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[2012] NSWSC 1118
Supreme Court of NSW
2012-06-28
Davies J, Buddin J
Original judgment source is linked above.
The proceedings arise from the activities of a company known as TLC Consulting Pty Limited (TLC). TLC is an acronym for 'True Love Corp'. The company operated as an introduction agency and advertised its services in a range of various magazines which included Rugby League Week, Cleo, Ralph, Cosmopolitan, Outback Magazine and Inside Football. It represented itself as an agency that was designed to assist its clients meet and form relationships with other people to whom it introduced them. The company operated from approximately 1996 until it was placed into administration on 3 August 2009. On 8 September 2009 a liquidator was appointed as a result of a creditors' voluntary winding-up. The second and third defendants each became bankrupt on 10 June 2010, with the first defendant following suit on 13 December 2010.
On 30 April 2003 Atkinson J made orders in the Supreme Court of Queensland in proceedings in which the applicant was the Commissioner of Fair Trading of that State. The first respondent in those proceedings was TLC whilst the second and third defendants in these proceedings were the third and second respondents respectively in those proceedings. The following orders were made by consent:
I was informed that the proceedings in respect of the second defendant for contempt of court, to which I referred in Veall [No 1], arose from the alleged contravention of those orders.
Between February 2003 and July 2008, TLC operated out of premises at Suite 9, 10 Sands Street, Tweed Heads. For some of that time its registered office was also at those premises. Some time between July and December 2008, TLC moved to premises in Southport in Queensland. From there it operated Australia wide and continued to contact and promise services to its clients and other persons in NSW. Following the move to Queensland, TLC shared premises with Stangs Finance Pty Limited (Stangs). TLC and Stangs shared the same post office box address as their respective contact addresses for the Australian Securities and Investments Commission (ASIC).
The first defendant was employed by TLC in March 2007 and continued working with the company until 2009. She was paid a salary and also received a commission. Payroll records reveal that for the 2007-2008 financial year she received a gross income of $105,534.24 and for the 2008-2009 financial year a gross income of $141,286.71. From 1 January 2009 she was listed as the sole director of TLC. In January 2010 she filed documents with ASIC requesting that she be removed from the ASIC registry as a director. She claimed that she had not realised that she had been appointed as a director and that the second defendant had effected her appointment without her permission.
Although the second defendant was never a director of TLC, she nonetheless drew a salary from it. She also operated the company's bank accounts. She was at all relevant times involved in its management and was described by former employees as its "boss". She and her husband (the third defendant) were signatories to TLC's bank account with the National Australia Bank whilst the third defendant was a signatory to the company's bank account with Westpac. The third defendant was the sole director and shareholder of TLC from 8 February 1996 until 1 January 2009. As well as drawing a salary from TLC, the third defendant had an interest in Stangs which operated from the same premises as TLC.
The plaintiff claims that TLC made a large number of representations concerning the services it would provide to its clients. Various persons were employed as 'consultants' by TLC, including the first defendant. It was their task to communicate those representations, usually by telephone, to the company's clients. The essence of the plaintiff's complaint, in broad terms, is that what was represented either did not eventuate at all, or if it did, it did so in a manner that fell well short of what had been promised. As a result, it is claimed that TLC engaged in misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) (the TPA) and/or s 42 of the Fair Trading Act 1987 (NSW) (the FTA), and in unconscionable conduct in contravention of s 51AB of the TPA and/or s 43 of the FTA. Of particular significance in the present proceedings is the plaintiff's claim that each of the defendants, by reason of his or her connection with TLC, aided or abetted and/or was knowingly concerned in the conduct of TLC such as to attract the provisions of the TPA and/or the FTA to which I have just referred. (Many of the legislative provisions referred to in this judgment have now been repealed and replaced, but that has no bearing upon these proceedings). 5The particulars of the representations in question, as well as the impugned conduct, are identified in the Amended Statement of Claim. Although there are numerous representations which are relied upon, the essential nature of the complaint is that over an extended period of time TLC, by its conduct, took advantage of persons, predominantly men, who were in an emotionally vulnerable position and exploited their vulnerability to the considerable financial disadvantage of those persons.
Liability of TLC
6Buddin J made these findings in relation to TLC:
Those observations are equally apposite to the present proceedings. Upon the evidence that has been adduced in these proceedings, it is manifestly clear that the person variously referred to as "Helen" or "Helena" is the second defendant. Furthermore, the evidence conclusively establishes that she was intimately involved in the activities of TLC and that she performed a significant role in directing and controlling its conduct. Apart from supervising the activities of TLC's employees, she controlled the company's bank accounts and she derived significant financial benefits from its operation.
At paragraph 151 of the second judgment I made the following observation about the fact that the first defendant had not given or adduced evidence: Finally, I observe that none of the plaintiff's evidence has been tested. Furthermore, there is nothing on the face of the evidence which would incline me not to accept it. Nor, as I have said, has the first defendant given, or adduced any evidence of her own. Since no explanation has been advanced for the failure to do so, it is appropriate to draw a "Jones v Dunkel" inference. See generally, Galea v Bagtrans Pty Limited [2010] NSWCA 350 per Allsop P [at para 2]; per Hodgson JA [at paras 50-61]; National Australia Bank Ltd v McCann [2010] NSWSC 766 per Davies J [at paras 72-4]. I adopt those remarks for the purposes of the present proceedings.
In my view, the only rational inference to draw from the evidence is that the second defendant had the requisite knowledge of "the essential elements of the contravention[s]" by TLC of the relevant legislation. At the very least, she exhibited a measure of "wilful blindness" in the sense in which that expression is used in the authorities.
The present hearing
12At the present hearing before me Mr Sarginson of Counsel appeared for the Plaintiff and Mr Daoud appeared for the First Defendant. There was no appearance on behalf of either the Second or the Third Defendants. However, lengthy written submissions had been filed in the Court by a person called Leif Schipper who was said to be the Authorised Representative of those Defendants. When the proceedings were before Registrar Bradford on 6 March 2012 the Second Defendant appeared via an AVL link. On that day the Registrar fixed the matter for hearing on 28 June 2012. In addition, copies of letters were sent by the Plaintiff on or about 4 May 2012 to the Second and Third Defendants informing them of the hearing on 28 June 2012. The letters were sent to a Post Office box address where I am satisfied the Second and Third Defendants have received mail throughout the proceedings. I am satisfied that the Second and Third Defendants had due notice of the hearing before me. 13The Director-General sought, first, an injunction preventing all three Defendants from being involved in any activities in the introductory agency industry affecting New South Wales, or; as an alternative, a requirement by them to provide a pre-contractual disclosure with a 28 day cooling-off period for the consumer; secondly, declarations of aiding and abetting etc, and being knowingly concerned in or party to, the contravention by TLC of various provisions of the Trade Practices and Fair Trading Acts by the Defendants; thirdly, restitutionary/compensatory orders against the Three Defendants. 14As best as the submissions put on behalf of the Second and Third Defendants can be understood, those Defendants resisted all of the remedies sought except that they were agreeable to have a three day cooling off period imposed in favour of any person dealing with them in the introductory agency industry. 15The First Defendant did not resist the granting of a permanent injunction against her, nor the making of the declarations but resisted the making of any orders involving the payment of money by her.
Injunctions 16The evidence of the way TLC operated and the way it dealt with clients is detailed by Buddin J in Veall (No. 2) at [24]-[135]. It is not necessary to set that material out again in the present judgment. That material shows, however, the extent of the involvement of the First Defendant in making the misleading and deceptive representations and engaging in the unconscionable behaviour towards the clients, many or all of whom were vulnerable people. 17As far as the Second and Third Defendants were concerned I note that they consented to orders made by Atkinson J in the Supreme Court of Queensland in 2003 which enjoined those Defendants and TLC from engaging in the activities of an introduction agency in the detailed manner set out in those orders - see Veall (No. 2) at [4]. I note also that the Second Defendant was punished for contempt for acting in breach of those orders - Commissioner for Fair Trading v TLC Consulting Services Pty Ltd [2011] QSC 233, and Commissioner for Fair Trading v TLC Consulting Services Pty Ltd [2011] QSC 374. 18What the Queensland proceedings against TLC and the Second and Third Defendants demonstrate is that what has been found in the present proceedings by Buddin J is not an isolated instance but a prolonged business arrangement that preyed on vulnerable people. It is difficult not to conclude that, at the very least, the Second and Third Defendants saw the business arrangement and the agency they established through TLC as an easy way of making money where they could deal lightly with the truth with clients and prospective clients to obtain money. A more sinister explanation which is open on the facts is that the business was set up with the intention of defrauding people. 19In either case, it seems to me that it is appropriate that a permanent injunction should be ordered against the Second and Third Defendants as the Director-General seeks. The power to restrain a person from carrying on the business of supplying goods or services is not intended to be punitive but rather is designed to protect the public: Holloway v Witham (1990) 21 NSWLR 70 at 88; Director-General of the Department of Fair Trading v Monaghan [2003] NSWSC 1099 at [197]. 20I could have no confidence that any limited form of injunction requiring a cooling off period would be effective as a protection to the public. The Second and Third Defendants have, by their behaviour, shown that it is necessary to exclude them from the introduction agency industry permanently. 21With regard to the First Defendant I have already noted that she does not resist the granting of a permanent injunction against her as well. It is said on her behalf that she has endeavoured to put the whole bitter experience behind her and she has no wish to work in the industry again. Nevertheless, it is appropriate to consider whether a permanent injunction is appropriate in her case. 22In my opinion the evidence amply justifies Buddin J's remarks at [150] where he said of the First Defendant: I accept that she could be described as the 'human face' of TLC and that she deliberately set out to win the trust of the clients whom she then manipulated in order to obtain money from them. In short, she was a central player in TLC's activities during the time that she worked there. In addition, she was paid a substantial wage for doing so. 23In those circumstances, and notwithstanding that she did not establish the business nor was she the controller of it, it is appropriate that she be permanently enjoined from being involved in the introduction agency business.
Declarations
24The Court has the power to make a declaration in circumstances such as the present. However, a declaration is a discretionary remedy. Considerations which will influence the Court whether or not to grant a declaration in proceedings such as these will include: whether the declaration will have any utility; whether the proceedings involve a matter of public interest; and whether the circumstances call for the marking of the Court's disapproval of the contravening conduct: Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No. 2) (1993) 41 FCR 89 at 99-100; Australian Competition and Consumer Commission v Powerballwin.com.au Pty Ltd [2010] FCA 378 at 41. 25In Australian Competition and Consumer Commission v Star Promotions Club Pty Ltd [2010] FCA 139 Rares J referred to the real function of a declaration in proceedings of the present type as follows:
... [It] is to enable the Commission, or other regulatory authority, to demonstrate that particular conduct identified in the declarations, has been found by the Court to contravene a statutory provision. This can be used to inform and persuade persons that they have, or may have, engaged in contravening conduct themselves.
These declarations provide a ready means of ensuring that, when different, but similar, conduct by other persons has been discovered, they can be informed and perhaps persuaded, that their conduct may also be in contravention of the statutory provision because of the factual similarities discernible in the detailed wording of the declarations. This has a useful and beneficial purpose in the enforcement of the law, particularly consumer protection provisions such as are found in Pt V of the Trade Practices Act. In addition, the identification of a contravention of the law in a declaration can quell a controversy even when by consent, by marking out and declaiming the conduct of the contravener.
The Commission will also able to educate the public and use the making of the orders as a means of vindicating and enforcing the application of the Act... 26For the reasons suggested in those cases I consider that it is appropriate to make the Declarations sought by the Plaintiff.
Compensatory orders
27The Plaintiff seeks orders for compensation pursuant to ss 72(2) and (5) Fair Trading Act. Buddin J has detailed the amounts paid by the various clients for which they received nothing as promised by TLC and its personnel: see Veall (No 2) at [30] - [117]. This evidence demonstrates that the following amounts represent the loss sustained by each of the clients who swore affidavits: Aaron Bennett $ 34,640 Stuart Childs $190,300 Neville Crockett $ 150 Thomas Gunthorpe $ 16,600 Clifford Kopp $123,000 Janet Langley $ 1,000 Wayne Robson $ 30,000 Ashley Ruiter $ 49,300 Sundara Rengasamy $ 11,200 Kenneth Vickers $ 18,400 Alan Young $683,145
$1,123,095 28Some of these require particular comment. 29Aaron Bennett: Mr Bennett paid all his money to TLC before the First Defendant commenced to work there. Any compensation ordered will be ordered only against the Second and Third Defendants. 30Clifford Kopp: The Plaintiff claimed an amount of $124,120. $123,000 was found to be established. Some of it was paid prior to the First Defendant's employment with TLC. 31 Kenneth Vickers: Mr Vickers paid all of his money to TLC before the First Defendant commenced to work there. Any compensation ordered will be ordered only against the Second and Third Defendants. 32Wayne Robson: The Plaintiff claimed $23,423 but Buddin J found that Mr Robson had paid $30,000. 33Alan Young: Mr Young paid some of the money to TLC before the First Defendant commenced to work there. The evidence suggests that amounts paid prior to that time totalled $367,035. However, the Plaintiff claimed only $281,500 in respect of that period. It is not possible to reconcile those two amounts. Nor is it possible to reconcile the total amount paid by Mr Young over the whole period of his dealings with TLC ($713,535) with the total amount claimed by the Plaintiff ($683,145). In those circumstances it is appropriate to cap any claim against the First Defendant at $281,500 and to cap any claim against the Second and Third Defendants at $683,145. 34All three Defendants are bankrupt. That is, however, no bar to an order made for compensatory damages under a provision such as s 72 FTA. That is because such damages are not provable in a bankruptcy but fall under s 82(2) Bankruptcy Act 1966 as being the equivalent of tortious unliquidated damages: Australian Competition and Consumer Commission v Krtharas; Re Kritharas [2000] FCA 1442; (2000) 178 ALR 363 at [24], [38]-[39]. 35The written submissions prepared by Mr Schipper, apparently for the Second and Third Defendants, rely on Re Lenske; Ex parte Lenske (1986) 9 FCR 532. However, that case held only that an order for restitution made by a Magistrate in respect of a larceny as a servant charge did not fall within s 82(3) Bankruptcy Act. It was held not to amount to a fine or penalty, and it was said that the employer had the right to prove in the bankruptcy for the amount concerned (at 534). That case was not concerned with compensatory damages under the FTA or the Trade Practices Act. 36Mr Schipper's submissions appeared to suggest that if any money had been lost by clients of TLC it had been lost because these clients had all been transferred to another entity called Hearts United and had lost their money with that organisation. This submission was associated with the submission casting doubt on the evidence of the clients because it had not been tested. There was simply no evidence about Hearts United. The submission is rejected. 37The other objection made by those written submissions to an order for compensation was that the Second and Third Defendants had not been present at the hearing before Buddin J and that, accordingly, the Plaintiff's evidence had not been tested, as Buddin J observed and considered. Indeed, this absence of the Second and Third Defendants from the prior hearing was the repeated theme of these submissions. There is no suggestion that the Second and Third Defendants did not receive due notice of the hearings before Buddin J. Buddin J determined after considering the absence of the Defendants to proceed in the manner discussed in Director General, Department of Services, Technology and Administration (No 1) [2011] NSWSC 209, and see Veall (No 4) at [4]-[7]. 38Although it was suggested by the Plaintiff that there may be a difference in approach to the issue of causation between what was said in Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353 at 366-367 and I & L Securities and HTW Valuers [2002] HCA 41; (2002) 210 CLR 109 at [52] -[57], any difference is irrelevant in the present case. I am satisfied that the misrepresentations of the Defendants were a cause of the loss sustained by the clients: HTW Valuers at [57]; and see also Holt v Biroka Pty Ltd (1988) 13 NSWLR 629 at 637. 39In my opinion the actions of the Second and Third Defendants in establishing the business in New South Wales and operating in the way they did was sufficiently egregious that orders for full compensation should be made against them. Their actions must be seen in the light of the injunction and the extent of the order for compensation contained in the orders of Atkinson J in Queensland against TLC and those Defendants. So far from having learnt anything from the orders made against them they appear to have set out upon the same course of conduct across the border in New South Wales where the injunction may not have extended (although they were enjoined in respect of persons resident in Queensland). The amounts of money extracted from the clients were significant and the people to whom they made the misrepresentations, told the lies and engaged in the unconscionable conduct were vulnerable people to their knowledge. 40As far as the First Defendant is concerned the first matter relates to the time of her employment with TLC. Clearly, the First Defendant cannot have responsibility for money paid by persons prior to her involvement with TLC. 41Secondly, the evidence discloses that, apart from her being a director of TLC for a 12 month period, she was an employee of that company. She came to work there some years after it had been established. 42As to her directorship, the First Defendant said that did not at any time consent to being appointed a director and that her signature on the relevant form was forged. She said in her submissions that as soon as she discovered that she was a director she took all reasonable steps to have herself removed as a director. The difficulty with determining the truth of this matter is part of a wider consideration. The First Defendant filed an Amended Defence on 30 August 2010 but it has not been verified. She has sworn no affidavits nor has she given any evidence. I shall return to this matter presently. 43A letter has been tendered on her behalf dated 29 January 2012 which in its entirety says this: To the Presiding Judge Supreme Court of New South Wales Please accept my most sincerest apologies for the hurt my actions have caused others whilst working for Helen Dimitrijevski. During this period of time, I was a young naive girl that was in a world that I didn't really understand. I woke up and found myself way out of my depth and in a world that can only be described as a cult. My life for the last two and half years has not been a life at all. I have lost friends and family members due to my actions and the media exposure. I have many wishes, one is that I never applied for the job at TLC consulting services. I was before 2009 a normal 21 year old women with a lot of hopes and dreams. None of which I have been able to achieve since I met Helen Dimitrijevski 5 years ago after responding to a job advertisement. I am not that person at all and now looking back I can't believe that I even did, said or put up with what was going on at that company. I have many times wanted to end my life in the last couple of years as I was so lost with what had happened. I am eternally thank (sic) to OFT Queensland for shutting down the company and Helen Dimitrijevski, I will never find myself in a position where others control my life ever again. 44Submissions have been made on her behalf which assert factual matters in an attempt, it would seem, to dilute the significance of the findings made about her by Buddin J. In addition the following is said: 10. In the two and an half years since the termination of the first defendant's employment with TLC: a. She has married (which almost failed due to her in-laws discovering material on the internet about her involvement with TLC); b. She has moved nine hours away from the Gold Coast, and is trying to start a new life; c. She has been employed for four weeks in a new career, and was recently asked by her employer to explain the postings on the internet about her and TLC, which she candidly did, and has been given a chance to prove herself; and d. She is deeply troubled and remorseful for the devastating impact TLC had on her, and for her role in TLC's devastating impact on its clients mentioned in these proceedings. 45The submission that she was naïve and overborne by the Second Defendant in particular sits very uneasily with some of the findings made by Buddin J. In Veall (No 2) he made these findings: Stuart Childs
Following this payment, Hollie repeatedly called to encourage him to pay for a "grooming weekend" on the Gold Coast. She told him that he would receive a discount. After paying $5,000, Hollie called to say that "the directors" had told her that he had not paid enough, and that he must pay more money. He was told about a woman called Kylie who loved horses and who, it was said, was "perfect" for him. He paid a further $13,000. In November 2008, Hollie called to tell him that Kylie was keen to meet him, but that she was a member of the "Marriage File", and that he had to pay to upgrade to this membership in order to meet her. He received numerous phone calls during that month from Hollie and Christina requesting that he pay more money to "upgrade". He was told that membership of the "Marriage File" would guarantee that he found a wife. Hollie told him that she was offering him an upgrade because she liked him. Mr Childs said that Hollie sometimes called him as often as 5 times a day. In December 2008 he attended the "grooming weekend" and was given a contract to sign. He said that he was pressured into signing it by Hollie.
After returning home to South Australia, Mr Childs was contacted by Elivia of TLC who said that he had signed a contract for $150,000. When he objected, she said that he must pay at least part of it. He paid further large sums of money in December 2008. He made numerous phone calls to Hollie requesting a refund. She refused his request and told him that he was "self-centred".
In January 2009 he was told by Hollie that he should purchase a phone from TLC with "special software". Hollie said that he would get the phone at a discount. When he paid the agreed price, he received calls demanding that he pay more money for the telephone. Although he was given details of some women to contact in 2009, none of them were suitable. When he told Hollie in June 2009 that he would complain to the ACCC that he thought the "introductions were fake", Hollie told him that he would "make a fool of himself" if he went to court. ... Damien Clear
Mr Clear was single and unemployed. He was also left depressed and profoundly deaf as a result of a work accident. He said that his fiance had left him in 2006. He said that he contacted TLC via their website in March 2008. Between March and October 2008 he received numerous telephone calls from TLC, including from Hollie, persuading him to join TLC. He eventually paid a membership fee in October 2008, and paid further money the following month when requested to do so. In November and December 2008, Steena and Hollie both telephoned him to tell him that TLC had suitable women for him, but that he had to pay a further amount of money to "upgrade" his membership in order to meet them.
In December 2008 Hollie told him that he needed to pay $35,000 in order to meet a woman named Cristy whose photo he had seen. He said that Hollie cried telling him that "the directors" wanted him to pay more money. Hollie however refused to allow him to speak to "the directors" and said that she would pay part of the money if he paid the remainder. He paid the money.
In December 2008, Mr Clear went on a "grooming weekend" to the Gold Coast. He met Hollie who told him that if he did not transfer $45,500 to TLC he would not be able to meet Cristy. He paid the money. He then went to dinner with Hollie and a woman named Kelly, and was told that he would have to pay more money if he wished to continue to have contact with Kelly. He was given a contract and told to sign it by Hollie. On the basis of being told that Kelly was interested in him, he signed the contract. When he contacted TLC subsequently, he was told that he could not contact Kelly as her mother was in hospital. ... Neville Crockett
Mr Crockett was unemployed and had the care of two young daughters. He lived in country Victoria when he saw an advertisement for TLC in the "Shepparton News". He telephoned TLC. In April 2009, Hollie contacted him to tell him that TLC had "lots of girls" in his local area. She said that she had over 15 years' experience, and that she had owned her own business. He joined TLC and was given details of a woman named Michelle who was a nurse at Shepparton Hospital. He contacted the hospital but ascertained that there was no nurse named Michelle working there. In May 2009, Hollie and Stephanie from TLC telephoned Mr Crockett in an endeavour to get him to "upgrade" his membership. He refused to do so. He was given details of women named Flora and Linda, neither of whom matched the "profile" which he had provided. ... Thomas Gunthorpe
Mr Gunthorpe is a farmer and IT Manager. He operated a small aircraft business in Goulburn but resided in Yass, NSW In November 2007 he saw an advertisement for TLC in "Outback" magazine, and rang the company. In December 2007, he received telephone calls from Hollie in relation to attending a "grooming weekend" on the Gold Coast. He declined the offer. In May 2008, Hollie telephoned him and told him that TLC had a "100% match" for him. The woman, who was named Chrissy Smith, was a horse breeder and former model. He was told that she had made her wealth in real estate.
Hollie subsequently telephoned him and told him that he could meet Chrissy if he attended the "grooming weekend". He paid $4,000 to do so. Between May and August 2008, Hollie called to say that Chrissy could not attend the "grooming weekend" as her father had died and that she was nursing her terminally ill mother. In late August 2008, Hollie called him to say that Chrissy could attend a "grooming weekend" in Melbourne provided he paid $6,000. She told him that "you can't put a price on love". He paid the money. Hollie then telephoned Mr Gunthorpe and told him that Chrissy was having financial difficulties. She said that he should "loan" Chrissy $5,000 by paying monies to TLC so that she could attend the "grooming weekend". He did so and spoke briefly to Chrissy on the phone.
In October 2008, Hollie told Mr Gunthorpe that he and Chrissy were a "perfect match", but that if he wanted to meet her he would have to pay $35,000 to join the "VIP Rural Marriage File". He also received other calls demanding that he pay more money. When he requested a refund of the monies which he had previously paid, it was refused.
Mr Gunthorpe traced the email address which he had been given for Chrissy, and found that it originated on the Gold Coast. When he told Hollie that he had traced the emails to TLC offices and that he would complain to the Fair Trading Office, she told him that TLC would sue him for defamation. Mr Gunthorpe made inquiries and located Chrissy Smith in Victoria. She told him that she had been a member of TLC, but that she had not paid for membership. She said that her parents were alive and that she was unaware of the representations which TLC had made about her. ... Clifford Kopp
Mr Kopp is a bus driver. He completed a membership form in April 2003 to join TLC via the internet...
In May 2008, Mr Kopp travelled to the Gold Coast to meet his new consultant Hollie, who stated that she would "fix all the problems". He "upgraded" to the "VIP Platinum Package" at a cost of $20,000. Hollie spoke to him for a number of hours. She asked him "how would you feel if all your life you had no one special in it? When you pass away, no one will remember you". Mr Kopp agreed to pay the additional sum. After he returned from the Gold Coast, Hollie made numerous telephone calls in May 2008 encouraging him to "upgrade", including joining a "Wedding Package" for $7,000, and obtaining the services of a nutritionist and psychiatrist at a cost of $14,000. In July 2008, Hollie encouraged Mr Kopp to take out a loan from Citibank so that he could pay for a "VIP grooming package" worth $21,000. After telling TLC that he had cancelled the loan, Mr Kopp was pressured to change his mind. He was given an authority to obtain credit information from Stangs and in due course borrowed $25,000 from them.
In September 2008 Hollie made numerous phone calls to Mr Kopp pressuring him to pay further monies, on the basis that he had received a "discount" from Hollie in respect of the upgrade, and that she would lose her job if he did not pay the full amount. In April 2009, Stephanie from TLC telephoned Mr Kopp stating that she was now his consultant and that she would fly to Sydney to meet him upon the basis that he paid $5,000. She pressured him to pay the money, even if it was by instalments. She said that Hollie had informed her that he had money "stashed away". After Mr Kopp wrote to TLC in April 2009 asking for a refund, he spoke to Hollie who stated that there had been a "buy out" of TLC and that he should "get over" his financial problems and stop "being a child". She said that he would not want to be on his death bed thinking "Gee, I've been a bus driver all my life and I have nothing to show for it". Mr Kopp requested refunds from TLC on many occasions, but was always refused. ... Wayne Robson
At the time he made his statement, Mr Robson was a 42 year old man who lived with his parents and was employed as a casual traffic controller. He has difficulty reading and writing. In December 2007 he contacted TLC after seeing an advertisement in "Cleo" magazine. In December 2007, Hollie telephoned Mr Robson and spoke to him for one and a half hours. Hollie encouraged him to pay $10,000 for a "package" involving a trip to Tweed Heads and a PDA telephone. Hollie also told him that a wealthy nurse who lived in Balmain named Rebecca wanted to meet him. He was transferred to Rebecca who told him that he was handsome. She said that $10,000 was "no big deal" as she had paid $36,000. He was transferred back to Hollie whom he told that he had difficulty in reading and writing. Hollie told him that TLC would help him borrow money so that he could meet Rebecca and obtain the PDA phone.
Hollie subsequently telephoned and said that she had spoken to "a Queensland insurance company" about Mr Robson getting a loan. She then transferred the call. When the loan was not approved, Hollie telephoned Mr Robson again, and organised a loan with another company, Flexirent. In February 2008, Mr Robson attended a "grooming weekend" at Tweed Heads where he met Hollie who showed him a photo of Rebecca. She told him that he must pay $20,000 to meet Rebecca, and that Rebecca wanted to be with him. The next day Hollie told Mr Robson that Rebecca could not meet him as she had had to return to Sydney urgently because her daughter was ill.
After Mr Robson returned to Sydney, Hollie arranged for documents to be faxed to him in respect of the "Men's Single Marriage File" package, which he signed because, as he put it, he trusted Hollie. In late March and early April 2008, Hollie pressured Mr Robson to take out a loan with GE Finance, and told him to inform them that it was for home renovations. A representative of GE Finance contacted Mr Robson, and the loan was eventually approved. After he transferred money to TLC, Hollie telephoned Mr Robson and said that a dinner would be arranged with Rebecca. A few days before the dinner was to take place, Hollie telephoned Mr Robson, and stated that Rebecca had cancelled the dinner. When Mr Robson insisted on meeting her, he was given various excuses. Between April and October 2008, TLC introduced Mr Robson to a number of women, but none of them were suitable. In October 2008, Mr Robson telephoned Hollie requesting a refund. This request was refused. ... Sundara Rengasamy
At the time of swearing his affidavit, Mr Rengasamy was 28 years old. He has a mild intellectual disability and, since 2004, had been in receipt of a disability support pension. He had not made many attempts to find a partner prior to contacting TLC.
In about April 2008 he saw an advertisement in his local newspaper "The Messenger" for True Love Corp ("TLC"), which he thinks said "Do you want to get into a relationship? Call True Love Corp."
In April 2008 he telephoned the number in the advertisement and spoke to a person whom he believed was either Hollie or Christine. Mr Rengasamy told the consultant that he wanted to meet a woman of Indian background aged between 25 and 30 with no children. He mentioned his mild intellectual disability. He was told that TLC had lots of members who fitted his profile and that he could be matched. He was quoted a fee of $1,200 which was to be deposited into the TLC account.
Mr Rengasamy gave the consultant his credit card details and email address. He paid $1,000 by BPay to TLC and a further $1,200 in mid April 2008. There was no written contract with TLC. Over the next few days he received profiles of three women, but each of them lived in another state.
On about 16 April, he received a phone call from either Hollie or Christine about the introductions. After he said that all the women lived too far away, the consultant told him about the different packages which TLC offered. He was told about the "premium membership package" costing $10,000 and was encouraged to "upgrade" to it. The consultant agreed to reduce the price because he was receiving the disability pension. He was told that "you won't regret it, it will be money well spent for you to find your perfect partner".
In April 2008, Mr Rengasamy paid $2,000 and then a further $2,300 after he had received emails from Hollie requesting that he pay more money and threatening to send a debt collector if he did not do so. Mr Rengasamy also received telephone calls during April and May from TLC about attending a "grooming weekend". Between June and July 2008, Mr Rengasamy received further emails from Hollie requesting that he pay more money. She told him that a debt collector would be sent if he did not do so. Mr Rengasamy felt threatened and between May and July, Mr Rengasamy paid TLC a further $4,700.
He continued to receive introductions but said that he could only get in touch with two of the four women on the telephone numbers which TLC had provided to him. He said that the other two women were nice but were not of Indian background and that they both lived interstate.
On 17 July 2008 he said that he received a telephone call from Hollie checking on his membership payments. When he told her that he could not give her more money, she asked him "How are you going to meet the woman of your dreams if you don't continue paying?" He said that he had been too embarrassed to tell his parents but at the end of July he eventually told his mother what had been happening. ... 46In relation to another client, Alan Young, Buddin J detailed how Mr Young had been introduced to a woman known as Angie Jovic. Buddin J then made this finding:
... Upon his arrival he received a telephone call from "Ms Jovic" informing him that she had to go to Melbourne in order to see her lawyer. Mr Young flew to Melbourne where he received another telephone call from "Ms Jovic" telling him that she was flying to the United States where her daughter had been in a car accident. When Mr Young returned to New Zealand he noticed that the documents that he had signed a few days earlier were missing. He spoke to "Ms Jovic" who told him that she had taken the documents to show her lawyer.
On 28 March 2008, Mr Young flew to the Gold Coast to meet with Helen from TLC to discuss what was left in the separate account which had been supposedly established for "Angie Jovic". She told him that nothing was left in it and that nearly $370,000 plus interest had been paid to her. Mr Young tried to reach a settlement with TLC without success. Mr Young said that in subsequent conversations with Helen in 2008, he was told that the "Angie Jovic" whom he had met in November 2006 did not exist and that no-one called Hollie had worked for TLC. ...
In October/November 2009, Mr Young contacted TLC and recognised the voice who answered the phone as that of "Angie Jovic". The person who answered the telephone identified herself as Hollie Veall and as the director of TLC. Despite extensive searches, investigators were unable to locate any trace of a person with the name of "Angie Jovic". 47All of this evidence shows the extent of the First Defendant's active involvement in the misrepresentations and pressure tactics employed by TLC towards its clients. I note also the findings made by Buddin J set out in paragraph [8] of this judgment which point to a high level of involvement by her. Even if it is accepted that she was young and naïve when she commenced working for TLC any scruples she may have had about the way the company operated seem to have been put aside for some years, perhaps eased by the substantial wages she was being paid. Further, evidence that she identified herself as the director of TLC to Mr Young throws considerable doubt on what appears in her Defence and on her submission that as soon as she found out she had been appointed without her consent she sought to have herself removed as director. The evidence suggests, rather, that she accepted her position as the director of the company. 48There was, as I have mentioned, no evidence at all from her to justify the submissions put on her behalf that she was bullied and threatened into behaving or continuing to behave in the ways demonstrated by the above extracts of Buddin J's findings. 49Even if it is accepted, however, that the Second Defendant was very controlling, it is difficult to believe that over a period of two and a half years the First Defendant could not have chosen to end her association with TLC rather than continue to behave in ways which she then must have known were morally and commercially dubious. 50Where that credibility problem exists at the outset, the failure of the First Defendant to offer any evidence to support the submissions made on her behalf is significant. This is also because evidence, properly adduced, of the type put forward in the submissions could be expected to require serious consideration on the issue of appropriate remedies. If the evidence was to be accepted it could be expected to result in a mitigation of compensation orders against the First Defendant. 51I do not consider, therefore, that I should place very much weight on the unsubstantiated submissions made on her behalf. I can accept, nevertheless, that her regret for her involvement with TLC is genuine. 52The First Defendant should not be required to pay compensation for persons she did not deal with at TLC. She was not an owner of the business. Although she was paid a substantial wage derived from the wrongful activities of the business it would not be appropriate to impose on her some sort of vicarious liability generally for all those who suffered at TLC's hands. 53I have noted earlier that she should not be required to pay compensation in respect of Aaron Bennett and Kenneth Vickers because their involvement with TLC preceded the First Defendant's employment there. With regard to Ashley Ruiter the evidence does not disclose what amounts were paid after the First Defendant was employed. She should not be required to pay compensation for his losses. With regard to Janet Langley there is no evidence that she dealt with the First Defendant. She should not pay compensation in respect of Janet Langley. There is no claim in respect of Damien Clear who took proceedings in the Victorian Civil and Administrative Tribunal to recover his money. 54With regard to Clifford Kopp the evidence discloses that the First Defendant became Mr Kopp's new consultant from May 2008. From that time until September 2008 the evidence identifies a total of $87,000 that the First Defendant persuaded Mr Kopp to part with. The evidence suggested the payment of further amounts but these were not specified. 55Sundara Rengasamy could not recall which consultant (either Hollie or Christine) he dealt with until April 2008 when the emails and telephone calls came from the Hollie. The evidence establishes that he parted with $9,000 as a result of the First Defendant's statements and pressure. 56It is not easy to ascertain the First Defendant's involvement with Alan Young. Mr Young was first introduced to a woman named "Angie Jovic" in November 2006. He continued to have contact with her by telephone up to about November 2007. They agreed to be married. After considerable difficulty in being able to meet her again (there was always an excuse by her) he flew to the Gold Coast in November 2007 where he met a person said to be Ms Jovic. Mr Young thought she was different physically and in personality from the woman he had met previously. He saw this woman subsequently, and on 15 February 2008 he flew to Brisbane to marry her. 57In Veall (no 2) Buddin J further described what happened:
It is convenient to now identify some of the common techniques that were used by TLC. (As I said earlier most of the clients were men. For convenience I shall simply refer to the persons to whom introductions were made as women); (a) making representations that clients needed to pay more money to 'upgrade' to a 'higher level of service' in order to meet compatible women when, by and large, those services were not provided; (b) making representations that there was a particular person who was 'perfect' for the consumer, but that it was not possible to introduce the consumer to the person unless the consumer paid more money to 'upgrade' to a higher level, or paid money to attend a 'grooming weekend', at which excuses were made that the woman who was a 'perfect match' could not attend; (c) making representations (both by telephone and in person when the client went to the Tweed Heads/Gold Coast area on a 'grooming weekend') that it was necessary for the client to pay further monies in order to meet a particular woman who was said to be interested in the client. Some clients were also pressured to 'lend' money to the woman by making payments to TLC, because the woman had particular financial problems (e.g. Thomas Gunthorpe; Alan Young). When the clients paid the money, repeated excuses were provided as to why the consumer could not meet the woman. (In some instances the overwhelming inference is that the women did not exist); (d) making representations that the client had to pay more money because they had 'underpaid', for example, for 'upgrades' or attending a 'grooming weekend'; (e) convincing three clients (Aaron Bennett, Ashley Ruiter and Kenneth Vickers) to pay money for a holiday in Fiji to be organised by TLC, on which the client would meet suitable women. Such holidays to Fiji never occurred, despite the clients having paid for them; (f) convincing two consumers (Kenneth Vickers and Ashley Ruiter) to pay money to attend a function at the 2005 Melbourne Cup at which female TLC members and 'Penthouse Pets' were going to be present and in respect of which accommodation at Crown Casino was to be provided. Although the event took place, neither female TLC members nor 'Penthouse Pets' were in attendance and nor was accommodation at Crown Casino provided (g) convincing consumers (e.g. Stuart Childs; Clifford Kopp) to pay money for an extravagantly priced mobile telephone which had 'special software' on it and which, when delivered, did not contain 'special software'; (h) using emotionally manipulative language to pressure consumers to pay monies to TLC. On occasions consultants used language that belittled and humiliated the clients, while promising them that if they paid further monies, their problems would be solved and that they would meet a woman who was 'perfect' for them. I have already referred to several such examples. To reiterate, the first defendant told Clifford Kopp in May 2008 that "I think you can afford it...you can't put a price on falling in love with the right lady...how would you feel if all your life you had no one special in it? When you pass away, no one will remember you"; and saying to him in April 2009 "Cliff, stop being a child and get over it. Everyone has financial problems. Now tell me what are you going to think when you are 80 and lying on your death bed? Gee, I've been a bus driver all my life and I have nothing to show for it". By way of further example, in February 2008 the first defendant told Wayne Robson that he needed to pay $20,000 in order to meet Rebecca and that "she'll be your dream lady and you'll get to spend your life together. Rebecca definitely wants to meet you and be with you". (i) pressuring clients to pay more money because the TLC consultant had paid part of the fees for an 'upgrade' on behalf of the client, or had given a 'discount' and would lose their job if the monies were not paid. Examples of such conduct are the first defendant telling Damian Clear in December 2008 at a 'grooming weekend' that she could lose her job if he told anyone that he had been introduced to a woman on a more expensive membership, and telling Clifford Kopp in May 2008 that he would have to pay the "full amount" for a package which involved the provision to him of psychiatric and nutritional advice or she would lose her job; (j) pressuring clients such as Stuart Childs and Ashley Ruiter to sign contracts without first reading them, or after they had consumed significant amount of alcohol, when attending 'grooming weekends'. The client would then be told that they must pay more money as they had signed a contract; (k) pressuring clients to take out loans in order to pay monies to TLC, and then facilitating such loans. Examples of such conduct are the first defendant pressuring Clifford Kopp to take out a loan in July 2008 (including sending him documents from Stangs), and pressuring Wayne Robson to take out a loan in early 2008; (l) refusing to refund monies to clients when they complained about the lack of service, and telling consumers that they would be sued for defamation or 'humiliated' in court if they took any action against TLC. An example of such conduct is the woman who introduced herself as a "female director" of TLC who told Stuart Childs in April 2009 that "we are a big international company, so don't muck us around".
The overwhelming impression which emerges from the evidence is that TLC's agents took every opportunity to target people (usually men) at a time when they were emotionally vulnerable. In some instances, the client lived in a remote location. Some had recently lost, or been separated from, a partner. Some clients (such as Damien Clear and Sundara Rengasamy) suffered from either a physical or an intellectual disability whilst Wayne Robson had difficulty reading and writing. Many of them were desperately lonely. In any event, what they each had in common was a deep yearning for a measure of personal fulfilment in their lives, a desire which made them susceptible to the extravagant claims which were made by TLC's agents who were prepared to exploit the situation in which the clients found themselves.
At face value it may seem extraordinary that a number of the clients were prepared to expend what were clearly exorbitant sums of money over extended periods of time for services that were not provided either at all, or to only a limited extent. Clearly many of the clients were very gullible. Presumably they felt that having committed themselves financially, they had no alternative but to see the matter through. Ultimately, however, the explanation for what occurred lies in the fact that through its agents, TLC was prepared to go to just about any lengths in order to extract money from its clients.
Whilst it is apparent that TLC did provide some introductions, it is also equally clear that, on many occasions, the person who was introduced did not have the characteristics or profile which the client had indicated that he or she was interested in.
Liability of the First Defendant
7The First Defendant worked at TLC from March 2007 until August/September 2009 when the company came under external administration. She remained listed as a director until January 2010. 8In respect of the First Defendant Buddin J made these findings:
The first defendant had a demonstrably clear connection to TLC and its activities. First, she was paid substantial sums of money by the company. In total she earned nearly $250,000 for the 2007-2008 and 2008-2009 financial years. Between January 2009 and January 2010 she was listed as the company's sole director. Secondly, there is an overwhelming body of evidence that a number of clients had direct contact with her, some of whom met her face to face on 'grooming weekends'. Moreover, the business records of TLC do not indicate that there was anyone else named Hollie working for the company. At least seven clients, Stuart Childs, Damien Clear, Thomas Gunthorpe, Clifford Kopp, Wayne Robson, Sundara Rengasamy and Alan Young provided direct evidence that the first defendant actually pressured them into paying money to TLC. She also made numerous other misrepresentations. Moreover, that body of evidence is supported by the accounts provided by TLC's ex-employees, Jessica Allison and Tracey Rutledge, which demonstrate that the first defendant's involvement in the relevant activities of TLC was at a high level. I accept that she could be described as the 'human face' of TLC and that she deliberately set out to win the trust of the clients whom she then manipulated in order to obtain money from them. In short, she was a central player in TLC's activities during the time that she worked there. The only inference which is available is that she well knew not only that TLC was engaging in misleading or deceptive conduct as well as unconscionable conduct but that she, as its agent, was by her own actions also so engaged. Putting the matter another way, the first defendant was "knowingly concerned in, or party to, the contravention[s]" of the Act by TLC.
Finally, I observe that none of the plaintiff's evidence has been tested. Furthermore, there is nothing on the face of the evidence which would incline me not to accept it. Nor, as I have said, has the first defendant given, or adduced any evidence of her own. Since no explanation has been advanced for the failure to do so, it is appropriate to draw a "Jones v Dunkel" inference. See generally, Galea v Bagtrans Pty Limited [2010] NSWCA 350 per Allsop P [at para 2]; per Hodgson JA [at paras 50-61]; National Australia Bank Ltd v McCann [2010] NSWSC 766 per Davies J [at paras 72-4].
Liability of the Third Defendant
9In his judgment of 3 May 2011 Buddin J made these findings in relation to the Third Defendant:
Considerable emphasis was placed by the plaintiff, in its submissions concerning the third defendant's liability, upon the orders made by Atkinson J which are set out in paragraph 4 of this judgment. It was submitted that given the nature, content and terms of those orders the third defendant had, in consenting to them, made an 'admission' within the meaning of the Evidence Act 1995 (NSW) . An 'admission' is defined as meaning a "previous representation" that is "adverse to the person's interest in the outcome of the proceeding". A "previous representation" is defined as "a representation made otherwise than in the course of giving evidence in the proceeding in which evidence of the representation is sought to be adduced". It was submitted that since the orders restrained him, and TLC, from engaging in the activities of an introduction agency and required them to pay considerable sums of money to nominated persons, it could be inferred that the first defendant was complicit in the activities of TLC as 'an introduction agency' at least as at 30 April 2003.
I accept those submissions. Even if I am wrong in concluding that what was contained in the orders constituted an "admission", I accept that the plaintiff can still rely upon that material. Although s 91 of the Evidence Act prevents the plaintiff from relying upon it in order "to prove the existence of a fact that was in issue in that proceeding", I nevertheless accept that the material could nonetheless be utilised to demonstrate that the third defendant had, as from 30 April 2003, a very clear awareness of what it was that TLC was then prevented from doing. See generally Ainsworth v Burden [2005] NSWCA 174 [at para 109].
The similarity between the conduct of TLC in these proceedings in which the third defendant is alleged to have been "knowingly concerned", and the conduct of both TLC and the third defendant, which was the subject of the orders made by Atkinson J, is stark indeed. In my view, there exists a powerful inference pointing to the third defendant's liability in these proceedings on either interpretation of the use to which the orders of Atkinson J may be put.
Furthermore, although the evidence does not indicate that the third defendant had any direct contact with the clients, it demonstrates that he nevertheless performed an integral role in TLC's operations. First, he was both its sole director and secretary from 9 February 1996 until 1 January 2009, a period of nearly 13 years. Secondly, for at least some of the time, he drew a salary from the company. Thirdly, he was a co-signatory to the company's NAB account. Fourthly, according to the evidence produced by Emma Sharkey, the third defendant was a guarantor for a commercial loan in the name of TLC and wrote to Westpac Bank on TLC letterhead seeking the release of Bpay codes to the National Australia Bank. Fifthly, according to Ms Sharkey's evidence, the third defendant, in conjunction with the second defendant took out a business loan with the National Australia Bank, and repayments in respect of it were made from the TLC business cheque account. Sixthly, the business in which he also had an interest (Stangs Finance) was based in the same premises as TLC and Jessica Allison gave evidence of the close connection between the two organisations. Moreover, Stangs endeavoured to broker a loan for Clifford Kopp so as to enable him to pay further monies to TLC. Finally, he was listed as the billing name on a mobile telephone number which was provided by TLC to Alan Young. In my view, those considerations provide a factual foundation from which it can readily be inferred that the third defendant had a "practical connexion" with, and was thus "concerned" in the contraventions by TLC of the relevant legislation.
I mentioned earlier that TLC operated from premises in Tweed Heads from February 2003. Until then, as the orders made by Atkinson J make clear, it had been operating in Queensland. The timing of the move from Queensland to New South Wales can hardly have been coincidental.
Given all those considerations it would be extremely difficult, in my view, to suggest that the third defendant could have been unaware of the nature and scope of the conduct of TLC, particularly given that it endured over such an extended period of time. As I have said it involved persistent contraventions of the relevant legislation, and consisted of a very large number of misrepresentations of one character or another, which were made to a considerable number of individual clients. Furthermore, its 'driving force' was none other than the third defendant's wife who was, inter alia, the other co-signatory to TLC's bank account with NAB. I accept that the third defendant may not have been aware of every separate representation that was made, but I have little doubt that he knew, in general terms, of the techniques that were employed by the company's agents when dealing with its clients in order to obtain money from them.
As I said earlier, the third defendant has not filed a Defence, much less put on any evidence. The plaintiff's evidence remains entirely untested, and again, I discern no reason why I should not accept it. As was the case with the first defendant, it is appropriate to draw a "Jones v Dunkel " inference by reason of the fact that nothing has been advanced to explain the failure of the third defendant to adduce evidence.
I should record that the plaintiff has, as a matter of fairness, drawn my attention to several cases in which the court has declined to make a finding that the defendant in question was liable as an accessory to misleading and deceptive conduct. Nonetheless, I accept the submission that each of those cases turned on their own facts: Crocodile Marketing v Griffith Vintners (1989) 28 NSWLR 539; Kaye (supra); Motor Trade Finances Prestige Leasing Pty Ltd v Elderslie Finance Group Corp Ltd [2006] NSWSC 1348; WesTrac Pty Ltd v Eastcoast OTR Tyres Pty Ltd [2009] NSWSC 728.
In all the circumstances, I am prepared to infer that the only rational inference is that the third defendant had the requisite knowledge of "the essential elements of the contravention[s]" by TLC of the relevant legislation. At the very least, he exhibited a measure of "wilful blindness" in the sense in which that expression is explained in the authorities.
Liability of the Second Defendant
10In Director General, Department of Services, Technology and Administration v Veall [No 1] [2011] NSWSC 209 Buddin J determined that the hearing of the proceedings would proceed only as against the First and Third Defendants at that time largely because there was evidence of the Second Defendant's mental condition and her admission to a mental health care unit. The matter ultimately proceeded against the Second Defendant at a hearing on 15 August 2011. Judgment in respect of that hearing was given by Buddin J on 18 August 2011: Veall (No 4) 11In that judgment Buddin J first set out paras [153]-[155] in respect of his determination of liability of the Third Defendant (paragraph [9] above). He went on to say:
Director General, Department Of Services, Technology & Administration
Veall
[2011] QSC 233
[2011] QSC 374
(1997) 41 NSWLR 353
(2000) 178 ALR 363
(1990) 21 NSWLR 70
(1988) 13 NSWLR 629
(2002) 210 CLR 109
(1986) 9 FCR 532
(1993) 41 FCR 89
(1989) 28 NSWLR 539