lending money or providing any other form of credit. 2 An order pursuant to s 65 of the Fair Trading Act 1987 that each defendant be permanently restrained from conducting or being engaged in (whether [without in any way limiting the scope of the foregoing] in a personal capacity, as a sole trader, in a partnership, as an employee, through another person, through the agency of another person, through the agency of a chain of other persons, through a company [whether or not that company is one of which the defendant is an officer and whether or not that company is one of which the defendant is a shareholder], through the agency of a company [whether or not that company is one of which the defendant is an officer and whether or not that company is one of which the defendant is a shareholder], or otherwise) the following: (a) registering, operating under, or using any business name containing any of the words 'credit', 'consolidate', 'account', 'consult', 'assist', 'help', 'serve', 'service', 'broker', 'finance', 'lend', 'loan', 'borrow', or 'mortgage' or any word derived therefrom or any similar or synonymous word; (b) being a director, secretary or manager of or in any company which has in its name any of the words 'credit', 'consolidate', 'account', 'consult', 'assist', 'help', 'serve', 'service', 'broker', 'finance', 'lend', 'loan', 'borrow', or 'mortgage', or any word derived therefrom or any similar or synonymous word; (c) owning or controlling more than 10% of the voting shares of any company which has in its name any of the words 'credit', 'consolidate', 'account', 'consult', 'assist', 'help', 'serve', 'service', 'broker', 'finance', 'lend', 'loan', 'borrow', or 'mortgage' or any word derived therefrom or any similar or synonymous word; (d) represent in trade or commerce that he or she · provides , or · will provide, or · would provide, or · arranges, or · will arrange, or · would arrange, or · secures, or · will secure, or · would secure to others services which he or she · is not in the business of providing, or · does not reasonably expect to be able to provide, or · does not intend to provide, or · intends to provide in a manner materially different from the manner represented; (e) in trade or commerce soliciting from any person gift vouchers or like instruments;

(f) holding on trust for other persons (other than persons being their grandparents, parents, siblings, children, grandchildren, spouse [ de jure or de facto ] any money or other assets; (g) in trade or commerce encouraging, advising, assisting or causing other persons to apply for or seek any advance of money on credit, any loan or any other form of credit, (h) in trade or commerce encouraging, advising, assisting or causing other persons to apply for or seek a credit reference check or any statement of a person's credit history or creditworthiness; (i) submitting on behalf of or in respect of another person an application for a credit reference check or any statement of a person's credit history or creditworthiness; j) applying for, arranging or securing for himself or herself any facility whereby he or she has access to any database relating to other persons' credit history or creditworthiness, (k) receiving any payment or other benefit in consideration of referring any person to any credit broker or provider, finance broker or provider, mortgage broker or provider, insurance broker or provider, (l) in trade or commerce engaging in conduct that is misleading or deceptive or is likely to mislead or deceive; (m) in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services, falsely represent that goods or services are of a particular standard, quality, value or grade; (n) in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services, represent that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits they do not have; (o) in trade or commerce accept payment or other consideration for goods or services where, at the time of acceptance he or she intends: (i) not supply the goods or services, or (ii) to supply goods or services materially different from the goods or services in respect of which the payment or other consideration is accepted. 3 An order pursuant to s 72 of the Fair Trading Act 1987 that each defendant pay into a trust fund; an amount determined by the Court, such trust fund to be administered as follows: (a) the trustee shall be the Director-General of the Department of Fair Trading;

(i) a separate account, or (ii) a separate cost centre within an existing account

(in either case hereinafter called the "Trust Account") so as to permit for separate identification and accounting of all financial transactions in relation to the activities of the Trust. The Trust Account will terminate 18 months from the date of the Court order, subject to any order made pursuant to (f) below. (c) The Trustee shall conduct such investigations as he thinks fit for the purpose of identifying persons who have suffered loss as a result of the defendants' involvement in the business known as 'Credit Accounting Consultancy' (hereinafter called 'the consumers'). (d) The Trustee shall allocate to the consumers such money from the Trust Account as he thinks fit, provided that he does not allocate to any consumer an amount greater than that which the Trustee judges to be the amount lost (including interest and consequential loss) by the consumer as a result of the operations of the business know as 'Credit Accounting Consultancy'.

(e) The Trustee may apply to the Court for an order requiring the defendants to pay further moneys into the Trust Account. (f) The Trustee may apply to the Court for an order extending or reducing the time period that the Trust Account is to run. (g) Once the Trustee has completed all inquiries and made all payments to consumers which he considers fit any remaining funds shall be paid to the Financial Counselling Trust Fund referred to in Clause 29 of the Credit (Savings and Transitional) Regulation, 1984.

2 The plaintiff relies, in substance, upon s 72(1) of the Fair Trading Act 1987 (NSW) (in conjunction with the power to grant an injunction under s 65 of that same Act) to support the orders sought. That sub-section provides: (1) Without limiting the generality of section 65, if, in a proceeding instituted under this Part, or for an offence against Part 3, 4, 5, 5B, 5C, 5D or 8, the Supreme Court finds that a person has sustained, or is likely to sustain, loss or damage by conduct of another person that contravened a provision of Part 3, 4, 5, 5B, 5C, 5D or 8, the Court may, whether or not it grants an injunction under section 65 or makes an order under section 67 or 68, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders specified in subsection (5)) if the Court considers that the order or orders concerned will compensate the first-mentioned person wholly or in part for the loss or damage or will prevent or reduce the loss or damage.

3 It is plain that the gist of this section is compensatory and/or protective, rather than punitive in its nature, and so the orders which should be made in relation to this case must be crafted bearing in mind that policy objective contained in the relevant legislative regime.

Position of the Various Defendants 4 The stance of the defendants in relation to these proceedings varies significantly. Hence, I need to consider separately the degree of consent or opposition to the orders sought by the plaintiff. I propose to do so before coming to the gravamen of the unlawful conduct alleged against the defendants and any consideration of the precise relief and compensatory orders authorised by the statute. 5 In relation to the second defendant (Ms Topalov), I have been informed by counsel for the plaintiff that she consents to all orders proposed in the amended summons, although she has not indicated consent to any particular amount for the purpose of the proposed order 3, that is to say the trust account order designed to compensate the clients of the business under the name of Credit Accounting Consultancy (CAC) who have been described by counsel for the plaintiff as the "victims" of the alleged "scam." Ms Topalov has not appeared in the proceedings and hence, assuming that I am to make some order for the creation of a trust account by way of compensation to those who have been allegedly "ripped off" to use the colloquialism used by the plaintiff by CAC, I need to do so in the absence of any submissions or evidence by her as to the quantum of contribution which should be made. 6 In relation to the third defendant (Mr Ross), the proceedings between the plaintiff and that defendant have been fully settled and orders have been made by the court, differently constituted, by consent. These orders, made on 15 April 2004, and which are not protected by any prohibition against publication, provide for orders broadly sought in the form sought by the plaintiff with some negotiated exceptions which seem to be focussed upon the activities of a particular named company and those orders require payment to the plaintiff of $700,000 within four months or such extended period as the court might, upon application on seven days notice, grant upon the ground that the third defendant, despite making all reasonable effort, has not been able to make payment on time. That sum is not disaggregated in the sense that it is inclusive of costs, and the payment is supported by mortgages in favour of the Commissioner for Fair Trading over specified properties. 7 Hence, given the finalisation of those orders against the third defendant, I do not need to concern myself any further with that aspect of the controversy. Nor do I think that the other defendants are prejudiced or even inhibited by the fact of that arrangement having been reached between the third defendant and the plaintiff. I therefore put it aside in terms of considering the appropriate orders that should be made against the other defendants. 8 The fourth defendant (Mr Carney) has consented to all of the orders proposed by the plaintiff in its amended summons, but contests the quantum of payment to the trust fund which is to be determined by the court in accordance with to the proposed order 3. I shall deal with the arguments put by Mr Carney, who has been self-represented in the proceedings, in due course. 9 The first defendant, Mr Thomas, has been represented by a solicitor, Mr Alex Martin, who has made extensive submissions in relation to a number of aspects of these proceedings. In large part, the solicitor for Mr Thomas has indicated that his instructions are to agree with most of the orders proposed by the plaintiff. But he has strongly contested the concept of the establishment of a trust fund pursuant to proposed order 3 and the quantum, if any, which should be paid by his client into that trust fund (if it is established) to compensate the former clients of the CAC. In addition, Mr Martin has identified certain aspects of the orders to which he objects. Apart from the question of the amount of any contribution to a compensatory trust fund, to which I shall give particular attention later in these reasons, the first defendant has opposed the following aspects of the plaintiff's proposed orders: · the inclusion of paragraph (f) in order 1, which would prohibit him from engaging in the business of lending money. · the inclusion of the words "help, serve, service" in paragraphs (a), (b) and (c) of order 2. · paragraph (e) of order 3 which would empower the trustee (that is the Director General of the Office of Fair Trading) to apply to the court for an order requiring the defendants to pay further monies into the trust account. · paragraph (d) of order 3 which requires the trustee to allocate to the consumers money from the trust account, in his/her discretion, provided that he/she does not allocate to any consumer an amount greater than that which the trustee judges to be the amount lost (including interest and consequential loss) by the consumer as a result of the operations of the business of CAC. · paragraph (g) of order 3. It is contended that rather than any surplus in the trust funds being allocated to the financial counselling trust fund, referred to in clause 29 of the Credit (Savings and Traditional) Regulation 1984, that the surplus should be returned to the defendants in proportion to the amount which they have contributed.

As I have indicated, there is a controversy between the plaintiff and the first defendant as to the quantum, if any, of an amount to be contributed to the trust fund. Furthermore, the first defendant in his submissions has disputed the power and authority of the court to construct or order such a compensatory fund. Again, I shall need to return to these issues. 10 I propose to make all the orders which have been consented to by the various defendants and to address specific attention to those which are disputed or where there is contention as to quantum. CAC's Business Operations 11 First, I should refer to the uncontested evidence as to the modus operandi of the defendants in their administration of CAC and to the undoubted exploitation of consumers or clients seeking to consolidate their loans or otherwise obtain credit using the facilities of CAC. 12 In my opinion, the plaintiff has made out its case, even without the substantial consent to orders that has occurred, that the four defendants conspired together in what might be described as a "scam" which involves substantial contraventions of the Fair Trading Act, 1987 (the Act). In my view, the evidence establishes that the breaches and attempts made by Mr Thomas, Mr Carney and other employees of CAC were aided, abetted, counselled and procured by all of the defendants. They were all knowingly concerned in breaches committed by them and by other CAC employees of s 65(1) of the Act. In substance and reality, the essence of unlawful conduct alleged against the defendants is not contested in the present proceedings. I accept the evidence tendered by the plaintiff, which was not the subject of cross examination, challenge or evidence called in rebuttal by the defendants, to the following effect: The defendants agreed the "scam" should be executed via the vehicle of CAC and its employees. · The day to day direction of the affairs of CAC was conducted by Mr Thomas (the first defendant). · Mr Thomas was assisted by Mr Carney (the fourth defendant), who was the most senior employee of the business. · The proprietor of CAC was Mr Ross, (the third defendant) who oversaw its affairs. · The bookkeeping of CAC was performed by Ms Topalov (the second defendant). · All of the defendants were knowingly concerned in the operations of CAC and aided the conduct of the "scam". · All of the defendants participated in the sharing of profits generated by CAC, whether by provision of salary, bonus or otherwise. 13 The business name of CAC was registered on 13 June 2000, and the registered sole proprietor of the business was Mr Ross. It was conducted at 48 Francis Street, Glebe, near Broadway. Advertisements were placed in various publications including the mainstream Sydney newspapers in which CAC described itself as "management consultants". The proposition presented in these advertisements by CAC was that they could advise and assist people as to the obtaining of credit. 14 The evidence indicates that those who sought the advice of CAC were often those already in significant debt and who sought to obtain a single or consolidated loan, which they would use to repay existing loans. The usual custom of CAC was to, upon obtaining a telephone call from a prospective client, ascertain details about the client and his/her financial affairs and to give advice that the client needed to obtain a credit history report before continuing the process. Thus it was that, in the examples tendered before this court, the usual process was that CAC would advise the client to execute a request for a credit history from a corporation, which has apparently specialised in the obtaining of such data. The client was advised that, upon obtaining such a history, he or she should arrange another appointment and come back to CAC for the organisation of the loan. 15 Typically, the client would come back a number of times to receive the assistance of CAC in the proposed restructuring of credit. A critical point is that CAC advised that the client should obtain a credit card, obtain cash advances against that card (with resultant interest obligations) and deposit those cash advances into a savings account and thereupon apply for a loan. Apparently, the clients were told that the credit card debt would be repaid when the new loan was obtained, and there was active assistance given by CAC in making an application for such loans, including the making of false statements to financial institutions from which the loans were sought. 16 CAC obtained substantial fees for these services. I accept the plaintiff's case that the receipt of such fees involved misrepresentations and, at least in the examples tendered to me, frequently involved the lack of any valuable or useful service in return to these fees. I accept the plaintiff's submission that the transactions, regularly engaged upon, were unconscionable. CAC required a "receipt" for the amounts paid out of the advance derived from the credit card, but in fact the document that the clients signed indicated that the money received constituted a "fee" which was not refundable. In some cases, CAC advised the client to obtain both bank credit cards and store credit cards. 17 As I have said, the plaintiff made available to the court and to the parties many hours of video/audio surveillance conducted in relation to CAC's operations by the police. The audio is not always clear. However we were able to discern discussions about getting more money in, advising clients as to obtaining a credit card, Mr Carney giving advice to a Mr Canty, Mr Carney saying that they needed more clients and that the employees should "look up some oldies". There is discussion on the tape about the requirement to confuse the client and the view is proffered that the client should not understand what is going on. Despite that, the client is told that he/she must "understand" the nature of the transaction. Some references are quite lurid in their content, namely references to consumers being "raped" and "robbed". 18 I find that this modus operandi involved substantial breaches of the relevant consumer protection legislation and amounted to unlawful conduct on the part of the defendants. The plaintiff read sixteen affidavits, and one additional statement was tendered, without objection, amounting to seventeen specific instances of cases of exploitation by CAC. 19 It is unnecessary to recite all of the specific evidence tendered by the plaintiff, which involved, it is said, breaches of the statutory provisions. Let me take two examples, in reliance upon the submissions of the plaintiff, which were not in substance contested by any of the defendants. I refer to the case of Mr Paramgit Bains and the case of Mr Stephen Scott Halligan. Paramgit Bains 20 The plaintiff's summary of the dealings by CAC with Mr Bains is as follows: (a) In February 2001 Paramjit Bains, the owner of two taxis, wanted a personal loan of $20,000 in order to buy a third taxi. He had been declined on 'a couple' of applications for loans. (b) By appointment, on 15 February 2001 Bains met with Carney at CAC. Carney said 'Before we can provide you with a loan we have a fee of $2,500 for a $20,000 loan.' After Bains showed Carney some bank statements and satisfied Carney that he could not afford that amount, Carney said 'We can probably do dit for about $1,600. I will do the paperwork for you, so that no one can refuse you.' Bains paid $1,600 and was provided with what Carney represented was a 'receipt' but which was a CAC 'Terms of Agreement' document, which Bains was required to sign. · The Commissioner alleges that the statement 'I will do the paperwork for you, so that no one can refuse you, was: º made in the course of trade and commerce; º made in connexion with the supply or possible supply of services; º misleading and deceptive and likely to mislead and deceive (a therefore a breach of subs. 42(1) of the Act); º unconscionable (contrary to subs. 43 (1) of the Act); º a false representation that the service to be provided by CAC was of a certain (very high) standard, value and quality (contrary to par. 44 (b) of the Act). · The Commissioner alleges that the soliciting of an upfront fee of $2,500 was: º done in connexion with the supply or possible supply of services; and º unconscionable (contrary to subs. 43 (1) of the Act) (including, without limitation, because it was contrary to par. 7 (2) (b) of the Credit (Finance Brokers) Act 1984). · The Commissioner alleges that the acceptance of the $1,600 fee: º was in trade and commerce; and º occurred at a time when CAC · did not intend to supply the services for which the payment was being made, or · intended to supply materially different (inferior) services, or · was aware of, or ought reasonably to have been aware of, reasonable grounds for believing that it would not be able to supply the services within a reasonable time (contrary to s 53 of the Act); and º was unconscionable (contrary to subs. 43 (1) of the Act) (including without limitation, because it was contrary to par. 7 (2) (b) of the Credit Finance Brokers Act). · The Commissioner alleges that the representation that the Terms of Agreement document was a 'receipt' was: º made in the course of trade and commerce; º made in connexion with the supply or possible supply of services; º misleading and deceptive and likely to mislead and deceive (contrary to subs. 42 (1) of the Act); and º unconscionable (contrary to subs. 43 (1) of the Act). (c) Bains was advised by Carney: 'Within 3 days you can come here And pick up the cheque.' When Bains returned to CAC on 19 February, he was told by an employee of CAC that he could not speak to Carney. A demand for a refund was unsuccessful. Bains has had no further dealings with CAC. · The Commissioner alleges that the statement 'Within 3 days you can come here and pick up the cheque' was: º made in the course of trade and commerce; º made in connexion with the supply or possible supply of services; º misleading and deceptive and likely to mislead and deceive (and therefore a breach of subs. 42 (1) of the Act); º unconscionable (contrary to subs. 43 (1) of the Act); and º a false representation that the service to be provided by CAC was of a certain (very high) standard, value and quality (contrary to par. 44 (b) of the Act). Stephen Scott Halligan 21 In reliance upon the plaintiff's summary of the dealings by CAC with Mr Halligan it seems that: (a) On 23 October 2001, by appointment made after seeing a CAC advertisement, Scott Halligan attended CAC's premises. Arrangements were made - and $20 was paid by Halligan - for obtaining of Halligan's credit history report. He later received that report by mail. (b) On 30 October 2001 Halligan went back to CAC and met Wright who said: 'It's a great credit report. I can guarantee you a loan, but it's going to cost you $33 for our upfront fee.' He directed Halligan to a nearby automatic teller machine ('ATM'). Halligan went and obtained $300. Upon his return he gave the money to Wright and received what was represented to be a 'receipt' but was in fact a Terms of Agreement document. Wright then completed an application form - using some false information - for a Commonwealth Bank of Australia ('CBA') / Woolworths credit card (also known as an Ezy Mastercard) and got Halligan to sign it. Wright also got Halligan to sign a blank application form for an ANZ Bank ('ANZ') credit card, saying 'I will complete it later with the same details we put on the Woolworths Ezy form. Depending on how you go with the Woolworths card, we might not need to use it.' Wright later completed and submitted the ANZ credit card application form. Later Halligan received a Woolworths credit card. He also received a letter saying that he had been refused an ANZ card. · The Commissoner alleges that the statement 'I can guarantee you a loan' was: º made in the course of trade and commerce; º made in connexion with the supply or possible supply of services; º misleading and deceptive and likely to mislead and deceive (and therefore a breach of subs. 42 (1) of the Act); º unconscionable (contrary to subs. 43 (1) of the Act); and º a false representation that the service to be provided by CAC was of a certain (very high) standard, value and quality (contrary to par. 44 (b) of the Act). · The Commissioner alleges that the imposition of an upfront fee of $300 was: º done in connexion with the supply or possible supply of services; and º unconscionable (contrary to subs. 43 (1) of the Act) (including, without limitation, because it was contrary to par. 7 (2) (b) of the Credit (Finance Brokers) Act 1984).

· The Commissioner alleges that the acceptance of the $300 fee: º was in trade and commerce; and º occurred at a time when CAC · did not intend to supply the services for which the payment was being made, or · intended to supply materially different (inferior) services, or · was aware of, or ought reasonably to have been aware of, reasonable grounds for believing that it would not be able to supply the services within a reasonable time (contrary to s 53 of the Act); and º was unconscionable (contrary to subs. 43 (1) of the Act) (including without limitation, because it was contrary to par. 7 (2) (b) of the Credit Finance Brokers Act). · The Commissioner alleges that the representation that the Terms of Agreement document was a 'receipt' was: º made in the course of trade and commerce; º made in connexion with the supply or possible supply of services; º misleading and deceptive and likely to mislead and deceive (contrary to subs. 42 (1) of the Act); and º unconscionable (contrary to subs. 43 (1) of the Act). · The Commissioner alleges that the completion and sending of the CBA/Woolworths credit card application from using false information was: º done in trade and commerce; º constituted conduct which was misleading and deceptive and which was likely to mislead or deceive (the financial institution) (contrary to subs. 42 (1)of the Act). · The Commissioner alleges that the counselling of Halligan to sign the CBA/Woolworths credit card application form when it contained false information was: º done in the course of trade and commerce; º done in connexion with the supply or possible supply of services; º a counselling fo Halligan to make a statement which was misleading and deceptive and likely to mislead and deceive (contrary to subs. 42 (1) of the Act); and º unconscionable (contrary to subs. 43 (1) of the Act). · The Commissioner alleges that the completing and submitting of the ANZ credit card application form º made in the course of trade and commerce; º made in connexion with the supply or possible supply of services; º misleading and deceptive and likely to mislead and deceive (contrary to subs. 42 (1) of the Act); and º unconscionable (contrary to subs. 43 (1) of the Act). (d) On 10 December 2001 Halligan attended CAC and met with Wright. As Wright had instructed him, Halligan did not sign the Woolworths credit card until he was with Wright. Once the card was signed, Wright telephoned the bank, purporting to be Halligan and activated the card.

(e) Wright then advised Halligan: Go down to David Jones in the city and get $3,000 of gift vouchers using your Woolworths Ezy Mastercard. … They will go to someone who would clear up the credit report, I will give you a cheque for $3,000. So you will get the cash back. On 11 December Halligan followed this advice and then gave the vouchers to Wright, who gave Halligan what was said to be a 'receipt'. Halligan applied again for a credit report and found, when he received it, that it was unchanged. When he raised this with Wright Wright gave him a cheque (on his own account) for $3,000. The cheque was honoured only to the extent of $1,000. · The Commissoner alleges that counselling of Halligan to obtain $3,000 of gift vouchers was º made in the course of trade and commerce; º made in connexion with the supply or possible supply of services; and º unconscionable (contrary to subs. 43 (1) of the Act). · The Commissioner alleges that the statement 'I will give you a cheque for $39000. So you will get the cash back' was º made in the course of trade and commerce; º made in connexion with the supply or possible supply of services; º misleading and deceptive and likely to mislead and deceive (contrary to subs. 42 (1) of the Act); and º unconscionable (contrary to subs. 43 (1) of the Act). · The Commissioner alleges that the representation of the Terms of Agreement document was a 'receipt' was º made in the course of trade and commerce; º made in connexion with the supply or possible supply of services; º misleading and deceptive and likely to mislead and deceive (contrary to subs. 42 (1) of the Act); and º unconscionable (contrary to subs. 43 (1) of the Act). · The Commissioner alleges that the receiving of the gift vouchers from Halligan was º made in the course of trade and commerce; º made in connexion with the supply or possible supply of services;

º unconscionable (contrary to subs. 43 (1) of the Act). (e) Wright had been telling Halligan of a Queensland property investment opportunity. When Halligan, on 22 January 2002, went to CAC and asked why the $3,000 cheque had bounced Wright said 'We've got this property in Queensland, but if you want to secure it you will have to get $2,000. Once I get the $2,000 I will start the application.' The next day Halligan returned to CAC with $2,000, which he gave to Wright and for which he was given what was said to be a 'receipt' but was actually a Terms of Agreement document. · The Commissioner alleges that the statement 'We've got this property in Queensland, but if you want to secure it you will have to get $2,000. Once I get the $2,000 I will start the application' was a statement to the effect that Halligan would have to make a further $2,000 payment before work would commence on his application for a loan and was: º made in the course of trade and commerce; º made in connexion with the supply or possible supply of services; º misleading and deceptive and likely to mislead and deceive (contrary to subs. 42 (1) of the Act); and º unconscionable (contrary to subs. 43 (1) of the Act). (f) After various delays and dealings, on 12 April 2002 Wright handed Halligan a cheque for $35,000. It was addressed to a company but Wright purported to endorse it for payment to Halligan. When Halligan attend the bank he was advised to return it whence it came. Halligan did not see Wright again. (g) Halligan's next face-to-face contact with CAC was on 16 April 2002. He had come to CAC to see Wright but was met by Thomas. Thomas took him for a walk outside. During the walk Halligan gave the $35,000 cheque to Thomas and Thomas said (inter alia) : I can get you fixed up….I can have you killed. Now we're going to go back and have Mark look after you. We will pay for your CRA this time…. I am the owner of CAC. Jason Wright no longer workers here. Your money will not be refunded. Come and see Mark and he will try and fix the mess. · The Commissioner alleges that the statement 'I can get you fixed up … I can have you killed' was: º made in the course of trade and commerce; º made in connexion with the supply or possible supply of services; º unconscionable (contrary to subs. 43 (1) of the Act). (h) Halligan returned to CAC's premises and dealt with Canty, who arranged a new credit report. On 18 April 2002 Halligan again attended CAC and met with Canty, who offered fake identification for $1,000, and a $40,000 loan if Halligan 'forg[o]t about the $5,000. On 20 April 2002 Halligan telephoned CAC and told Canty that he did not want 'to do this'. He asked for the return of his paperwork. Canty said: Look, it will be sent to Alex Martin, our solicitor. If you still want your money back, go and see our solicitor. Rowland said for you to never ring here again or come here again. You are banned from this property. (i) In late April 2002 Halligan saw Martin. Halligan said 'I want to know when I'm going to get my money back'. Martin replied: The Police at Bankstown have your statement and your paperwork. Steve, it will take 24 months to sort out because there is a lot of investigation needed. Leave it with us. 22 These are but two examples of the many proffered by the plaintiff as to the way things worked at the Broadway headquarters of CAC. No submissions were put to challenge these accounts, nor was any evidence tendered in rebuttal. I accept them, in these circumstances, as symptomatic of the conduct of the defendants and others associated with CAC in relation to many clients who sought to avail themselves of CAC's services. Jones v Dunkel 23 In my opinion, it is a formidable point put by the plaintiff that the defendants, who are in many ways in the best position to provide evidence to this court as to the practice of CAC, its income and (if any) legitimate business did not tender evidence in these proceedings; they gave no testimony: Jones v Dunkel (1959) 101 CLR 298; Ho v Powell (2001) 51 NSWLR 572 at 576, 578. Thus an inference favourable to the plaintiff's case can be drawn.

Trust 24 The jurisdictional question is whether the court has power to order the construction of a trust for the benefit of justly aggrieved clients of CAC, as sought by the plaintiff. Initially, the first defendant consented to the making of orders in the form of the existing interim orders, including order 3 which would result in a trust account to compensate the victims. However, as he is entitled to, the first defendant resiled from that position and put to the court that there was no power to make an order for the construction of the trust as sought by the plaintiff. 25 Essentially, the defendant relied in this regard upon the judgment of Windeyer J in Cauvin v Phillip Morris Ltd [2002] NSWSC 736, unreported and handed down on the 22 August 2002. This was a case against wholesalers of tobacco products and retailers of such products, brought both personally and as representatives of all tobacco consumers. His Honour held (paragraph [34]) that: Whatever may be the position in the United States of America there is no power in this court to make orders for disposition of a fund other than to persons who establish an entitlement to compensation out of such fund. Notions based on cy-p rës analogies, escheat, fluid recovery and deterrent distribution are just that. On no basis are they within the remedies available under s 87 of the Trade Practices Act.

In the result, the trial judge ordered that the action should not proceed as a representative action, and that the balance of the amended statement of claim should be struck out with liberty to replead by further amended statement of claim, with certain limited specified qualifications. 26 The High Court declined special leave to appeal against the refusal of the Court of Appeal of New South Wales to grant leave to appeal against the judgment of Windeyer J by judgment, ex tempore, of 2 April 2004: Cauvin v Phillip Morris Ltd [2004] HCATrans 93. The High Court took the view that the judgment was discretionary, and based upon the view that it was inappropriate to allow the action to proceed by order of a class action. Leave to replead was given by the first instance judge. In the view of the High Court (constituted by Gleeson CJ and Gummow J) there were insufficient prospects of success of an appeal to warrant a grant of special leave to appeal to the High Court, and accordingly the application was refused. 27 A reading of that transcript shows that the question that of power to set up a trust in the circumstances was not a matter of substantive argument in the High Court. More importantly, it is put that the observation of Windeyer J needs to be understood in its context. As Mr Singleton, counsel for the plaintiff, has persuasively pointed out, the judge at first in Cauvin was essentially concerned with provisions of the Trade Practices Act 1974 (Cth). Section 87(1) of that Act empowering orders where: the court finds that a person who is a party to the proceeding has suffered, or is likely to suffer loss or damage by the conduct of another person…

The powers conferred upon the court to make general orders are also limited by words in s 87(1A)(a) to circumstances where there has been an application "of a person who suffered, or is likely to suffer loss or damage". It appears that in Cauvin , the orders sought were not directed to compensate consumers for identifiable loss or damage but for other, more general, community purposes. The present case is concerned with a different statutory scheme seeking compensation for victims of a fraudulent, unlawful operation. The powers conferred on this court by s 72 of the Fair Trading Act, 1987 are unconstrained by some significant considerations that arise under the Trade Practices Act. In particular, where there is a finding of loss or damage, then the court may: make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who is involved in the contravention …. if the court considers that the order or orders concerned will compensate the first mentioned person wholly or in part for the loss or damage or will prevent or reduce the loss or damage.

So, any appropriate orders are empowered if they are compensatory in character, and the making of such orders does not require the person who suffers loss or damage either to be a party to the proceedings or to be the applicant or plaintiff invoking the court's jurisdiction. The adjective "appropriate" is one of wide import and confers a broad discretion in the court to do justice. 28 If the court were to order the construction of the trust as sought by the plaintiff the trustee (that is the Director General of the Department of Fair Trading, or the equivalent officer under new administrative arrangements) would be required to act bona fide and otherwise in accordance with law. The proposed order 3(d) is sufficient in its terms to allow and perhaps require the trustee to deduct from any amounts to be paid to individual consumers compensation which is already been paid either as a result of the order of a consumer protection tribunal or as a result of an agreement between CAC and the individual consumer so as to prevent double counting of any compensatory payment. Similarly, and more broadly, the trustee can and indeed would be bound to ensure that monies are paid only to those who ought to be compensated and to the extent of the loss or damage suffered by them. 29 In these circumstances, in my opinion it is within the power of this court to make the orders as sought constituting the trust, and apart from questions as to the quantum of payment into the trust fund by the defendants, no substantive argument has been advanced as a matter of discretion to suggest that court should not do so. I propose to make the orders sought, subject to a number of qualifications.

Contribution to Fund 30 The most difficult question which has been agitated before me concerns the amount of contribution to the fund which the defendants should make. The high water mark of the plaintiff's claim as to quantum is to argue that the evidence justifies the conclusion (particularly in the absence of any evidence from the defendants) that all proceeds received by CAC over the period examined were illegitimate, and that the transactions, which are the subject of criticism, did not constitute a "side" business. It is also said that the amount proposed for contribution in the submissions of the plaintiff is less than the total amount that was unlawfully acquired, and there has been some discounting for "vicissitudes". 31 It is said that if one contemplates the various classes of evidence which indicate the way in which CAC operated - the video tapes which were the result of police surveillance, the seventeen "tangible samples" of CAC's dealings with individual consumers, the evidence indicating a more general description of the modus operandi of the business and the evidence of Mr Canty, one cannot discern in any of that material a legitimate side to the business with consequential earnings. Mark Anthony Canty was from about November 2002 an employee of CAC. Hence, it is claimed by the plaintiff that one can see over the relevant period, that is from 1 July 2000 (when CAC formally began trading under that name) to 19 February 2003 (when this court restrained further business) a reasonably based estimate of earnings of $8,840,000. The way in which that estimate is calculated is based upon what has been described as the "inside" evidence of Mr Canty, in particular that the CAC had a weekly target of earning between $60,000 and $70,000 per week. An extrapolation over the relevant period, and taking a middle figure of $65,000 per week, then multiplying that by 136 weeks (the number of weeks in the relevant period) yields the result contended for. 32 Then the plaintiff suggests that, nonetheless, it is prepared to contend for a reduced amount taking account of conceivable "vicissitudes" and that something like half that amount would be appropriate in all of the circumstances. Thus, what is sought is that each defendant should be required to pay into the trust fund a portion significantly in excess of $1,000,000. However, there are some countervailing considerations, which tend to undermine this approach that might be characterised as something of an ambit claim. 33 First, as the plaintiff accepts, the losses ascertainable from the sixteen affidavits of individual consumers placed before the court yield a total loss of something marginally more than $80,000. If the figure of $80,000 is taken and divided by sixteen so as to obtain an average loss and then multiplied by the number of complaints that have been lodged with the Department (that is 96) then a loss in the vicinity of $480,000 can be calculated in relation to known victims. 34 The plaintiff then says that this would be an underestimate because the evidence of Ms Jane Elizabeth Gibson, a senior investigator with the Department, indicates that the usual situation is that the following publication of a judgment of the court a substantial increase in the number of victims emerges by way of additional complaints. However, even taking the rounded up figure of $500,000 there is a large gap between that figure and the total amount, which the plaintiff contends should be deposited in the fund. Ms Gibson was called by the plaintiff and then extensively cross-examined by Mr Martin, solicitor for Mr Thomas. She was able to identify only an approximate global figure in relation to the loss, which she had calculated from the 96 complaints received by the Department. That approximate figure was $308,000. She could not recall the proportion of those complainants who did not identify their loss, nor did she know how many of the complainants had received amounts by order of a consumer protection tribunal or by agreement with CAC. She knew that several cases had been settled and that some orders were made by the Consumer, Trader and Tenancy Tribunal (CTTT) Ms Gibson accepted that it may be possible to locate those complainants who had also made claims to the CTTT but that had not been done. Hence, there is an element of uncertainty and perhaps overstatement attaching to the figure of $308,000, although I bear in mind also, as Ms Gibson stressed, that an unspecified number of the complainants did not indicate the extent of their loss. 35 Referring more specifically to the particular evidence indicating the extent of uncertainty about the amount needed for compensation, Ms Gibson who, over a period of eleven years with the Department of Fair Trading (the predecessor to the Office of Fair Trading) has had experience of conducting investigations into alleged scams and unfair trading practices. (T. p 58, line 50). The witness went on to give some further material evidence as follows: After publicity has been given to a case of consumer exploitation the Department generally would get a lot of people coming forward as a result of that publicity who would "lodge a complaint with us……" (T. p 59, line 35). However, this varies from case to case. (T. p 59, lines 43 - 45). She expects that in a case of this kind, that is to say of the kind presently before the court, the response would be "significant" (T. p 60, line 15). Ms Gibson cannot recall and does not know whether some of the complainants may have obtained compensation from CAC or as a result of a tribunal proceeding (T. p 62). Ms Gibson's estimate, so far as she could ascertain from the written complaints that had been lodged, was that the money owed to the individual complainants was roughly $308,000 (T. p 66, line 23). The last complaint received was approximately towards the end of last year (T. p66, lines 35 - 38). Not all of the complainants identified how much they had lost, so that the rough and global estimate of $308,000 does not include those complainants who failed to specify the amount, nor does it include the component of interest (T. p 66, lines 26 - 33). The witness cannot recall with any precision all of the complainants who may have made a claim to the CTTT and whether the matter was settled (T. p 69, lines 53 - 56). The usual practice is that at the end of a legal proceeding, the relevant minister issues a press release, and in the past such press releases have resulted in further complainants coming forward but Ms Gibson could not specify any exact number because "it does differ on a case by case basis" (T. p 74, lines 4 - 12).

36 In relation to the appropriate amount, Mr Martin characterised the quantum sought by the plaintiff, that is something over $5,000,000 as "extravagant" and pointed to the disparity between that figure and the other figures that I have mentioned. He submits that such an amount would not be ordered in the absence of cogent evidence, that it should not be concluded that everyone who came through CAC's doors was "ripped off", that Ms Gibson gave oral evidence which was honest but showed insufficient detail of the quantification of the sum needed for the trust fund to deal with the problem. He accepted that the court has a broad discretion as to the amount and that a just remedy must be a tenable figure. 37 In my view, there is some force in these submissions. As I have already pointed out the thrust of the section is remedial and compensatory and not punitive. The court needs to guard against an excessive figure which might cause major financial hardship to the defendants and which could be characterised as a penalty rather than an amount for restitution. 38 None of this is to understate the culpability of the defendants or the appalling nature of the transactions which have been demonstrated in evidence. Plainly, a substantial sum is called for, and I accept the submissions of the plaintiff that, even if there are ascertainable differences in culpability, there is a joint and several liability for the whole of the losses which the defendants, acting together, have caused. Mr Singleton puts it that each defendant could in fact be ordered to compensate the whole of the victims' losses, that incapacity to pay should not limit the amounts (even assuming the assets of the defendants had been put in evidence, which they were not) and that the proper priority is that "the victims be compensated to the fullest extent possible, not that the defendants' finances be quarantined."

Culpability of First Defendant, Rowland Thomas 39 In relation to the culpability of the first defendant, counsel for the plaintiff referred to some litigation conducted in the Federal Court of Australia in the early 1980's under the Trade Practices Act 1974 against a defendant named Mr Barry Stacey. It is common ground that that Mr Stacey is the same person as the first defendant (Mr Rowland Thomas) in the present proceedings. 40 The trial judge, Smithers J, began his judgment, which resulted in the imposition of substantial fines on Stacey, by saying that the proceedings arose out of a "course of systematic, heartless and fraudulent exploitation by the defendants of persons of modest means in which the victims paid thousands of dollars to the defendant company for worthless contracts… All lost their money and some were left with a load of debt which will be a heavy burden for years ahead." See Alan Raymond Ducret v Colourshot Pty Limited (1981) ATPR 40 - 196. 41 Mr Singleton puts that apart from references in that judgment to the requirement for consumers to perform "unrewarding and onerous work", that opening passage accurately describes, by way of analogy, the activities of the first defendant in the present proceedings. By reason of a failure to pay those fines that litigation continued concerning the incarceration of the person who in the subsequent case law came to be described as Mr Thomas, challenging his incarceration for a period of six months as a result of breach of the court's order: see Thomas v Quarmby (1983) ATPR 40 - 357 (Supreme Court of NSW per Miles J); Thomas v Ducret (1983) ATPR 40 - 359 (in the Federal Court of Australia per Sheppard J); Thomas v Ducret (1983) ATPR 40 - 360; and finally in the High Court of Australia Thomas v Ducret (1984) 153 CLR 506 in which the High Court held that there was an unintended gap in the law, and that there was no power vested in a judge to award imprisonment in default of payment of a fine to be paid by an offender convicted of an offence which was not an indictable offence. Thus, the imprisonment was held to be invalid, but neither the conviction nor the monetary penalty was varied by the High Court. This interesting background might have been salient if the court were concerned with a contested issue of breach of statute or was imposing a penalty. However, given that the first defendant has, by and large, consented to the orders sought against him and as his solicitor has pointed out, there was a gap of a couple of decades or between those events and the present circumstances, it seems to me that those cases have little or no value in the resolution of the present controversy.

42 There is some broad analogy with the quantification of assets confiscation in cases where criminal conduct is involved. There, it has been held that the court must take something of a "rough and ready" approach rather than one based on arithmetic: R v Fagher (1989) 16 WSWLR 67 at 80, Allen J said that the court's assessment must necessarily be reached upon a "rough and ready" approach. This seems to me especially so in this case where the amount of compensation which will be required is so difficult to ascertain on the available evidence. There is one further consideration which prompts me to take a considerably more cautious approach than is urged upon me by the plaintiff; that is the proposed order 3(d) that: the trustee may apply to the court for an order requiring the defendants to pay further monies into the trust account.

In other words, if the account, duly administered, becomes exhausted by way of proper payments to the victims, then the court can be approached to provide further orders for payment. On the other hand, it is possible that the amounts that I propose to order will be sufficient to remedy the injustices which have arisen. 43 In addition to the amount which has been agreed and ordered in respect of one of the defendants, I propose to make an order that each of the three remaining defendants make a contribution to the trust of $200,000 each. Thus, subject to the deduction of an amount for costs in relation to the third defendant, the fund should have something in the order of $1.3 million to be drawn upon. In all of the circumstances, I am of the view that that is a reasonable approach.

Fourth Defendant Mr. Carney 44 Because Mr Carney was unrepresented, and not entirely prepared to meet the arguments put by the plaintiff against him, I allowed him leave to file further material. He did so on 11 May 2004, and counsel for the plaintiff put submissions in response to that material, in written form, on 26 May 2004. Some of the material upon which Mr Carney seeks to rely makes factual assertions. I have read the material, but I must accept the submission of the plaintiff that the factual material, including for example "an overview" of the defendant's circumstances since commencing his employment with CAC, constitutes material about which Mr Carney has given no evidence either oral or by way of affidavit. Counsel for the plaintiff is correct in saying that the court cannot act on this unproven material and I decline to do so. 45 One other aspect of the material filed by Mr Carney consists of an application, or perhaps a foreshadowed application, for the release of property which is currently the subject of restraining orders made by this court, subject to exceptions allowing living and legal expenses to be met: Director-General of the Department of Fair Trading v Rowland Thomas (Kirby J, 13 December 2002), and (Barr J, 17 December 2002). 46 Mr Carney seeks approval from the court to release the property so that it can be sold. However, this would represent a departure of substance from the existing orders made by the court, differently constituted, and although it may be justifiable, should be initiated by way of a notice of motion supported by affidavit evidence. I agree with the plaintiff's submission that it is entitled to notice of exactly what order is sought, upon what basis and is entitled to a hearing in respect of those matters as distinct from an informal reference to such an application in material filed after the conclusion of proceedings in court. 47 I turn now to the now to the material presented by Mr Carney which can be properly construed as a submission in relation to the evidence that is before the court and dealing with the one issue of disagreement between the plaintiff and the fourth defendant, that is the issue as to the quantum of payment which he should be required to make into the trust fund. 48 In summary, Mr Carney puts that: · he should be ordered to contribute less than at least some of the other defendants (particularly Mr Thomas, the first defendant) because he was neither the most senior nor the most culpable of those involved in the fraudulent conduct. · he should not be ordered to pay an amount more than he is able to afford. However, I observe that this submission faces the difficulty that the court has no evidentiary material before it as to the assets or capacity to pay of Mr Carney, assuming that this is a relevant matter in any event. · he was a mere employee of CAC, neither a principal, nor the manager of the business. · Mr Carney was an employee and did not receive a share of the profits of the business, merely wages. 49 In my view, there is some persuasive force in a number of these points. There is no evidence that convinces me that he was a principal of the enterprise, that is, I do not think that he was a proprietor of the business. Although in the evidence of Mr Canty there is reference to Mr Carney having been "the manager" or "the acting manager" at various times. But this is not, in my view, established with clarity. The mere fact that Mr Carney was the longest serving, and most senior employee does not mean much in the scheme of things. The video/audio tapes are somewhat equivocal as to who really was the leading force in the operation. For example, he says in relation to tape no 3 that its effect, as it impacts upon his position, is: I come in later and ask both David and Mark what are they going to be doing for the client to earn the fees. They tell me what they are doing, not me telling them. 50 However, although in some ways these are reasonable points for Mr Carney to make, in my opinion there is sufficient evidence for the court to conclude that: · he was the most experienced and knowledgeable of the consultants employed by CAC. · he was a direct participant in the defrauding of CAC's clients, and was so involved from the beginning of CAC's operations until the end. · in any event, the plaintiff has a cogent argument that there is joint and several liability on the part of all of the defendants. · although it is reasonable to conclude that Mr Carney was a wage earner rather than an entrepreneur receiving a share of the profits, nonetheless his wages were paid from the proceeds of a tacit or express agreement to defraud clients of CAC of which he had knowledge and in which he was an active participant. 51 In all of the circumstances, and while giving weight to the matters of concern raised by Mr Carney, I propose to make an order that will require an equal contribution from each of those defendants who have contested the question of the amount which should be paid into the trust fund. Drafting of Order 52 There are three other aspects of the drafting of the order constituting the trust fund to which the first defendant objects. Although not strenuously pressed, he opposes paragraph (e) of the order empowering the trustee to apply to the court for further monies to be paid into the trust account. I regard this as a reasonable, indeed sensible, provision and it is integral to my reasoning as to why the court should take a cautious approach to the quantum order to be paid in as I have earlier indicated. I would reject that proposed deletion. 53 Secondly, there was an objection to the provision in paragraph 3(d) requiring the trustee to allocate to the consumers money from the trust account in a discretionary way but not an amount which is greater than that which the trustee judges or assesses to be the amount lost, including interest and consequential loss by the consumer. In my view, that provision is essentially protective of the defendants' position. It is probably otherwise implied as an obligation falling upon the trustee flowing from the general law of trusts. But to the extent that is desirable that it be spelt out it seems to me an entirely appropriate provision. I do not imagine for one moment that the trustee would be inclined to grant amounts of money in excess of what was appropriate and necessary but I am unable to see how the first defendant or any of the defendants are prejudiced by the inclusion of such a protective provision in the orders. 54 Thirdly, there is opposition to any surplus in the trust fund, after dispersion, being allocated to the financial counselling trust fund. That trust fund is constituted by clause 29 of the Credit (Savings and Transitional) Regulation 1984 being a regulation made under the Credit Act, 1984 (NSW). The clause provides: (1) The fund and the scheme for the administration of the fund, established by the trust deed executed on 6 August 1993 by the Minister for Consumer Affairs is established for the receipt of money the subject of a direction under s 86B of the Act [that is the Credit Act]. (2) The terms of the trust deed are set out in Schedule 8(3). The money in the fund is to be applied for the following purposes: (a) the provision of funding to community based non-profit organisations that operate in NSW to provide financial counselling or train persons in financial counselling, (b) the provision of funding to non-profit organisations that operate within NSW which, or persons who, satisfy the trustees of the fund that they can educate the public of NSW in any matter related to the management of personal finances.

I have no doubt that these are worthy objectives and in an era when debt and financial difficulty appears quite widespread that the educative function of such a trust performs a significant public purpose. Nevertheless, the question is whether if there is a surplus in the trust fund which I propose to order it is the defendants in the present litigation who ought to be contributing to the financial counselling fund by a coercive order of this court. 55 In my opinion, such a requirement could be characterised as punitive rather than reflecting the leitmotiv of the statutory provisions which are the foundation of the plaintiff's case. Whilst valiantly seeking to pursue this aspect of the orders, Mr Singleton fairly indicated that this was "the weakest" part of his argument. I therefore propose that an order be made that if there is a surplus in the fund once the trustee has completed all inquiries and made all payments to consumers which he considers proper and justifiable that any remaining funds shall be repaid to the defendants proportionately to their contribution to the fund. 56 I note that counsel for the plaintiff has indicated (and I take this to be an undertaking to the court) that the monies in the fund will be held in an interest bearing investment account of a kind which is practicable to allow payments to be made from time to time, and otherwise within the discretion of the trustee, so that the real value of the contributions should be maintained, so far as feasible, in the event that there is some basis for the repayment of a surplus to the defendants.

Engaging in Business of Lending Money 57 The residue of this judgment will be directed to the specific criticisms where there is non-agreement raised by the solicitor for the first defendant. In my view, the prohibition upon the first defendant against him engaging in the business of lending money is defensible in the light of all of the circumstances. 58 The objection taken to the insertion of those words is that Mr Thomas may wish to lend some of his personal money to earn interest and that the order is so made would inhibit the future making of money for no good public purpose. On the other hand, the plaintiff says that the order would not preclude the first defendant from lending his own money to person x or corporation y without infringing the prohibition because he would not be running "a business" in that respect. He would simply be engaging in a personal transaction not a systematic process of lending money more widely. 59 The prefatory words of the order which sets out the prohibitions refer to "any of the following types of businesses …" And the substantive provision in 1(f) itself talks of "the business" of lending money or providing any other form of credit. That is how I would construe the order, and if there were to be any consequential proceedings then the concessions made by counsel for the plaintiff as to the true meaning and intent of the prohibition and this judgment may be available to assist an understanding of what was intended. 'Help, Serve, Service' 60 It is finally said that the word "help, serve, service" in paragraphs (a) (b) (c) of order 2 should not form part of the order against the first defendant. It is contended that the use of those words in provisions which permanently restrain the defendant from conducting or being engaged in some commercial activity (to use a compendious but an inexact expression) which operates under or uses a business name containing these words, and which restrains the defendant from being a director, secretary or manager of or in any company which uses these words in its name and which prohibits the defendant from owning or controlling more than 10% of the voting shares of any company which has those words in its name constitutes an oppressive, excessive and unnecessary constraint which is not required to serve the public interest or prevent future exploitation of consumers. 61 There are two reasons which, in my view, and notwithstanding the submissions of counsel for the plaintiff to the contrary, support the objection to the use of these particular words. The first is that it is not only the words themselves but any word derived from them (which is probably unexceptionable) or any "synonymous" word. The prohibition of the use of those words is broad enough, but the importation of any synonyms makes them very wide. The Oxford Compact Thesaurus, Second Edition (2003) indicates that synonyms of "help" include making it easier, improve. And synonyms of "serve" include performing duties or services for, or be of use in fulfilling "a purpose". 62 Secondly, in my opinion, it is the series of prohibitions contained in proposed order 1 which constitutes the effective and substantive protection of consumers for the future. The defendant will be prohibited from, for example, engaging in the business of advising other persons in respect of obtaining credit or loans and, as I have already indicated, despite the absence of consent, will be precluded from engaging in the business of lending money or providing any other form of credit. These are the real and tangible restrictions on future activity. In my view, the court should accede to the proposition that the inclusion of the identified words in the proposed order 2 is both unnecessary and excessive.

Orders 63 In short, I propose to order that a trust fund be constituted in the way contemplated in the orders sought, but that any surplus should be returned to the defendants pro rata to their contribution. 64 The orders against the first defendant should be modified in the way which I have indicated in this judgment; that the first, second, and fourth defendants, should be ordered pursuant to s 72 of the Fair Trading Act, 1987 pay into the said trust fund an amount of $200,000. 65 The first, second, and fourth defendants should be ordered to pay the costs of the plaintiff of these proceedings including the cost of the investigation conducted by the first plaintiff to the extent necessary to initiate and pursue the proceedings in this court. I note that, in comparable proceedings, Greg James J referred to "a considerable degree of investigation … prior to the commencement of the proceedings" and ordered payment to the Department of Fair Trading of costs, including investigative costs: Director-General, Department of Fair Trading v Infinity Forms of Yellow Remember Pty Ltd (unreported, Greg James J, 29 October, 2003). 66 I direct that the plaintiff provide short minutes of order to give effect to this judgment within seven days.

Last Modified: 06/07/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

Trade Practices Act 1974(Cth)

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Judgment (32 paragraphs)

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Cases Cited (6)

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