FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Apple Pty Ltd (No 3) [2018] FCA 617

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 192A of the Evidence Act 1995 (Cth), the affidavit of Laughlin Nicholls affirmed on 11 August 2017 is able to be adduced as evidence at the hearing.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

LEE J:

A    INTRODUCTION

1    At the heart of this preliminary application is whether misleading statements made by a regulator, to procure evidence in a misleading or deceptive conduct case, amount to an impropriety and, if so, whether admissions obtained as a result of such conduct, are to be excluded by the principled exercise of discretion.

2    Although these questions are to be determined by the application of the law of evidence, the relevant statutory provisions reflect evaluative assessments, including as to what is to be regarded, in the circumstances, as improper. This is not a straightforward task. This is hardly surprising when the concept of officious lie, that is, a lie told to benefit what is perceived to be a greater good, has vexed ethicists and theologians since ancient times. In Ethics, Aristotle asserts it is never allowable to tell such a lie; in Plato’s Republic, lying is treated more leniently, being allowed if motivated by a genuine desire to advance the greater good. St Augustine’s approach was similar to Aristotle, and this view has generally prevailed in Christian doctrine, although St Thomas Aquinas, as one would expect, was more nuanced.

3    Various legal systems, perhaps reflecting different value judgments, have adopted contrasting responses to evidence which is said to have been obtained by unlawful or improper conduct. For those interested in a detailed comparative analysis (albeit focussed primarily on exclusionary rules in the context of the criminal law) see H L Krongold, “A Comparative Perspective on the Exclusion of Relevant Evidence: Common Law and Civil Law Jurisdictions” (2003) 12 Dalhousie Journal of Legal Studies 97. But these larger questions need not detain us.

4    As is reflected in the Evidence Act 1995 (Cth) (EA), the remedial response here to the problem of improperly obtained evidence is for an exclusionary rule to exist, contained in s 138. This section will be examined in detail below, but what should be noted, at the outset, is that the section calls for a process which has two stages: first, determining whether evidence was obtained improperly or in consequence of an impropriety; and secondly, if the evidence was so obtained, an exercise of discretion which, put in general terms, involves a close consideration of not only the evidence sought to be excluded, but also a contextual analysis which takes into account, among other things, its probative value, its apparent importance, and how the evidence was obtained. This may be simply stated, but its application is not necessarily easy. As will become evident, some of the matters examined in making an assessment as to whether the evidence was obtained improperly are themselves relevant to the principled exercise of discretion. Moreover, at the first stage, the persuasive onus is on the objecting party; at the second stage, the persuasive onus shifts, so that the party seeking adduction needs to establish that the desirability of admitting the evidence outweighs the undesirability of admitting it. I will turn to this two-staged task after explaining something of the procedural background and the relevant evidence itself.

5    The balance of these reasons will be divided into the following headings:

    B    The Proceeding & Procedural Matters

    C    The First Nicholls Affidavit & The Objection

    D    The Voir Dire – Relevant Evidence & Findings

    E    A Matter of Concern

    F    Section 138 & The Applicable Principles

    G    The First Stage – Improper or in Consequence of an Impropriety?

    H    The Second Stage – The Exercise of Discretion

    I    The Section 135 Argument

    J    Conclusion & Orders

B    THE PROCEEDING & PROCEDURAL MATTERS

6    By further amended concise statement (FACS) filed 15 November 2017, the applicant (ACCC) alleges that the respondents, Apple Pty Ltd (Apple Australia) and Apple Inc (Apple US) (collectively, Apple) engaged in misleading or deceptive conduct and made false or misleading statements to consumers about the availability of remedies for non-compliance with the consumer guarantees in Part 3-2 of the Australian Consumer Law (ACL) in respect of iPhone and iPad devices previously repaired by service providers not authorised by Apple.

7    At FACS [23]-[25], the ACCC alleges that as part of its investigation of what it describes as the ‘Error 53 software fault’, in or about June 2016, “officers of the ACCC telephoned the 13 retail stores operated by Apple Australia…to make an inquiry about a defective iPhone”. I pause to note that the Error 53 software fault refers to events (occurring between September 2014 to around February 2016) where some iPhone and/or iPad users experienced a fault, which rendered their iPhones and/or iPads inoperable.

8    The FACS goes on to plead:

24.    In each call, the ACCC caller told the Apple Australia representative(s) responding to the call that: (A) the screen of the iPhone had been preplaced by someone other than Apple Australia or an Apple-Authorised Service Provider; and (B) a fault had later developed with the speaker component of the iPhone.

25.    In each call, Apple Australia represented to the ACCC caller that no Apple entity (including Apple Australia and Apple US) was required to, or would, remedy the defective speaker at no cost under the ACL if the screen of the iPhone had been replaced by someone other than Apple Australia or an Apple-Authorised Service Provider (the ACCC Representations).

(Bolding in original)

9    In its Concise Statement in Response filed 29 November 2017 (CSR) at [53]-[58], Apple says it did not make the ACCC Representations to the effect alleged, and says that no contravening conduct occurred because the consumer guarantees set out in ss 54 and 55 of the ACL cannot apply to hypothetical circumstances (and, in the present circumstances, there was no antecedent supply of a good to a consumer in trade or commerce and no consumer could have been misled or deceived). Additionally, to the extent that the alleged ACCC Representations were made, they were representations that were no more than an expression of an opinion about a legal question.

10    There are other aspects of the case advanced by the ACCC against Apple, but these are unnecessary to detail for present purposes. Pursuant to case management directions, affidavit evidence has been filed by both the ACCC and Apple and the proceeding has been listed for final hearing in June 2018.

11    Part of the evidence adduced by the ACCC (and indeed the only evidence served in support of what I will describe as the ACCC Representation case) was an affidavit affirmed by Mr Laughlin Nicholls on 11 August 2017 (First Nicholls Affidavit). At a case management hearing, Apple indicated that it objected to the First Nicholls Affidavit in its entirety. This is of significance because the ACCC Representation case rests entirely upon this evidence and, if the evidence is excluded, the ACCC conceded in its written submissions that this aspect of its case will be dismissed.

12    It seemed to me that the First Nicholls Affidavit raised complex and potentially important questions which, on one view, could be determinative of the ACCC Representation case. Consistent with the case management objectives set out in Part VB of the Federal Court of Australia Act 1976 (Cth), the Court is to exercise its case management powers to further the overarching purpose of the prompt and efficient disposition of controversies before the Court. In order to further that purpose, and given the possibility that if the evidence was excluded it would narrow the issues in the context of an ongoing mediation (and given that extended argument was likely to be necessary to determine the objection), I considered it was appropriate to conduct a voir dire with the intention of making an advance ruling pursuant to s 192A of the EA.

13    Often, if a party seeks discretionary exclusion of evidence, such a course would not be appropriate, because matters which are relevant to the principled exercise of discretion might only emerge during the course of a final hearing. This is not such a case. It is common ground that all matters called in aid to contend that the First Nicholls Affidavit ought to be admitted or excluded are matters which are able to be presently identified and both parties were content to adopt the course of an advance ruling.

C    THE FIRST NICHOLLS AFFIDAVIT & THE OBJECTION

14    Mr Nicholls is a Senior Investigator with the Victoria Enforcement, Enforcement Division of the ACCC. Mr Nicholls gives evidence of making 13 telephone calls (Relevant Calls) in the presence of either Mr Liam Hedge, an investigator employed by the ACCC, or Ms Winnie Cheung, a graduate then employed by the ACCC.

15    The Relevant Calls were placed to Apple Australia Stores located in the Australian Capital Territory, South Australia, New South Wales, Victoria, Western Australia and Queensland. All of the Relevant Calls were made in June 2016 and, although the First Nicholls Affidavit does not reveal the fact, other evidence establishes that the Relevant Calls are a subset of a larger number of calls made from the offices of the ACCC in Melbourne in June 2016. The calls were recorded and the audio recordings comprise annexure LN1 to the First Nicholls Affidavit; transcripts have also been provided, and comprise annexures LN2-LN14.

16    It will be necessary to come back to the content of the Relevant Calls below, but it suffices, for present purposes, to note that in each of these calls Mr Nicholls had discussions with staff apparently employed by Apple Australia based on a series of fictions. In particular, a ruse was employed by Mr Nicholls by pretending to be a consumer saddled with a defective iPhone.

17    As noted above, Apple objects to the evidence contained in the First Nicholls Affidavit. This is on three bases (the first two of which constituted the primary thrust of Apple’s submissions):

(a)    first, the admissions obtained and referred to in the First Nicholls Affidavit were obtained improperly because, to the extent the affidavit records representations that are admissions, they were made during questioning in circumstances where Mr Nicholls knowingly made false statements and knew (or ought reasonably to have known) that making those false statements was likely to cause the person being questioned to make an admission: see s 138(2)(b) of the EA;

(b)    secondly, that “more broadly” the evidence was obtained improperly or in consequence of an impropriety: see s 138(1) of the EA; and

(c)    thirdly, the evidence ought be the subject of discretionary exclusion because the probative value of the evidence is substantially outweighed by the danger that it might be unfairly prejudicial to Apple: see s 135(a) of the EA.

D    THE VOIR DIRE – RELEVANT EVIDENCE & FINDINGS

18    In order to make the advance ruling, evidence was adduced on the voir dire and, apart from the First Nicholls Affidavit, the ACCC relied upon a further affidavit of Mr Nicholls affirmed 15 December 2017 (Second Nicholls Affidavit), two ‘chain of custody’ affidavits by solicitors, and an affidavit of Mr Scott Peter Gregson affirmed on 16 February 2018 (Gregson Affidavit). The balance of the ACCC’s evidence was a CD-ROM, correspondence and, importantly: (a) audio recordings of further calls made in June 2016 to an additional nine Apple Stores (which, together with the Relevant Calls, I will describe compendiously as the June Calls); and (b) a bundle of file notes made by Mr Nicholls of telephone calls made to Apple Stores in April 2016 (April Calls). Mr Nicholls and Mr Gregson were cross-examined. For Apple, the only tender was a letter from its solicitor, Clayton Utz, to the ACCC dated 29 July 2013.

19    It is unnecessary to make reference to some of this material, but from the evidence adduced on the voir dire, I make the following relevant findings:

(a)    in undertaking its enforcement role under the Competition and Consumer Act 2010 (Cth) (CCA), the ACCC uses a number of investigative tools including, on occasion, what it describes internally as “Jo Consumer enquiries” (Jo Consumer enquiries); Jo Consumer enquiries involve ACCC investigators making enquiries of traders, and occasionally purchasing goods or services from traders, without disclosing that they are ACCC officers;

(b)    types of Jo Consumer enquiries may differ, including in-store, online or phone enquiries, or attending seminars or forums; the information gleaned from Jo Consumer enquiries is used for three main purposes: (i) compliance assessments, as part of reviewing particular representations or conduct across an industry; (ii) investigations, to gather evidence about alleged contraventions; and (iii) enforcement action, including obtaining evidence as to alleged contraventions;

(c)    guidance is provided by the ACCC to investigators as to how investigations may be undertaken and there has been “some material available on Jo Consumer investigations at different points in time” (T 12) and, according to Mr Nicholls, there were (at least at some time) guidelines as to how to conduct such operations, setting out the circumstances in which covert calls are to be made (T 28);

(d)    as a general proposition, ACCC investigators endeavour to make Jo Consumer enquiries closely resemble the interaction of consumers with businesses; dissembling the fact that the officer making the enquiry is an ACCC investigator enables the relevant officer “to gather highly relevant information about how a business interacts with consumers” (see Gregson Affidavit at [12]);

(e)    again, as general propositions: (i) there are advantages to conducting Jo Consumer enquiries, including where the investigation involves oral representations and there is a need to obtain evidence of what statements are being made, and consumers may be unwilling or unable to assist in providing evidence; and (ii) “Jo Consumer enquiries are an important investigative tool for the ACCC to carry out its enforcement activities” (see Gregson Affidavit at [14]);

(f)    Mr Gregson, as the head of the Enforcement Division of the ACCC, “would certainly want [a Jo Consumer enquiry] to be done within the framework that [the ACCC] set[s] our investigators” and the use of Jo Consumer enquiries would be inappropriate if it went beyond what was necessary for the purposes of investigation as a matter of principle (T 8);

(g)    although Mr Gregson was aware of the relevant Apple investigation and that it involved Jo Consumer enquiries, he had no recollection of knowing who was involved or the specific set up of the April Calls or June Calls, nor was he involved in the process of approving use of the technique in the present case;

(h)    in April 2016, in making the April Calls, Mr Nicholls engaged in what was, in effect, “a trial run, to try out some investigative techniques”; the records of the April Calls were not intended or envisaged to form part of the evidence in any case brought by the ACCC, but constituted Mr Nicholls “just testing the waters with some investigative techniques to see how it might play out” (T 15);

(i)    there were two outcomes in the April Calls: either a communication from an Apple employee that the fictional consumer had no rights under the ACL to a free repair; or, alternatively, there was no indication either way as to ACL rights, but rather a request was made by the Apple employee that the fictional iPhone be brought into an Apple Store with the intention that it be looked at by Apple technicians (T 16);

(j)    after the making of the April Calls, Mr Nicholls thought about how he could hone his technique and obtain the most effective evidence in conjunction with his colleagues; before Mr Nicholls decided to make the June Calls, he added an important additional element to the fictional consumer’s scenario he was to portray: this was, that whatever Apple Store he called, he was to represent to his interlocutor that the fictional consumer lived an inconvenient distance away, thereby suggesting it was impracticable for the fictional consumer to come into the Apple Store (T 20); this was a detail deployed quite deliberately (T 21); importantly, this investigative technique (of identifying a consumer at an apparently inconvenient location) was adopted by Mr Nicholls in the June Calls to try to push the conversation along with the Apple employee to make it more likely that there would be an answer given by that employee relevant to the question as to whether ACL rights existed (T 21); put another way, the adoption by Mr Nicholls of this technique reflected a general strategy in the June Calls to attempt to direct the conversation to the point of the Apple employee expressing a view about whether the fictional consumer had a right to free repair under the ACL (T 23);

(k)    as to the June Calls, again Mr Nicholls only obtained two outcomes to his enquiries: one was a request by the Apple employee for the fictional consumer to bring the defective iPhone into the Apple Store; the other was for the Apple employee to make a statement to the effect that the fictional consumer did not have a right to free repair under the provisions of the ACL; it follows, that in none of the June Calls was there a conversation during which an Apple employee said that there was a right to free repair under the ACL (T 24); this outcome was obtained in circumstances (given Mr Nicholls’ previous communications) where he considered, at the time of the making of the June Calls, that this was the most likely response, that is, that there was no right to a free repair, and when he obtained such a response he made certain to get the Apple employee to repeat it (T 24); Mr Nicholls adopted this course of conduct because he was conscious of trying to make sure that the evidence, being the admissions made by Apple employees, was as clear and definite as possible as to what the Apple employee was saying concerning the ACL (T 26);

(l)    although the June Calls comprised 22 calls, in the First Nicholls Affidavit, reference was only made to 13 telephone calls (being the Relevant Calls), and no reference whatever was made in that affidavit to the April Calls (or, obviously enough, those of the June Calls which were not the Relevant Calls).

20    As can be seen from the above, my findings, in effect, involve acceptance of much of the evidence given by both Mr Nicholls and Mr Gregson in their affidavits, as clarified during cross-examination. Before passing from the findings, there is an additional matter which requires specific comment.

21    The impression I received from the evidence was that the ACCC, or at least Mr Gregson, treated the use of deceptive investigative techniques with apparent insouciance. This is despite the evidence, noted above, that Mr Gregson wanted any Jo Consumer enquiry to be performed within the ‘framework’ set for the investigator and his view that the use of Jo Consumer enquiries ought not go beyond what was necessary for the purposes of an investigation (see [19(f)] above).

22    The Gregson Affidavit was couched at a high level of generality, and when asked about this topic in cross-examination, the following evidence was given (T 8):

And as a general rule, you wouldn’t endorse the use of deceptive techniques of this kind until proper consideration had been given to exhausting non-deceptive investigative techniques?---No, I don’t agree with that proposition.

So is it the case that you would accept that even if there are non-deceptive techniques available to gather evidence, it would still be equally legitimate to use deceptive techniques to gather the same evidence?---Well, quite possibly, depending on the circumstances.

23    When I later asked for specific clarification of this evidence (at T 12), Mr Gregson indicated that he would not have chosen the word “deceptive” and that in circumstances where there may be evidence from consumers of “very isolated instances” of potential contravening conduct, it “may be appropriate to corroborate or test how broad” the impugned conduct was by use of Jo Consumer enquiries. This answer did not assist me in directly clarifying the evidence as to why the use of deceptive techniques could “quite possibly” be adopted, depending on the circumstances, prior to exhausting (or at least dismissing as impracticable) non-deceptive investigative techniques.

24    No evidence was adduced of the ACCC guidelines (despite their apparent existence, at least at some time) nor of “the framework that [the ACCC] set[s] our investigators”. No contemporaneous documentation was adduced such as memoranda proposing or approving the calls or revealing a considered approach to the relevant authorisation being made. This cannot be taken too far, notwithstanding the principle that where a party fails to adduce evidence-in-chief on a relevant matter within the knowledge of witnesses the party calls, the court should not draw inferences favourable to that party: see Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418E per Handley JA. It is possible to conclude, however, that although there was unchallenged hearsay evidence of authorisation (by Mr O’Shaughnessy and Mr Zawa), I do not know the reasoning processes which led to the authorisation, nor do I know whether the conduct was consistent with pre-existing guidelines or “the framework that [the ACCC] set[s] our investigators”.

25    What I conclude on the evidence adduced is that a casual approach was taken to choosing the technique of Jo Consumer enquiries in the present case and without exhausting (or dismissing as impracticable) non-deceptive investigative techniques to obtain similar evidence. On one level, this criticism might be thought to have a logical difficulty, as the Relevant Calls are relied upon only for a limited purpose – to make out the ACCC Representation case, that is, misleading or deceptive conduct directed specifically to the regulator with regard to the Relevant Calls. In this narrow sense, there was no alternative evidence to that procured and relied upon to make out this particular aspect of the ACCC’s case. However, the point I make is a broader one: despite the general but compelling evidence given as to the importance (and perhaps the critical importance) of Jo Consumer enquiries in appropriate cases, here the regulator was seeking to procure evidence to support a misleading or deceptive conduct case against Apple in relation to consumer warranties. In relation to this investigation and evidence gathering as to that general case against Apple, I am not satisfied that the covert activity was embarked upon by reference to any perceived difficulty in obtaining evidence relevant to the impugned conduct of Apple, which was the topic of investigation. I used the expression above, ‘apparent insouciance’, because the impression I received was that, within the ACCC, what Mr Nicholls did was regarded (at least by the head of the ACCC’s Enforcement Division) as nothing out of the ordinary. It was also far from being a technique employed after, and only when, other techniques, which did not involve deception, were discounted as being impracticable. Put another way, despite Mr Gregson’s evidence that the use of Jo Consumer enquiries would be inappropriate if they went beyond what was necessary for the purposes of an investigation, the evidence does not support the conclusion that they were, in fact, necessary for investigation of Apple’s conduct.

26    Finally, in dealing with findings, I should make reference to a not unrelated point. As set out above, Apple tendered Exhibit VDA and it was said by Apple to be relevant because the letter dealt with the provision of documents pursuant to a notice issued to Apple under s 155(1)(a) and (b) of the CCA. The argument went that the letter was evidence of the fact that 80% of calls to Apple Call Centres (but not Apple Stores) were recorded and given consumers were more likely to place calls to the Apple Call Centres than to Apple Stores in relation to queries as to phone faults, it should be inferred that there was an available repository of recorded interactions between ‘real life’ consumers and Apple employees which were ignored by the ACCC in preference to conducting the Jo Consumer enquiries. For at least three reasons I would decline to draw such an inference: first, the letter speaks of practices in and before July 2013 and I have no idea whether such practices remained in place during the relevant period with which we are presently concerned; secondly, connected to the first point, the letter itself notes that the practice of Apple was to delete this recorded data “automatically” (although this deletion practice, at least in 2013, was said to have been “temporarily discontinued”); thirdly, the records would only record communications with Apple Call Centres which, for all I know, might be outside Australia and, in any event, may not necessarily reflect similar interactions in calls made to Apple Stores.

E    A MATTER OF CONCERN

27    Prior to turning to legal principle and the submissions of the parties, it is convenient that I deal with a further matter arising from the evidence, which was relied upon by counsel for Apple, Mr Free, and causes me some concern.

28    On 2 June 2017, Moshinsky J made an order that by 4 pm on 11 August 2017, the ACCC file and serve “all affidavit material on which it intends to rely at the hearing on liability”. The First Nicholls Affidavit was served in accordance with this direction. The Second Nicholls Affidavit, which was affirmed on 15 December 2017, was only served after a case management hearing on 7 December 2017, during the course of which I had indicated that the following week I would consider whether an advance ruling should be made.

29    This is of significance because any reader of the two affidavits affirmed by Mr Nicholls would have formed the clear impression that the only telephone calls made by Mr Nicholls were the Relevant Calls referred to in the First Nicholls Affidavit which, we now know, comprised only a subset of the June Calls. Indeed, this impression was reinforced by the Second Nicholls Affidavit which specifically says, under the heading “Purpose of my calls to Apple stores”, the following:

4.    I made the [Relevant Calls as] referred to in paragraphs 3 to 15 of [the First Nicholls Affidavit] for two reasons.

5.    First, to investigate the types of statements that were being made by Apple service staff around Australia in relation to the consumer guarantees available under the [ACL]. In particular, I wanted to see if I could find evidence that could be used in any future legal proceeding in addition to the evidence that the ACCC could obtain from consumers and the records of the Respondents.

6.    Secondly, to ensure that the ACCC had the best evidence of the actual language used by Apple service staff. It is for this reason that these phone calls were made and recorded. Prior to these calls, the scope of the consumer evidence that would be available to the ACCC was not clear. I thought these recordings might add significantly to the evidence that the ACCC could rely upon in any future legal proceeding.

7.    I made the [Relevant Calls as] referred to in paragraphs 3 to 15 of [the First Nicholls Affidavit] with the permission of Mr Gerard O’Shaughnessy (Assistant Director, Victoria Enforcement) and Mr Paul Zawa (General Manager, Victoria and Tasmania Enforcement).

30    As noted above, neither Mr O’Shaughnessy nor Mr Zawa were called to give evidence.

31    As I understand the position from Mr Free, it was only after Apple foreshadowed service of a notice to produce that information concerning the balance of the June Calls and the April Calls came to light. Mr Studdy SC, who did not appear for the ACCC prior to the voir dire (when he tendered records of the additional calls in June 2016 and the April Calls), submitted that there was nothing untoward in there being no prior disclosure or reference in the evidence served by ACCC to the other telephone calls. I disagree.

32    Section 64 of the Judiciary Act 1903 (Cth) relevantly provides that in any suit to which a person suing on behalf of the Commonwealth is a party, the rights of parties shall as nearly as possible be the same as in a suit between subject and subject. Notwithstanding this provision, it might be assumed that a regulator bringing civil penalty proceedings is “subject to some form of duty...that can be described as a duty to conduct litigation fairly”, although the position of the regulator cannot be equated with the position of a prosecutor (see Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345 at 407 [152]; Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 258 CLR 482 at 513 [78] per Keane J). At the very least, the ACCC holds itself out as a model litigant. To adapt Griffiths CJ’s famous words in Melbourne Steamship Company Limited v Moorehead (1912) 15 CLR 333 at 342, it does not seem to me to be reflective of the traditional and almost instinctive standard of fair play to be observed by an emanation of the Crown to leave, on the face of the served affidavit evidence-in-chief, a less than complete impression as to the way in which the investigative technique developed by Mr Nicholls was honed and refined and to refer, only incompletely, to the calls made in June 2018. After all, this was hardly a matter at the periphery of this aspect of the case.

33    Although I have misgivings about how the affidavit evidence served in-chief and the Second Nicholls Affidavit was expressed and the (at best) incomplete impression left by the ACCC upon service, this does not seem to me to be a material consideration for the present exercise of my discretion under ss 135 or 138 of the EA. The earlier failure to disclose, on the face of the affidavit material, the full circumstances in which the evidence of Apple’s admissions was obtained, does not seem to me to impact upon the question of admissibility now that Mr Studdy, with characteristic candour, has disclosed all the relevant circumstances. Accordingly, considerations as to the initially incomplete account provided by the ACCC in the First and Second Nicholls Affidavits can be put to one side when I come below to the principled exercise of the discretions contained in Part 3.11 of the EA.

F    SECTION 138 & THE APPLICABLE PRINCIPLES

34    Recently, in a case which bears characteristics common to the present circumstances, Moshinsky J in Director of Consumer Affairs Victoria v The Good Guys Discount Warehouses (Australia) Pty Ltd [2016] FCA 22; (2016) 245 FCR 529 had occasion to consider (and reject) objections under s 138 of the EA to a similar body of evidence. In doing so (at 549-554 [75]-[91]), his Honour canvassed, in detail, the applicable principles relating to s 138. I gratefully adopt his Honour’s exposition of the section and the principles to be drawn from the cases. It is unnecessary to repeat those principles, save to highlight the following:

(a)    as noted above, a two-staged task is involved: first, the court is to determine whether the evidence was obtained either: (i) improperly or in contravention of an Australian law; or (ii) in consequence of an impropriety or of a contravention of an Australian law; secondly, if the evidence was so obtained, it is not to be admitted “unless the desirability of admitting the evidence outweighs the undesirability of admitting evidence that has been obtained in the way in which the evidence was obtained”;

(b)    it is neither practicable nor desirable to seek to define with precision the borderline between what is acceptable and what is improper;

(c)    identification of impropriety requires attention to be given to the following: (i) the minimum standards expected and required in the relevant context; (ii) the conduct in question must not merely blur or contravene those standards in some minor respect; it must be quite or clearly inconsistent with those standards; (iii) the concepts of ‘harassment’ and ‘manipulation’ referred to in the cases suggest some level of encouragement, persuasion or importunity;

(d)    in circumstances where there is no unlawfulness, mere doubts about the desirability or appropriateness of particular conduct will not be sufficient to demonstrate impropriety;

(e)    at the second stage, that is, in reaching a decision as to whether the court is satisfied that the desirability of admitting the evidence outweighs the undesirability of admitting it, the court is required to take into account each of the matters identified in s 138(3) (identified below), however, the court is entitled to take into account additional relevant matters.

G    THE FIRST STAGE – IMPROPER OR in consequence of AN IMPROPRIETY?

G.1    Three Matters of Common Ground

35    In approaching the question of whether the evidence of admissions obtained during the Relevant Calls was obtained either: (a) improperly or in contravention of an Australian law; or (b) in consequence of an impropriety or of a contravention of an Australian law, it is convenient to deal initially with three uncontroversial matters.

36    The first is that there is no issue between the parties that the relevant statements by Apple employees contained in the First Nicholls Affidavit regarding ACL rights are admissions for the purposes of Part 3.4 of the EA. They are relevant previous representations made by persons who were speaking on behalf of Apple Australia, which is a party to the proceeding, and they are adverse to the interest of Apple Australia in the outcome of the proceeding.

37    The second is that the admissions are not relied upon by the ACCC as evidence of the tendency of Apple Australia to act in a particular way such as to attract the operation of the tendency rule as provided for in Part 3.6 of the EA. No tendency notice has been given and the Court has not been invited to determine that the evidence has significant probative value: see s 97 of the EA. The only relevance of its proposed adduction is to make out the ACCC Representation case.

38    The third is that there is no issue as to the fact that the admissions were not procured in contravention of an Australian law. Although the conduct of covertly recording a telephone conversation may contravene statutory prohibitions in some States and Territories, the Relevant Calls were made by Mr Nicholls in June 2016 from Melbourne (to various Apple Stores located in Victoria, Western Australia, Queensland, South Australia, Australian Capital Territory and New South Wales). The Surveillance Devices Act 1999 (Vic) expressly excludes the application of its prohibitions to “anything done in the course of duty by a member or member of staff of the Australian Competition and Consumer Commission” (see s 5(a)).

G.2    The Conduct Relied upon by Apple

G.2.1    The Two Arguments

39    As noted at [17(a)] and [17(b)] above, Apple puts its s 138 argument as to the conduct of the ACCC in two ways: first, the admissions were obtained improperly because they were made during questioning where Mr Nicholls knowingly made false statements and he knew (or ought reasonably to have known) that those false statements were likely to cause the Apple employee to make an admission (see s 138(2)(b) of the EA); and secondly, and “more broadly” that the evidence was obtained improperly or in consequence of an impropriety (see s 138(1) of the EA). Although the broader and narrower arguments necessarily overlap, I will deal with each of these bases separately.

G.2.2    The First Argument – Admissions and Deliberately False Statements

G.2.2.1        The Oral Argument at the Hearing

40    Apple submitted that the admissions should be taken to have been improperly obtained, for the purposes of s 138(1), by virtue of s 138(2)(b). This is because the evidence consists of admissions made “during or in consequence of questioning” and Mr Nicholls, who was conducting that questioning, made multiple statements in the course of that questioning which he knew to be false, in circumstances where he knew (or ought reasonably to have known) that the false statement was likely to cause the person who was being questioned to make an admission. It is said that this can readily be inferred from both the way Mr Nicholls directed the conversation, as shown in the transcripts, and the acknowledgements in both the Second Nicholls Affidavit and cross-examination that Mr Nicholls made the calls in an attempt to elicit evidence that could be used against Apple Australia.

41    In this respect, the submission was that the present case can be contrasted to that considered in The Good Guys where Moshinsky J was not satisfied that the inspectors who visited The Good Guys stores (pretending to be interested in buying a television) knew or ought reasonably to have known that making the false statements considered in that case was likely to cause the person who was being questioned to make an admission. The relevant finding in The Good Guys at 563 [127] was that there was:

no causal relationship between, on the one hand, the false statements about being interested in purchasing a television and, on the other hand, the way in which the salesperson answered the questions concerning extended warranties and the position the customer would be in if the television broke down after 12 months.

42    In this way, the falsehood in The Good Guys (which was limited to a statement about being interested in buying a television) served merely as the prompt for an otherwise general discussion about what rights would exist in relation to a television purchased from the store.

43    The critical distinguishing feature here, it was contended, was that Mr Nicholls only succeeded in eliciting admissions about ACL rights by honing his technique through the April Calls and then constructing an elaborate hypothetical scenario based on multiple falsehoods, all of which were calculated to cause, and did cause, the admissions to be made about ACL rights. In particular, it was submitted that this involved the adoption of a technique fashioned from the experience gained through the April Calls: the employee was asked to advise the fictional ‘Jack’ about his rights in respect of a particular fictitious device, based on a fictitious scenario involving specific forms of damage and repair and in circumstances where the Apple employee was pressed to provide an answer on the spot because of a false claim that it was inconvenient for ‘Jack’ to attend the store. The combination of these falsehoods caused the Apple employee to make a statement about how the ACL applied to the fictitious good. As a consequence, all of the elements of s 138(2)(b) of the EA are present and the evidence is therefore to be taken as having been obtained improperly.

44    In response, orally at the voir dire, the ACCC submitted that s 138(2) of the EA is not engaged as there is no basis to conclude that Mr Nicholls knew, or ought reasonably to have known, that the pretext and his questions were likely to cause the making of the admissions. To suggest that Mr Nicholls knew, or ought to have known, how the Apple employees were likely to respond “completely ignores the fact that Mr Nicholls was engaged in a conversation with the Apple support staff in which they were free to respond as they saw fit”.

45    The ACCC pointed to the fact, which I accept, that the transcripts record that when Mr Nicholls came to ask about the ACL, he initially did so on an open basis and this permitted whatever response the Apple employee considered appropriate. Of course, when Mr Nicholls sought to confirm the statements, the ACCC accepted that he did so in a leading way, but that this only occurred after the admission had been obtained through an open question. Additionally, the ACCC submitted that none of the Apple employees appeared to have difficulty understanding Mr Nicholls’ questions.

G.2.2.2        Further submissions

46    After reserving judgment, it occurred to me that the common position taken by the parties that the admissions were made “during or in consequence of questioning” for the purposes of s 138(2) of the EA may not be self-evidently correct, and I invited further submissions.

47    The ACCC frankly acknowledged that its submissions on the voir dire proceeded on the basis that the Relevant Calls involved ‘questioning’ within the meaning of s 138(2)(b). This was because such a submission reflected the approach taken in relation to the similar activities considered in The Good Guys where it was unsuccessfully contended that s 138(2)(b) only applies to admissions made after a proceeding is commenced. Notwithstanding the position in The Good Guys, the ACCC submitted that it is open for the Court to determine that Mr Nicholls was not engaged in ‘questioning’ within the meaning of s 138(2)(b) as: (a) Mr Nicholls’ conversations with the Apple employees did not amount to questioning; and (b) Mr Nicholls was not an “investigating official” engaged in questioning in relation to a criminal offence for the purposes of the EA.

48    As to the meaning of the term ‘questioning’, although it is not defined in the EA, it has been the subject of some clarification in R v Naa [2009] NSWSC 851; (2009) 76 NSWLR 271, a case in which the court was concerned with admissions made by an accused when police attended the scene of a crime and were speaking to the accused in an attempt to persuade him to drop his weapons. In relation to the use of ‘questioning’ in s 139 of the Evidence Act 1995 (NSW), Howie J observed at 295 [98]:

The first question is whether the section applies to the situation in which the police were involved. It depends upon whether the police were engaged in “questioning” the accused. The word is not defined in the Evidence Act. In general parlance it means “asking questions of someone” or “interrogating”. I do not believe that the word means “a conversation during which questions are asked”. Clearly to my mind the section was aimed at formal or informal interrogation of a suspect by a police officer for the purpose of the officer obtaining information, whether or not at the time of the interrogation the suspect was formally under arrest.

(Bold emphasis added)

49    The ACCC further submitted that in Application by Peter James Holland pursuant to s 78 Crimes (Appeal and Review) Act 2001 (NSW) [2017] NSWSC 462 at [66]-[69], the meaning of the word ‘questioning’ explained in R v Naa was also adopted by Fagan J, but in the context of both ss 138(2) and 139(2) of the Evidence Act 1995 (NSW). Holland was a statutory inquiry into a conviction partly based on admissions made by the prisoner in a series of conversations with the complainant, which conversations were taped by the complainant under instruction of the police.

50    The ACCC submitted that the Relevant Calls, when properly considered, constituted conversations in which questions were asked, rather than involving questioning (or interrogating) within the meaning of s 138(2)(b) of the EA. It was said that further support for this characterisation is derived from words “person conducting the questioning” in the chapeau to s 138(2). This is consistent with a formal or informal interrogation: see R v Reitberger [2014] NSWDC 154 at [70]. I will return to this submission below.

51    More broadly, the ACCC noted that although the term ‘questioning’ is used in other sections of the EA (including ss 26, 29 and 38, which concern the questioning of a witness giving evidence), elsewhere it is used in the context of criminal proceedings and concerns the activities of ‘investigating officials’ (see ss 85, 86, and 139). Despite the fact that s 138(2)(b) is not limited to the activities of investigating officials in the same way as the other provisions of the EA, it was contended that it is open for the Court to read s 138(2)(b) in conjunction with s 139, which defines the application of s 138(1) insofar as it deals with evidence obtained during official questioning, and that, given Mr Nicholls was not an ‘investigating official’ engaged in questioning in relation to a criminal offence as contemplated by s 139, he was not engaged in questioning within the meaning of s 138(2)(b).

52    Apple contends that the ACCC should be held to its concession that the admissions were made in the context of questioning but, in any event, the concession by the ACCC was properly made and pointed to the fact that it accords with the analysis in The Good Guys at 562-563 [126]-[127] and, given that there is no material difference between the type of exchange that occurred in that case and in the present case, a contrary conclusion as to applicability should not be adopted in the present case unless I were to consider that Moshinsky J’s conclusion as to applicability was clearly wrong.

53    This state of satisfaction cannot be reached, it was submitted, because the word ‘questioning’ in s 138(2)(b) should be given its ordinary meaning, being an exchange which principally involves one person asking questions of another.

54    There was no similarity with R v Naa (where it was concluded that admissions made by the accused during an armed confrontation did not constitute admissions made in the course of questioning or ‘official questioning’ for the purposes of either ss 138 or 139). However, it was contended the case is useful as to the meaning of ‘questioning’, because Howie J said, at 295 [98], that in general parlance, ‘questioning’ means asking questions of someone or interrogating. It was pointed out that Blow J reached a similar conclusion about the meaning of ‘questioning’ in Jager v Lynch [2003] TASSC 114; (2003) 12 Tas R 195 (as to s 139(2) of the Evidence Act 2001 (Tas), which referred to evidence of a statement made or an act done by a person ‘during official questioning’). Blow J concluded at 198 [7], that “an essential feature of any questioning is the asking of a number of questions”.

55    Put simply, it was said that there is no basis either textually or contextually to read down s 138(2) as applying only to questioning of a particular kind (such as formal or official questioning) or questioning by a certain kind of questioner (such as a law enforcement officer). Section 138 has been in essentially the same form since commencement, but since commencement, there has been a distinction within the Act between ‘questioning’ (as referred to in s 138(2)) and particular types of questioning. Prior to the passage of the Evidence Amendment Act 2008 (Cth), certain provisions regulated obtaining evidence during ‘official questioning’ but this concept was replaced by a broader concept, namely questioning ‘conducted by an investigating official’. As the Explanatory Memorandum to the Evidence Amendment Bill 2008 (Cth) noted, this was in response to a concern as to the restriction of the ambit of s 139(2) following observations made by the High Court in Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216 that “in the course of official questioning” marked out “a period of time running from when questioning commenced to when it ceased” (at 237 [52] per Gleeson CJ, Hayne and Heydon JJ). Relevantly, however, according to Apple, s 138(2) has always been concerned with the broader and unqualified concept of ‘questioning’.

G.2.2.3        Applicability

56    I have set out the submissions made as to applicability at some length because I do not consider that I should proceed on the basis that the ACCC is to be held to its initial submission. The question that arises is whether, as a matter of law, I am to take conduct of a certain kind as constituting improper conduct for the purposes of determining whether I am to exercise a discretion. The subsection either applies in the present circumstances, or it does not.

57    Although I reject the notion now embraced by the ACCC that s 138(2)(b) only has work to do in the criminal context (see ACCC’s Supplementary Submissions at [3(b)]), the application of orthodox principles of statutory construction in construing the provision so that it is consistent with the language and purpose of all the provisions of the statute is not straightforward: see Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at 381-382 [69]- [70] per McHugh, Gummow, Kirby and Hayne JJ.

58    Contextually, if I may say so, the observations of Howie J in R v Naa and Fagan J in Holland as to the meaning of the term ‘questioning’, and the observation that the section was aimed at formal or informal interrogation of a suspect by an investigating officer for the purpose of the officer obtaining information, have much to commend them. Recourse to secondary material supports that consideration was given to a restriction on the admissibility of improperly obtained admissions in the context of “police or other official questioning” (see Australian Law Reform Commission, Evidence (Interim Report), Report No 26 (1985), Vol 1 at [22(b)]). Unsurprisingly, the analysis of the policy concerns was focused on the activities of law enforcement agencies (see, for example, Evidence (Interim Report), Vol 1 at [965]).

59    Despite this, the text does not, in terms, direct itself only to questioning by particular types of officials conducting particular kinds of questioning. Apple submits, with some justification, that limiting the application of s 138(2)(b) of the EA to formal or official questioning by investigators would serve to undermine the statutory purpose of regulating improper conduct in the obtaining of evidence.

60    It follows from the above that it cannot be said that I could reach the level of conviction necessary to cause me to depart from the approach taken as to the applicability of the subsection, in relevantly identical circumstances, in The Good Guys.

G.2.2.4        Conclusion on First Argument

61    Section 138(2)(b) of the EA relevantly provides:

Discretion to exclude improperly or illegally obtained evidence

…

(2)  Without limiting subsection (1), evidence of an admission that was made during or in consequence of questioning, and evidence obtained in consequence of the admission, is taken to have been obtained improperly if the person conducting the questioning:

…

(b)  made a false statement in the course of the questioning even though he or she knew or ought reasonably to have known that the statement was false and that making the false statement was likely to cause the person who was being questioned to make an admission.

62    Mr Nicholls, posing as ‘Jack’, questioned the Apple employee as to how Apple would seek to address the supposed problem with his iPhone and what rights or entitlements he had in that regard. I accept that these were not merely conversations of a non-inquisitive character in which there happened to be some questions incidentally asked. Following the approach adopted in The Good Guys, I do not accept that the Relevant Calls, when properly considered, constituted conversations in which questions were asked, as opposed to questioning within the meaning of s 138(2)(b).

63    The real question then becomes the one which was the focus of oral submissions at the voir dire and addressed by the ACCC in its initial outline of submissions: did Mr Nicholls know, or ought he to have reasonably known, that making various false statements in the course of his questioning was likely to cause the person who was being questioned to make an admission?

64    In The Good Guys, no causal relationship was found between, on the one hand, the false statements, and on the other hand, the way in which “the salesperson answered the questions concerning extended warranties and the position the customer would be in if the television broke down after 12 months”: see 563 [127]. In The Good Guys, the falsehood (which, unlike here, was limited to a statement about being interested in the product) served merely as the prompt for an otherwise general discussion about what rights would exist in relation to a television purchased from the shop. It followed that the inspectors did not know, or ought reasonably to have known, that making the false statements was likely to cause the person who was being questioned to make an admission.

65    As I have found at [19] above, the ‘trial run’ of the April Calls resulted, as one of the two outcomes of the calls, in a non-response (in the sense that a request was made that the fictional iPhone be brought into the Apple Store). As a result of this and after deliberation, Mr Nicholls added the ‘inconvenient distance’ element to his future calls. As explained at [19(j)] above, this expedient was adopted to try to push the conversation in the June Calls along so as to make it more likely that an Apple employee would express a view about whether the fictional consumer had a right to free repair under the ACL. At the time, following the introduction of the additional element, Mr Nicholls considered the most likely response was that there was no right to a free repair, and when he obtained such an admission, he made certain to have the admission repeated so that the admissions made were as clear as possible.

66    In these circumstances, unlike in The Good Guys where no causal relationship existed, the statements were more than a prompt for an otherwise general discussion. Mr Nicholls knew that making the false statements he had honed through his ‘trial run’ was likely to cause the person who was being questioned to make an admission. It follows that evidence of the admissions made during the Relevant Calls, in accordance with s 138(2)(b) of the EA, is to be taken to have been obtained improperly.

G.2.3    Second Argument – s 138 Generally

67    Even if I am wrong about the applicability of s 138(2)(b) of the EA, I would, for reasons I will now explain, still conclude that the admissions made during the Relevant Calls were obtained improperly.

68    I set out above, by way of summary, the approach to assessing whether evidence was obtained improperly or in consequence of an impropriety. Uninstructed by authority, one might have thought this task involved a broad evaluative assessment which depended upon the particular circumstances of the case, but the New South Wales Court of Criminal Appeal has explained that although the clear intention of s 138 is to replace the general law discretion to exclude improperly obtained evidence and that the term ‘impropriety’ is undefined, the statutory conception should be analysed through the prism of the common law as explained in cases such as Ridgeway v The Queen (1995) 184 CLR 19 at 36-40 (per Mason CJ, Deane and Dawson JJ): see Robinson v Woolworths Ltd [2005] NSWCCA 426; (2005) 64 NSWLR 612 at 618-619 [22]-[23] per Basten JA, Barr J agreeing. One of the difficulties in applying the cases on s 138, however, is that although the section applies in the civil context, as the Judicial Commission of New South Wales has recognised in its Civil Trials Bench Book (June 2007), “it has been little used in civil proceedings” (at 4914). Accordingly, most examples of its application reflect what is said to be the “fundamental concern” of the section, namely to ensure that a contravention, or some other impropriety involved in obtaining the evidence, is balanced against the important public interest in “successfully prosecuting alleged offenders”: see, for example, R v Camilleri [2007] NSWCCA 36; (2007) 68 NSWLR 720 at 726-727 [31] per McClellan CJ at CL, Bell and Howie JJ agreeing, and Fleming v The Queen [2009] NSWCCA 233; (2009) 197 A Crim R 282 at 289 [21] per McClellan CJ at CL, Grove and RA Hulme JJ agreeing.

69    I would have thought that the weight to be given to public policy favouring the exclusion of the evidence (including the public interest in maintaining standards of propriety by those entrusted with statutory powers) will necessarily vary depending upon the context, including whether one is considering criminal law enforcement or the activity of civil regulators. It seems to me that this context will not only be relevant at the second stage which has, as its point of departure, evidence obtained improperly or in contravention of an Australian law, but also in the anterior, first stage evaluative assessment of what is, in fact, improper in all the circumstances.

70    In any event, as noted at [34] above, in assessing, at the first stage, what is improper or amounts to an impropriety, authority directs me to give consideration to the minimum standards expected and required in the relevant context (so to this extent, context is important). It also warns, however, that the conduct in question must not merely contravene those standards in some minor respect, but must be clearly inconsistent with those standards and some level of encouragement, persuasion or importunity should be evident.

71    I am satisfied, consistently with the evidence of Mr Gregson, that the minimum standards expected and required in the relevant context included that: (a) Jo Consumer enquiries would to be done pursuant to some guidelines or framework that the ACCC would set its investigators; (b) the use of Jo Consumer enquiries would be appropriate to adopt if they were necessary for the purposes of investigation; (c) connected to last point, that the use of deceptive techniques to obtain certain evidence would only be adopted after dismissing as impracticable non-deceptive investigative techniques to obtain the same evidence; and (d) the ACCC, through its investigators, would not make false statements to persons if the investigator knew the statements were false and that making the false statements was likely to cause the person who was being questioned to make an admission.

72    I have already made findings that these standards were breached and I do not consider the breaches to be minor. As I have also already explained, the “trial run, to try out some investigative techniques” and the efforts to hone and adopt a technique to direct the conversation to the point of increasing the likelihood of the Apple employee making an admission (and then having them confirm and repeat it), does demonstrate a level of importuning or persistence in obtaining admissions. Having regard to all the findings I have made as to the context in which the evidence of the admission was procured, I conclude it was obtained improperly for the purposes of s 138(1). In reaching this view, I have had regard to the evidence of the conversations themselves (a topic to which I will return at [78] below).

73    Accordingly, it is necessary that I now turn to consider whether the desirability of admitting the evidence outweighs the undesirability of admitting the evidence which, as explained, has been obtained improperly. In doing so, as noted above, I am conscious that, hitherto, the onus of persuasion was on Apple, as the party objecting to the evidence, to establish that the evidence falls within the terms of s 138(1): Gilmour v Environment Protection Authority [2002] NSWCCA 399; (2002) 55 NSWLR 593 at [46] per Santow JA, Hidden and Adams JJ agreeing (I note that the paragraph referred to is not included in the authorised report). Now that I have been satisfied that it does, the onus of persuasion shifts to the ACCC, being the party tendering the evidence, to establish that the desirability of admitting the evidence outweighs the undesirability of admitting it in the circumstances in which it has been obtained: R v Coulstock (1998) 99 A Crim R 143 at 147 per Hunt CJ at CL, Ireland and Levine JJ agreeing; Robinson at 621-622 [33] per Basten JA, 632 [106] per Hall J.

H    THE SECOND STAGE – THE EXERCISE OF DISCRETION

H.1    Relevant Factors

74    Subsection 138(3) of the EA relevantly provides:

(3)  Without limiting the matters that the court may take into account under subsection (1), it is to take into account:

(a)  the probative value of the evidence; and

(b)  the importance of the evidence in the proceeding; and

(c)  the nature of the relevant offence, cause of action or defence and the nature of the subject-matter of the proceeding; and

(d)  the gravity of the impropriety or contravention; and

(e)  whether the impropriety or contravention was deliberate or reckless; and

(f)  whether the impropriety or contravention was contrary to or inconsistent with a right of a person recognised by the International Covenant on Civil and Political Rights; and

(g)  whether any other proceeding (whether or not in a court) has been or is likely to be taken in relation to the impropriety or contravention; and

(h)  the difficulty (if any) of obtaining the evidence without impropriety or contravention of an Australian law.

75    Leaving aside s 138(3)(f) which has no present materiality, I will deal with each of these mandatory considerations but will do so out of turn and deal initially with the two I consider to be of very real significance in the present circumstances: the gravity of the impropriety and whether it was deliberate or reckless.

H.1.1    Gravity, Deliberateness and Recklessness: ss 138(3)(d) and (e)

76    As explained above, in conducting the first stage evaluative assessment, I formed the conclusion that the conduct in question was quite inconsistent with appropriate standards and that, as the conduct was not unlawful, it follows that in making a finding that the evidence was obtained improperly, I had more than mere doubts about the desirability or appropriateness of the particular conduct.

77    These findings, made in the context of the characterisation of the conduct are, obviously enough, also relevant to an assessment of its gravity. Having said that, what amounts to conduct that is improper is assessed on a continuum which has, at the one end, conduct which, although properly characterised as arising from an impropriety, is not particularly serious and, on the other end, conduct which is very seriously unlawful and egregious. In my view, the conduct with which we are concerned is very much at the lower end of the spectrum.

78    Although, as I have explained, there was a degree of deliberateness in the conduct, I have no doubt that Mr Nicholls made the Relevant Calls (and caused them to be recorded and transcribed) with the subjective intention of seeking: (a) to investigate the types of statements that were being made by Apple employees around Australia in relation to the consumer guarantees available under the ACL; and (b) to ensure that the ACCC had what Mr Nicholls believed was the ‘best evidence’ of the actual language used by Apple employees. Moreover, although false statements were made during the Relevant Calls which Mr Nicholls knew were likely to cause the Apple employee to make an admission, the Relevant Calls could have exhibited trickier or worse conduct. A fair reading of the transcripts indicates (in each of the Relevant Calls at least) that when Mr Nicholls raised the ACL for the first time, he did so on an open basis and asked a question which permitted the Apple employees to answer as they saw fit.

79    Mr Nicholls did so against the background that making enquiries under a pretext such as that used is an investigative technique that the ACCC uses and is perceived by his superior, Mr Gregson, to be an important investigative tool for the ACCC. In assessing the gravity of the conduct, it is necessary to have regard to the fact that the conduct was not illegal and, although I have found the conduct was inappropriately honed in order to obtain admissions, Mr Nicholls subjectively believed he was behaving appropriately and with approval (at least in general terms), consistent with the general approach taken by the ACCC to Jo Consumer enquiries.

80    Although only limited assistance can be gained from examining the bespoke circumstances of other cases, a useful illustration of more serious improper conduct in covertly recording telephone conversations is provided by Bedford v Bedford (unreported, Supreme Court of New South Wales, Windeyer J, 20 October 1998). In that case, it was unsuccessfully alleged that a tape recording had been made contrary to the Listening Devices Act 1984 (NSW), and thus rendered inadmissible. It was, however, accepted that the evidence had been improperly obtained, and that the conduct on the part of the plaintiff and his solicitor was deliberate and most serious. That case had none of the mitigating features present here of a regulator (albeit in my view overzealously) seeking, in good faith, to obtain evidence in the course of the pursuit of the regulator’s enforcement responsibilities.

81    Moreover, here there was no recklessness of the type explained by Bathurst CJ in Gedeon v The Queen [2013] NSWCCA 257; (2013) 237 A Crim R 326 at 366 [210] (with whom Beazley P, Hoeben CJ at CL, Blanch and Price JJ agreed), namely here there was no recognition that the conduct might be improper but a determination was made to engage in it not caring one way or another. To the contrary, as I have already explained, Mr Nicholls considered he was authorised and was behaving appropriately.

82    I accept Apple’s submission that the investigative technique adopted by Mr Nicholls fell below the minimum standards expected of a regulator such as the ACCC. I also accept that Mr Nicholls only succeeded in obtaining evidence of the kind he was looking for by an elaborate ruse.

83    Having said this, in my view, the presence of honest but mistaken conduct, and the lack of grave impropriety and recklessness weigh significantly in the discretionary balance.

H.1.2    Probative Value and Importance: ss 138(3)(a) and (b)

84    In section B above, I explained the ACCC Representation case and, at [11] above, that the ACCC’s case in this respect rests entirely upon the admissions obtained through the Relevant Calls and, if the evidence is excluded, the ACCC conceded that this aspect of the overall case against Apple will fail. It follows that the evidence has a high degree of probative value and importance in the case that the ACCC wishes to advance against Apple.

H.1.3    Nature of Cause of Action and Subject-Matter of Proceeding: s 138(3)(c)

85    The proceeding is one by a regulator seeking relief which includes the imposition of pecuniary penalties. Although it is a civil proceeding, it also has a public purpose in that it is a means by which a regulator seeks to obtain public declarations of contravention of the law as part of its regulatory role. Although, as Apple submits, the alleged contraventions the subject of the proceeding are not grave, the allegations taken as a whole are, nonetheless, serious ones concerning the public being misled as to important consumer rights.

H.1.4    Difficulty of Obtaining Evidence without Impropriety: s 138(3)(h)

86    This is a factor telling against the reception of the evidence. Apple submits that the ACCC had no difficulty in obtaining evidence of real world transactions involving actual consumers. To the extent that it was concerned to investigate the representations made about consumers presenting with defective devices, there were means readily available of obtaining evidence of representations made to actual consumers in the course of ordinary transactions. There was no need to generate new alleged contraventions by a series of elaborate fictions.

87    As I have recorded above, it does not seem to me that the ACCC did really consider whether similar evidence of contravening conduct could be obtained without engaging in the conduct I have found to be improper. Although the ACCC Representation case rests entirely on communications to Mr Nicholls during the Relevant Calls, in approaching this aspect of the discretion, I have paid attention to the overall case of contravening conduct made against Apple. To approach this discretionary factor in an unduly narrow way (premised on the notion that there was no way of obtaining evidence relevant only to the ACCC Representation case without engaging in the Relevant Calls) would not give sufficient consideration to this factor, which seems to me to be one of some present significance.

H.1.5    Other Proceeding in Relation to the Impropriety: s 138(3)(g)

88    As explained by Beech-Jones J in R v Gallagher [2015] NSWCCA 228 at [45], the absence of any disciplinary action is a factor in favour of the rejection of the evidence because it leaves exclusion of the evidence as the only means of vindicating the law that was contravened: see also Parker v Comptroller-General of Customs [2007] NSWCA 348; (2007) 243 ALR 574 at 591-592 [64] per Basten JA; Australian Securities and Investments Commission v Sigalla (No 2) [2010] NSWSC 792; (2010) 240 FLR 327 at 362 [127] per White J). Given that Mr Nicholls was conducting himself bona fide and with the apparent approval of his superiors, there does not appear to be any prospect of disciplinary action being taken against him. That being said, even in the absence of any disciplinary action against Mr Nicholls, I do not consider that this factor weighs materially in the discretionary mix in the present circumstances.

H.2    The Weighing Process

89    This brings me to the central issue: whether the ACCC has persuaded me that the desirability of admitting the evidence outweighs the undesirability of admitting evidence that has been obtained in the way in which the evidence was obtained.

90    When one has regard to the mandatory discretionary factors which seem, in this case, to encompass, subject to what I have said at [75] above, all factors relevant for the exercise of discretion, I am persuaded that the desirability of admitting the evidence outweighs the undesirability of admitting evidence that has been obtained in the way in which it was obtained. Although I have disquiet about what has occurred and some surprise that a tighter rein is not kept within the ACCC to ensure that covert activity is not engaged in unless it is strictly necessary, in the particular circumstances, I do not believe that this conduct is of sufficient seriousness such that the rejection of the evidence should be used as some way of vindicating the contravention of what I regard to be the appropriate standards of conduct. In the circumstances of this proceeding, the discretion gives content to the Court’s role in resolving a fundamental tension, being the balancing of, on the one hand, the public interest in admitting reliable evidence and thereby allowing a regulator to enforce the law, and on the other hand, the public interest in deterring improper conduct by a regulator seeking to enforce the law.

91    Having considered the circumstances, and being conscious of the weighing exercise being brought to bear in this proceeding, it seems to me that I should not rely on s 138 to exclude the evidence.

I    The SECTION 135 ARGUMENT

92    As noted above, a subsidiary contention was made by Apple that the admissions should be excluded pursuant to s 135(a) of the EA on the basis that their probative value is substantially outweighed by the danger that the evidence might be unfairly prejudicial to Apple. The alleged unfair prejudice identified was the potential that the evidence in relation to the ACCC Representation case could be used inappropriately to affect the treatment of other evidence in relation to the other parts of the ACCC’s overall case. More particularly, given the content of the Second Nicholls Affidavit, the understandable concern was raised that the ACCC might seek to use the transcripts of the Relevant Calls to demonstrate that they are somehow representative in a broader way of the “types of statements that were being made by Apple service staff around Australia in relation to the consumer guarantees available under the [ACL]”: Second Nicholls Affidavit at [5].

93    During the course of oral argument, however, it became plain that the ACCC eschews use of the evidence other than to prove the ACCC Representation case. Consistently with this, as noted above, no tendency notice has been served and it follows that the issue of alleged unfair prejudice falls away.

J    CONCLUSION & ORDERS

94    It follows from the above that neither of the discretionary exclusions contained in Part 3.11 of the EA are engaged. Given that it is common ground that the evidence is relevant within the meaning of ss 55 and 56 of the EA, I will make an advance ruling pursuant to s 192A of the EA. This ruling can be stated simply as allowing the affidavit to be read. For completeness, I note that I did give consideration as to whether a limitation should be made pursuant to s 136 of the EA to limit the use of the relevant admissions to the ACCC Representation case, but in the light of the submissions made by the ACCC, and in the absence of a tendency notice, I do not consider that such a limitation is necessary.

95    I will hear the parties as to the costs of the voir dire.

Associate:

Dated:    8 May 2018