FEDERAL COURT OF AUSTRALIA
Australian Competition & Consumer Commission v Zanok Technologies Pty Ltd [2009] FCA 1124
Trade Practices Act 1974 (Cth) ss 51AA, 52, 53B, 58, 75B, 80(1AA)
Federal Court of Australia Rules O 9 r 1(3)
Australian Competition & Consumer Commission v Chats House Investments (1996) 71 FCR 250referred to
Australian Competition & Consumer Commission v Goldy Motors Pty Limited (2001) ATPR 41-801 cited
Australian Competition & Consumer Commission v Henry Kaye and National Investment Institute Pty Limited [2004] FCA 1363 considered
Australian Competition & Consumer Commission v Target Australia Pty Limited (2001) ATPR 41-840 cited
Australian Competition & Consumer Commission v Z-Tek Computer Pty Limited (1997) 78 FCR 197referred to
Glev Pty Limited v Kentucky Fried Chicken Pty Limited (1994) ATPR 41-299 referred to
ICI Australia Operations Pty Limited v TPC (1992) 38 FCR 248referred to
Louth v Diprose (1992) 175 CLR 621 referred to
Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (1993) 41 FCR 89applied
TPC v Mobil Oil Australia Limited (1985) 4 FCR 296 cited
Yorke v Lucas (1985) 158 CLR 661 applied
NSD 385 of 2009
EDMONDS J
2 OCTOBER 2009
SYDNEY
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IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
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GENERAL DIVISION |
NSD 385 of 2009 |
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BETWEEN: |
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
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AND: |
ZANOK TECHNOLOGIES PTY LIMITED First Respondent
DARLEY STEPHEN Second Respondent
VANITHA DARLEY Third Respondent
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JUDGE: |
EDMONDS J |
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DATE OF ORDER: |
2 OCTOBER 2009 |
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WHERE MADE: |
SYDNEY |
THE COURT DECLARES THAT:
1. The first respondent in trade or commerce, in the period from about December 2008 to about May 2009, engaged in unconscionable conduct contrary to s 51AA of the Trade Practices Act 1974 (Cth) (‘the Act’) by requiring consumers to pay a fee for information technology training, in circumstances where the first respondent knew or ought to have known that the consumer:
1.1 Was seeking paid employment in the information technology industry whether by responding to an advertisement or advertisements placed by or on behalf of the first respondent or otherwise;
1.2 was not seeking information technology training;
1.3 only paid for and undertook information technology training provided by the first respondent because he or she understood that the first respondent would guarantee employment following the completion of the information technology training; and
1.4 was typically a temporary resident or on a bridging visa and required employment in the information technology industry to become a permanent resident.
2. The first respondent, in the period from about February 2009 to about May 2009, by means of statements published on the websites www.zanokit.com and www.zhipes.com and in statements made to job applicants in interviews, made representations to the effect that:
2.1 The first respondent was a global company with offices in countries including the USA;
2.2 the first respondent had developed and sold functional information technology software products;
representations which were misleading or deceptive by reason of the fact that:
2.3 the first respondent does not have an office in the USA;
2.4 the first respondent either has not developed, or has not previously made available for sale, functional information technology software products;
and thereby, in trade and commerce:
2.5 engaged in conduct that was misleading or deceptive or likely to mislead or deceive, contrary to s 52(1) of the Act.
3. The first respondent in the period from about February 2009 to about May 2009 by means of statements published on the classifieds website www.gumtree.com.au (Gumtree) made representations to the effect that:
3.1 The first respondent was offering paid employment opportunities in the information technology sector in Sydney and Melbourne;
3.2 the first respondent offered ‘IT scholarships via paid training courses’;
representations which were misleading or deceptive by reason of the fact that:
3.3 the first respondent was in fact offering information technology training for which applicants were required to pay a non-refundable fee of up to $4,700, rather than paid employment opportunities in the information technology sector;
3.4 the ‘IT scholarships’ offered by the first respondent did not exist;
and thereby, in trade and commerce:
3.5 engaged in conduct that was misleading or deceptive or likely to mislead or deceive, contrary to s 52(1) of the Act.
3.6 engaged in conduct that was liable to mislead persons seeking employment as to the availability, nature, terms or conditions of the employment, contrary to s 53B of the Act.
4. The first respondent in the period from about February 2009 to about May 2009 by means of statements made to job applicants in interviews, and from about April 2009 to about May 2009 by means of statements published on the classifieds website www.seek.com.au (Seek), made a representation to the effect that:
4.1 The first respondent offered an unqualified guarantee of paid employment in the information technology sector in Sydney or Melbourne at the end of an information technology training course;
a representation which was misleading or deceptive by reason of the fact that:
4.2 the first respondent was not in a position to guarantee paid employment in the information technology sector to all graduates of the information technology training course; and
4.3 clause 8 of the Workplace Training Agreement between the first respondent and the trainee provided that any guarantee of paid employment did not apply in the event of a ‘Global Economic Crisis’;
and thereby, in trade and commerce:
4.4 engaged in conduct that was misleading or deceptive or likely to mislead or deceive, contrary to s 52(1) of the Act.
4.5 engaged in conduct that was liable to mislead persons seeking employment as to the availability, nature, terms or conditions of the employment, contrary to s 53B of the Act.
5. The first respondent in the period from about December 2008 to about May 2009 by means of statements made to job applicants in interviews, made a representation to the effect that:
5.1 The first respondent would pay graduates of the information technology training course a salary of a minimum $45,000 per annum once employed by the first respondent;
a representation which was misleading or deceptive by reason of the fact that:
5.2 the first respondent was not in a position to guarantee to pay a salary of a minimum $45,000 per annum to graduates of the information technology training course;
and thereby, in trade and commerce:
5.3 engaged in conduct that was misleading or deceptive or likely to mislead or deceive, contrary to s 52(1) of the Act.
5.4 engaged in conduct that was liable to mislead persons seeking employment as to the availability, nature, terms or conditions of the employment, contrary to s 53B of the Act.
6. The first respondent in the period from about December 2008 to about May 2009 by means of statements made to trainees during the course of the training induction, made a representation to the effect that:
6.1 The first respondent offered a referral program whereby trainees would be paid $200 for each individual they referred to the first respondent who signed up for the information technology training course;
a representation which was misleading or deceptive by reason of the fact that:
6.2 none of the trainees who have referred others to the program have received payment;
and thereby, in trade and commerce:
6.3 engaged in conduct that was misleading or deceptive or likely to mislead or deceive, contrary to s 52(1) of the Act.
7. The first respondent in the period from about February 2009 to about May 2009, by accepting payment for information technology training when:
7.1 The first respondent intended to supply information technology training materially different from the information technology training in respect of which the payment was accepted; or
7.2 there were reasonable grounds, of which the first respondent was or ought to have been aware, for believing that it would not be able to supply the information technology training within the time period specified by the first respondent;
engaged in conduct in trade or commerce contrary to s 58 of the Act.
8. The second respondent has been directly or indirectly knowingly concerned in or party to the conduct of the first respondent constituting each of the contraventions specified in paras 1 to 7 above.
9. The third respondent has been directly or indirectly knowingly concerned in or party to the conduct of the first respondent constituting each of the contraventions specified in paras 1 to 7 above.
THE COURT ORDERS THAT:
10. The first respondent, for a period of five years, by itself, its agents or otherwise, be restrained from representing, on any website or by other means, that:
10.1 The first respondent is recruiting to fill vacancies in the information technology sector;
10.2 the first respondent offers information technology scholarships in the form of paid information technology training courses;
10.3 the first respondent offers a guarantee of paid employment at the end of the information technology training;
10.4 the first respondent is a global company with offices in countries including the USA;
10.5 the first respondent has developed and sells functional information technology software products;
10.6 the first respondent will pay graduates of the information technology training course a salary of a minimum specified amount per annum once employed by the first respondent;
10.7 the first respondent offers a referral program whereby trainees are paid a specified amount for each individual they refer to the first respondent who signs up for the information technology training course;
unless:
10.8 the first respondent has vacancies in the information technology sector which are not dependent on the completion of an information technology training course conducted by or on behalf of the first respondent;
10.9 the information technology scholarships offered by the first respondent:
10.9.1 exist; and
10.9.2 pay for the cost of the relevant information technology training course;
10.10 the first respondent is in a position to guarantee paid employment to all graduates of the information technology training course;
10.11 the first respondent has offices in the relevant countries;
10.12 the first respondent either has developed, or has made available for sale, functional information technology software products;
10.13 the first respondent is in a position to pay graduates of the information technology training course a salary of a minimum of the specified amount per annum once employed by the first respondent; and
10.14 the first respondent offers a referral program whereby trainees are paid the specified amount for each individual they refer to the first respondent who signs up for the information technology training course.
11. The first respondent, for a period of five years, by itself, its agents or otherwise, be restrained from:
11.1 Soliciting a person to enter into an agreement in relation to information technology training and/or requiring the person to pay for the cost of that information technology training; or
11.2 being directly or indirectly knowingly concerned in or party to a corporation soliciting entry into the agreement or requiring payment as the case may be,
in circumstances where:
11.3 the person is seeking paid employment in the information technology industry, whether by responding to an advertisement or advertisements placed by or on behalf of the first respondent or otherwise,
until seven (7) days after the person has been informed of the requirement for the information technology training.
12. The first respondent, for a period of five years, by itself, its agents or otherwise, be restrained from providing information technology training to a person which is materially different from the information technology training in respect of which the payment from the person is accepted.
13. The second respondent, for a period of five years, by himself, his agents or otherwise, be restrained from being directly or indirectly knowingly concerned in or party to any corporation representing, on any website or by other means, that:
13.1 The corporation is recruiting to fill employment vacancies in the information technology sector;
13.2 the corporation offers information technology scholarships in the form of paid information technology training courses;
13.3 the corporation offers a guarantee of paid employment at the end of the information technology training;
13.4 the corporation is a global company with offices in countries including the USA;
13.5 the corporation has developed and sells functional information technology software products;
13.6 the corporation will pay graduates of the information technology training course a salary of a minimum of a specified amount per annum once employed by the corporation;
13.7 the corporation offers a referral program whereby trainees are paid a specified amount for each individual they refer to the corporation who signs up for the information technology training course;
unless:
13.8 the corporation has vacancies in the information technology sector which are not dependent on the completion of an IT training course conducted by or on behalf of the corporation;
13.9 the information technology scholarships offered by the corporation:
13.9.1 exist; and
13.9.2 pay for the cost of the relevant information technology training course;
13.10 the corporation is in a position to guarantee paid employment to all graduates of the information technology training course;
13.11 the corporation has offices in the relevant countries;
13.12 the corporation either has developed, or has made available for sale, functional information technology software products;
13.13 the corporation is in a position to pay graduates of the information technology training course a salary of a minimum of the specified amount per annum once employed by the corporation; and
13.14 the corporation offers a referral program whereby trainees are paid the specified amount for each individual they refer to the corporation who signs up for the information technology training course.
14. The second respondent, for a period of five years, by himself, his agents or otherwise, be restrained from:
14.1 Soliciting a person to enter into an agreement in relation to information technology training and/or requiring the person to pay for the cost of that information technology training; or
14.2 being directly or indirectly knowingly concerned in or party to a corporation soliciting entry into the agreement or requiring payment as the case may be,
in circumstances where:
14.3 the person is seeking paid employment in the information technology industry, whether by responding to an advertisement or advertisements placed by or on behalf of the first respondent or otherwise,
until seven (7) days after the person has been informed of the requirement for the information technology training.
15. The second respondent, for a period of five years, by himself, his agents or otherwise, be restrained from providing, or being directly or indirectly knowingly concerned in or party to a corporation providing, information technology training to a person which is materially different from the information technology training in respect of which the payment from the person is accepted.
16. The third respondent, for a period of five years, by herself, her agents or otherwise, be restrained from being directly or indirectly knowingly concerned in or party to any corporation representing, on any website or by other means, that:
16.1 The corporation is recruiting to fill paid employment vacancies in the information technology sector;
16.2 the corporation offers information technology scholarships in the form of paid information technology training courses;
16.3 the corporation offers a guarantee of paid employment at the end of the information technology training;
16.4 the corporation is a global company with offices in countries including the USA;
16.5 the corporation has developed and sells functional information technology software products;
16.6 the corporation will pay graduates of the information technology training course a salary of a minimum of a specified amount per annum once employed by the corporation;
16.7 the corporation offers a referral program whereby trainees are paid a specified amount for each individual they refer to the corporation who signs up for the information technology training course;
unless:
16.8 the corporation has vacancies in the information technology sector which are not dependent on the completion of a information technology training course conducted by or on behalf of the corporation;
16.9 the information technology scholarships offered by the corporation:
16.9.1 exist; and
16.9.2 pay for the cost of the relevant information technology training course;
16.10 the corporation is in a position to guarantee paid employment to all graduates of the information technology training course;
16.11 the corporation has offices in the relevant countries;
16.12 the corporation either has developed, or has made available for sale, functional information technology software products;
16.13 the corporation is in a position to pay graduates of the information technology training course a salary of a minimum of the specified amount per annum once employed by the corporation; and
16.14 the corporation offers a referral program whereby trainees are paid the specified amount for each individual they refer to the corporation who signs up for the information technology training course.
17. The third respondent, for a period of five years, by herself, her agents or otherwise, be restrained from:
17.1 Training and/or requiring the person to pay for the cost of that information technology training; or
17.2 being directly or indirectly knowingly concerned in or party to a corporation soliciting entry into the agreement or requiring payment as the case may be,
in circumstances where:
17.3 the person is seeking paid employment in the information technology industry, whether by responding to an advertisement or advertisements placed by or on behalf of the first respondent or otherwise,
until seven (7) days after the person has been informed of the requirement for the information technology training.
18. The third respondent, for a period of five years, by herself, her agents or otherwise, be restrained from providing, or being directly or indirectly knowingly concerned in or party to a corporation providing, information technology training to a person which is materially different from the information technology training in respect of which the payment from the person is accepted.
19. The respondents pay the applicant’s costs in an amount to be agreed, or in lieu of agreement, as taxed.
Note pursuant to Order 37 Subrule 2(3) of the Federal Court Rules
1. The second and third respondents (Darley Stephen and Vanitha Darley) may be liable to imprisonment or sequestration of property unless each abstains from the conduct referred to in the above orders; and
2. The first respondent (Zanok Technologies Pty Limited) may be liable to sequestration of property unless it abstains from the conduct referred to in the above orders.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.
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IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
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GENERAL DIVISION |
NSD 385 of 2009 |
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BETWEEN: |
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
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AND: |
ZANOK TECHNOLOGIES PTY LIMITED first respondent
DARLEY STEPHEN Second Respondent
VANITHA DARLEY Third Respondent
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JUDGE: |
EDMONDS J |
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DATE: |
2 OCTOBER 2009 |
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PLACE: |
SYDNEY |
REASONS FOR JUDGMENT
1 In this proceeding the applicant (‘the ACCC’) seeks declarations and injunctions in relation to conduct by the respondents which the ACCC alleges is in contravention of ss 51AA, 52, 53B and 58 of the Trade Practices Act 1974 (Cth) (‘the Act’). On 13 May 2009, Jagot J granted interlocutory orders against the respondents which continue until further order.
2 At the commencement of the hearing, I gave the ACCC leave to file in Court an amended application making amendments which were not substantial but which sought to identify, with greater precision, the contravening conduct of the respondents alleged by the ACCC having regard to the evidence relied on. The respondents did not oppose the grant of such leave.
3 In support of its application, the ACCC relied on the following:
Affidavit of Jane Angélè Lin Sworn on 7 May 2009 Ex 1
Affidavit of Jane Angélè Lin Sworn on 12 May 2009 Ex 2
Affidavit of Gaurav Chandoke Affirmed on 12 May 2009 Ex 3
Affidavit of Amzad Mirza Sworn on 11 May 2009 Ex 4
Affidavit of Heramb Patil Affirmed on 11 May 2009 Ex 5
Affidavit of Sridevi Gangichettu Affirmed on 14 May 2009 Ex 6
Affidavit of Anand Ramakrishnan Affirmed on 21 May 2009 Ex 7
Affidavit of Maziar Navabi Sworn on 1 June 2009 Ex 8
Affidavit of Shreyas Narayana Sworn on 10 July 2009 Ex 9
Affidavit of Sanjib Ghosh Sworn on 11 May 2009 Ex 10
Affidavit of Manav Arora Affirmed on 12 May 2009 Ex 11
Affidavit of Himanshu Patel Affirmed on 15 May 2009 Ex 12
Affidavit of Smitha Thomas Affirmed on 22 May 2009 Ex 13
4 No objection was taken to any of this evidence. None of the deponents were required for cross-examination and the respondents filed no affidavits in response; nor did they seek to tender any evidence in the course of what, in consequence of the position they took, was a relatively short hearing.
5 On the hearing, the second respondent appeared in person, by telephone from Melbourne, and as representative of the first and third respondents. I had previously granted the second respondent leave to appear for the first respondent pursuant to O 9 r 1(3) of the Federal Court of Australia Rules.
6 What follows in these reasons is largely taken from the written submissions of the ACCC dated 21 September 2009.
Declarations
7 The ACCC submitted the modus operandi of the first respondent (‘Zanok’) was as follows:
(1) It both directly, and through its agent Australian Regional Employment Agencies Pty Ltd (‘AREA’), placed advertisements on websites, offering members of the public employment opportunities for Information Technology (‘IT’) graduates;
(2) during ‘interviews’, the prospective employee would be informed that Zanok had an established business in providing IT services and that a period of training was required at a cost to the trainee of up to $4,700 which would prepare the trainee for employment with Zanok that was guaranteed on completion of the training, or earlier if the trainee ‘proved’ themselves to the company;
(3) the training in fact provided by Zanok was unstructured, disorganised and of no assistance or value to the trainees;
(4) the period set aside for the training was in fact used by Zanok to have a number of the trainees contact prospective customers of Zanok and otherwise assist Zanok to establish its business;
(5) Zanok deceived the trainees into believing they would be offered employment in return for paying a fee for the pre-employment training when in fact Zanok had no available employment opportunities and in lieu of providing the promised training, required the trainees to assist Zanok in setting up its business.
8 Zanok was incorporated on 4 March 2008. The second respondent (Mr Darley Stephen) and the third respondent (Ms Vanitha Darley) are listed as directors of Zanok. Zanok’s website (www.zanokit.com) described Zanok as a ‘Global Consultancy and IT Solutions Company’ based in the USA, Australia, India and Malaysia. The Zanok website was registered on 15 March 2008, that is, less than two weeks after Zanok was incorporated.
9 AREA is a company based in South Australia. It was incorporated in 2007 and is engaged in the business of locating employment for students. Mr Shreyas Narayana was the National Recruitment Manager for AREA located at AREA’s Melbourne office. AREA was retained by Zanok to assist with finding and interviewing applicants for employment with Zanok.
10 During the period February 2009 to May 2009, Zanok, and AREA on behalf of Zanok, placed a number of advertisements on various websites. The advertising placed by or on behalf of Zanok was directed to persons residing in Australia by reason of a temporary visa issued by the Department of Immigration and Citizenship. Most notably, it applied to persons residing in Australia by reason of a ‘485 visa’ or skilled graduate visa. A 485 visa or skilled graduate visa permits the holder to remain in Australia for up to 18 months after completing higher education to enable the person to obtain the relevant points needed to meet the requirements of a permanent general skilled migrant visa. Points are rewarded depending on certain factors including whether the applicant has a job offer in Australia. To obtain sufficient points to attain the permanent general skilled migrant visa one option is for a person to have been employed in a skilled occupation in Australia for at least 12 of the last 24 months.
11 Many of the witness affidavits filed by the ACCC depose to similar facts. Exhibit 11 is a typical example. Mr Arora was born in India and migrated to Australia in June 2006. His native language is Hindi. He holds various degrees including a Masters of IT obtained from the Swinburne University of Technology in Melbourne. He has temporary residency in Australia expiring September 2010 at which time unless he qualifies for permanent residency will be required to return to India. One way for Ms Arora to obtain permanent residency is to complete one year of work experience in the IT field. Mr Arora has had great difficulty obtaining employment in an IT position because of his lack of experience in the Australian IT industry.
12 In January 2009, Mr Arora read an advertisement for a position as a business analyst with Zanok. There was no mention of training in the advertisement. Mr Arora attended an interview on 3 February 2009. During the interview Mr Arora was informed by representatives of Zanok that:
(1) Zanok was a big organisation in the United States;
(2) Zanok was prepared to offer him three months of training with a guaranteed job on completion of the training;
(3) the total cost of the training would be $4,250 if paid up front, $4,500 if paid in two instalments or $4,700 if paid in three instalments;
(4) when employed by Zanok he would receive a salary package of $45,000 – $50,000 per annum;
(5) because Zanok was guaranteeing jobs the positions would fill quickly and ‘it is best for you to pay for the training as early as possible’.
13 Mr Arora paid the first instalment by credit card for the training program on 6 February 2009.
14 Similar evidence is given by the deponents in Exhibit 10 at paras 21 – 43 and Exhibit 4 at paras 17 – 45.
15 Zanok was aware that, at the time of paying the training fee, the trainees were at a special disadvantage, namely, concerned to obtain permanent residency by obtaining one year of skilled work experience in Australia within a relatively short period of time. The trainees were not seeking training but paid employment which Zanok promised them in return for payment of the training fee. The evidence for this is to be found in:
(1) Exhibit 3: para 8;
(2) Exhibit 4: paras 10, 11, 40;
(3) Exhibit 5: para 36;
(4) Exhibit 6: paras 9 – 10, 26, 33;
(5) Exhibit 7: paras 10 – 12, 26, 36;
(6) Exhibit 9: para 18;
(7) Exhibit 10: paras 20, 22, 36, 37, 82;
(8) Exhibit 11: para 37;
(9) Exhibit 13: paras 7 – 9, 13.
16 Section 51AA incorporates into the Act the unwritten law in relation to unconscionable conduct thereby extending the remedies available under the Act for unconscionable conduct to the extent that this concept is presently part of the common law or equitable principles recognised by the courts. Unconscionable conduct is conduct which attracts a sufficient level of judicial opprobrium to support the grant of relief based on principles set out in specific equitable doctrines established by Courts of Equity: Australian Competition & Consumer Commission v CG Berbatis Holdings Pty Limited (2003) 214 CLR 51. Unconscionability is a concept which requires a high level of moral obloquy. It is not necessary for the party who has benefited from a transaction challenged as unconscionable to itself have created the special advantage which forms the basis of the unconscionability claim. It is sufficient if that party knows, or ought to have known, of the other party’s situation of special disadvantage and takes unfair advantage of the opportunity presented: Louth v Diprose (1992) 175 CLR 621. A person will be under a special disadvantage if there are circumstances seriously affecting the ability of the person to make a judgement in his or her own best interests: Berbatis Holdings per Gleeson CJ at [5]. A person is not under a special disadvantage simply because of inequality of bargaining power: Berbatis Holdings.
17 In the present circumstances, the unconscionable conduct on the part of Zanok was the promise that, in return for a fee, the applicant would receive training and thereafter guaranteed skilled employment in circumstances where Zanok knew or ought to have known that many of the applicants were temporary residents and anxious to find skilled employment to assist with their applications for permanent resident status. This conduct constituted more than simply taking advantage of a superior bargaining position but involved an unconscientious exploitation of another’s inability or diminished ability to conserve his or her own interests. Dangling the ‘employment carrot’ in return for a fee in circumstances in which the applicant faces having to leave Australia, constitutes a high level of moral obloquy especially where the promised employment does not exist: Australian Competition & Consumer Commission v Chats House Investments (1996) 71 FCR 250.
18 In the circumstances, the ACCC submitted the Court should make a declaration in terms of para 1 of the amended application.
19 The power to make a declaration is a discretionary one and the basis upon which it should be exercised is conveniently summarised by Kenny J in Australian Competition & Consumer Commission v Henry Kaye and National Investment Institute Pty Limited [2004] FCA 1363 at [200] – [201]. In Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (1993) 41 FCR 89, Sheppard J held that the concern of the Act with the public interest supported the view that the Court may, in appropriate cases, exercise its power to grant the declaratory relief to mark its disapproval of particular conduct engaged in contravention of the Act: [1993] 41 FCR 89 at 100 see also 106 per Foster J and 107 per Hill J; Australian Competition & Consumer Commission v Goldy Motors Pty Limited (2001) ATPR 41-801 at [34] per Carr J; Australian Competition & Consumer Commission v Target Australia Pty Limited (2001) ATPR 41-840 at [18] per Lee J. In the circumstances, the ACCC submitted that the Court should make the declaratory relief sought in paras 1 – 9 of the amended application, particularly given the important public interest element involved and also having regard to the fact that the ACCC stands apart from other litigants in that its functions include the furtherance of those public interests. I agree.
20 Presumably as a means of satisfying trainees that Zanok was capable of arranging employment opportunities, it represented to them that it was a global company with offices in a number of countries including the United States. This is based on the following examples:
(1) Zanok website at p 2 of Tab 9 of Exhibit JAL-1 to Exhibit 1;
(2) Exhibit 4 at para 50;
(3) Exhibit 5 at para 11 and annexure HP-2;
(4) Exhibit 6 at para 42;
(5) Exhibit 8 at paras 14 and 24.
(6) Exhibit 10 at paras 24 – 30;
21 In fact, Zanok had no presence in the United States. The evidence disclosed that the Zanok office addresses located in America do not exist. Consequently, the evidence established Zanok had engaged in conduct that constituted a contravention of s 52 of the Act.
22 Zanok also represented that it had developed and sold functional IT software products. For example see the following affidavits:
(1) Tabs 9, 11 and 12 of Exhibit JAL-1 to Exhibit 1;
(2) Exhibit 6 at paras 23 and 49;
(3) Exhibit 7 at paras 22 and 51.
(4) Exhibit 10 at paras 31, 60 and 74;
(5) Exhibit 12 at paras 14 and 42;
23 In fact, Zanok had no functional IT software products. So much is established by:
(1) Exhibit 3 at paras 21 – 24;
(2) Exhibit 6 at paras 72 – 75;
(3) Exhibit 7 at para 79;
(4) Exhibit 10 at paras 74 and 81.
(5) Exhibit 12 at paras 56 and 57;
24 The ACCC submitted the Court should make a declaration in terms of para 2 of the amended application. For the reasons outlined above, including at [19] above, I agree.
25 From in or about February 2009 Zanok made representations in advertisements published on the website www.gumtree.com.au to the following effect:
(1) That Zanok was offering paid employment opportunities in the IT sector in Sydney and Melbourne;
(2) that Zanok was offering ‘IT Scholarships via paid training courses’.
26 For examples of the advertisements on the www.gumtree.com.au website, see Tab 22 of Exhibit JAL-1 to Exhibit 1.
27 In fact, contrary to the representations, Zanok was offering IT training for which trainees were required to pay a non refundable fee of up to $4,700 rather than paid employment opportunities in the IT sector and further the ‘IT Scholarships’ did not exist. This is evidenced by the following:
(1) Exhibit 4 at para 27;
(2) Exhibit 6 at para 21;
(3) Exhibit 7 at para 24;
(4) Exhibit 8 at para 11.
28 In these circumstances, Zanok engaged in conduct that was misleading or deceptive in contravention of s 52 of the Act. Zanok also contravened s 53B of the Act, namely, it engaged in conduct that was liable to mislead a person seeking employment as to the availability, nature, terms or conditions or any other matter relating to the employment.
29 The ACCC submitted that the Court should make a declaration in terms of para 3 of the amended application. For the reasons outlined above, including at [19], I agree.
30 In addition to the publications on the Gumtree website, Zanok, from about April 2009, on the website www.seek.com.au and in the interviews with applicants from February 2009, made representations to the effect that Zanok offered an unqualified guarantee of paid employment in the IT sector in Sydney or Melbourne at the end of an IT training course. Examples of the advertisements placed on the website www.seek.com.au can be found at Tab 22 of Exhibit JAL-1 to Exhibit 1. Examples of the representations made during interviews include:
(1) Exhibit 4 at para 27;
(2) Exhibit 7 at para 24.
(3) Exhibit 8 at para 11;
(4) Exhibit 9 at paras 18, 35;
(5) Exhibit 10 at para 21;
(6) Exhibit 11 at paras 14 – 16;
(7) Exhibit 12 at para 15;
31 In fact, Zanok was not in a position to guarantee paid employment in the IT sector to graduates of the training course. Further, cl 8 of the Workplace Training Agreement between Zanok and the trainee provided that any guarantee of paid employment did not apply in the event of a ‘Global Economic Crisis’. See Exhibit 5 at paras 24 – 33 and Exhibit 7 at paras 84 – 100.
32 As a consequence the ACCC submitted Zanok engaged in conduct that was misleading or deceptive contrary to s 52 of the Act and further engaged in conduct that was liable to mislead persons who were seeking employment as to the availability, nature, terms or conditions of the employment contrary to s 53B of the Act. In these circumstances the ACCC submitted that the Court should make a declaration in terms of para 4 of the amended application. For the reasons outlined above, including at [19] above, I agree.
33 During various interviews with applicants from in or about December 2008, Zanok represented that Zanok would pay graduates of the IT training course a salary of a minimum $45,000 per annum once employed by Zanok. The evidence of the representation is contained in the following affidavits:
(1) Exhibit 6 at para 23;
(2) Exhibit 7 at para 24;
(3) Exhibit 8 at para 11;
(4) Exhibit 9 at para 18.
34 The representation was in fact misleading or deceptive because Zanok was not in a position to pay a salary of a minimum of $45,000 per annum (or any amount) to graduates of the training courses. The evidence in respect of that matter can be located in the following affidavits:
(1) Exhibit 5 at paras 24 – 33;
(2) Exhibit 7 at paras 84 – 98.
35 In the circumstances, the ACCC submitted the representation was misleading or deceptive contrary to s 52 of the Act and Zanok engaged in conduct that was liable to mislead persons seeking employment as to availability, nature, terms or conditions of the employment contrary to s 53B of the Act. Accordingly, the ACCC submitted the Court should make a declaration in terms of para 5 of the amended application. For the reasons outlined above, including at [19] above, I agree.
36 Zanok represented to applicants that it offered a referral program whereby trainees would be paid $200 per individual they referred to Zanok that signed up for the IT training course.
37 The evidence of the representation referred to in [35] is contained in the following affidavits:
(1) Exhibit 4 at paras 54 – 55, 74 and annexure AM5;
(2) Exhibit 8 at paras 35, 42 and annexure MN6.
38 The representation was in fact misleading or deceptive because Zanok did not pay to any of the trainees the promised $200 payment in respect of trainees referred to Zanok: Exhibit 1 at para 35.26.
39 In the circumstances, the ACCC submitted the representation was misleading or deceptive contrary to s 52 of the Act and accordingly the Court should make a declaration in terms of para 6 of the amended application. For the reasons outlined above, including at [19] above, I agree.
40 From in or about February 2009 Zanok accepted payment for the training in circumstances where Zanok intended to supply training materially different to the training in respect of which the payment was accepted, alternatively, there were reasonable grounds of which Zanok was or ought to have been aware for believing that it would be unable to supply the training within the time period specified by Zanok.
41 Zanok prepared training documents which contained an outline of the training for which payment was accepted. See Exhibit 6 annexure SG4 at pages 30 – 46, SG5 at pages 48 – 55. In fact the training actually delivered to the extent that it existed was very different. See the following affidavits:
(1) Exhibit 1 at paras 35.16 – 35.29;
(2) Exhibit 3 at paras 26 – 28;
(3) Exhibit 4 at paras 58 – 75;
(4) Exhibit 6 at paras 59 – 85;
(5) Exhibit 7 at paras 58 – 82;
(6) Exhibit 8 at paras 43 – 75;
(7) Exhibit 10 at paras 63 – 81.
42 In the circumstances, Zanok engaged in conduct in trade or commerce contrary to s 58 of the Act in that it accepted payment for services where at the time of acceptance:
(1) it did not intend to supply the services or intended to supply services materially different from the services in respect of which payment was accepted; or
(2) there were reasonable grounds of which Zanok was aware or ought reasonably to have been aware that it would not be able to supply the services within the period specified by it or within a reasonable time.
43 The ACCC submitted the Court should therefore make a declaration in terms of para 7 of the amended application. For the reasons outlined above, including at [19] above, I agree.
44 Section 75B of the Act provides that a person is involved in a contravention of a provision of Part V (which includes ss 51AA, 52, 53B and 58 of the Act) where a person has been in any way, directly or indirectly, knowingly concerned in, or a party to, the contravention. The words ‘party to a contravention’ refer to a person who participates in, or assents to, the contravention. To be regarded as participating, a person must have knowledge of the essential elements constituting the contravention: Yorke v Lucas (1985) 158 CLR 661 at 670. The evidence establishes that Mr Darley Stephen was knowingly concerned in or a party to the contraventions which the ACCC alleges as against Zanok. That evidence is contained in the following:
(1) Exhibit 1 at paras 5 and 6 and Tab 1 of Exhibit JAL-1 to Exhibit 1;
(2) Exhibit 7 at paras 19 – 25, 26, 38, 39, 51, 52, 59, 61, 62, 64, 67, 69 – 71, 73, 76, 89, 91, 93, 98;
(3) Exhibit 8 at paras 41, 48, 52, 53, 56, 59, 63, 64, 66, 68, 70 – 71, 73;
(4) Exhibit 9 at paras 12, 18, 21, 26, 33, 34, 35, 38, 41, 43, 49, 53, 57, 59, 60;
45 In the circumstances, the ACCC submitted the Court should make a declaration in accordance with para 8 of the amended application. For the reasons outlined above, including at [19] above, I agree.
46 The ACCC also submitted the evidence establishes that Ms Vanitha Darley was a person directly or indirectly knowingly concerned in or a party to the contraventions of Zanok alleged by the ACCC. That evidence is contained in the following:
(1) Exhibit 1 at paras 5 and 6 and Tab 1 of Exhibit JAL-1 to Exhibit 1;
(2) Exhibit 3 at paras 11, 12, 14, 22, 23, 26, 32 – 34;
(3) Exhibit 5 at paras 21 – 22;
(4) Exhibit 7 at paras 91 – 93, 96, 98;
(5) Exhibit 8 at paras 52, 63.
(6) Exhibit 9 at paras 17 – 19, 59;
(7) Exhibit 10 at para 60.
(8) Exhibit 11 at paras 27 – 29, 31, 35, 40 – 41;
(9) Exhibit 13 at para 58 – 61, 64;
47 In the circumstances, the ACCC submitted the Court should make a declaration in accordance with para 9 of the amended application. For the reasons outlined above, including at [19] above, I agree.
Injunctions
48 As noted at [1] above, Jagot J granted interlocutory orders against each of the respondents which injunctions are in the same form the ACCC submitted should be made on a final basis. The respondents did not oppose the making of the injunctions in the form sought by the ACCC. Section 80(1AA) of the Act provides that when application for an injunction has been made the Court may if it deems to be appropriate, grant an injunction by consent of all the parties to the proceedings, whether or not the Court is satisfied the person has engaged, or is proposing to engage, in conduct of a kind mentioned in subs (1).
49 The Court has power to grant injunctions on such terms as the Court determines to be appropriate. That discretion must be confined by reference to the scope and purpose of the Act. The Court needs to be satisfied of the following matters:
(1) The injunctive relief should be designed to prevent a repetition of the conduct for which the relief is sought;
(2) the jurisdiction to grant an injunction is enlivened by an alleged or actual contravention of the Act and there must be a sufficient nexus between the contravention and the injunction granted; and
(3) the injunction granted must relate to the case or controversy the subject of the proceeding: Australian Competition & Consumer Commission v Z-Tek Computer Pty Limited (1997) 78 FCR 197.
50 In ICI Australia Operations Pty Limited v TPC (1992) 38 FCR 248, Lockhart J said that the Act permitted the granting of an injunction to deter an offender from repeating the offence and in TPC v Mobil Oil Australia Limited (1985) 4 FCR 296, Toohey J said that even where there was no evidence to indicate the offenders intention to continue the offending conduct, it might be appropriate to mark the Courts disapproval by an injunction. In Glev Pty Limited v Kentucky Fried Chicken Pty Limited (1994) ATPR 41-299, von Doussa J pointed out that in applications for an injunction under the Act there is an element of public interest involved and the Court should be slower to withhold relief.
51 Section 80 is essentially a public interest provision, the traditional rules relating to injunctive relief do not apply and once the condition precedent of the grant of an injunction has been satisfied, that is, once a breach has been established, the Court has the widest possible injunctive powers devoid of traditional restraints, though the power must be exercised judicially and sensibly.
52 By reason of the foregoing, the ACCC submitted that the Court should grant the injunctions sought in paras 10 - 18 of the amended application. I agree.
Costs
53 The respondents must pay the ACCC’s costs of the proceedings as taxed or agreed.
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I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds. |
Associate:
Dated: 2 October 2009
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Counsel for the Applicant: |
Mr S White SC |
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Solicitor for the Applicant: |
Australian Government Solicitor |
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Counsel for the Respondents: |
The Second Respondent attended by telephone for himself and on behalf of the First and Third Respondents |
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Date of Hearing: |
28 September 2009 |
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Date of Judgment: |
2 October 2009 |
