FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Lux Pty Ltd

[2004] FCA 1344

TRADE PRACTICES – sale of vacuum cleaner to consumer – sales agent acting unconscionably – form of relief – whether injunctive relief appropriate – no case for order for public notice – whether provision of compliance program appropriate

COSTS – unconscionable conduct – whether proceedings prosecuted as a test case – whether applicant failed to establish entire pleaded case – whether applicant acted unreasonably in not accepting settlement proposals – whether costs should not follow event in relation to expert evidence and evidence of prior contracts

Trade Practices Act 1974 (Cth) ss 51AB, 80, 80A

Australian Competition and Consumer Commission v 4WD Systems Pty Ltd (2003) 200 ALR 491 cited

Australian Competition and Consumer Commission v Davis [2003] FCA 1227 cited

Australian Competition and Consumer Commission v Davis [2003] FCA 1458 cited

Australian Competition and Consumer Commission v Lux Pty Ltd [2004] FCA 926 cited

Australian Competition and Consumer Commission v McCaskey (2000) 104 FCR 8 cited

Australian Competition and Consumer Commission v Midland Bricks Co Pty Ltd (2004) 207 ALR 329 cited

Australian Competition and Consumer Commission v Universal Music Pty Ltd (2002) 201 ALR 618 cited

Australian Competition and Consumer Commission v Virgin Mobile Australia Pty Ltd [2002] FCA 1548 cited

Australian Competition and Consumer Commission v Woolworths Ltd (2002) ATPR 41-890 cited

Australian Competition and Consumer Commission v Worldplay Services Pty Ltd [2004] FCA 1138 cited

BMW Australia Limited v Australian Competition and Consumer Commission (2004) 207 ALR 452 cited

ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 cited

McKerlie v New South Wales [2000] NSWSC 1159 cited

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v LUX PTY LTD and DENNIS PODGER

W124 of 2000

RD NICHOLSON J

20 OCTOBER 2004

PERTH

THE COURT ORDERS THAT:

Counsel be heard as to the form of the proposed draft orders.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

THE COURT ORDERS THAT:

1. The first respondent:

(a) within three months of the making of this order, formulate a trade practices compliance program to be implemented for its staff, which:

(i) has the purpose of ensuring that the first respondent does not engage in conduct in contravention of section 51AB of the Trade Practices Act 1974 (Cth) of the kind referred to in the first declaration made by the Court in this matter on 16 July 2004, or similar or related conduct, during the period referred to in subparagraph (d) below;

(ii) is tailored to the circumstances of the first respondent; and

(iii) provides for the allocation of compliance responsibilities to a senior officer of the first respondent.

(b) use all reasonable endeavours to have the compliance program accord with the provisions of the Australian Standard for Compliance Programs AS 3806;

(c) within one month of formulating the compliance program, implement the compliance program as formulated; and

(d) maintain the compliance program for a period of two years from the making of this order.

2. Costs be paid as follows:

(a) subject to (b), the respondents pay the applicant’s costs including the applicant’s costs occasioned by the respondents’ expert Mr Wolowski and the belated introduction of the evidence of the respondents’ expert Professor Hayes.

(b) The applicant bear its own costs in relation to expert evidence of Ms Nada Murphy including costs of and incidental to:

(i)                  instructing Ms Murphy to act as an expert witness;

(ii)                Ms Murphy’s attendances with Mr and Mrs Standing;

(iii)               Ms Murphy’s report and the joint expert report;

(iv)              legal argument concerning the admissibility and relevant of Ms Murphy’s evidence;

(v)                examination in chief, cross examination, and re-examination of Ms Murphy; and

(vi)              any subpoenas to Ms Murphy.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     On 16 July 2004 reasons for judgment were delivered in this proceeding. At the same time the following declarations were made:

‘1. The first respondent, in connection with the supply of a vacuum cleaner to Janice Standing on 26 August 1999, engaged in unconscionable conduct in contravention of s 51AB of the Trade Practices Act 1974 (Cth)(‘the Act’).

2. The second respondent in engaging in the conduct found by the Court in these reasons has been directly knowingly concerned in and a party to the contravention of s 51AB of the Act, namely the engagement in unconscionable conduct.’

In relation to applications for orders granting injunctive relief, requiring a public notice and the implementation of a compliance program, a further opportunity was provided to the parties to provide submissions in the circumstances. The parties were also directed make submissions on the issue of costs. These reasons address the matters raised in written submissions on those outstanding issues.

injunctive relief

2                     The form of injunctions sought by the applicant is addressed in the first place to the first respondent (‘Lux’) and in the second to the second respondent (‘Mr Podger’). In respect of each it seeks a restraint in the following terms:

‘for a period of three years from the entering of the order, from entering into any contract with a consumer for the supply of any Lux electrical appliance in circumstances where the [respondent] knows or has reasonable notice that the consumer is substantially unable to assess, whether because of the consumer’s inability or limited ability to read and/or write or for any other reason, the financial consequences of entering into the contract, including his or her obligations and liabilities under the contract without first giving the consumer the opportunity to obtain independent advice in relation to the contract.’

3                     The applicant accepts that the jurisdiction to grant an injunction is wider under s 80 of the Trade Practices Act 1974 (Cth) (‘the Act’) than it would be under traditional equitable principles. In Australian Competition and Consumer Commission v Lux Pty Ltd [2004] FCA 926 at [138], it has already been accepted by the Court that injunctive relief may be granted if it is in the public interest to do so whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of a contravening kind; where there is little likelihood that the respondents might engage in the restrained behaviour; and where there is little likelihood that the respondents might engage in the restrained behaviour. The public interest (as has been said there) is to be understood in the context of the role of the applicant in establishing normative processes in relation to the operation of the whole market by ensuring that a person in that market has a fair opportunity to obtain what the market should, over time, deliver.

cessation of participation in the market

4                     Here the respondents bring evidence (in the affidavit of Mr Lucarelli, to which no objection is taken) that Lux ceased its business of unsolicited door-to-door sales of portable vacuum cleaners on 23 October 2003 and does not intend to resume such business or to undertake any sales involving unsolicited sales. In relation to Mr Podger, the evidence is that he is no longer involved in sales work. Lux now carries on the business of the sale of ducted vacuum cleaner units and servicing of products sold by it. The business is conducted by Lux advertising products for sale and inviting potential customers to respond to the advertisement. Upon receiving an enquiry from such a customer, a representative of Lux visits the home of that customer with a view to providing a quotation for the supply and installation of a ducted vacuum system. If the customer accepts a quotation, a time is arranged for the supply and installation of the system. Payment is made prior to installation. No finance is offered or provided by Lux to its customers, all transactions being on terms that payment is received at the time of purchase. It continues to provide after sale facilities for its products.

5                     The respondents, while accepting that the Court’s power to grant an injunction is purely discretionary, submit that the discretion should be exercised to decline injunctive relief in the circumstances of the case. This submission is supported by the statement that the Court found the unconscionable conduct was not the entering into of the contract but rather the meeting between Mr Podger and Mrs Janice Standing (‘Mrs Standing’) and in particular the decision by Mr Podger not to act on his thought to give Mrs Standing an opportunity to obtain independent advice. I agree with the submission for the applicant that this description of the reasoning of the Court is artificial and cannot be accepted. The declaration of unconscionable conduct related to conduct in connection with the supply of a vacuum cleaner. The conduct in question made sense only in the context of Mrs Standing entering into the contract with Lux and to the extent that it led to Mrs Standing entering into that contract.

6                     Nevertheless, the respondents say it is relevant that the finding of the Court is to be understood in the context of other findings of fact made in the reasons for judgment. These included the fact that the conduct in question occurred four years ago; the issue arose in respect of a single meeting between Mr Podger and Mrs Standing; and the case related to the single sale of a vacuum cleaner. Further, it was found that Mrs Standing did not make any complaint to anyone in respect of the conduct, nor did she convey her subjective feelings of fear to Mr Podger or otherwise make them apparent. (A further contention that there was a finding that Mr Standing invited Mr Podger to visit the home is not in accord with the findings in the reasons).

7                     The respondents accept the role of the applicant in establishing normative processes in relation to the operation of the whole market. The applicant says that Lux continues to operate in the market relevant for the purposes of the injunction. Consequently, it is argued that it is by no means clear that the proposed injunctions would not, in the changed circumstances of Lux and Mr Podger’s activities, serve the public interest of specific deterrence.

8                     The applicant submits that the business now carried on by Lux is within the scope of the proposed injunctions. Further, it is said, the applicant’s case was run and the Court findings made on the basis that Lux was a ‘supplier of goods, amongst other things, vacuum cleaners to consumers …’, the case not being confined to the unsolicited door-to-door sales of portable vacuum cleaners. The submission is that the ‘market’ in which Lux operates has therefore not changed at all. Additionally, the applicant argues that there is nothing in the Court’s previous reasons for judgment to suggest that the goods sold to Mrs Standing, being a portable vacuum cleaner, was material or even relevant to the Court’s ultimate finding of unconscionability. Likewise, the applicant submits, the question of how it was that Mr Podger came to attend at the Standings’ home appears not have played any material role in the conduct ultimately found by the Court to be unconscionable. Finally, it is submitted, it is apparent from the evidence that Lux, through its sales representatives, continues to attend consumers in their homes in connection with the supply or possible supply of goods. The applicant contends that the fact such attendance will be made following a consumer request or enquiry does not mean that attendance could or would not be made at the homes of vulnerable consumers, like Mrs Standing. It is submitted that, therefore, there is a public interest in granting the injunctions sought against the respondents.

9                     Additionally the applicant contends there is a public interest in establishing a scheme of deterrence of which the proposed injunctions would form part. Reliance is placed upon ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 at
254–255 per Lockhart J, as well as Australian Competition and Consumer Commission v Midland Bricks Co Pty Ltd (2004) 207 ALR 329 at [46] per Lee J.

whether form of injunctions uncertain

10                  The respondents submit that the injunctions are too wide. First, it is said they go outside the parameters of the case as pleaded and prosecuted before the Court. Second, it is said they seek to encompass all Lux ‘electrical products’ regardless of the manner in which the product is sold. Third, it is said that they are not limited to consumers who are substantially illiterate and unable to understand commercial matters in any depth but seek to include consumers who are substantially unable to assess the financial consequences of entering into a contract because of an inability or limited ability to read and/or write, or any other reason.

Parameters of the case

11                  The applicant submits that the parameters of the case as pleaded and prosecuted are not directly relevant in assessing whether or not the Court should make the proposed injunctions. This, the applicant says, is because the terms of s 80(1) of the Act make it clear that it is the finding of a contravention or participation in a contravention required by (in this case) s 80(1)(a)(i) and s 80(1)(e) that mark the boundaries of the injunctions that may be made under the section. Here, the applicant says, while it was required by the terms of s 51AB of the Act that the respondents’ conduct in the present case be ‘in connection with’ the supply of a good or service (or possible supply of a good or service), the fact that the good supplied was a portable vacuum cleaner was not ultimately material or even relevant to the Court’s finding that the conduct in question was unconscionable. In other words, if granted, the proposed injunctions would restrain precisely the type of conduct that was found by the Court to be unconscionable, notwithstanding that it may arise in connection with the supply of goods that are similar (indeed very similar rather than precisely the same as) to the particular good the subject of the supply to Mrs Standing.

12                  The applicant submits that the interests of Mrs Standing at stake were her financial interest and the judgement she was unable to make in her best (financial) interest was as to the financial consequences of entering into the contract. Therefore, it is said, the proposed injunctions are directly connected to the contravention found, albeit crafted in a narrower form to make them workable.

13                  The applicant makes a further submission on a question of law to the effect that this Court has previously determined there is a sufficient nexus between a contravention or participation in the contravention found for the purpose of s 80(1) and the conduct sought to be restrained where the latter is of a ‘similar’ kind to the former: ICI Australia at 258-259 per Lockhart J with Gummow and French JJ concurring; see also Australian Competition and Consumer Commission v Worldplay Services Pty Ltd [2004] FCA 1138. Although there is dicta to the contrary in BMW Australia Limited v Australian Competition and Consumer Commission (2004) 207 ALR 452 suggesting that ‘the terms of any injunction based only on past conduct should be limited to restraining a repetition of precisely that conduct’, it is submitted that the approach in ICI Australia should be preferred. Therefore the applicant submits it is appropriate for this Court to restrain ‘similar’ conduct.

Applicability to ‘electrical appliances’

14                  The respondents contend that the injunctions seek to encompass all Lux ‘electrical products’ regardless of the manner in which the products are sold.

15                  As to the reference to ‘electrical appliance’, the applicant contends that findings of the Court clearly related to an electrical appliance and did not hinge on whether the electrical appliance in question was a portable vacuum cleaner. The applicant submits that it is appropriate to restrain the respondents from engaging in precisely that same conduct in the future in relation to the sale of all electrical appliances. As an alternative, the applicant would accept amendment to the form of injunctions to refer to ‘all vacuum cleaning systems or appliances’.

16                  As to the manner in which Lux’s products are sold, the applicant submits that how the meeting between a consumer and a sales person was arranged, and particularly whether it was solicited by the consumer or not, is irrelevant to the manner in which the good is ultimately sold by the sales representative to the consumer. It is said the proposed injunctions are directly connected to the requisite s 80(1) findings in that they make it clear they relate to dealings directly between Lux, Mr Podger and consumers.

Impossibility of compliance

17                  The respondents make two arguments under this heading. They say, first, that the wording of the injunctions requires Lux, its servants and agents to make several separate and independent judgments on the abilities of the consumer. Second, it is said the terms ‘substantially’, ‘financial consequences’, ‘obligations and liabilities under the contract’, ‘independent advice’, ‘the opportunity’, and ‘any other reason’ are uncertain and incapable of easy definition.

18                  The applicant contends that the proposed injunctions do not impose any requirement of subjective assessment upon the respondents. Rather, it is said, they would restrain conduct where the respondents actually knew that a consumer was substantially unable to assess the financial consequences of the contract or should be aware that such was the case (that being where they have reasonable notice of such). Accordingly it is said that the term ‘any other reason’ understood in that way would not be ‘all encompassing’ as the respondents suggest. The applicant accepts that the injunctions would not require the respondents to ‘compel potential customers to seek independent advice’. I accept the applicant’s submission that the meaning of the description ‘independent advice’ is not controversial. It simply refers to the opinion of a third party who is thinking and acting for themselves and is not influenced by the respondents. It is likewise submitted by the applicant that in their particular context the terms to which the applicant directs attention are not ambiguous or unclear and may be understood according to their plain English meaning. I also agree with the submission for the applicant that as the Court did not consider that the issue of subsequent non-enforcement of the contract in which Mrs Standing had entered was relevant to the finding of contravention made against the respondents. It is not a matter of assistance to the formulation or appropriateness of the injunctions.

19                  Additionally the applicant contends that the injunctions proposed are in terms no more uncertain than, and arguably more certain than, forms of injunctive relief previously granted by the Federal Court in Australian Competition and Consumer Commission v Davis [2003] FCA 1227 and Australian Competition and Consumer Commission v McCaskey (2000) 104 FCR 8.

Understanding of obligations and liabilities under contract

20                  It is also submitted by the respondents that the scope of the injunctions sought is inconsistent with the findings of the Court that Mrs Standing did in fact understand her obligations and at least some of her liabilities under the contract. The respondents accept there was a finding that Mrs Standing was a person of some vulnerability because she was substantially illiterate and unable to understand commercial matters in any depth. However, they submit it was found also that Mr and Mrs Standing are persons who were able to live independently and manage their lives from day to day within a central range of activities; they were prepared to enter into contracts for purchase; they understood the amount and frequency of payments to be made as a consequence; and were not heedful of the consequences of failures to make payments. Further, it is said, the Court was unable to conclude that the Standings did not understand the consequences of non-compliance, only that for reasons they considered important, they ignored those consequences.

21                  The applicant points to other findings which were made, notwithstanding the aforementioned findings in relation to evidence of prior contracts entered into by the Standings. The other findings were that Mrs Standing, in the context of her dealings with Lux through Mr Podger, was ‘patently a person of some vulnerability because of her illiteracy and level of comprehension of commercial matters’; ‘was substantially illiterate and did not understand commercial matters in any depth’; had a ‘limited ability to assess the financial impact of purchasing a new vacuum cleaner and whether it was in the interests of her and her husband’; ‘knew she was signing an agreement for the purchase of a vacuum cleaner but did not fully understand the implications of the Lux contract’; and ‘was not able to make a worthwhile judgement as to what was in her best interests in the circumstances’.

22                  I agree with the submission for the applicant that the matters referred to in the immediately forgoing submissions for the respondents do not represent a finding by the Court to the effect that Mrs Standing did in fact understand her obligations and at least some of her liabilities under the contract. What the applicant seeks is for the Court to approach the matter on the basis that it cannot be said Mrs Standing substantially understood or was able to assess the financial consequences, including her obligations and liabilities under the contract. The applicant submits that the proposed injunctions reflect the Court’s findings as to the circumstances of the particular contract in question rather than any prior contracts entered into by Mrs Standing.

reasoning

23                  I agree with the applicant that the public interest considerations cannot be entirely discounted in relation to the adverse findings in this proceeding. Nevertheless the adverse findings have their own limited resonance which very considerably discounts the scope for application of the public interest considerations in the balance of convenience.

24                  Additionally, I do not rate the risk of repetition of the contravening conduct as very likely. This is for two reasons. First, the contravening conduct occurred four years ago and was an isolated incident. There is no evidence of repetition of such conduct. Second, each of the respondents now functions in a substantially and relevantly very different way. I accept the submission for the applicant that the new circumstances are not totally different in character from the contravening conduct because they involve on-site dealings with consumers. However, those dealings require a prior invitation from a consumer. The future circumstances in which a sale will occur cannot be disconnected from the consensual character of the events which lead to it.

25                  Also to be weighed in the balance is the connection of the terms of the injunctions to s 80 and to the character of the contravening conduct. Even if I proceed on the basis that the form of injunctive order proposed would be within power, the orders are in a form which may involve complication in their application. The terms of the injunctions, while arguably not impossible of compliance, are nevertheless equally arguably uncertain in their scope and application. This is so even accepting the applicant’s submission that the orders would operate only where there is actual knowledge or a reasonable notice of the consumer’s vulnerable condition. When the scope of the order is considered against the requirements of s 80 and the precise circumstances of the contravening conduct, there is insufficient nexus to weigh confidently in favour of granting the injunctions.

26                  In weighing these matters in all the circumstances I consider that the balance of convenience falls against the grant of the injunctive relief sought or any lesser variation of it.

order for public notice

27                  Lux contends that as the applicant has acted protectively towards the market by issuing two media releases and as the respondents are no longer participants in the relevant market, there is no protective goal to be served by further public advertisement of a notice by Lux. The two media releases referred to were those issued by the applicant upon the institution of the proceeding and following delivery of reasons for judgment. The first was published on 1 August 2000. It set forth the allegations made against the respondents in the proceeding. The second was published on 19 July 2004. It publicised the allegations made in the proceedings and findings of the Court. Both were published on the applicant’s website and in the media.

28                  The applicant concedes that the media release issued by it on 19 July 2004 may have gone some way to informing the public and relevant markets of the outcome of the litigation. It acknowledges that the issue of that media release is a matter which the Court may wish to take into account in determining whether or not to exercise its discretion to order the proposed public notice. However it is contended that the issue of the media release by the applicant should not be considered to automatically preclude the Court from exercising its discretion under s 80 and s 80A of the Act to order the respondents to publish a notice. It is said that the order of the public notice would serve the legitimate purposes of the law and would operate protectively and not punitively. This is because, it is said, it would further increase the understanding of the public and those in the relevant market of their rights and obligations under the Act; it will right the wrong by drawing attention of consumers in respect of whom Lux may have acted in a manner that Lux now accepts to be improper; and, most significantly, it will aid in the enforcement of any injunctions the Court may exercise its discretion to grant.

29                  I accept the submission for the applicant that it is entirely proper for it to continue to seek the proposed public notice in the circumstances and that it is not inappropriate and vindictive for it to do so. However, as a matter of discretion, I do not consider that the protective goals which would be served by a further public notice issued by Lux justify the exercise of the discretion to order that such public notice be given. I reach this view significantly because of the applicant’s second media release on 19 July 2004. Additionally, the terms of the proposed order in relation to a public notice require quite extensive advertising, which in my view is not justified in the circumstances. Among those circumstances, I take into account particularly that this is not a case where the offending conduct has been widespread but rather has been confined to a particular instance.

trade practices corporate compliance program

30                  Lux contends that the applicant has failed to provide the Court with any concept of the nature of the program which it seeks the Court to order against it. Additionally it is said that the applicant has been unable to present to the Court any evidence or criticism of Lux’s existing program. Finally, it is submitted that there is no identifiable benefit to be achieved by the imposition of the program given that the respondents are no longer participants in the relevant market and are no longer involved in unsolicited door-to-door sales of vacuum cleaners or any electrical product to consumers.

31                  These submissions are supported by reference to the statement by Selway J in Australian Competition and Consumer Commission v 4WD Systems Pty Ltd (2003) 200 ALR 491 at 557 to the effect that an order to carry on a compliance program in the absence of some clear benefit such a program might deliver in terms of future behaviour by the respondents would be entirely punitive.

32                  The applicant seeks to distinguish the situation of Lux from that considered by Selway J in ACCC v 4WD Systems on the basis that there was no material before the Court to suggest that the respondent there was still actively promoting a franchise system. Here, it is said, there is evidence, in the form of the affidavit of Mr Lucarelli, that Lux continues to deal directly with consumers in connection with the supply of goods to them, notwithstanding that it no longer engages in unsolicited dealings. Additionally it is submitted that par 4 of the applicant’s minute sets out the compliance program order in sufficient detail and is not overly prescriptive because it is not practicable to prescribe with minute particularity the content of such a program: ACCC v Midland Bricks Co Pty Ltd at [52] per Lee J referring to comments made by French J in Australian Competition and Consumer Commission v Virgin Mobile Australia Pty Ltd [2002] FCA 1548 at [24]. It is also said that the absence of adverse evidence on Lux’s existing training program does not carry with it a conclusion that there will not be benefits in terms of future behaviour by the respondents from a compliance program. Such a program would be appropriate, it is submitted, in circumstances where the contravening conduct arose notwithstanding Lux’s existing training program and in the face of denials by it that its conduct was contravening.

33                  In my view the submissions for the applicant identify factors which cause the balance of convenience to favour the applicant on this issue and to outweigh the factors identified in the submission for Lux. While the offending conduct may have been an isolated occurrence, it involved conduct apparently not addressed by Lux’s training program. Here the ongoing engagement of Lux’s staff in connection with the supply of ducted vacuum cleaners to consumers makes participation in a compliance program appropriate. I agree with the applicant that this is so even though Lux no longer engages in unsolicited dealings. This is therefore not a case where an order to carry out a compliance program would be entirely punitive.

34                  I consider that in all the circumstances the need for the order should continue for two years rather than three.

costs

whether proceeding a ‘test case’

35                  The respondents submit that the applicant prosecuted the case as a ‘test case’ with a view to establishing a watermark for the conduct of retailers in respect to the intellectually disabled, especially in circumstances of door-to-door sales. It is said the prosecution was not instigated by any complaint by Mr or Mrs Standing nor was it in response to any attempt by Lux to enforce the terms of the contract against the Standings.

36                  In response the applicant states that contention is entirely without foundation. It accepts that Mrs Standing’s alleged intellectual disability was clearly a circumstance to be taken into account in the Court’s evaluation of the respondents’ conduct. However, the fact that such allegation was not found as a fact by the Court still left it with the task of assessing the respondents’ conduct by reference to all the circumstances in which the conduct had occurred.

failure to establish entire pleaded case

37                  The respondents point to the fact that the applicant failed to have the Court set a precedent in respect of the treatment by retailers of intellectually disabled persons in the community. It is contended that the findings made by the Court are inconsistent with the case as pleaded, as opened by the applicant and as prosecuted at trial. This was reflected, it is said, in the Court’s inability to grant the injunctive relief or order public advertisement and compliance program sought in the application.

38                  In support, the respondents refer to the pleadings in relation to Mr and Mrs Standing that they were illiterate to the extent that they are unable to read or write other than simple words and their respective names, and additionally that they are intellectually disabled such that they were unable to understands contracts. The respondents cite the applicant’s opening statements asserting the centrality of the intellectual disability of Mrs Standing. Reference is also made to the Court’s rejection that the demeanour of Mr and Mrs Standing was such as to support a finding that they are persons with an intellectual disability. Reliance is also placed on the limited relief granted in the reasons for judgment delivered on 16 July 2004. It is submitted, therefore, that the applicant only succeeded to a very small extent in its application.

39                  The applicant directs attention to the nature of the case raised under s 51AB of the Act and submits that the fact that not all the circumstances of the conduct were found to be exactly as pleaded does not have the consequence that the ultimate findings were either inconsistent with the case pleaded or that the applicant had not succeeded in its action. In relation to the relief granted on the prior occasion, the applicant points to the declarations made on that occasion and the fact that it was not then appropriate for other orders to be finalised. If it proves to be the case that any of the relief now sought is considered by the Court to be inappropriate on the basis that both respondents have left the market, it is submitted that this should not have costs implications for the applicant given that such state of affairs arose after the institution of the proceeding and did not become known to the applicant until 27 August 2004.

non-acceptance of settlement proposals

40                  The respondents say that the applicant acted unreasonably in not accepting the respondents’ settlement proposals and that this is relevant to the exercise by the Court of its discretion in relation to costs.

41                  The offers of settlement were made, first, in a letter dated 18 September 2001 and, after rejection by the applicant by a letter dated 24 September 2001, were renewed in a letter dated 17 December 2001 with the additional requirement that the applicant discontinue the proceedings. This was rejected by a letter from the applicant’s solicitors dated 8 January 2002. In the latter letter the applicant stated its willingness to consider settlement on the basis that it would substantially address the orders sought in the amended application which it considered appropriate given the evidence and circumstances of the action and the applicant’s public interest role. The applicant submits that an offer to settle with no order as to costs is not properly regarded as a Calderbankoffer since there is no genuine compromise: Australian Competition and Consumer Commission v Universal Music Pty Ltd (2002) 201 ALR 618 at [59] – [61] per Hill J and McKerlie v New South Wales [2000] NSWSC 1159. It is said for the applicant that, therefore, the respondents’ offers of settlement are irrelevant to the exercise of the Court’s discretion in relation to costs. Alternatively, it is contended that the applicant has acted entirely reasonably in relation to the offers and has obtained a judgment more favourable to it than the terms of any of the offers of settlement: Australian Competition and Consumer Commission v Woolworths Ltd (2002) ATPR 41-890 at [25] – [32] and Australian Competition and Consumer Commission v Davis [2003] FCA 1458 at [5]. Additionally, it is submitted that the change of business practice by the respondents as evidenced by the affidavit of Mr Lucarelli is irrelevant to the question of whether or not the applicant acted reasonably in refusing the offers.

Costs of expert evidence

42                  In the alternative the respondents contend that the usual order that costs follow the event should be departed from in relation to the issue of expert evidence. This would include the cost of four days of evidence and cross-examination; the cost of the respondents’ challenges as to the admissibility of the applicant’s expert’s evidence including the cost of the subpoena; and the cost of the respondents’ expert witnesses, Mr Wolowski and Associate Professor Hayes. This submission arises because the Court found that it was not assisted by the expert evidence of the applicant’s witness Ms Murphy. It is submitted by the respondents that the applicant should bear the respondents’ costs in relation to expert evidence or the applicant should bear its own costs in relation to such evidence.

43                  The applicant submits that it ought not to be deprived of those costs because it was reasonable and proper for it adduce such evidence. There was also a genuine dispute as to the admissibility and weight to be given to Ms Murphy’s evidence. Further it is said that much of the costs incurred in relation to such evidence was attributable to the forensic decisions of the respondents in unsuccessfully challenging the admissibility of the applicant’s expert’s report and challenging, largely unsuccessfully, claims for privilege in connection with documents in her possession. In addition, the applicant submits that the costs of the respondents’ initial expert, Mr Wolowski (who was not called at trial due to his ill-health), and the additional costs incurred by all parties due to the belated introduction of the evidence of the respondents’ second expert, Associate Professor Hayes, should be borne by the respondents as costs thrown away.

evidence of prior contracts

44                  The respondents also contend that the usual order that costs follow the event should be departed from in relation to the issue of evidence of prior contracts entered into by the Standings. They submit that the applicant only conceded the relevance of those contracts in its final submissions to the Court. Due to the applicant’s failure to concede that issue prior to or at trial, the respondents were required to call witnesses in respect of those dealings. This occupied two days of trial. The respondents seek that the applicant pay the costs of calling those witnesses and ought not to be indemnified in respect of its costs of those two days because it ought properly to have conceded the relevance of the contracts prior to its final submissions.

45                  In response, the applicant submits that in fact it conceded the relevance of prior contacts prior to witnesses being called on those contracts but with an express reservation of the right to object to any inference being drawn from those contracts as to the capacity of the Standings to understand them. Consistently with this the applicant said it contended in its closing submissions (par 81) that the fact that the Standings entered into prior contracts is not evidence of their understanding of those contracts. This was accepted by the Court. In those circumstances the applicant contends its approach was entirely reasonable and there is no basis for any displacement of the ordinary rule that costs should follow the event in respect of such evidence.

reasoning

46                  I agree with the applicant’s submission that there is no conclusive evidence that the proceeding was a test case in relation to conduct involving an intellectually disabled consumer. While there is every indicia that such may have been the applicant’s intention, such indicia is equally open to the inference that the allegation of intellectual disability was one of the factors to be taken into account in relation to the claim of contravention of s 51AB.

47                  I also agree with the applicant that the failure to fully make out its pleading does not itself have the consequence that costs do not follow the event. In particular, the fact that the Court has not granted all the relief claimed by the applicant does not have that consequence. The applicant has succeeded in obtaining declarations relating to unconscionable conduct by the respondents and orders for consequential relief. There is a proper foundation for the application of the usual rule that costs follow the event.

48                  I do not consider the applicant’s refusal of settlement offers provide a proper basis for departure from that rule. The applicant has obtained a judgment more favourable than the terms of settlement offered.

49                  Nor do I consider the applicant’s approach to the issue of prior contracts was unreasonable to the point where the usual costs order should be displaced.

50                  The position is otherwise in relation to the issue of the applicant’s expert evidence. I consider that the proper balance would be struck if the applicant bears its own costs in relation to such evidence other than the costs of the respondents’ expert Mr Wolowski and the belated introduction of the evidence of Associate Professor Hayes, which should be borne by the respondents.

Associate:

Dated: 20 October 2004