FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v ACN 135 183 372 (Administrators Appointed) (formerly known as Energy Watch Pty Ltd) [2012] FCA 586

THE COURT ORDERS THAT:

(1)    Leave be given to the applicant under section 440D of the Corporations Act 2001 (Cth) to continue this proceeding as against the first respondent.

(2)    Costs of the applicant’s interlocutory application dated 23 May 2012 are reserved.

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

REASONS FOR JUDGMENT

1    On 30 April 2012, the Court gave judgment in Australian Competition and Consumer Commission v Energy Watch Pty Ltd [2012] FCA 425, finding the first respondent (“Energy Watch”) liable for breaches of ss 18(1), 29(1)(g) and 34 of the Australian Consumer Law, in respect of 80 misleading and deceptive advertisements for Energy Watch’s electricity brokering services.

2    On 17 May 2012, Energy Watch appointed administrators under the Corporations Act 2001 (Cth) (“the Act”).

3    On 23 May 2012, the applicant (“ACCC”) filed an interlocutory application seeking leave to proceed against Energy Watch in administration, pursuant to s 440D(1)(b) of the Act. Section 440D(1) provides as follows:

(1)    During the administration of a company a proceeding in a court against the company, or in relation to any of its property, cannot be begun or proceeded with, except:

    (a)    with the administrator’s written consent; or

(b)    with the leave of the Court and in accordance with such terms, if any, as the Court imposes.

4    The administrators initially opposed the ACCC’s request for consent under s 440D(1)(a) of the Act. The first creditors’ meeting took place on 29 May 2012. The meeting revealed that:

(a)     the liabilities of Energy Watch outweigh its assets by approximately 5 to 6 million dollars;

(b)     as a result of the financial position of Energy Watch and the limited funds available to the administrators, Madgwicks Lawyers had been instructed not to appear and the administrators would not appear in their own right at today’s hearing of the interlocutory application for leave to proceed; and

(c)     Madgwicks Lawyers were instructed not to continue with the objection to the ACCC’s interlocutory application for leave to proceed.

Relevant principles

5    The grant of leave under s 440D(1)(b) of the Act is a matter of discretion for the Court. The circumstances pertinent to the exercise of the Court’s discretion to grant leave depend heavily on the relevant facts. In Larkden Pty Limited v Lloyd Energy Systems Pty Limited (2011) 285 ALR 207, Hammerschlag J of the New South Wales Supreme Court observed at [40] that:

Every application must be considered on its own circumstances. There are infinite possible scenarios. There may be a flurry or a dearth of meritorious applications. Those circumstances need have no particular quality of rarity.

6    The interests of creditors is an important circumstance and one of the main reasons why leave under s 440D(1)(b) is rarely granted. However, there are also strong public policy grounds for the ACCC being able to maintain regulatory actions of this type expeditiously to their conclusion. The object of the Competition and Consumer Act 2010 (Cth) for which the ACCC is regulator is to “enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection”.

7    In Australian Competition and Consumer Commission v Advanced Medical Institute Pty Limited (Administrator Appointed) (No 3) [2011] FCA 348, North J granted leave under s 440D, in the context of an interlocutory application by the present applicant to enforce consumer law. At [6], his Honour said:

Whilst s 440D(1) places a statutory freeze on litigation for the purpose of advancing the administration, the proper administration of the trade practices law would suggest that the proceeding brought by the ACCC should proceed despite the present form of control of the company.

8    This proceeding is at a more advanced stage than in the proceeding before North J, making the case for leave to be granted here even stronger than in that matter. The ACCC advanced several reasons why leave under s 440D(1)(b) should be granted. Each reason advanced has merit. They are as follows:

1.    The proceeding has a solid foundation grounded in the liability judgment but there is a need for final orders to formally record and resolve the dispute, in accordance with that judgment.

2.    The proceeding is at a very advanced stage with only the issue of final orders remaining. The administrators are not required to actively defend a claim which would divert them from their essential tasks.

3.    Energy Watch has been found liable of multiple breaches of consumer protection legislation. It should not be allowed to escape the consequences of the liability judgment.

4.    If leave is granted, the administrators will not be obliged to incur substantial costs, as the balance of the proceeding will not be protracted.

5.    A grant of leave will not prejudice the rights of any one creditor as against another.

6.    The administrators are not facing uncertainty or the need to make decisions in the absence of information about the proceeding. The judgment is clear, as is the final relief sought by the applicant, although the amount of penalty is ultimately a matter for the Court.

7.    Finally, the Court is able to grant leave subject to any legitimate concerns of administrators. No such concerns have been expressed.

9    Therefore, in all the circumstances, it is entirely appropriate and proper to make the orders that the Court has made, for the reasons given.

Associate:

Dated:    6 June 2012