Director General, Department Of Services, Technology & Administration v Veall

Director General, Department Of Services, Technology & Administration v Veall - [2012] NSWSC 1118 - NSWSC 2012 case summary — Zoe

The First, Second and Third Respondents by themselves, their servants and/or agents, and/or representatives be restrained permanently, from carrying on the business of offering to find, or finding persons to be introduced, or introducing persons to others ('introduction services'), such business including: (a) providing introduction services to persons resident in Queensland other than to persons who are parties to existing contracts for the provision of such services by the First Respondent; (b) accepting payment or other consideration for such introduction services from persons residing in Queensland whether under existing contracts or otherwise including accepting any further payment or other consideration from persons who are parties to existing contracts for the provision of introduction services by the First Respondent; (c) making available to persons, wherever located, information concerning persons available to be introduced who reside in Queensland, other than to persons who are parties to existing contracts for the provision of such information by the First Respondent; (d) introducing to persons, wherever located, persons resident in Queensland; other than persons who are parties to existing contracts with the First Respondent for the introduction of themselves to other persons; (e) entering into contracts with persons resident in Queensland for the provision of introduction services. ("providing introduction services in Queensland").
The orders in paragraph 1 above commence to operate 7 days from the date these orders are made.
The First, Second and Third Respondents pay to the Applicant the following sums: (a) $396,111.00 by way of compensation pursuant to section 100 (5) (d) of the Fair Trading Act 1989 (Qld); (b) $37,500.00 by way of interest on the amount of $396,111.00. The combined amount of $433,611.00 shall be paid within 120 days from the date of this order, the liability for such payment being joint and several.
The Applicant will distribute the amount of $433,611.00 as follows: (a) To Andrew George the sum of $95,000.00 (b) To the remaining persons listed in the Schedule to the Originating Application except for: (i) Brett Anthony Elliott (ii) Conan Kelly. The balance of $338,611.00 on a pro-rata basis
The First, Second and Third Respondents will cause a notice to be published on all the First Respondent's websites including the website at the address www.tlccs.com.au, stating that the First Respondent is unable to offer or provide introduction services in Queensland (as that term is defined in paragraph 1 above), such notice to appear for at least six months from the date of these orders.
The First, Second and Third Respondents pay the Applicant within 120 days of the date of this order costs fixed in the amount of $130,000.00.

[27]

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:

[33]

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

[116]

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:

[143]

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".

At a glance

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Judgment (56 paragraphs)

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Legislation Cited (4)

Cases Cited (23)

Cited By (5)