FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Geowash Pty Ltd (Subject to a Deed of Company Arrangement) [2017] FCA 747

ORDERS

THE COURT ORDERS THAT:

1.    The applicant has leave pursuant to s 444(3)(c) of the Corporations Act 2001 (Cth) to commence a proceeding against the first respondent.

2.    The applicant has leave to file the originating process in Federal Court of Australia proceeding No WAD 230 of 2017.

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

REASONS FOR JUDGMENT

SIOPIS J:

1    This is an application under s 444E(3) of the Corporations Act 2001 (Cth) by the applicant, the Australian Competition and Consumer Commission (the ACCC), to commence a proceeding against a company, Geowash Pty Ltd, which is subject to a deed of company arrangement (Geowash).

2    Section 444E(3) of the Corporations Act provides as follows:

The person cannot:

(a)    begin or proceed with a proceeding against the company or in relation to any of its property; or

(b)    begin or proceed with enforcement process in relation to property of the company;

except:

(c)    with the leave of the Court; and

(d)    in accordance with such terms (if any) as the Court imposes.

3    The ACCC seeks leave to commence an application against Geowash and two persons, Ms Sanam Ali and Mr Charles Cameron, who, it is alleged, participated in the conduct of Geowash’s business, and who were, thereby, involved in the unlawful conduct alleged against Geowash.

4    In its proposed application, the ACCC intends to allege that, in contravention of the Australian Consumer Law (the ACL) and the Competition and Consumer Act 2010 (Cth), Geowash engaged in conduct that was misleading or deceptive and unconscionable, in relation to its marketing of franchises for the operation of a car wash business. The ACCC will seek, amongst other relief, the payment of penalties, orders for the disqualification of Ms Ali and Mr Cameron and orders for non-party consumer redress.

5    The important facts relied on by the ACCC as giving rise to its claims are set out in a document described as a “Concise Statement”, which was settled by senior counsel for the ACCC, and which is before the Court.

6    In very general terms, the statement of important facts alleges that Geowash provided to potential franchisees documents which represented that the franchisees would be charged in a specific manner. Further, it is alleged that Geowash made representations as to the revenues and the profits prospective franchises could make in the operation of a franchised car wash business. Geowash, it is alleged, also made representations as to the association which Geowash had with certain well-known companies, such as Emirates, Hertz and other companies. The ACCC alleges that the representations were not true, or that there were no reasonable grounds for making the representations.

7    Further, the ACCC alleges that during interviews with a potential franchisee for the sale of a franchise, Ms Ali and/or Mr Cameron would typically elicit information from the potential franchisee as to that person’s maximum budget and represent that a franchise could be acquired for a lump sum payment which was typically that person’s maximum budget. The ACCC alleges that after the potential franchisee had paid the initial fee and executed a franchise agreement, Geowash acted inconsistently with the representations it had made.

8    The Court has a discretion whether to grant leave under s 444E(3)(c) of the Corporations Act to commence a proceeding against a company which is subject to a deed of company arrangement.

9    Some of the matters to which regard is to be had in exercising that discretion were identified and considered in some detail in Australian Competition and Consumer Commission v Phoenix Institute of Australia Pty Ltd (Subject to Deed of Company Arrangement) [2016] FCA 1246 where, unlike this case, the application for leave was opposed by the two respondents. The ACCC’s submissions have addressed those matters insofar as they are relevant to this application. I accept those submissions.

10    First, it is plain from the facts set out in the concise statement of facts that there is a serious question to be tried.

11    Secondly, in my view, the public interest favours the grant of leave.

12    There are two aspects of the public interest which are relevant to this case. On the one hand, there is the public interest in the ACCC being able to bring court proceedings as a means of enforcing the ACL and/or the Competition and Consumer Act, and, thereby, ensuring that business morality is maintained in Australia. On the other hand, there is the public interest in giving effect to the premise in Pt 5.3A of the Corporations Act that the claims of creditors against a company which is subject to a deed of company arrangement will be settled within the regime established by that deed. In relation to this latter aspect of the public interest, I observe that as a condition of the grant of leave, the applicant will provide an undertaking not to enforce any monetary relief against Geowash without the leave of the Court.

13    In this case, where there is no opposition to the application, the public interest in enforcing the ACL, in my view, substantially outweighs the countervailing public interest arising under the Corporations Act. However, insofar as there may be concerns by the participants in the deed of company arrangement, that the institution of the proposed proceeding may adversely affect the operation of the regime under the deed of company arrangement, the ACCC’s undertaking not to enforce any monetary relief against Geowash substantially ameliorates any such concerns.

14    Thirdly, the relief which the ACCC claims can only be granted by a court and this factor along with the factual complexity of the allegations to be made in the ACCC’s claim favours the grant of leave.

15    Accordingly, I will make the orders sought by the ACCC.

Associate:

Dated:    3 July 2017