Productivity Partners Pty Ltd (trading as Captain Cook College) v Australian Competition and Consumer Commission

Judgment (6 paragraphs)

[1]

The application by the first and second appellants to vacate the listing of the appeal be dismissed with costs.
The listing of the appeals in NSD887/2021 and NSD895/2021 for hearing commencing on 4 May 2022 with an estimate of three days be confirmed.
In accordance with Practice Note APP2, not later than 4.00pm on 14 April 2022: (a) the appellants in matter NSD887/2021 file and serve on each respondent an outline of submissions and chronology of the relevant events; and (b) the appellant in matter NSD895/2021 file and serve on each respondent any outline of supplementary submissions addressing Ground 1 of the Notice of Appeal, with such submissions to be limited to 10 pages.
Not later than 4.00pm on 28 April 2022, the first respondent in each matter file and serve on the appellants an outline of submissions, a chronology of the relevant events, and a list of materials to be included in Part C of the Appeal Book.
Not later than 12.00pm on 3 May 2022, the appellants file and serve on each respondent any submission in reply.
In accordance with Practice Note APP2, not later than 4.00pm on 2 May 2022, the appellants file and serve on each respondent Part C of the Appeal Book (being a single Part C covering both matter NSD887/2021 and NSD895/2021), not including any reply submissions to be filed in accordance with order 5.
Outlines of submissions are to be easily legible using a font size of at least 12 points and one and a half line spacing throughout, including in any footnotes and annexures. Italics or underlining must be used for legislation and case citations and boldface or italics may be used for occasional emphasis, and are not to exceed: (a) in the case of the first and second appellants jointly in matter NSD887/2021, 20 pages in length, including any annexures; (b) in the case of the appellant in matter NSD895/2021, 20 pages in length (as regards the submissions filed on 30 March 2022) and 10 pages in length (as regards any supplementary submissions), including any annexures; and (c) in the case of the first respondent in each matter, combined submissions 30 pages in length, including any annexures.

Background And Facts 3 Productivity Partners Pty Limited (trading as Captain Cook College) is a company which engaged in the business of providing vocational education and training. The courses offered by Productivity Partners were generally provided in the context of a scheme funded by the Commonwealth Government. Productivity Partners was the wholly-owned subsidiary of Site Group International Limited. Site's chief operating officer was Mr Blake Wills. Mr Wills was also the chief executive officer of the college operated by Productivity Partners. 4 In November 2018, the Australian Competition and Consumer Commission (the ACCC) commenced proceedings against Productivity Partners, Site and Mr Wills. The ACCC alleged that Productivity Partners engaged in a system of conduct or pattern of behaviour which was unconscionable contrary to s 21 of the Australian Consumer Law (ACL) (Sch 2 to the Competition and Consumer Act 2010 (Cth)) and that Site and Mr Wills were knowingly concerned in or party to Productivity Partners' contraventions. 5 The case brought by the ACCC was heard by the primary judge in June and July 2020. On 2 July 2021, the primary judge handed down a judgment in which his Honour found, in summary, that Productivity Partners had engaged in systemic unconscionable conduct in contravention of s 21 of the ACL and that Mr Wills and Site were knowingly concerned in that identified unconscionable conduct and the contraventions arising therefrom: Australian Competition and Consumer Commission v Productivity Partners Pty Ltd (trading as Captain Cook College) (No 3) [2021] FCA 737. The findings against Site essentially flowed from the fact that, at the time of the relevant conduct, Mr Wills was Site's chief executive officer and that his conduct and state of mind were accordingly attributable to Site. 6 On 4 August 2021, the primary judge made declarations in respect of the contravening conduct and adjourned the matter for further hearing in respect of the other relief sought by the ACCC, including pecuniary penalties: Australian Competition and Consumer Commission v Productivity Partners Pty Ltd (trading as Captain Cook College) (No 5) [2021] FCA 919. 7 On 1 September 2021, Productivity Partners and Site filed a notice of appeal (NSD 887 of 2021). The ACCC and Mr Wills were named as respondents to that appeal. Mr Wills also filed a notice of appeal (NSD 895 of 2021), naming the ACCC, Productivity Partners and Site as respondents to the appeal. Self-evidently, those two appeals are related and must travel together. 8 On 24 December 2021, the ACCC filed an application for security for costs. The quantum of the security sought by the ACCC was $140,000. In February 2022, Site filed and relied upon on an affidavit of its chief financial officer, Mr Craig Dawson, in opposition to the security for costs application. That affidavit, affirmed on 4 February 2022 (the February affidavit), was also relied on by Productivity Partners and Site in support of their application to vacate the hearing of the appeal. 9 In his affidavit, Mr Dawson explained the essence of Productivity Partners and Site's opposition to the security for costs application in the following terms: I am informed by my solicitors that Site's appeal is likely to be set down for hearing in May 2022. If Site was required to pay $140,000 in security for costs, it would significantly impact Site's ability to meet its operating expenses, including the payment of wages and salaries, rent and its creditors. I am carefully managing Site's cash flow so that Site's operations can continue as projected until the value of the Proposed Transaction is realised in April 2022. I am unlikely to be able to sustain Site's operational cash-flow if security is ordered in this proceeding. 10 In effect, what Mr Dawson was saying was that if Site was required to pay $140,000 by way of security for costs prior to a May 2022 hearing, it may be insolvent. 11 It should perhaps also be noted in this context that it is common ground that Productivity Partners no longer carries on any business. The security for costs application accordingly hinged on Site's financial position. It would also appear that Site has effectively assumed responsibility for the conduct of the appeals on behalf of both itself and Productivity Partners, and the application to vacate the hearing of the appeals hinged primarily on the ability of Site to fund the prosecution of the appeals. It is accordingly convenient to refer to Site as being the relevant party which is seeking to vacate the hearing of the appeals. 12 Mr Dawson's evidence in the February affidavit concerning Site's financial position as at February 2022 is of some relevance to Site's application to vacate the hearing of its appeal. As will be seen, Site claims that its financial position is such that it will not be able to pay its lawyers to prosecute its appeal if it is to be heard in May 2022. That is why it wants the appeal to be adjourned. Yet, if Site's financial position was as dire as suggested in the February affidavit, it must have been apparent to Site from as early as February 2022, if not before, that it may have difficulties paying its lawyers to prosecute its appeal if it was set down for hearing in May 2022, irrespective of whether or not it was required to proffer the security sought by the ACCC. 13 Nevertheless, as will be seen, Site did not oppose its appeal being set down for hearing in May 2022. And, to make matters worse, it did not bring its application to vacate the May 2022 listing until very recent times. 14 There are a number of other important points to note about the February affidavit. 15 First, Mr Dawson stated that, as at 31 December 2021, Site had cash at hand in the sum of $813,000. By 4 February 2022, that figure had been reduced to $289,899 as a result of what Mr Dawson said was the payment of Site's "ordinary operating costs". 16 Second, it would appear that, despite Site being aware of the possibility or likelihood that its appeal would be listed for hearing in May 2022, it appears to have made no provision for the payment of its anticipated legal costs in relation to the prosecution of its appeal. It appears to have not put any money aside on account of its anticipated legal costs or taken those costs into account in the conduct of its financial affairs. 17 Third, Mr Dawson indicated that there had been a significant reduction in Site's revenue over the previous financial year, largely as a result of falling enrolments due to the COVID-19 pandemic. He indicated, however, that he expected that enrolments, and, therefore, Site's revenue, would recover during the next 12 months. 18 Fourth, Mr Dawson indicated that, as at December 2021, Site had access to up to $2 million in further credit under a credit facility that it had with a related or associated entity, Punta Properties. Mr Dawson indicated, however, that that position had changed since 31 December 2021, apparently because Site had renegotiated its agreement with Punta Properties. As a result of that renegotiation, Site no longer had access to the $2 million finance previously available to it. 19 It is not entirely clear from Mr Dawson's affidavit why Site renegotiated its agreement with Punta Properties such that it no longer had access to the finance previously available to it. It seems, however, that the finance was made available in the context of an agreement between Site and Punta Properties which related to the development of a property in the Philippines in which Site has a substantial interest. The reason for the renegotiation was said to be that further investors were to be brought into the development. Be that as it may, the important point for present purposes is that, in renegotiating the agreement such that it no longer has access to potentially $2 million in further finance, Site appears not to have taken into account its anticipated legal costs of prosecuting its appeal in the near future. Had Site taken advantage of the finance previously available to it, there would have been no issue in relation to its ability to fund the appeal. 20 Fifth, in the February affidavit, Mr Dawson indicated that he expected that the renegotiated agreement relating to the development of the property in the Philippines would be finalised by the end of April 2022. If that occurred as anticipated, Mr Dawson stated that Site would be entitled to the net sum of US$3.9 million. As will be seen, however, Mr Dawson's expectations in relation to the finalisation of the property transaction appear to have been overly optimistic. As will also be seen, it would appear that Mr Dawson's forecasts or expectations often turn out to be overly optimistic. 21 Sixth, Mr Dawson also said that he expected that Site's financial position would improve by August or September 2022 as a result of another agreement pursuant to which Site had sold its "SSTD business" to another entity. Mr Dawson suggested that it was likely that Site would receive approximately $700,000 by August 2022 from that sale transaction, but that depended on a number of other financial contingencies relating to the performance of the relevant business. 22 The ACCC's security for costs application was heard by a registrar on 8 February 2022. Judgment in respect of the application was reserved. On 18 February 2022, the parties communicated with the Court's registry about the listing of the appeal in May 2022. The dates on which counsel for the respective parties were available for the hearing were provided to the registry. It would appear that, despite what Mr Dawson had said in his February affidavit about Site's fairly dire financial position, Site did not suggest that there was any impediment or potential impediment to the hearing of its appeal proceeding in May 2022. Site certainly did not resist the appeal being set down for hearing in the May Full Court sittings. Site's communications with the registry did, however, refer to the outstanding security for costs application. 23 On 16 March 2022, the parties were advised that the appeal had been listed for hearing to commence on 4 May 2022. The following day, the registrar who had heard the security for costs application delivered his judgment and ordered Productivity Partners and Site to provide security in the sum of $93,450 by 7 April 2022. The registrar also ordered that the appeal be stayed if that security was not provided. 24 Just over a week later, on 25 March 2022, Site informed the ACCC that it proposed to provide the required security by 7 April 2022, but that they would apply for the hearing of the appeal to be vacated. 25 On 28 March 2022, Site filed an interlocutory application seeking to have the appeal vacated.

CONSIDERATION AND RESOLUTION OF THE APPLICATION 40 While the matter is somewhat finely balanced, I am ultimately not persuaded that it would be appropriate to vacate the May 2022 listing of the appeal in all the circumstances. That is so for a number of reasons. 41 First, I am not satisfied that Site has provided an adequate or reasonable explanation for why its application was made only one month out from the hearing of the appeal. 42 Site intimated that the timing of the application had something to do with the outcome of the security for costs application. I have considerable difficulty accepting that to be the case. 43 The security that Site has been ordered to provide is for a fairly modest amount - $93,450. Even if it is accepted that Site may be unable to pay its lawyers to prosecute the appeal at the hearing commencing on 4 May 2022, it is difficult to accept that that fact only became apparent to it when it was ordered to provide that fairly modest amount as security for costs. As was noted earlier, that must have been apparent from at least early February 2022 when Mr Dawson affirmed his affidavit in opposition to the security for costs application. The February affidavit painted a fairly dire picture of Site's financial position at that time. Indeed, it was effectively suggested that Site might be insolvent if it was required to provide $140,000 by way of security for costs by May 2022. 44 In those circumstances, any application to vacate the hearing of the appeal should have been made well before late March 2022. The delay in making the application is not satisfactorily explained by the timing of the security for costs order. 45 The delay in making the application is of some considerable significance. That is because if the appeal is vacated at this late stage, the prejudice to the respondents will be greater than it would have been if the application had been made at an earlier point in time. The inconvenience to the Court and other litigants is also increased by the delay. 46 Second, it may be accepted that the prosecution of the appeal is a matter of considerable importance for Site. Site and Productivity Partners face potentially large pecuniary penalties if the primary judge's findings against them are not overturned. It may be accepted, in those circumstances, that Site may suffer considerable detriment if the hearing of the appeal in May is not vacated and it turns out that it is unable to pay their lawyers and therefore unable to prosecute their appeals. 47 That problem, however, would appear to be a problem largely of Site's own making. 48 Site has undoubtedly known since the appeals were lodged in August 2021 that it would be required to pay its lawyers to prosecute the appeals. The evidence indicates, however, that Site has made no real or genuine attempt to conduct its business affairs with that in mind. Mr Dawson's affidavit evidence clearly indicates that Site has made significant financial and commercial decisions in circumstances where little or no consideration has been given to the fact that Site would have to pay its lawyers to prosecute the appeals. No money appears to have been set aside to pay for legal fees in relation to the appeals. Apparently large amounts have been paid in respect of other business outgoings in preference to the making of provision for the anticipated legal expenses. Moreover, agreements have been entered into or renegotiated in apparent disregard of the need for Site to have sufficient money or finance to fund the appeals. 49 Third, I am, in any event, somewhat sceptical that Site will be unable to pay its lawyers to prosecute the appeal if push comes to shove. If, as Mr Dawson suggested in his evidence, Site does not presently have sufficient liquid funds at hand to pay its lawyers, it remains unclear why it would not be able to obtain some form of finance to enable it to prosecute its appeals. It appears to have a significant interest in commercial property in the Philippines worth many millions of dollars. It is unclear why Site would not be able to secure finance for the prosecution of the appeal using that property as some form of security. Mr Dawson says nothing in his affidavits about what, if any, steps Site has taken, or might be able to take, to secure some form of finance or other funding to allow it to prosecute its appeal. I would infer from the evidence as a whole that, just as it has conducted its business in commercial affairs without apparent regard to the need to fund its appeal, Site has made no real or genuine attempt to secure alternative sources of funding or finance for the prosecution of the appeals. 50 Fourth, I am not in any event entirely satisfied that Site will be in any better position to prosecute the appeal if it were to be heard in August 2022. I accept that Mr Dawson has a genuine belief or anticipation that Site will be in a better financial position by August 2022. I am, however, not entirely satisfied that his optimism is necessarily well-founded. 51 As already noted, some of Mr Dawson's previous forecasts or expectations have turned out to be overly optimistic or not well-founded. His expectations or beliefs concerning the improvement in Site's financial position later in the year are subject to a number of contingencies and uncertainties. The terms of the transaction relating to the property in the Philippines have not been finalised. The finalisation of the terms has already been pushed back some months to at least June 2022. The size and the timing of the receipts which are expected to flow from the sale of the SSTD business are also subject to contingencies. The flow of funds from that transaction appear to hinge to a large extent on the financial results of the business. The anticipated improved revenue streams from Site's businesses also hinge on whether enrolments improve this year. 52 There is, in short, some degree of uncertainty in relation to each of the transactions or circumstances that are expected to lead to an improvement in Site's improved financial position by August 2022. 53 It is also important to add that if I were to grant an adjournment, it would only be on the basis that Productivity Partners and Site be required to pay the ACCC and Mr Wills' costs, not only of the application to vacate, but also the costs thrown away by the vacation of the appeal. I would also have ordered that the costs be assessed on a lump sum basis and paid forthwith, or within a very short space of time. The estimate of the costs orders, provided by the ACCC and Mr Wills, were approximately $25,000 in total. Thus, the granting of the adjournment would, at least to a certain extent, worsen Site's financial position. 54 Fifth, the vacation of the hearing date would potentially cause prejudice to both the ACCC and Mr Wills. Both indicated that their counsel were only available during a fairly narrow window in August 2022. If the hearing was to be vacated, the Court could not, at this stage at least, specifically fix the appeal for hearing during that narrow window or necessarily ensure that the ACCC and Mr Wills would be able to secure hearing dates suitable to their counsel. As indicated earlier, that circumstance caused the ACCC to reconsider the neutral stance it initially took and to oppose the adjournment application. 55 Sixth, the vacation of the hearing would result in some degree of inconvenience and detriment to the Court and other litigants. The Court listed the hearing of the appeal in the May 2022 sittings on dates suitable to the parties and their counsel. The allocation and fixing of hearing dates in Full Court sittings is a relatively complex exercise. Most litigants hope or expect to get a relatively early hearing of their appeal. Whether that it possible depends on the number of appeals to be heard in the relevant Full Court sittings, the availability of counsel and the availability of judges to sit on appeals during that sitting. The listing of one appeal in a particular Full Court sitting, particularly an appeal that is likely to take more than two days, is likely to result in another appeal not being able to be heard during that sitting. If the listed appeal is subsequently vacated, another appeal may not be able to be listed in its place, particularly if the appeal is vacated at a relatively late stage. 56 As already noted, the appeals in this matter were listed on a date that was suitable and convenient to all the parties. Three judges have set aside time to hear this appeal. Some litigants may have been unable to secure hearing dates in May 2022 because of the listing of this matter. If the appeals are vacated at this late stage, it is unlikely that any other appeals are likely to be able to be heard on the days initially allocated to the hearing of these appeals. And if the May hearing of these appeals is vacated and the appeals are instead listed to be heard in the August sittings, some litigants may not be able to secure hearing dates in August 2022. 57 The inconvenience to the Court, and the potential prejudice to other litigants, which would result from the late vacation of the hearing of these appeals are not insignificant considerations. 58 Seventh, there are also other public interest considerations which weigh against vacating the hearing of the appeals. The underlying subject matter of the appeal involves matters of considerable importance, including public importance. The events the subject of the appeal occurred as long ago as 2015. The proceedings have been on foot for some time. The appeal itself was filed approximately six months ago. It is of some importance that matters such as this one secure an early hearing and resolution. 59 In all the circumstances, I am not persuaded that it is appropriate to vacate the May hearing dates. 60 It follows that the application by Site to vacate the hearing of the appeal is refused and dismissed with costs. I certify that the preceding sixty (60) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wigney.

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