Qantas Airways Ltd v Cameron

BETWEEN: australian competition and consumer commission

REASONS FOR JUDGMENT In this proceeding it is alleged that the three respondents promoted, or took part in the promotion of a pyramid selling scheme to which subs 61(2A) of the Trade Practices Act 1974 (Cth) ("the TPA") applies. That subsection is in the following terms: "(2A) A corporation also contravenes this section if the corporation promotes, or takes part in the promotion of, a scheme under which - (a) a payment is to be made by a person who participates, or who has applied or been invited to participate, in the scheme to or for the benefit of the corporation or another person who takes part in the promotion of the scheme or to or for the benefit of another person who participates in the scheme; and (b) the inducement for making the payment is the holding out to the person who makes or is to make the payment the prospect of receiving payments from other persons who may participate in the scheme." The applicant is the Australian Competition and Consumer Commission ("the ACCC"); it has instituted the proceeding on its own behalf, but also in a representative capacity for those persons who have participated in the pyramid selling scheme. Its right to do so has been challenged and that issue will be addressed at a later stage in these reasons. The first respondent, Golden Sphere International Inc ("Golden Sphere") was incorporated in the Republic of Vanuatu on 2 February 1996 as an International Company limited by shares. The second and third respondents, Pamela Joy Reynolds and Victor Michael Cottrill, are Australian citizens who were, at all material times, resident in the State of Queensland. However, Mrs Reynolds is presently a resident of Vanuatu and has been so since 28 August 1996. It was alleged that this proceeding can be sustained against Mrs Reynolds and Mr Cottrill as natural persons because of the provisions of subs 6(3) of the TPA. That subsection provides as follows: "(3) In addition to the effect that this Act, other than Parts IIIA and X, has as provided by subsection (2), the provisions of Part IVA and of Divisions 1 and 1A of Part V have, by force of this subsection, the effect it would have if - (a) those provisions (other than section 55) were, by express provision, confined in their operation to engaging in conduct to the extent to which the conduct involves the use of postal, telegraphic or telephonic services or takes place in a radio or television broadcast; and (b) a reference in those provisions to a corporation included a reference to a person not being a corporation." Section 61, dealing with "Pyramid selling", appears in Div 1 "Unfair Practices" of Pt V "Consumer Protection" of the TPA and so there is the potential for subs 6(3) to authorise the institution of a proceeding such as this against natural persons. In fact, counsel for all respondents accepted that the applicant had established that the promotion of the challenged pyramid selling scheme ("the scheme" or "the Golden Sphere scheme") involved the use of postal services and, as will become apparent, the evidence in the trial warranted that concession. Nonetheless, the second and third respondents have denied that they promoted or took part in the promotion of the Golden Sphere scheme. In its amended application the applicant has sought injunctive relief against all three respondents; it seeks orders restraining them from promoting or taking part in the promotion of the Golden Sphere scheme and its seeks orders restraining the second and third respondents from being, in any way, directly or indirectly, knowingly concerned in Golden Sphere's promotion of the scheme. The applicant also seeks, on behalf of the other group members, orders that include a declaratory order that those members who participated in the scheme are entitled to be repaid any money that they had paid in respect of the Golden Sphere scheme. THE GOLDEN SPHERE SCHEME The evidence disclosed that when a member of the public ("the target") was approached and invited to join the Golden Sphere scheme, he or she was shown a "Certificate of Authenticity" ("the Certificate") in which were inserted the names of seven people. Those names were numbered consecutively - one to seven - and the personal details of the bank account of the first named person appeared immediately opposite his or her name. The scheme called for the target paying three separate amounts of $AUD50. The first of those payments went to the person "selling" the scheme; that person was invariably number seven in the list of names in the Certificate. The second payment was made to Golden Sphere and the third payment was made direct to the bank account of the person whose name appeared first in the Certificate. Upon payment by the target to Golden Sphere and upon Golden Sphere being satisfied that payment had been made to the person first named in the Certificate, Golden Sphere would forward to the new member three numbered certificates. Each of those certificates contained the target's name in the seventh position. The claimed attraction of the scheme was that as the first named person was paid his or her multiple payments of $50, that name would be removed from the list and every name would advance one step until the target's name was first on the list. The pyramid effect of the scheme was expected to be achieved because every target was encouraged to sell his or her three Certificates. A booklet which accompanied the three certificates represented that a target could receive a return of as much as $109,350.00 by achieving the No 1 position. Most, if not all, payments of $50 that were made to Golden Sphere involved the use of postal services. No witness attempted to explain how the first seven names appeared on the first Certificate that would have been issued in the promotion of the scheme; it is not therefore possible to explain how the scheme could have had a "legitimate" origin. However, Mrs Reynolds and Mr Cottrill both became members of the scheme at an early stage, and their names and the names of their relatives and friends appear in the earliest numbered certificates. Without the presence of those seven names, the scheme would not have had the necessary appeal to a prospective target. Mr Cottrill admitted that he acquired several certificates in the Golden Sphere scheme but that he did not pay for any of them. He said that his name was at number seven position; when asked to identify those ahead of him he listed his son, his daughter, his grand-nephew, Mrs Reynolds and her son (or stepson). THE PLEADINGS ACCC instituted proceedings in this matter on 5 September 1996 and on 1 October 1996 a judge of this Court, Kiefel J, made orders restraining the promotion of the Golden Sphere scheme until further order. The third respondent, Mr Cottrill filed an appearance and a defence in which he denied that he had, in any way, participated in the scheme or in its promotion. Nevertheless, he acknowledged that he had, on 1 October 1996, consented to this Court making an order that he be restrained from being, in any way, directly or indirectly, knowingly concerned in the Golden Sphere scheme or its promotion and, without admissions, he gave undertakings in his defence in terms consistent with those orders. At the time when the case was called on for hearing, neither Golden Sphere nor Mrs Reynolds had filed an appearance or a defence. However, on the first day of trial, Ms Macdonald of counsel announced her appearance on behalf of Mr Cottrill in the substantive proceedings and on behalf of all three respondents on a Notice of Motion that challenged the efficacy of the service of the proceedings in this matter on Golden Sphere and Mrs Reynolds. That challenge having been unsuccessful, Ms Macdonald then announced that she represented all three respondents in the substantive proceedings and that appearances and addresses for service would be filed in Court that day. A defence was not filed on behalf of Golden Sphere and Ms Macdonald informed the Court that she was instructed to admit that its conduct, as described in these reasons, amounted to a breach of the provisions of subs 61(2A) of the TPA. Mrs Reynolds did not file a defence but the case proceeded against her as if every allegation in the statement of claim was in issue. BACKGROUND FACTS In November 1995 Mrs Reynolds was carrying on the practice of her profession as a public accountant in Ashmore City and Southport, Queensland. She said in evidence that she received a letter dated 15 November 1995 from Golden Sphere International Inc. of PO Box 257 Port Vila, Vanuatu. Some initials were appended at the end of the letter but they are indecipherable and it was Mrs Reynolds' evidence that she did not then know, nor does she now know, the identity of the signatory to that letter. Indeed, it is her evidence that she does not know the identity of the person or persons who control Golden Sphere. Based on a newspaper article that was published in Vanuatu (Ex R1) she believes that it might be a Mr Bruce Tunks and his daughter but that is only supposition on her part. The letter from Golden Sphere commenced with a request that Mrs Reynolds consider "acting as the Australian Agent for the a Vanuatu International Company". When asked if she knew why a stranger in Vanuatu might have chosen her as its Australian agent, she suggested that a business associate, Mr Peter Coombe, a solicitor who had at one time practised in Vanuatu, might have recommended her, but she did not know. The letter from Golden Sphere said that the company was not yet incorporated but that "we are in the process of commencing a network marketing business operation world wide ...". The nature of the "marketing business operation" was not particularised in the letter. The letter did however state that a bank account was to be opened in Australia "to receive monies from the network system" and to "allow funds to be deposited, business expenses and your fees to be paid". Mrs Reynolds was requested to register the business name of "Golden Sphere" in Queensland and to open a bank account in that name. The letter went on to advise that, upon completion of the incorporation of the company in Vanuatu, the bank account would be closed and Mrs Reynolds would then be required to transfer surplus funds "internationally upon our instruction". In the meantime Mrs Reynolds was asked to receive all correspondence and to forward it daily to a Vanuatu post office box. By letter dated 25 November 1995, Mrs Reynolds replied to Golden Sphere at its Vanuatu post office box number, stating that she needed to seek advice in relation to her becoming the Australian agent of a foreign company. However, she advised that she had attended to the registration of the business name of "Golden Sphere" with the Department of Consumer Affairs and she enclosed a copy of the Certificate of Registration that had been issued on 23 November. She said in that letter: "I have registered the business name to myself and that of an employee until such time as I receive your instructions to de-register"; the employee was Mr Cottrill. Mrs Reynolds also advised in her letter that she had opened a bank account - No 10295220 - on 25 November 1995, the same day as her letter, in the name of "Golden Sphere" with the Commonwealth Bank of Australia, Southport Branch. Mrs Reynolds and Mr Cottrill were both signatories to that cheque account. Mrs Reynolds then wrote: "I confirm acceptance of receiving all correspondence to my Post Office Box 36, Ashmore City, Qld 4214, Australia, and that all cheques received will be banked into the newly opened account and all correspondence forwarded to your Post Office Box daily." The evidence does not reveal what knowledge Mrs Reynolds and Mr Cottrill had of the Golden Sphere scheme at this stage: that is, at 25 November 1995. Subsequently however, they both became aware, in a general issue, of its method of operation for they each became participants in the scheme. On 27 December 1995 Mrs Reynolds and Mr Cottrill opened separate accounts with the Nerang River Branch of the Commonwealth Bank of Australia. Mrs Reynolds opened a joint account with her adult stepson Adam John Reynolds-Hislop, while Mr Cottrill opened an account jointly with Nathan Joshua Edridge, the son of his niece, Rhonda Edridge. Nathan was aged about 4 years at the time. From January 1996 onwards, a large number of $50 payments were deposited on a daily basis into each of those accounts. Both Mrs Reynolds and Mr Cottrill said that the several deposits to those respective accounts were consequential upon their successful involvements as participants in the Golden Sphere scheme. In addition to these activities, as from 3 January 1996, a larger number of $50 payments were deposited on a daily basis to the credit of the account with the Southport branch of the Commonwealth Bank that had been opened in the name of Golden Sphere. It means, and I hold, that from late 1995 or early 1996, both of them were fully aware of the method of operation of the Golden Sphere scheme. But it cannot be said with confidence what their state of knowledge about the scheme was when they registered the business name and opened the bank account in November 1995. By late November 1995, Mrs Reynolds, based on instructions from a person whose identity was unknown to her, had committed herself in some unspecified way to act on behalf of a foreign party that she knew was not then an incorporated company. She did not know the detail of the intended network marketing business, or if she did, she did not explain it in her evidence: she knew that she was to receive cheques but she did not know for what purpose, or if she did, she did not explain it in her evidence. She did not disclose in her evidence any information about the people in "the network system" who would be paying money into the account that she and Mr Cottrill had opened. It is most remarkable that a business woman with fifteen years experience in the field of accountancy would be prepared to involve herself in such an exercise when she knew so little about it and so little about the persons who were organising the exercise. Then again, it is also remarkable that these unknown people in Vanuatu would give such open ended trust to a complete stranger. These issues would not, of course, be so perplexing if, contrary to her evidence, Mrs Reynolds was well known to the people in Vanuatu and knew the operational details of the scheme. It was apparent from her evidence that Mrs Reynolds did have some association with a Mr Jonathon Law, a chartered accountant then resident Vanuatu. She described him in terms that purported to establish that he was in a position to give her instructions on behalf of Golden Sphere but without him being a principal of Golden Sphere. But with this qualification she was prepared to commit herself in the manner described, allegedly on behalf of some unknown client. On 21 December 1995 Mrs Reynolds wrote Golden Sphere in Vanuatu informing them that she had spoken to a barrister in Southport who had advised her that "the type of business your company proposes to commence in Australia is of a grey nature in relation to Trade Practices Law". She went on to say that she was unable to offer her consent to act as the agent in Australia prior to "further investigation". Nevertheless, her letter contained the following passage: "as instructed I continue to bank deposits received by mail and forward all correspondence to you." Although she failed to address the subject in her evidence, the content of this letter is another indicator, and I so find, that at this stage, Mrs Reynolds was substantially, if not fully, aware of the exact nature of the exercise that Golden Sphere had embarked upon. How else could she have instructed the barrister and obtained advice of the nature that she relayed in her letter? On 29 January 1996 Mrs Reynolds and Mr Cottrill signed a document entitled "Notice Of Cessation of Business Under Business Name". The effect of this document was to give advice that the business carried on under the business name "Golden Sphere" had ceased to operate in Queensland "by the person or all or the persons to whom the business name is registered"; those persons were, of course, Mrs Reynolds and Mr Cottrill. Coincidentally, on 3 February 1996, Golden Sphere wrote to Mrs Reynolds informing her of its incorporation in Vanuatu on the preceding day, 2 February 1996. A copy of the Certificate of Incorporation was enclosed with the letter. Mrs Reynolds denied in cross-examination that the signing of the notice of cessation was because she knew of the imminent incorporation of Golden Sphere International Inc. She said that it was a coincidence. This is difficult to accept as, by her letter of 5 February 1996, Mrs Reynolds wrote to Golden Sphere in Vanuatu in these terms: "In accordance with your initial instructions after incorporation of Golden Sphere International Inc on 2 February 1996, as advised, I have completed a Notice of Cessation of Business Form 5 with the Office of Consumer Affairs to de-register the business name of Golden Sphere (copy attached for your information and attention)". On 9 February 1996, Mrs Reynolds wrote Mr Peter Coombe; he was then practicing as a solicitor in Southport. She informed him that she had been requested to become the Australian Agent for Golden Sphere. She wrote that Golden Sphere proposed to commence a network marketing operation worldwide and she submitted to Mr Coombe "an information booklet" that had been sent to her by Golden Sphere for her perusal. She asked for a "legal opinion on the proposed business operation in Australia". It was her evidence that Mr Coombe advised her orally that she should not accept the appointment because the proposed business would or might breach s 61 of the TPA. Mr Coombe's oral advice was confirmed in writing in his lengthy letter to Mrs Reynolds dated 29 February 1996. Mrs Reynolds thereupon wrote Golden Sphere enclosing a copy Mr Coombe's advice and informing the company that she could not accept the appointment as the company's agent in Australia. Her letter is dated 19 February 1996. That is obviously a mistake; the probability is that it should have been dated on the same date as, or a subsequent date to Mr Coombe's letter of 29 February. I will hereafter refer to this letter as "Mrs Reynold's February letter." GOLDEN SPHERE The Constitution of Golden Sphere was exhibited as an annexure to the affidavit of Julian Marc Ala, the Financial Services Commissioner and the officer in charge of the Vanuatu Financial Services Commission. From a perusal of the constitution, it is impossible to ascertain the identity of the natural persons who are engaged in the business of the company. Its registered office is shown as care of a firm of chartered accountants, Messrs Moores Rowland, and its registered agent was said to be Moores Rowland Corporate Services Limited. That last mentioned company was also described as the sole incorporator of Golden Sphere. Article seven of the constitution of the company named its first directors as Equity Holdings Limited and Southpac Nominees Limited; the address of each of those companies was Second Floor, Windsor House, Kumul Highway, Port Vila, Vanuatu, that being the address of Messrs Moores Rowland and Moores Rowland Corporate Services Limited. Mrs Reynolds knew of the firm of chartered accountants but she did not know them as the registered agents of Golden Sphere; she thought that Mr Law held that position. Independently of the proceeding in this Court, the ACCC had also instituted a proceeding against Golden Sphere and Mrs Reynolds in the Supreme Court of the Republic of Vanuatu. Two affidavits of Peter John Toy ("Mr Toy"), a legal officer in the employ of the Australian Government Solicitor ("the AGS") were read as part of the case for the applicant in this matter. In his affidavit of 7 February 1997 Mr Toy annexed correspondence that had passed between his office and the office of Messrs Clayton Utz Solicitors of Port Vila, Vanuatu. In a letter dated 24 January 1997, Mr Toy noted that neither Golden Sphere nor Mrs Reynolds had yet filed an appearance in this present proceeding and he advised that he was writing to inform Messrs Clayton Utz that the ACCC intended to proceed against the first and second respondents in their absence. Messrs Clayton Utz replied by letter dated 28 January 1997 informing the AGS that they did not have instructions to appear for Golden Sphere or Mrs Reynolds "in connection with any proceedings before the Australian Courts". Mr Toy replied to Messrs Clayton Utz by letter dated 30 January 1997 advising that his first mentioned letter was written in the hope that Messrs Clayton Utz might be able to inform the Australian authorities of addresses for correspondence to the first and second respondents. By letter dated 4 February 1997 Messrs Clayton Utz replied in these terms: "... our clients instruct us not to disclose to you either of their addresses for correspondence." This last mentioned letter suggests that there might be some connection between the first and second respondents in that they both retained the same solicitors who wrote jointly on their behalf to the AGS without differentiating between them. In addition, Mrs Reynolds not only enjoyed the services of the same solicitors in Vanuatu as Golden Sphere, she and Mr Cottrill are presently represented by the same solicitors and the same counsel as are representing Golden Sphere in this current proceeding. In those circumstances I do not accept her evidence that she has no knowledge of the identity of the natural persons who stand behind Golden Sphere. The position with respect to Mr Cottrill is different. There is no like evidence connecting him to Golden Sphere in this area. I am not, therefore, able to make a finding that he knows the identity of the person or persons standing behind Golden Sphere. MRS REYNOLDS Mrs Reynolds was a most unsatisfactory witness. In her appearance, presentation and manner she was unimpressive. Added to that, there were aspects of her evidence that were either outright lies or, at least, so incredible as to be unacceptable. I list the following as some examples of her unsatisfactory evidence: 1. In applying for permission to take up residence in Vanuatu, Mrs Reynolds was required to submit to the authorities a statement of her financial affairs. Her statement, which was dated 22 August 1996, included as an asset the entry: "ANZ - Vanuatu (50% share) 300,000". The symbol - $A - appeared at the top of the statement thereby indicated that she had an asset of $AUD300,000 on deposit with the Australian and New Zealand Banking Corporation in Vanuatu. Under cross-examination, Mrs Reynolds acknowledged that she had no such asset; she explained that she had intended to insert in the statement that she had an asset (in the form of a bond) in the sum of 300,000 vatu (which, so she said, was the equivalent of about $AUD2,800). She said that she had arranged for her secretary to complete the statement and had not earlier noticed the mistake. She said that she only became aware of her mistake when some papers in this action, including a copy of her financial statement, were served on her in September 1996. There are two aspects of this incident that are disconcerting. First, despite the enormity of the mistake, Mrs Reynolds has made no attempt to inform the Vanuatu authorities of it; secondly, there is documentary evidence that establishes that Mrs Reynolds did not have any account with the ANZ Bank in Vanuatu in August 1996. She did not open an account with that bank until the following month. Her explanation, when this was put to her, was that she prepared the statement knowing that she would, in due course, have such an account. I do not believe this evidence. I consider that it is a deliberate falsehood. 2. Mrs Reynolds protested that it was her regular practice to register, in her name, business names on behalf of clients. She was unable to accept that it would be wholly misleading for her to hold herself out as the proprietor, or one of the proprietors, of a business that was being conducted under a particular business name if she was not, in truth, the proprietor, or one of the proprietors, of that business name. She saw nothing wrong in her holding herself out, with Mr Cottrill, as the proprietor of a business that was carried on under the registered business name of "Golden Sphere". When the business name was registered its place of business was shown as 26 Marine Parade Southport. That was the business address of Mrs Reynold's public accounting practice. Likewise, she considered it in order to withhold from the bank that she was merely representing a client in Vanuatu when she opened a bank account in the joint names of herself and Mr Cottrill for the business name "Golden Sphere". I cannot accept this evidence. At its worst, it is another lie; at its best, it shows ineptitude, a lack of business standards and a lack of commercial morality. 3. When questioned whether Golden Sphere was carrying on business in Australia, Mrs Reynolds became particularly evasive as is evidenced from the following passage in her cross-examination at p 193: "... if the business was receiving money at that time it was carrying on business, presumably, was not it? --- That's a Tax Department question. Is it? Well, you are a tax agent, are not you, or you were then? --- I'm sorry, I'm not here as a tax agent. I'm here --- Are you able to answer my question? --- As far as carrying on business, as I said that's not - I'm not qualified to make that - the decision here." In my opinion, Mrs Reynolds foresaw that she would be in difficulties if she were to answer that she knew that Golden Sphere was, by the receipt of moneys, engaging in a business. She attempted, without success, to avoid that difficulty. Her weak attempts to avoid answering the questions merely exacerbated her parlous position. 4. Mrs Reynolds said that she was instructed, from time to time, by Mr Law in Vanuatu to draw cheques made payable to "cash" and to remit them to Vanuatu. Between February 1996 and April 1996 Mrs Reynolds withdrew approximately $43,500 from the Golden Sphere bank account. During the course of her cross-examination, photocopies of a variety of "cash" cheques were put to her; in each case she identified her signature on each cheque. At first she said that the particular cheque had been remitted by her to Vanuatu in accordance with the instructions that she had received. It was then drawn to her attention that there was a bank stamp on each cheque, indicative of the stamp used by a paying bank when a cheque is presented to it for cash payment. She then, for the first time, said that on occasions, she was verbally instructed that a Mr Allan Smith would call at her office to collect the proceeds of a particular "cash" cheque. She did not know Mr Smith but she said that she handed over the amount of cash to him. Her failure to refer to Mr Smith during the course of her evidence in chief strongly suggested that this answer was given in cross-examination when it became apparent to her that it was necessary to explain the presence of the bank stamp on the photocopied cheques. I do not believe her evidence about "Mr Smith". It is quite incredible that she would hand over sums of money of such a size to a complete stranger, with no identification, who did not give a receipt. 5. On 4 March 1996, Mr Cottrill, on Mrs Reynolds' instructions, opened LPO Box 3078 at the licensed post office at "Newstead News" in the name of Golden Sphere. Mrs Reynolds, in her evidence in chief, said that she wanted another post office box opened as she did not want hers "to be continued to be used". Mrs Reynolds said that she was concerned about her continuing association with Golden Sphere. She said that she discussed this with Mr Cottrill and one or other of them suggested that another post office box should be opened. She said that she told Mr Jonathan Law that this would occur. The use of a post office box facility at "Newstead News" continued throughout March to August 1996. Australia Post terminated its use on 30 August 1996. Thereafter, until 16 September, 1873 items of mail were received addressed to that box number. This is indicative of the activity that had been taking place. The establishment of this new post office box may have distanced Mrs Reynolds' accountancy practice and business from the business of Golden Sphere, but it did not distance Mrs Reynolds' personally. Despite her February letter refusing to accept the appointment as Golden Sphere's agent in Australia, she still continued to act on behalf of Golden Sphere in Australia arranging, by use of the new post office box number, to have its mail received and forwarded on; in addition she still continued to operate the Bank account in the name of Golden Sphere at the Southport Branch of the Commonwealth Bank. 6. On 6 March 1996 Mrs Reynolds was interviewed by officers of the Queensland Office of Consumer Affairs ("OCA") and officers of the ACCC. In that interview Mrs Reynolds denied that she was the promoter of the Golden Sphere scheme and stated that her only involvement was a request by Golden Sphere for her firm to act as the Australian agent; she said that she told her interviewing officers that she had declined to take up the appointment on legal advice. She said that she supplied them with a copy of the letter dated 29 February 1996 from Messrs Coombe & Partners in which he advised that the Golden Sphere scheme was in breach of s 61 of the Trade Practices Act 1974. She said in evidence that her attitude at the interview was to be co-operative and helpful. But on that occasion the bank account with the Commonwealth Bank at Southport was still operational. She admitted that she had not given that information to the interviewing officers and when asked why she had not she then replied: "They did not ask me that question". 7. On 29 August 1996 officers of OCA executed warrants under the Pyramid Selling Scheme (Elimination) Act 1973 (Qld) at the business and residential premises of Mrs Reynolds. They seized Golden Sphere documentation and two computer disks. Upon inspection, the disks contained a data base of the Golden Sphere certificate holders to the end of May 1996. When asked to explain how she came to be in possession of numerous blank certificates and brochures for Golden Sphere she said that they had been sent to her by the company but not at her request. She also said that the computer disks that were found in her premises as a result of the search had also been forwarded to her but not at her request. This evidence is wholly inconsistent with Mrs Reynolds' February letter of advice to Golden Sphere informing it that she could not act as its agent in Australia. It is inconceivable in those circumstances that a business house would thereafter, for many months, continue to forward material to the person who had declined to act as its agent. 8. Why would Mrs Reynolds, on the one hand, write Golden Sphere refusing appointment as its agent, yet on the other hand continuing receiving and controlling Golden Sphere's funds in Australia? The answer, I find, is that Mr Coombe's letter was intended to afford her protection from inquiries from the State and Federal authorities and to corroborate her claims of innocence should she be investigated. Instead, it put beyond doubt, through her subsequent conduct and that of Mr Cottrill that she knew that what they were doing was wrong. MR COTTRILL Mr Cottrill said in evidence that he is commonly known as Michael or Mick Cottrill. He gave his occupation as financial consultant, but acknowledged that in late 1995 and early 1996 he was working on a part time basis for Mrs Reynolds. He was not an impressive witness. I am satisfied that he also knew that he had acted in breach of the provision of the TPA and his poor performance in the witness box can be traced back to his attempts to avoid making admissions against his interests. Under cross-examination, Mr Cottrill acknowledged that he performed services for remuneration for Mrs Reynolds and that these services included work performed on behalf of Golden Sphere. The relevant extract from his evidence is as follows: "Well, were you paid for the work you did on the Golden Sphere matter? ... Well, it came under an arrangement that she paid me for things that I did, yes. There was no - as I said before, I did not keep times or invoices or anything similar. We just came to a suitable arrangement. How much were you paid? ... I think formerly I was paid $3,000 of which ... For the Golden Sphere matter? ... For that and a few other things (sic) did, yes, as I mentioned, with her brother and the - I received money from Financial Technology as a consultant that was my main income at the time." Although this answer does not identify in sufficient detail the nature of the work that Mr Cottrill performed on behalf of Golden Sphere so as to bring about a finding that his work amounted to the promotion of the activities of Golden Sphere, nevertheless it is an important piece of evidence which, when added to the remainder of the evidence, leads to a conclusion that he was taking part in the promotion of the Golden Sphere scheme. The remaining evidence that justifies that finding is as follows: 1. Under cross-examination Mr Cottrill refused to acknowledge that the effect of his signature on the application to register the business name "Golden Sphere" amounted to him holding himself out as a proprietor of the business to be carried on under that name. He said: "I did not sign it as being a proprietor of the company. I signed it on her instructions for a business name that she was representing." Mr Cottrill has a long involvement in business matters. He is not an unintelligent person. He had ability sufficient to obtain a degree in electrical engineering although he no longer follows that profession. His manner in giving this evidence showed, quite obviously, that he was fully aware of the significance of the questions that were being asked of him and his attempts to avoid issues that he perceived might be embarrassing were most unimpressive. He was similarly evasive when questioned in cross-examination about the circumstances leading up to him, jointly with Mrs Reynolds, opening a bank account with the Commonwealth Bank in November 1995. It was put to him that he knew "very well" that he "opened that business name and used it as the basis for opening a partnership or firm account with the Commonwealth Bank of Australia". He attempted to avoid the question by saying "I was told by Mrs Reynolds ..." but counsel interrupted to say: "Do not tell me what Ms Reynolds said to you. Answer my question if you are able to? - I opened the account on the - the - I - I submitted the form and registered the business name on the request of Ms Reynolds, not in order to open a bank account. I was aware of the fact, because she had told me, that to open the account that had to happen first. ... I did attend the bank with Ms Reynolds, and I signed, or I would have thought I was signing as a signatory to the account." A copy of the application form was put to Mr Cottrill and it quite clearly showed, as he was forced to admit, that it was an application for a "Partnership or Firm" to open a banking account. Under the heading "Partner's Names (in full)" his name and Mrs Reynold's name appear. It is quite ridiculous for him to suggest that he thought he was merely signing a form which would enable him to be a signatory on someone else's bank account. 2. Mr Cottrill said that he went to the "Newstead News" on 4 March 1996 on instructions from Mrs Reynolds to open a post office box for Golden Sphere. Mrs Clegg, who gave evidence for the applicant, was employed at that time by "Newstead News"; her duties included the responsibility for looking after the operations of the licensed post office box facilities. Mr Cottrill claimed that Mrs Clegg told him at the time when he applied to open the box that the Certificate of Incorporation and the registered address of the company would be sufficient information for Australia Post. The application to open the facility showed the name of the intended box holder as "Golden Sphere International Inc" and in the space provided for "Signature of Applicant" there is the signature of "Peter Hudeson". Mr Cottrill claimed that he did not, on 4 March, identify himself as "Peter Hudson" or as "Peter Hudeson" nor did he, on that date, give either of those names to Mrs Clegg. He said that although he completed the application form by inserting appropriate items of information, he did not sign the form on that date. He maintained that he was not asked his name and that he did not give it. He said that approximately two weeks later he was handed a note which apparently had been placed in the mail box asking that someone call and see Mrs Clegg. In par 5 of his affidavit sworn on 10 April 1997 Mr Cottrill deposed: "On instructions from Pamela Reynolds I called into the Post Office and approached Ms Clegg, who at the time was apparently very nervous and upset and said that she had forgotten to get a signature on the form, and was concerned that she could get into trouble for her omission in that regard. I said to Ms Clegg that the post office box was not mine and I queried whether it was appropriate that I sign for it. She then said to me words to the effect of "just sign anything, it does not go anywhere." At the time that struck me as somewhat farcical. I signed the form under the name of Peter Hudson (sic). I did that facetiously. Peter Hudson is something of a legendary figure in AFL football, and is a household name in Victoria, where I grew up. I was amused by this lady's apparent panic about the lack of a signature and her insistence that there be a signature, regardless of whose signature it was, and whether it was right or wrong, so I signed "Peter Hudson" as a joke, just as one might sign "Mickey Mouse" in such circumstances." During the course of his evidence Mr Cottrill repeated the assertion in his affidavit that he told Mrs Clegg that he would not sign the application form in his name. He said: "I said I would not sign it in my name because it was not my box and she said, "I need a signature", and the inference was, "sign anything", which I did." At a later stage in his cross-examination Mr Cottrill claimed that he said to Mrs Clegg "I will not sign it in my name" and, at a later stage again, he said to her "I might sign it in a false name". Neither of those assertions were made in his affidavit nor were either of them put to Mrs Clegg during the course of her cross-examination. It was Mrs Clegg's evidence that the signature "Peter Hudeson" was appended to the application form when the form was initially filled out. She said that she had no recollection of the man whom she knew as Peter Hudeson returning to her agency on a second or subsequent occasion. She deposed in her affidavit that the person who completed the application form also signed it by using the name "Peter Hudeson". Mr Cottrill did not dispute that he was the person who filled out the application form; the conflict arose because he said that he did not sign it and, when asked by Mrs Clegg to sign it on a later occasion, he signed the name "Peter Hudeson". He was in direct conflict with Mrs Clegg but I unhesitatingly prefer her evidence. She was a very nervous witness but she was also that type of person who is transparently honest. She was precise, methodical and so very conscientious; it would be wholly out of character for her to participate knowingly, in any form of deception. I cannot say the same for Mr Cottrill. 3. Not only did Mr Cottrill arrange to open the new post office box at the "Newstead News", he also arranged for a courier company called "DHL", whose business premises were next door to the news agency, to arrange to courier the mail to Golden Sphere in Vanuatu. Somehow the business arrangement with DHL broke down; Mr Cottrill was unable to explain why except as he says "I was then asked if I could organise someone to pick up the mail, which I did". Thereafter he arranged for his estranged wife, Karen, to clear the box daily. In response to a question from Mr Basten QC, counsel for the applicant, Mr Cottrill acknowledged that Karen had worked for Golden Sphere. The question was: "And did she do any work with you in relation to the Golden Sphere scheme?... Yes, she did. What did she do? ... She collected mail from a post office box. At your request? ... Yes." Again this represents a small incident but one which is symptomatic of his ongoing involvement in the business affairs of Golden Sphere. Not only does Mr Cottrill's evidence about opening the post office box at the Newstead Agency constitute an admission implicating him in the conduct of the business of Golden Sphere, his claims that he so acted on the instructions of Mrs Reynolds also implicate her. 4. Mr Cottrill acknowledged that he attended the meeting with officers of OCA and ACCC on 6 March as a result of one of them contacting him by telephone. He was not sure when the telephone contact was made but he acknowledged that it would have been a few days before the meeting. This is important because he opened the new post office box at the Newstead Agency on 4 March 1996, two days before the meeting. He was pressed to explain why he would have done this when he had earlier been told that the scheme was illegal. His reply, in my opinion, unwittingly constituted a further acknowledgment that he remained involved in the promotion of the business of Golden Sphere. He said: "I considered that I was helping her in her efforts to remove herself from Golden Sphere at the time. She told me that she needed the post office box opened at their request because she did not want to receive the mail to her business." It may well be that Mrs Reynolds no longer wished to have mail addressed to Golden Sphere passing through her post office box, but the consequences of Mr Cottrill's answer was that he, and on his evidence, Mrs Reynolds were instrumental in assisting Golden Sphere by having mail addressed to it channelled through the Newstead post office box. In that context both he and Mrs Reynolds were involved directly in the promotion of Golden Sphere's business. 5. Miranda Toplis, who gave evidence on behalf of the applicant, swore an affidavit dated 19 February 1997. In that affidavit she described how she had become a member of Golden Sphere in or about 19 April 1996, receiving her three Certificates approximately a week later. She said that in early May 1996 she was invited by a friend to "a Golden Sphere meeting". She attended the meeting with her mother and there were about fifteen to twenty people in attendance. It was her evidence that two men conducted the meeting, one of whom introduced himself as "Mick Cottrill". She asserted that Mr Cottrill addressed the meeting, talking about the Golden Sphere scheme and generally extolling its virtues. In his affidavit that was sworn on 10 April 1997 Mr Cottrill addressed the contents of the affidavit of Ms Toplis. He acknowledged that he did attend such a meeting but he denied that he was the organiser of the meeting or that he addressed the meeting. He did however say in his affidavit: "I was asked by Ms Ann-Marie May to speak about Golden Sphere and answer some questions as a successful participant in the scheme. I did not know any of the people who attended the meeting apart from Ann-Marie May and a man by the name of David Nicholls, whom I understood to be, like me, a happy participant in the scheme, invited by Ann-Marie to address her meeting." I am not impressed with this explanation by Mr Cottrill. If, as he claimed, he was no more than a successful participant in the scheme, he had nothing to gain by attending such a meeting. He had made his entry into the scheme in late 1995 or early 1996 and he had onsold his three Certificates. He had no way of knowing whether the people attending the meeting four months later in May 1996 were part of the pyramid of which he was part or whether they were part of another pyramid. If, on the other hand - contrary to his evidence - he remained involved in some way in the operation of the scheme, then his presence at that and any like meeting would be understandable. Ms Toplis was not shaken in her evidence and she reiterated her story that Mr Cottrill addressed the meeting. In their head-on collision I prefer the evidence of Ms Toplis to that of Mr Cottrill. In addition it must be emphasised that this meeting in May 1996 was some two months after the meeting with officers of the ACCC at which Mrs Reynolds had given an assurance that she would have no further involvement in the Golden Sphere scheme and at which meeting Mr Cottrill was also present. If, as he maintained, he did not have any involvement in any illegal scheme or in the promotion of any illegal scheme, his presence at that meeting in May is difficult to understand, the more so having regard to his participation in the March meeting with officers from the OCA and the ACCC. 6. Mr Cottrill admitted during the course of his cross-examination that he had been instrumental in arranging to have brochures and Certificates of Authenticity printed in the name of and on behalf of Golden Sphere. In February 1996 Mr Cottrill placed orders for the printing of booklets and certificates with Concorde Printing at Currumbin Queensland. From then until August 1996 monthly orders for the printing of approximately 10,000 booklets and certificates were received by Concorde Printing. I find that this activity is clear evidence that Golden Sphere was carrying on its business in trade or commerce in Australia during that period. Mr Cottrill acknowledged during the course of his cross-examination that printed material was delivered from Concorde to the office of Keith Henry Pty Ltd. He also acknowledged that his niece, Rhonda Edridge, the mother of Nathan Edridge, worked in the office of Keith Henry Pty Ltd. Asked whether he, Mr Cottrill, had arranged "for things to be delivered there" his answer was: "I don't know - I was aware, yes, I was aware that things were being delivered there, yes. Were they delivered there on your instructions? - Possibly they were. I would think probably yes. Thank you. And do you remember how many orders you would have placed for certificates to be printed? - I did not place orders for certificates printed, I recall I rang on several occasions to inquire where some were. Who did place the orders for those certificates? - I am not aware, I believe probably they came from the registered office. And why would you have been ringing to inquire about them? - Because I was the one that mentioned, or nominated those printers to Pamela Reynolds who then in turn recommended those printers to the registered office. Those printers have done work for me on numerous occasions." I regard this passage from the evidence of Mr Cottrill as another example of his deliberate evasiveness and his refusal to face up to reality. He had an involvement in the affairs of Golden Sphere; he knew that he had that involvement but he was desperately trying to avoid or, at least, to minimise it. Mr Cottrill conceded that on one occasion either he or Mrs Edridge contacted the printing company complaining that the name Golden Sphere had appeared on the outside of the package that had been delivered to the premises of Keith Henry Pty Ltd. (He was not sure of the month in which this event occurred, but he agreed that it could possibly be around April or May 1996). He acknowledged that either he or Mrs Edridge rang Concorde Printers and instructed them not to use the name of Golden Sphere in any labelling on packages. Asked whether he had been aware of this event and whether he was aware of the instruction that had been given, Mr Cottrill answered in the affirmative. He was then asked "What was the reason for that instruction?" His reply was: "Because printing I don't think any printing should be on the outside of the box apart from - I don't think it should be when it is being delivered by public people. Not even if it is a business name which is receiving the printing? - The business name was not - I don't quite know how to phrase that. Well, it is a ridiculous proposition, is it not Mr Cottrill, there is no reason not to put the name of the business to whom you are delivering stuff on the outside, is there? - Possibly not. Unless it is illegal? - Well, at that time we had already been told that it could be a breach of Trade Practices Act, yes, and there had been some publicity in the newspapers. And the fact was that you did not want the name on the outside because you did not want cab drivers and couriers knowing where the business was based? - No that is not quite correct. Well, what was the reason why you did not want it on the outside? - Because I don't think it was something that the whole world needed to know anything about it." In my opinion, it is self evident from these evasive answers that Mr Cottrill was involved in the affairs of Golden Sphere to a sufficient degree to know that it was under suspicion and to know that it was in the best interests of Golden Sphere to keep its identity and any address connected with it as secret as possible. The applicant called William Edward Freeman as a witness; in 1996 he had been involved as a principal in Concorde. In par 9 of his affidavit that was sworn on 19 February 1997 Mr Freeman said: "I recall that in or about June 1996 Mick (Cottrill) also placed an order for the printing of a Golden Sphere Newsletter." In cross-examination Mr Cottrill denied that he had placed an order for such a newsletter. He said he was aware of the printing of the newsletter but it was his belief that the registered office of the company had arranged it. Mr Cottrill had sworn a lengthy affidavit answering the allegations contained in the various affidavits of witnesses for the applicant, one of whom was Mr Freeman. He was forced to acknowledge that he had not disputed Mr Freeman's allegation in par 9 that he, Mr Cottrill, had placed the order for the printing of the newsletter and he was also forced to acknowledge that his counsel had not cross-examined Mr Freeman on that subject. The evidence concerning Mr Cottrill's involvement with the printing of material for Golden Sphere is confused in some areas, not the least because Mr Freeman evidenced uncertainty in some areas of his evidence under cross-examination. Nevertheless, the fact remains that Mr Cottrill admitted to an involvement in the printing of some material in the name of and on behalf of Golden Sphere and that is, in my opinion, another example of his continuing involvement in the business affairs of Golden Sphere. 7. Mr Cottrill acknowledged that at one stage his wife made him aware that there were difficulties in collecting mail from the Newstead Post Office. Asked what he did when told of this, Mr Cottrill replied that he referred it to Mrs Reynolds. He said that he knew that the matter had been rectified as a result of a letter dated 16 July 1996 from Mr Peter Coombe's office as he had given the letter to his wife to deliver to the post office. He in turn had obtained the letter from Mrs Reynolds. The contents of the letter are quite significant. It was addressed "To whom it may concern"; it was typed on the letterhead of "Coombe & Partners" and it was signed by Mr Peter Coombe. The letter stated: "This firm has received instructions to act for Golden Sphere International Inc of Vanuatu in connection with post addressed to it at LPO Box 3078, Newstead 4006. We authorise the bearer of this document to collect and receive all post addressed to Golden Sphere International Inc at LPO Box 3078, Newstead 4006." Once again, this incident may be added to the mounting list of other incidents which have the effect, in totality, of leading to the conclusion that both Mr Cottrill and Mrs Reynolds were inextricably involved in the affairs of Golden Sphere from November 1995 and throughout the first half of 1996. 8. Mr Cottrill signed a cheque for $2,000 payable on the Golden Sphere account to P J Reynolds in February 1996. That was one of two cheques that he signed. He said that he signed it on instructions from Mrs Reynolds but she never told him the purpose of the money. At that stage Mr Cottrill said that he regarded Mrs Reynolds as "representing that company and I never queried it." FINDINGS Notwithstanding the conduct of Mrs Reynolds and Mr Cottrill in registering the business name of "Golden Sphere" and opening a bank account in that name, I am not prepared to make a finding that they, or either of them, carried on business as the proprietors of "Golden Sphere". As the applicant disavowed any claim that Mrs Reynolds was the "alter-ego" of Golden Sphere, I am left to infer that some third (and unknown) party was the driving force behind the first respondent. The probabilities are that Mrs Reynolds knows the identity of that person but that is not now a matter of consequence except insofar as it reacts adversely on her credit. As to Golden Sphere the evidence has disclosed that it has engaged in trade or commerce within Australia: · It caused its scheme to be disseminated in Australia and it recruited membership as a result of that dissemination. · Through the services, first of Mrs Reynolds, and, later, by use of the Newstead News Agency, Golden Sphere maintained a post office box facility in Australia as an address to which members and intending members of the Golden Sphere scheme could send money. · Golden Sphere maintained a bank account at the Southport branch of the Commonwealth Bank of Australia into which Mrs Reynolds and Mr Cottrill caused payments received under the scheme to be deposited. I also find that it is a "corporation" for the purposes of s 61 of the TPA. Because of its incorporation in Vanuatu it is a "foreign corporation" but the word "corporation" is defined in s 4 of the TPA to include a foreign corporation. I further find that the Golden Sphere scheme is a pyramid scheme to which s 61(2A) of the TPA applies and that its operation involved the use of postal services. The proscription against a corporation acting in breach of subs 61(2A) also applies to natural persons when, as is the case here, the conduct that is the subject of challenge involves the use of postal services: see subs 6(3) of the TPA. In late February 1996, Mrs Reynolds knew, as a result of legal advice from her then solicitor, Mr Coombe, that the scheme breached subs 61(2A) of the TPA and Mr Cottrill acknowledged under cross-examination that she had told him of that advice. No matter what they may have suspected prior to then, from late February I find that both knew that any subsequent activity on their part in the affairs of Golden Sphere would amount to a direct and knowing involvement in the promotion of a scheme that breached the provisions of sub 61(2A). In coming to that conclusion I have had regard to the following facts, the cumulative effect of which, in my opinion, supports that finding: · The registration by each of them of the business name "Golden Sphere". · The opening by them of the bank account in the name of "Golden Sphere" with the Southport branch of the Commonwealth Bank. · The participation by each of them in the scheme including, in particular, the insertion of their names and the names of their relatives and friends to fill up the first seven places in the certificates. · The initial use by Mrs Reynolds of her post office box number - PO Box 36 Ashmore City Queensland 4214 - for Golden Sphere's mail and the inclusion of that address on the Certificates of Authenticity. · The "cash" cheques that each of them drew on the Golden Sphere bank account. · The printed material and computer discs that were found in Mrs Reynolds' premises. · The establishment and operation of the post office box facilities at the Newstead News Agency. · Mr Cottrill's attendance at the Golden Sphere meeting in respect of which Ms Toplis gave evidence. · The involvement of each of them, but more so of Mr Cottrill on instructions from Mrs Reynolds, in the placement of orders with the printer for brochures entitled "Welcome to Golden Sphere" and documents entitled "Certificates of Authenticity". THE STANDING OF THE APPLICANT Originally the ACCC sought relief for itself only pursuant to ss 80, 80A and 83 of the TPA. Subsequently however, it was granted leave to amend its application to seek further relief on behalf of a class comprising consumers who had participated in the scheme. The applicant seeks the latter relief as a representative party pursuant to pt IVA of the Federal Court of Australia Act 1976 (Cth) ("the FCA Act"). The Court must be satisfied that the ACCC has that standing before any relief is granted by virtue of its representative capacity. In particular, the ACCC must satisfy the terms of s 33C of the Federal Court Act, which provides as follows: "33C (1) Subject to this Part, where: (a) 7 or more persons have claims against the same person; and (b) the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and (c) the claims of all those persons give rise to a substantial common issue of law or fact; a proceeding may be commenced by one or more of those persons as representing some or all of them." The FCA Act further provides that a person referred to in par 33C(1)(a) who has a sufficient interest to commence a proceeding on his or her own behalf against another person has a sufficient interest to commence a representative proceeding against that other person on behalf of other persons referred to in that paragraph: see subs 33D(1). In other words, s 33C identifies the circumstances when it will be appropriate for representative proceedings to be utilised and s 33D then proceeds to identify who may be the initiator of those representative proceedings. I am satisfied that the ACCC comes within the meaning of the word "persons" appearing in par 33(C)(1)(a). It is established by Act of Parliament as a body corporate: par 6A(2)(a) of the TPA; and it is entitled to sue and be sued in its corporate name: par 6A(2)(d). Although the FCA Act does not contain a definition of "person" recourse may be had to par 22(1)(a) of the Acts Interpretation Act 1901 (Cth): "Expressions used to denote persons generally (such as "person", "party", "someone", "anyone", "no-one", "one", "another" and "whoever"), include a body politic or corporate as well as an individual." I am of the opinion that the ACCC has a right to institute proceedings and, in that sense, has a claim against each of the respondents. I am also of the opinion that those members of the general public who invested in the Golden Sphere scheme also have claims against them. Once it is established that Golden Sphere promoted a pyramid selling scheme in contravention of s 61 of Pt V the TPA and once it is established that Mrs Reynolds and Mr Cottrill were persons who were directly, knowingly involved in the promotion of that scheme, (and thus concerned in the contravention by Golden Sphere of that section) then it can be accepted that the ACCC and separately each member of the public who invested in the scheme would be entitled to seek injunctive relief under s 80 of the TPA; that injunctive relief extends to the activities of all three respondents. The relevant provisions of subs 80(1) are as follows: "...[W]here, on the application of ..., the Commission or any other person, the Court is satisfied that a person has engaged, ... in conduct that constitutes ...: (a) a contravention of a provision of Part... V; (b) ... (c) ... (d) ... (e) being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or (f) ... the Court may grant an injunction in such terms as the Court determines to be appropriate." Section 80, together with ss 82 and 87 are in Pt VI of the TPA entitled "Enforcement and Remedies". Reference may also be made to s 75B, the first of the sections in that Part; it states, so far as is relevant to this action, that a reference in Pt VI to a person (eg Golden Sphere) who is involved in a contravention of a provision of (inter alia) Pt V shall be read as a reference to a person (eg Mrs Reynolds and Mr Cottrill) who: "(a) ... (b) ... (c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or (d) ... A finding of a liability can therefore also be made against Mrs Reynolds and Mr Cottrill by recourse to this provision. Each investing member is entitled to recover the amount of any loss or damage suffered by him or her by virtue of the provisions of ss 82 and 87 of the TPA. Subsection 82(1) of the TPA provides that: "A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Pt IV or V may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention." Section 87 goes further and, in the circumstances postulated in the section, authorises the Court to "make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention ...". A variety of remedial and protective orders are then listed in subs 87(2). Although the requirements of par 33C(1)(a) of the FCA Act are such that the seven or more persons must have "claims" against the same persons it is not necessary that those seven or more persons seek the same relief: see subs 33C(2) which provides that a representative proceeding may be commenced whether or not the relief sought is the same for each person represented. To emphasise that the need for a common interest is not that great, regard may also be had to the provisions of par 33C(2)(b) which provides as follows: "(2) A representative proceeding may be commenced: (a) ... (b) whether or not the proceeding: (i) is concerned with separate contracts or transactions between the respondent in the proceeding and individual group members; or (ii) involves separate acts or omissions of the respondent done or omitted to be done in relation to individual group members." The facts of this case are very different from those in Qantas Airways Ltd v Cameron (1996) 66 FCR 246 where, in representative proceedings, Qantas was unsuccessfully sued on behalf of various passengers who had requested non-smoking seats. Each of the passengers had either been seated in a designated smoking area or in a seat so close to such an area as to be affected by smoke. As Lehane J pointed out at p 298: "The point has been made by Lindgren J, but is perhaps worth reiterating: the case illustrates in a number of ways the difficulties involved in doing justice, in group proceedings, to a number of individual claims for damages based on tort or on representations said to constitute misleading or deceptive conduct. Each member of the group must, in order to make good a claim for relief, establish that there is, in the circumstances of his or her dealings with the respondent, a factual basis supporting each element of the causes of action relied on. In my view, the group members in this case have not done so." Those observations do not apply to the present case. The decision of Wilcox J in Tropical Shine Holdings Pty Ltd v Lake Gesture Pty Ltd (1993) 45 FCR 457 should, in my opinion be followed in these proceedings. There were two factual differences in that case which should be noted at the outset. In the first place, it was not the ACCC that initiated the representative proceedings: it was a business competitor who claimed that it and customers of the respondents had been harmed by the wrongful conduct of the respondents. However, as the facts in Tropical Shine are unfolded and compared with the facts in the present case, I think that it will become apparent that the role of the ACCC can be substantiated just as Wilcox J found that the applicant in Tropical Shine was entitled to initiate the representative proceedings. The second difference lies in the fact that in Tropical Shine Wilcox J was dealing with a respondents' notice of motion before trial in which they sought an order striking out the proceedings, or, alternatively, an order that the matter not proceed as a representative proceeding. This difference will not have any effect upon the application of the judgment in Tropical Shine to the facts of this case but I mention it because of the need to remember the context in which his Honour's remarks are to be understood. The facts in Tropical Shine can be shortly stated: the applicant and the respondents both carried on business as importers and vendors of household furniture. The respondents were a group of companies who traded under the name of "Federation Furniture Company". The applicant, having taken exception to the manner in which the respondents advertised and promoted their business, instituted proceedings claiming that the respondents had breached various provisions of the TPA. The applicant sought orders, including injunctive orders with respect to the respondents' advertising, and damages. It alleged that the respondents were advertising in such a way as to mislead or deceive potential purchasers about the quality and price of their furniture. The application encompassed group members in terms of those persons "who have suffered ... or are likely to suffer loss or damage by reasons of the respondent's conduct alleged in the statement of claim being persons who bought furniture at the sales, advertised, promoted and conducted by the first respondent as set out below." In a detailed analysis of the legislation, in the course of which he also examined the report prepared by the Australian Law Reform Commission entitled "Grouped Proceedings in the Federal Court", his Honour concluded that it was appropriate for the claims of the applicant on the one hand and the claims of the consumers on the other hand, to proceed in tandem in a representative proceeding. In coming to that conclusion his Honour was mindful that the case was "unusual in that the claim made by the applicant on its own behalf differs in kind from that available to group members."(p 464). But, as he later pointed out, the applicant's personal claims were not incompatible with the group members' claims. His Honour said: "On the contrary, it is an essential ingredient of the applicant's personal claim that people were misled by the advertisements into purchasing furniture from Federation Furniture Company. The cases divide only after that fact is established. The group members' claims require that they then establish their individual losses; the applicant's claim requires proof that, absent the influence of the advertisement, the people who purchased from Federation Furniture Company would have dealt with it. Having regard to the substantial overlap of the facts requiring to be established and the absence of any discernible conflict of interest, it seems to me impossible to conclude that this will not be an efficient and effective means of dealing with the various claims. Neither is there any reason to think it otherwise inappropriate that the claims be pursued in this way." There is also, in the present case, a division between the case of the ACCC and the case of the group members. But, in my opinion it is not as dramatic as that in Tropical Shine where it was necessary for the applicant to prove that it would have otherwise enjoyed the patronage of the respondents' customers. In the present case, the nature of the claims advanced by the ACCC and by the group members is the same - it is only the relief that they respectively seek that differs. Both the ACCC and the group members have to prove the breach of each component part of subs 61(2A), together with the use of postal services and the relevant involvement of Mrs Reynolds and Mr Cottrill. Having surmounted those difficulties, it is only then that their interests will diverge. Whereas the ACCC is seeking injunctive relief against the three respondents pursuant to s 80 of TPA, the group members are looking for orders under s 82 of the Act to compensate them for their loss or damage. But notwithstanding this obvious difference in the relief that was sought, both the ACCC and the group members have pursued claims that arose "out of the same, similar or related circumstances": par 33C(1)(b) of the FCA Act. And, additionally, the claims of the ACCC and the group members give rise to substantial common issues of law and fact: par 33C(1)(c). The decision of Branson J in Australian Competition and Consumer Commission v Chats House Investment Pty Ltd (1996) 71 FCR 250 is of direct relevance to these proceedings and I reject the proposition of counsel for the respondents that I should refuse to follow it. In that case, as in this case, the ACCC sought injunctive relief against the respondents and the payment of damages to the group members. Briefly, the first respondent had held itself out to the public as being willing and able to act for members of the public in respect of foreign exchange trading. Members of the public (not including the ACCC) were described as clients of the first respondent; they handed over moneys to the first respondent for investment. It was found that the first respondent had maintained an elaborate facade, designed to convince its clients that they were engaging in genuine foreign exchange margin trading when, in fact, no such trading was taking place. Her Honour considered and rejected the proposition that the wider provisions of Pt IVA of the FCA Act should be read down because of the earlier provisions in subs 87(1B) of the TPA which enabled the ACCC to make a application to this Court on behalf of persons who have suffered loss or damage - but only with the written consent of those persons. (It was common ground that the ACCC had not obtained the written consent to the institution of this proceeding from any member of the Golden Sphere scheme). Having regard to the facts as proved, her Honour concluded in Chats House that the first respondent had breached ss 51AA, 52, and 53 of the TPA. Her Honour was satisfied that it was appropriate, in the circumstances of the case, for injunctive relief to issue at the suit of ACCC and that, separately, the case warranted an award of damages in favour of the group members. In Tropical Shine, in Chats House and in the present case it is apparent that there was a substantial overlap in the facts required to establish the respective claims of the applicant on the one hand and the members of the public on the other. In none of the cases could there be any suggestion of any conflict of interest. The fact that the ACCC was acting in the public interest for the protection of consumers whilst the members of the group were pursuing their private interests was considered by Branson J in Chats House (at 254) but her Honour concluded that the difference of interests was not a disqualifying feature and I respectfully agree. One of the major submissions that was advanced on behalf of the respondents was that the claim of the ACCC and the claims of the group members must have a measure of "commonalty". Whilst conceding that the participants in the scheme have claims that have common interest, the respondents submitted that those claims were materially different to the claim advanced by the ACCC and that the participants represented a group of which the ACCC was not and could not be a part. In this regard, the submission is at odds with the decision of Branson J in ACCC v Chats House. As to that decision, the respondents argued that her Honour's decision was made in the absence of full argument as the respondents were unrepresented. Whilst that is true, her Honour nevertheless gave a considered judgment and it would not be appropriate for another judge of this Court to depart from it unless it was clearly wrong. With respect, I do not think that it was wrong. The claim that there is a need to establish what has been described as some measure of "commonalty" does not stand up when one reflects upon the language of the FCA Act and subpar 33C(2)(a)(iv) in particular; that is the provision that expressly states that a representative proceeding may be commenced whether or not the relief sought is the same for each person. The fact that two or more members of the group may be seeking different relief highlights the probability that there will be differences. Furthermore, regard must be had to the language of par 33C(1)(b); it will be sufficient if the claims "arise out of ... related circumstances". For these reasons, I reject the respondents' submissions. In my opinion, the correct way to test the matter is to examine the separate material of each claim that is intended to be included in the representative proceedings. In the present case that examination would show that the nature of ACCC's claim differs from the claims of the intended group members but only in respect of the nature of the relief sought. Each intended member of the group and the ACCC would, on the other hand, be intent on proving a breach of subs 61(2A) of the TPA and the individual facts that made up the commission of the breach. Those facts, although differing from participant to participant in some details (such as the name of the member who approached the target and the words that the members may have used) would nevertheless establish a consistent pattern whereby an existing participant in the Golden Sphere scheme would induce a target to pay over his or her three payments of $AUD50 and thereafter Golden Sphere would send or cause to be sent to that target three Certificates and the brochure. Although the names of the parties and the dates of the transaction would differ, the pattern would, otherwise, be the same. The establishment of that pattern and individual facts that related to various targets would entitle the ACCC to move the Court for injunctive relief; the establishment of those factors would also entitle individual targets to their respective - but different - relief. So expressed, one can see that there is a strong link in the respective positions of the ACCC and the group members. In that sense it can be said that there is a common interest pervading the claims of the ACCC and the group members but that common interest does not and need not extend to the relief that is sought. Section 33E of the FCA Act states that, with some exceptions, the consent of a person to be a group member in a representative proceeding is not required. The exceptions extend to the Commonwealth, the States and the Territories and their ministers and officers and to: "A body corporate established for a public purpose by a law of the Commonwealth, of a State or of a Territory, other than an incorporated company or association." The ACCC would be "a body corporate established for a public purpose ..." but I do not consider that some form of written consent from the ACCC was a condition precedent to the institution of these proceedings. In the first place, the combined effect of ss 33C and 33D is to identify a person ("A") as the one who is entitled to institute the proceeding; the person who is then referred to in s 33E is not person "A" but person "B". Secondly, if the first answer should be incorrect, the mere act of instituting the proceeding is abundant evidence that the party is consenting to be a group member: and in that case it would be unnecessary for a separate form of consent to be exhibited. The respondents are not assisted by the provisions of s 33E. Next it was submitted that the Court should exercise its discretion under either s 33M or s 33N to bring this proceeding to an end. Such a discretionary power is reserved to the Court where it is of the opinion that the cost to the respondents of identifying group members and making distributions to them would be excessive "having regard to the likely total of those amounts": s 33M; a similar power is reserved under s 33N where the Court concludes that costs would be excessive or that it is inappropriate that claims be pursued by means of a representative proceeding. This submission is entirely devoid of merit. Findings have been made against the respondents that they have knowingly engaged in breaches of the TPA: various sums of money, including an amount of $254,650, have been intercepted by the authorities and if this submission was accepted those moneys would be disbursed to the respondents. That is enough to dismiss this submission summarily. The respondents submitted that any award of damages in this case should be limited to an amount of $1,000 or thereabouts. The significance of this sum is that the ACCC called, as witnesses in the trial, a selected few persons who gave evidence about the circumstances in which they became participants in the Golden Sphere scheme. Their evidence was that their losses totalled about $1,000. If the Court were to accept this submission it would, in my opinion, destroy the efficacy of representative proceedings. The purpose of such proceedings is to avoid the very exercise that the respondents now described as a deficiency or a hiatus; as I understand their submission they would expect the ACCC to call every person who participated in the Golden Sphere scheme (other than those who have opted out) to prove the individual loss or damage of each such person. If that exercise had to be carried out, the whole purpose of representative proceedings would be emasculated. The legislation supports the contrary views; it gives to the Court wide discretionary powers to fix awards of damages consistent with the circumstances of a particular action. This is made clear by the following provisions of subs 33Z(1) of the FCA: "The Court may, in determining a matter in a representative proceeding, do any one or more of the following: (a) ... (b) ... (c) ... (d) ... (e) make an award of damages for group members, sub-group members or individual group members, being damages consisting of specified amounts or amounts worked out in such manner as the Court specifies; (f) award damages in an aggregate amount without specifying amounts awarded in respect of individual group members; (g) make such other order as the Court thinks just." These provisions, and the contents of s 33ZB make it clear that the identity of the group who may ultimately enjoy the benefit of a judgment and an award of damages will, most likely be indeterminate at the time of the judgment. The latter section requires a judgment only to "describe or otherwise identify the group members who will be affected by it." Finally, the respondents claimed that the evidence before the Court was insufficient to allow the Court to fix an appropriate award for damages. Subsection 33Z(3) of the FCA provides as follows: "Subject to section 33V, the Court is not to make an award of damages under paragraph (1)(f) unless a reasonably accurate assessment can be made of the total amount to which group members will be entitled under the judgment." Section 33V deals with the need to obtain the Court's approval to a settlement or a discontinuance and need not be considered further. As will become apparent, the amount of damages that I propose to award will be "an aggregate amount without specifying amounts awarded in respect of individual group members" but I remain satisfied that the calculations that have been made by the ACCC (as amended by me for the reasons hereinafter set out) constitute a "reasonably accurate assessment" of the "total amount to which group members will be entitled under the judgment". The word "assessment" used in the phrase "assessment of damages" imports an element of judicial discretion: assessing damages is not the application of mathematical formulae. When it is qualified by the words "reasonably accurate" it can be said, with confidence, that the judicial discretion has been widely extended. I am satisfied that the legislature has intended that the practical application of the provisions of Pt IVA of the FCA is not to be read down through any evidentiary inability to identify every member of the group and the relevant amount of damage that each member has or may have suffered. The applicant has based its calculations of damages upon a loss of $AUD50 per member only; it might have thought to have claimed $AUD150; after all that is the total of the payments made by each target. But a claim based on $AUD150 would not have had any regard to the fact that some of the targets must have on-sold some certificates to other targets thereby recouping some part (perhaps all) of his or her outlay. There may well be members of the group who, upon investigation, will be found to have suffered no loss; others, perhaps, will be found to have suffered a loss of $AUD150 because they did not sell any of their certificates. Then again, there will be other participants who will be able to establish their loss at $AUD50 or $AUD100. These are aspects of the case that can be determined at a later stage by the trustee. It was in this climate that the respondents sought to challenge the Court's ability to make a "reasonably accurate assessment". The respondents have proffered no evidence or assistance; they are content to sit back and despite their conduct, claim that they should not be the object of an award of damages because of the applicant's alleged inability to prove those damages. To allow such an attitude to prevail would be tantamount to allowing the respondents to profit from their wrong doings. The ACCC has proposed that the damages be based only on the minimal sum of $AUD50 per member. If the respondents properly considered that this figure was excessive, the remedy was in their hands to submit the contradictory evidence; this is a case where it would be appropriate to place an evidentiary onus on the respondents because of their possession of the information that would allegedly refute the applicant's claims. They have made no effort to do that. In my opinion, the applications that the ACCC have made have been both generous and reasonably accurate. BURDEN OF PROOF A decision of a Court depends upon the court discovering the material facts which satisfy the granting of the relief sought. The common law requires that a party, normally the claimant who has initiated proceedings, substantiate those facts, first by adducing evidence of them and, secondly, by persuading the court that they exist or occurred. The burden of proof therefore involves these two aspects: the burden of adducing evidence, and the burden of convincing the court of the material facts: see Ligertwood A Australian Evidence 2nd Ed Butterworths 1993 at 301-302. The first of these may be called the legal burden, although other writers have referred to it as the burden of proof on the pleadings: see Phipson on Evidence 14th Ed par 4-05, "the fixed burden of proof": see Bridge (1949) 12 MLR 274, the probative burden: see Director of Public Prosecutions v Morgan [1976] AC 182 at 190, or the evidential burden: see Ligertwood, (supra), at 302. The legal burden of proof is the obligation of a party to meet the requirement of a rule of law that a fact in issue is proved or disproved either by a preponderance of evidence or beyond reasonable doubt. In civil cases in general the legal burden rests on the party asserting the claim or cause of action to prove all facts essential to such claim: see Apollo Shower Screens Pty Ltd v Building and Construction Industry Long Service Payments Corp (1985) 1 NSWLR 561 at 564 per Hunt J. However, Walsh JA stated in Currie v Dempsey (1976) 69 SR (NSW) 116 at 125: "The onus is on the defendant, if the allegation is not a denial of an essential element of the cause of action, but is one which, if established, will constitute a good defence, that is, an "avoidance" of the claim which, prima facie, the plaintiff has." The second of these burdens may be called the evidential burden. This is the obligation to show, if called upon to do so, that there is sufficient evidence to raise an issue as to the existence or non-existence of a fact in issue, having regard to the standard of proof: see JD Heydon, Cross on Evidence 5th Aust Ed, Butterworths, Sydney 1996 par [7015]. It is also described as the burden of introducing evidence: see Purkess v Crittendon (1965) 114 CLR 164 at 168 per Barwick CJ, Kitto and Taylor JJ. There is no absolute test for determining the incidence of the evidential burden of proof. In general the party bearing the legal burden on an issue also bears the evidential burden. Where the facts or means of proving a matter are particularly within the knowledge or capacity of the opponent, the proponent is not absolved from establishing a prima facie case. A mere scintilla is not enough, but slight evidence adduced of a matter may be regarded as sufficient proof of it in the absence of an explanation or rebuttal by the opponent: see Taylor v Spencer [1965] NSWR 961 at 964 per Herron CJ; Morgan v Babcock and Wilcox Ltd (1929) 43 CLR 163 at 178 per Isaacs J. The proponent who has the legal burden of proof on an issue must adduce sufficient evidence for it to be left to the tribunal of fact. For the proponent to succeed on that issue, it must persuade the tribunal of fact to an appropriate standard. In civil cases the standard of proof is on the balance of probabilities: see Briginshaw v Briginshaw (1938) 60 CLR 336. Applying the above to the facts in Golden Sphere it is apparent that from the outset that the ACCC has both the legal and evidentiary burden to prove that members of the public who participated in the scheme suffered losses of either $50, $100 or $150. By calling a number of witnesses who had lost money, and then giving the names of all those others who had allegedly lost, the ACCC was attempting to discharge its evidential burden; it was attempting to support the inference that because those witnesses who were called had lost either $50 or $100 or $150, then the fact finder could draw the inference that some of the others on the list have likewise lost similar amounts. This needed to be discharged above the requisite standard of care - on the balance of probabilities. If the Court is convinced that this requisite standard has been satisfied, the evidential burden has in effect "swung" onto the respondents. Although the respondents have the burden resting on them, they do not necessarily have to call evidence. This is because the place where the burden eventually comes to rest does not necessarily decide the issue: at the end of the case the Court has to decide as a matter of fact whether the inference should or should not be drawn. The proponent of an issue discharges the evidential burden by adducing prima facie evidence. If the tribunal of fact believes the evidence the inference of the existence of the fact may or may not be drawn: see Porticanin v Australian Consolidated Industries Ltd [1979] 2 NSWLR 419 per Hope and Glass JJA at 425. If the opponent does not adduce evidence it runs the risk of losing on that issue: see Porticanin (supra) per Hope and Glass JJA at 425. The shifting of the evidential burden from the proponent to the opponent means that after the proponent has adduced prima facie evidence of a matter, the opponent should adduce some evidence as a matter of common prudence, so as to prove the matter to the contrary or throw its existence into doubt: see Porticanan (supra) per Hope and Glass JJA at 425-426; Purkess v Crittenden (supra) at 168 per Barwick CJ, Kitto and Taylor JJ and 171 per Wyndeyer J. This burden of disproving or throwing doubt on the case made by the proponent is sometimes called the provisional burden: see Purkess v Crittenden (supra) at 168 per Barwick CJ, Kitto and Taylor JJ and 171 per Wyndeyer J. Where a proponent of an issue discharges the evidential burden by adducing presumptive evidence and that evidence is believed, the tribunal of fact is bound to decide the issue in the proponent's favour if the opponent calls no evidence. In such a case there is a shifting of the burden in the sense that if the opponent does not adduce evidence he or she will lose. The proponent of an issue bears the legal burden throughout the case: see Porticanan (supra) per Hope and Glass JJA at 425-426. In some cases the practical effect of presumptions of law will be that if the evidence is accepted, a favourable finding will be made on that issue unless the evidence is rebutted by the opponent to an appropriate standard. The burden is in that sense discharged rather than shifted. The findings of fact that have been made are such that they point to Mrs Reynolds and Mr Cottrill having much more knowledge about the activities of Golden Sphere than they have admitted. The ACCC has led sufficient evidence that is creditable and acceptable; the respondents could have, but they declined the opportunity to attempt to refute. I am prepared to find each aspect of the case made out against each of them.

CALCULATION OF THE CLAIM The applicant's claim on behalf of the members of the public who invested in the scheme until the end of September 1996, was quantified at $600,000.00. Some of the calculations that have been made in the compilation of that figure have been agreed by the respondents. For example, the applicant was successful in obtaining access to Golden Sphere's Database showing a membership of 4,933 persons between the period 27 December 1995 and 31 May 1996. That figure and those dates were agreed. The affidavit of Ms Rout, a legal officer in the employ of the Australian Government Solicitor was read by consent. It revealed that money orders and cheques totalling $254,650 had been intercepted by the applicant through the use of subpoenas. It was accepted by counsel for the respondents that those cheques and money orders were processed between late June and early September 1996 and that they represent payments by participants in the scheme to the first respondent, Golden Sphere. At $50 per participant, that amount would suggest 5,093 memberships, but some of the payments were for $100 and others were for $150. There being no other explanation, it could be that some participants misunderstood instructions and sent larger payments of $100 or $150 to Golden Sphere. If this be the correct interpretation, then there would be a lower number of participants than the suggested figure of 5,093. The applicant in its calculations has rounded this figure down to 5,000 and I consider that to be an appropriately conservative approach. The information referred to above has the effect of leaving two "gaps" representing the number of new members for the earlier part of June 1996 and for the balance of September 1996. The applicant applied an arbitrary figure of 2,000 for each of those periods and thereby presented its calculations in the following fashion: Calculation of the number of Golden Sphere participants Golden Sphere Database for period 27 December 1995 to 31 May 1996 4,933 Assume constant flow of new members for June 1996 Money Orders and Cheques between late June and early September 1996 based on the affidavit of Ms Rout Assume constant flow of new members for September 1996 2,000 Total (say) 5,000 Less Opt outs Balance remaining 2,000 14,000 1,779 12,221 Say: 12,000 members at $50 per member $600,000

In my opinion, these calculations must be reduced. The figure of 5,000 new members in late June to early September 1996 would suggest about 2,000 new members per month if that were accepted as being about a ten week period. On the other hand the figure of 4,933 new members in the first five months of the year points to an average of about 1,000 per month. Furthermore, the remaining two periods are only for the balances of their respective months. After making provision for the rounding-off that has already occurred I would reduce the figure of 12,000 members to 11,000. As a consequence this reduces the applicant's claim to $550,000. In making this reduction I remain conscious of the fact that the applicant has limited its claim on behalf of the group members to the payments of $AUD50 to Golden Sphere; it might have, but did not attempt to increase the claim on behalf of group members to cover the two additional payments that each target would have made. On the other hand, it remains a probability that some of the group members may have successfully sold some of their certificates and, as a result, received some of their money back. I think it so highly unlikely that any target would have reached the No 1 position, that I disregard any need to reduce the claim further. Ms Nicole Jane Chatterton may be cited as an example of the results of participating in the Golden Sphere scheme. Her friend, Ms McDonald, induced her to enter the scheme; Ms Chatterton deposited $50 into the bank account of the person named in the number one position and forwarded a cheque for $50 to Golden Sphere together with the deposit slip that the bank issued in respect of the deposit for the first $50. She said that she received her three certificates about eight days later and later still sold two of the three certificates for $50 each. But save for these two payments, she has not received any other money; she is therefore $50 out-of-pocket. Another example of a participant is Mr Richard Stockwell; his story is much the same as Ms Chatterton's save that he only managed to sell one certificate and recoup $50. TRUSTEE The applicant has filed in Court the consent of Digby Nicholas Bartholomew Ross of the Insolvency and Trustee service, in his capacity as Official Receiver for the Bankruptcy District of Queensland, to act as the trustee in this matter for the distribution of funds to group members in accordance with the orders given from time to time by this Court. I am satisfied that Mr Ross is a suitable person and he is hereby appointed trustee for the purposes hereinbefore specified. There will be orders dealing with the administration of the moneys as set out in the orders of the Court that accompany these reasons. I grant leave to Mr Ross to approach the Court generally for directions. I certify that this and the preceding forty two (42) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Loughlin

Solicitor for the Applicant: Messrs Witheriff Nyst

Solicitor for the Respondent: Australian Government Solicitor

Date of Hearing: 23, 24, 25, 26 March 1998