FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Employsure Pty Ltd

[2020] FCA 1409

ORDERS

THE COURT ORDERS THAT:

1.    The amended originating application be dismissed.

2.    Within 21 days hereof, the parties are to seek to agree costs. If they are unable to reach such an agreement, within that time each should file and serve an outline of submissions on costs not exceeding three pages in length. Unless either of the parties can demonstrate the need for a further oral hearing, the issue of costs will be determined on the papers and without a further oral hearing.

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

REASONS FOR JUDGMENT

GRIFFITHS J:

PART A: INTRODUCTION AND THE ACCC’S CLAIMS SUMMARISED

1    Employsure Pty Ltd is a specialist workplace relations consultancy. It advises employers and business owners regarding the requirements of workplace relations and work health and safety legislation. Employsure operates nationally and, during the period in respect of which the claims of the Australian Competition and Consumer Commission (ACCC) relate, it provided products and services to over 20,000 employers across the nation. Those services included reviewing client documentation relating to workplace relations and work health and safety compliance, providing an advice helpline which was available at all times and representing clients in courts and tribunals if they became involved in formal proceedings.

2    Employsure’s business model applies by way of a subscription as opposed to a fee for service model. Under the subscription model, Employsure’s clients pay a fixed fee and they are then entitled to access Employsure’s products and services as required. The subscription fee is not affected by the volume of work which a particular client requires from Employsure.

3    The majority of Employsure’s client base are small business owners who employ staff, although Employsure also has several large clients.

4    Employsure offers on-site consultancy services as required, including staff training, management of disciplinary processes and risk reviews, as well as an initial review of a client’s work health and safety practices (which Employsure calls a “Safe Check Review”) and a review of a client’s workplace relations practices (which Employsure calls a “Wage Check and Contract Check”). These particular services are generally offered by Employsure to its clients on payment of an additional fee, although sometimes they may be provided gratuitously as part of the negotiations of the total subscription fee.

5    It is appropriate to say something briefly about how Employsure provides its products and services. Where a prospective client or interested person telephones Employsure, the calls are received by Employsure’s business sales consultants (BSCs). Sometimes these calls involve BSCs providing free advice to the caller. If a caller is, or may be, interested in acquiring Employsure’s services, there is a procedure whereby the BSC offers to arrange a face-to-face meeting with one of Employsure’s business development managers (BDMs). Where that opportunity is taken up, the BDM normally provides the person with additional advice, as well as explaining Employsure’s services and providing an obligation free quote. As will emerge, some clients enter into a formal agreement with Employsure at this initial meeting or shortly thereafter.

6    The ACCC raises five separate causes of action against Employsure, all of which relate to the manner in which Employsure has promoted its products and services to the public and, in particular to people who search online for employment related advice. Those five causes of action are as follows:

(a)    The making of what are described as Government Affiliation Representations by way of seven Google Ads which the ACCC claims conveyed representations that Employsure was, or was affiliated with, and/or was endorsed by, a government agency.

(b)    The use by Employsure of keywords and design of Google Ads which was said to involve misleading or deceptive conduct in circumstances where Employsure:

(i)    researched the terms used by persons visiting the official websites of government agencies such as the Fair Work Ombudsman (FWO) and the Fair Work Commission (FWC);

(ii)    used terms in its Google Ads campaigns knowing that the keywords it chose reflected the search terms used by consumers in accessing online the FWO and FWC websites; and

(iii)    designed its Google Ads in a fashion whereby the headline repeated or incorporated those keywords, sometimes being the names of government organisations, such as FWO, together with a URL, such as “fairworkhelp.com.au”.

(c)    In the period January 2016 to 30 November 2018, in 16 of its Google Ads and three of its landing pages websites, Employsure prominently advertised its “free advice” telephone helpline, which represented that Employsure provided a free advice service and also represented that the provision of free advice was Employsure’s primary function, which the ACCC alleges also involved misleading or deceptive conduct.

(d)    Employsure engaged in unconscionable conduct, contrary to s 21 of the Australian Consumer Law (ACL) with respect to its dealings with three small businesses. The unconscionable conduct was said to relate to Employsure’s conduct in entangling those businesses in its “marketing web”.

(e)    Certain clauses in Employsure’s standard form small business contract were unfair contract terms in contravention of ss 23 and 24 of the ACL.

7    It is desirable to say something more about each of those five causes of action. The relevant legal principles will be discussed later in these reasons for judgment.

(a) Government Affiliation Representations

8    The ACCC alleges that in seven Google Ads, which appeared over the period from 10 August 2016 to 30 November 2018, Employsure represented that it was, or was affiliated with, or endorsed by, a government agency contrary to the fact (Government Affiliation Representations). The ACCC alleged that the representations were made through Employsure’s use of Google Ads services, which resulted in consumers who used search words, such as “fair work ombudsman” and “fair work commission” and other associated keywords, accessing Employsure’s Google Ads. It claimed that those advertisements conveyed an association with a government agency, contrary to the fact, because Employsure is a private company which has no affiliation with, or endorsement by, any government agency. The Google Ads appeared on webpages which were accessed by a computer, smartphone or other internet capable device (such as a tablet).

9    The ACCC alleges that Employsure:

(a)    engaged in conduct which was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18(1) of the ACL; and

(b)    made false or misleading representations that its services:

(i)    are of a particular standard or quality in contravention of s 29(1)(b) of the ACL; and

(ii)    had government sponsorship or approval in contravention of s 29(1)(h) of the ACL.

10    It should be noted at the outset that there was some inconsistency in the ACCC’s presentation of this particular claim. In both its written and oral submissions the ACCC referred to the Government Affiliation Representation (i.e. as if there was only one such representation). In contrast, in the amended concise statement the ACCC referred repeatedly to the “Government Affiliation Representations” (see e.g. [5] and [13]). Given the fact that the ACCC claimed that Employsure represented that it was, or was affiliated with, or endorsed by, a government agency, which presents three alternative possibilities, it is more accurate to refer to the Government Affiliation Representations, which I will adopt for the remainder of these reasons for judgment.

The seven Google Ads

11    It is well to set out the seven Google Ads which are the subject of the ACCC’s claims concerning the “Government Affiliation Representations”.

12    The first Google Ad, which was published during the period 27 August 2016 to 12 April 2018 when a Google searcher inserted the search words “fair work ombudsman”, was as follows (as revealed by a Google search conducted on 3 November 2017):

13    The second Google Ad, which was published during the period 10 August 2016 to 23 April 2018 when a Google searcher entered the search words “fair work australia”, was as follows (as revealed by a Google search conducted on 3 November 2017):

14    The third Google Ad, which was published during the period was published during the period 1 February 2017 to 30 April 2018 when a Google searcher inserted the search words “fair work commission” was as follows (as revealed by a Google search conducted on 3 November 2017):

15    The fourth Google Ad, which was published during the period 31 August 2017 to 31 August 2018 when a Google searcher inserted the search words “fair work ombudsman” was as follows (as revealed by a Google search conducted on 30 November 2017):

16    The fifth Google Ad, which was published during the period 2 January 2017 to 9 August 2018 when a Google searcher inserted the search words “australia government fair work” was as follows (as revealed by a search conducted on 30 November 2017):

17    The sixth Google Ad, which was published during the period 2 January 2017 to 9 April 2018 when a Google searcher inserted the search words “australia fair pay” was as follows (as revealed by a search conducted on 30 November 2017):

18    The seventh Google Ad, which was published during the period 9 April 2018 to 30 November 2018 when a Google searcher inserted the search words “fair work ombudsman” was as follows (as revealed by a search conducted on 16 April 2018):

19    The ACCC contended that the Government Affiliation Representations are conveyed by the headline and other words and phrases in the Google Ads and the URLs. Those phrases included “Fair Work Ombudsman” (FWO), “Fair Work Australia” or “Fair Work Commission” (FWC), which are major government agencies dealing with workplace relations. It contended that, by using those words in the Google Ads, the advertisements took on an “official” or “authoritative air”. The ACCC emphasised that the term Employsure did not appear in the advertisements. The ACCC contended that the Government Affiliation Representations were further conveyed by:

(a)    the URL www.fairworkhelp.com.au/Fair-Work/Australia being displayed in the first six of the seven Google Ads immediately under the headline;

(b)    the references to “free” advice, which appeared in all seven Google Ads, and to which particular emphasis was given in the first four ads by being expressed as “Free 24/7 Employer Advice”; and

(c)    referring to its helpline as “the” advice service (or “the” free advice service) with the definitive article being used to reinforce the association of the service, or its resemblance, to the FWO helpline.

20    Finally, the ACCC relied upon the context in which the relevant representations were made. In particular, it emphasised that the seven Google Ads appeared following an internet search for the terms “fair work ombudsman” (Google Ads 1, 4 and 7), “fair work australia” (Google Ad 2), “fair work commission” (Google Ad 3), “australian government fair work” (Google Ad 5) and “australia fair pay” (Google Ad 6). It emphasised that Employsure knew that those search terms were commonly used by consumers searching for the FWO or the FWC. Another matter of context relied upon by the ACCC was the fact that several of the Google Ads (1, 3, 4, 5 and 6) displayed a phone number which allowed Google searchers to call simply by linking through to Employsure.

(b) Use of keywords and design of Google Ads liable to mislead

21    The ACCC claimed that, from February 2017 to 30 November 2018, Employsure sought and obtained information about the search terms most frequently used by consumers searching for the FWO websites and then used those keywords as part of the design of its Google Ads campaigns. It contended that the selection and use of those keywords (which were known to be associated with key government websites) in the design of the Google Ads campaigns was liable to mislead the public about the nature and characteristics of the services provided by Employsure. The ACCC contended that Employsure’s conduct contravened both ss 18 and 34 of the ACL. Section 18 is set out at [233] below. Section 34 provided:

34    Misleading conduct as to the nature etc. of services

A person must not, in trade or commerce, engage in conduct that is liable to mislead the public as to the nature, the characteristics, the suitability for their purpose or the quantity of any services.

Note:    A pecuniary penalty may be imposed for a contravention of this section.

22    It may be noted that, in contrast with the terms of ss 18 and 29, a contravention of s 34 relates to conduct “that is liable to mislead the public”. As Gleeson J pointed out in Australian Competition and Consumer Commission v We Buy Houses Pty Ltd [2017] FCA 915 at [73] “there will be a sufficient approach to the public if first, the approach is general and at random and secondly, the number of people are approached is sufficiently large…”. It is also established that the phrase “liable to mislead” is a narrower concept (see Trade Practices Commission v J & R Enterprises Pty Ltd [1991] FCA 23; 99 ALR 325). The notion of “liable to mislead” requires an actual probability that the relevant consumer class will be misled (Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 634; 317 ALR 73 at [44] per Allsop CJ). Finally, it should be noted that s 34 is a civil penalty provision.

(c) Free Advice Representations

23    The ACCC claimed that in 16 of Employsure’s Google Ads, which appeared on three different websites (i.e. www.fairworkhelp.com.au, www.employersupport.com.au and www.employerline.com.au) over different periods of time from January 2016 to November 2018, Employsure prominently advertised “free advice” (Google Free Advice Ads). Those words usually appeared in the headline, together with a telephone number. The ACCC contended that this conduct contravened ss 18, 29(1)(b) and 34 of the ACL. It contended that the relevant Google Ads:

(a)    represented that consumers could call the displayed telephone number to receive free advice during the call; and

(b)    the primary function of that advice was to provide free advice.

24    The ACCC contended that this was false and misleading, and liable to mislead the public, because the primary purpose of the free advice hotline was to generate leads for Employsure’s paid services.

The 16 Google Free Advice Ads

25    The 16 Google Free Advice Ads the subject of these claims are as follows. The first is the same as the first Google Ad set out at [12] above.

26    The second Ad is not included in the seven Google Ads. It is as follows:

27    The third Ad is not included in the seven Google Ads. It is as follows:

28    The fourth Ad is the same as the second Google Ad set out at [13] above.

29    The fifth Ad is the third Google Ad which is set out at [14] above.

30    The sixth Ad is not included in the seven Google Ads. It is as follows:

31    The seventh Ad is not included in the seven Google Ads. It is as follows:

32    The eighth Ad is not included in the seven Google Ads. It is as follows:

33    The ninth Ad is not included in the seven Google Ads. It is as follows:

34    The tenth Ad is not included in the seven Google Ads. It is as follows:

35    The eleventh Ad is not included in the seven Google Ads. It is as follows:

36    The twelfth Ad is not included in the seven Google Ads. It is as follows:

37    The thirteenth Ad is not included in the seven Google Ads. It is as follows:

38    The fourteenth Ad is not included in the seven Google Ads. It is as follows:

39    The fifteenth Ad is not included in the seven Google Ads. It is as follows:

40    The sixteenth Ad is not included in the seven Google Ads. It is as follows:

(d) Unconscionable conduct

41    The ACCC claimed that Employsure engaged in unconscionable conduct, contrary to s 21 of the ACL, in its dealings with the following three small businesses: Blue Print Painting (BPP), Active Community OOSH (ACO) and The Dutch Butcher (TDB). The relevant conduct occurred between August 2015 and June 2017.

42    The matters relied upon by the ACCC as constituting unconscionable conduct included the following. Representatives of the three small businesses conducted Google searches looking for contact details for the FWO or another similar regulatory agency to obtain advice in relation to an employment related issue concerning them. Each of the representatives made a search associated with a keyword used by Employsure in its Google Ad ads campaigns. The Google Ads included links to one of Employsure’s websites and a phone number that connected to Employsure’s inbound call centre was displayed either on the Google Ad or the Employsure website to which it was linked. The representatives called the promoted telephone number in the mistaken belief that they were calling a government agency. They were then caught up in the sales process involving BSCs and BDMs.

43    The following particular matters (in one or more dealings with the three small businesses) were also relied upon by the ACCC:

(a)    The Employsure BSC answered the call with “fair work help” and did not disclose that they were from Employsure.

(b)    The BSC referred to Employsure or the BDM as a third party whom they were recommending.

(c)    The BSC did not provide advice, but used responses to obtain information about the particular small business which was then used to emphasise the risks the business faced in relation to employment issues, with the aim of securing a face-to-face meeting between an Employsure BDM and the particular business.

(d)    The BDM did not provide advice in the initial face-to-face meeting with the relevant small businesses, rather he or she promoted Employsure’s commercial services and used various sales techniques to induce the small business owner to enter into a standard form agreement with Employsure during the course of the initial meeting.

(e)    Individual consumers were not provided with an opportunity to read and/or understand the terms of Employsure’s standard form contract. The key terms of the contract were not disclosed to the consumer, including the fact that there was no cooling off period, no early termination provision, that the contract automatically renewed and the full amount became immediately payable if a payment was missed. A copy of the contract was not left with the consumer upon execution notwithstanding the significant fees payable under the contract, depending upon its duration.

(f)    Neither the BSC nor the BDM made it clear that they were not from, nor had the particular small business been referred to them by, the government, including not correcting the individual representatives when it became evident that they mistakenly believed that to be the case.

(g)    Employsure relied upon the no early termination clause and made it difficult for the three relevant small businesses to terminate their contracts, despite the circumstances in which the contracts had been entered into.

(e) Unfair contract terms

44    The ACCC claimed that, contrary to ss 23 and 24 of the ACL, Employsure included unfair contract terms in three versions of its standard form contract in the period from 12 November 2016 to October 2018. The terms related to the clauses of those contracts concerning no provision for early termination, unilateral price increases on automatic renewal and a penalty provision.

PART B: AGREED FACTS RELATING TO THE OPERATION OF THE GOOGLE SEARCH ENGINE

45    The parties were able to agree many facts relating to the operation of the Google search engine. Although the statement of agreed facts is lengthy, it is desirable to set it out in full (save for the single footnote and annexures) given the central significance of Google advertising in this proceeding. The statement of agreed facts is Annexure A to these reasons for judgment.

PART C: THE EVIDENCE AND FINDINGS OF FACT

46    The parties tendered a large volume of documentary evidence.

47    The ACCC led evidence from several witnesses, including representatives of the three small businesses who had dealings with Employsure, which dealings underpinned the ACCC’s claims of unconscionability and unfair contract terms.

48    Although Employsure filed affidavits from six witnesses, including several of its employees whose conduct lies at the heart of the ACCC’s claims, Employsure ultimately called only two witnesses. The first was Employsure’s chief executive officer, Mr Edmund Mallett. The other was Employsure’s finance director, Mr Steven Nicholson, who affirmed two affidavits.

49    The ACCC contended that the principle in Jones v Dunkel [1959] HCA 8; 101 CLR 298 is triggered by Employsure’s failure to call the employees referred to at the beginning of [48] above.

50    I will now summarise the parties’ evidence and state my relevant findings of fact.

(a) The ACCC’s witnesses’ evidence summarised

51    The ACCC’s witnesses were in two broad categories. The first category broadly relates to evidence which describes the steps taken to access copies of the Google Ads and other materials which are the subject of the ACCC’s claims. The ACCC also called a FWO employee, who described the services provided by that government agency.

52    The second category comprises witnesses involved in the three small business operations who had dealings with Employsure.

(i) Accessing the Google Ads

53    Evidence was given by Mr Mark McCarthy, an ACCC senior investigation officer, as to how he “captured” various screenshots linked to Employsure’s marketing. Mr McCarthy’s evidence was uncontroversial and he was not required for cross-examination. I accept his evidence in its entirety.

54    Similar evidence was given by Mr Sam Spirou, another ACCC senior investigator. Again, his evidence was uncontroversial and he was not required for cross-examination. I accept his evidence in its entirety.

55    Similar evidence was given by another ACCC senior investigation officer, Ms Rachel Waye. Ms Waye described the steps she took to capture still images of search engine results and website screen captures. Her evidence was also uncontroversial and she was not required for cross-examination. I accept her evidence in its entirety.

56    The ACCC also relied upon an affidavit dated 26 April 2019 sworn by Ms Antonia Parkes, who works in the office of the FWO. Ms Parkes described how the FWO commenced operating the Fair Work Infoline when the FWO began in 2009. This Infoline is accessed by dialling 13 13 94. Ms Parkes described the purpose of the Fair Work Infoline as to provide practical workplace relations advice to assist both employees and employers to comply with their workplace relations obligations. The Fair Work Infoline is funded by the federal government and provides free advice and assistance on matters such as minimum wages, termination of employment, entitlements and managing performance.

57    Ms Parkes described how in December 2013 the FWO launched a Small Business Helpline as an aspect of the Fair Work Infoline. It too is federally funded and provides free advice and assistance on matters such as wages, conditions of employment and termination of employment. I accept Ms Parkes’ evidence.

(ii) The evidence of some small business owners and their dealings with Employsure

58    It is convenient to summarise this evidence by reference to the three relevant small businesses.

(A) Blue Print Painting (BPP)

59    Ms Kerri-Ann Richardson was called as a witness by the ACCC. Like all the witnesses who were called to give evidence in the proceeding, Ms Richardson gave her evidence by video link. From 2013 to 2018, Ms Richardson was the owner of The Trustee for GKC Family Trust, trading as BPP, which ceased business in May 2018. Ms Richardson’s evidence in chief may be summarised as follows. BPP, which Ms Richardson established together with her husband in August 2013, operated a domestic and commercial painting business. At the relevant times, it had five employees. Ms Richardson had responsibility for staff payments, accounts and other administrative responsibilities.

60    Prior to August 2015, Ms Richardson had called the FWO and the Department of Fair Trading on several occasions to inquire about pay rates or loadings. She estimated that she called those agencies approximately three times a year. She said that whenever she needed to call the FWO, she used Google to find a telephone number.

61    Around 13 August 2015, Ms Richardson performed a Google search. She wanted to obtain information from the FWO regarding overtime payments. She had not heard of the business called Employsure and she did not use the word “Employsure” in her Google search. Under cross-examination Ms Richardson acknowledged that she could not recall the precise words she used in her Google search. They may have been any of “Fair Work Ombudsman”, “Department of Fair Trading”, “Fair Work” or “award wages”. She said that upon entering her Google search she either saw a phone number in the Google search results or found the phone number by clicking on one of the first search results displayed.

62    In preparing her affidavit, Ms Richardson listened to an audio recording of the approximately 15 minute conversation she had with a man called Ross. She reiterated that she thought she was speaking to someone at the FWO and did not appreciate that she had actually called Employsure.

63    The Employsure representative answered her call by saying “Fair Work help, Ross speaking”. At no time during the conversation did Ross tell her that he worked for Employsure.

64    Ms Richardson asked Ross for advice regarding overtime payments, to which he replied by asking whether she had any agreements with her staff. When she said she did not, she recalled that “it made me feel as if I was doing something wrong that I wasn’t aware of – and that there was something I had to do”. She thought she was speaking to someone from the government who was telling her that that was something she needed or had to do.

65    After Ross told Ms Richardson that he could organise a face-to-face with a meeting with a consultant from Employsure, Ms Richardson said that she asked him to email her Employsure’s details. Under cross-examination, Ms Richardson said that by the end of her telephone conversation with Ross she understood Ross to be describing a consultancy endorsed by the FWO. In her affidavit, Ms Richardson deposed that she understood Ross to be describing a consultancy which worked with the FWO to educate business owners on what their requirements were. She also understood that the initial information session described by Ross would be free, because no fee was discussed. Under cross-examination, Ms Richardson said that she understood that the consultancy would work side by side with BPP in a similar manner to that which an accountant would work with a company.

66    When Ross told her that “they actually give us access to their diary, and their calendars”, she thought that Ross was describing something like a sub-branch of, or a consultancy which worked with, the FWO.

67    Ms Richardson then described the meeting she had at her home on 20 August 2015 with Ms Roxanne Miners, who was a consultant with Employsure. The meeting took about an hour and a half and that Ms Miners did not provide her with any hardcopy documents.

68    Early in their meeting, Ms Miners said that she was not from the FWO but said something along the lines of “we work in conjunction” with them. This caused Ms Richardson to understand that Employsure worked together with FWO to help small businesses. In cross-examination, Ms Richardson was closely questioned about that evidence and the accuracy of her claim that Ms Miners only told Ms Richardson that she “did not work for” the FWO and did not inform her that Employsure was “not affiliated” with the FWO. That evidence was inconsistent with what she told another representative of Employsure in 2016. She told him (Mr Keenan) that Ms Miners told her that she was “not affiliated with them”. I prefer this evidence, which is confirmed by a contemporaneous recording of the telephone conversation with Mr Keenan.

69    Ms Richardson gave detailed evidence of the need for BPP to obtain assistance because they were tendering for a big contract in the Northern Territory and would need to employ additional painters. In her affidavit, Ms Richardson described the advice which she received from Ms Miners, including various case studies used by Ms Miners to market Employsure’s various services. Ms Richardson was closely cross-examined on her recollection of the details of those case studies. She ultimately acknowledged that, with the passage of time, it was possible that that she could not accurately recall the specifics of the examples given by Ms Miners.

70    Ms Richardson deposed that when she told Ms Miners that she would contact FWO or the Department of Fair Trading (as it used to be called according to her) to raise employee matters, Ms Miners responded by saying that if she continued to do that “that could trigger an audit, in which case they’ll come out”. Ms Richardson remembered this phrase because it made her feel quite worried and that this was one of the main reasons why she felt that BPP should sign up with Employsure’s services. At this stage, she still understood that the number she had called to check the pay rates was the phone number for the FWO.

71    Ms Richardson said that, because of things she was told by Ms Miners, she felt like she was doing the wrong thing as an employer by not having policies and procedures and contracts in place as advised by Ms Miners. She was concerned because she thought that Ms Miners was a representative of a company who worked with the FWO.

72    Ms Richardson described what Ms Miners told her about Employsure’s contract to provide services: that it would be for three years and would include services such as company policies and procedures, template employee contracts, insurance and the 24/7 helpline. Ms Miners told her the price for Employsure’s services. Ms Richardson first thought it was $3,000 in total. Ms Miners then confirmed that the fee was $3,000 for each year of the three year contract. Ms Richardson agreed to the contract because she thought that BPP needed it. A major reason for this belief was that she thought that Employsure worked with the government and that the FWO might audit the business if she did not sign up.

73    Ms Richardson then described how she used her finger to place her signature electronically on Ms Miners’ iPad, which had a blank screen. Ms Richardson did not read the contract, either in hardcopy form or on the iPad, before placing her signature electronically on the iPad. Under cross-examination, she acknowledged that she knew she was signing a contract which was legally binding.

74    Ms Richardson deposed that the first time she saw a copy of the contract was the following day, after Ms Miners emailed it to her at Ms Richardson’s request. Ms Richardson said that Ms Miners never told her that there were shorter contract options available. Ms Richardson believed that a shorter contract would have been an attractive option for BPP given the nature of its business and the financial difficulties it faced.

75    Ms Richardson then gave evidence of the discussion she had with her husband after she signed the contract. Her husband raised concerns, after which she felt physically sick and stupid. She was unable to sleep that night. Ms Richardson subsequently contacted Ms Miners and asked her whether there was a cooling off period because she was not feeling confident and “my husband has some questions he wants to talk more about it”. Ms Miners told her that there was no cooling off period because it was a business to business contract.

76    Ms Richardson then described how she subsequently received two separate copies of the contract on two separate email addresses. She reviewed one copy and made handwritten comments on it. Those handwritten comments included that “Roxanne verbally read the contract to me then passed me an ipad with only the signing screen available” and that the “further terms were NOT read out to me”. Under cross-examination, Ms Richardson acknowledged that she had no recollection of which parts of the contract were read out to her by Ms Miners, but she stood by her handwritten note which was made shortly after her meeting with Ms Miners.

77    Ms Richardson described her subsequent conversations with various Employsure representatives, including one conversation with Mr Mark Callaghan on 24 August 2015 (i.e. four days after her meeting with Ms Miners) regarding a compliance review teleconference. She deposed that she told him that she was happy to go ahead with that review. She added in her affidavit that she did this because she was aware at the time that she couldn’t cancel the contract and there was no cooling off period.

78    Ms Richardson described a conversation she had later on 24 August 2015 with another Employsure representative, Ms Carole-Anne Byrne. Ms Richardson deposed that in preparing her affidavit she had listened to the audio recording of that telephone conversation. The recording confirms that after Ms Byrne enquired whether there was anything she wished to discuss regarding the initial meeting with Ms Miners, Ms Richardson said (in part):

Yes, sure. Look, every – everything was fine. I’ve booked in to go ahead with the policy. What my concerns were, was that after I had the discussions with Roxanne and she left and my husband came home, and I was talking to him and telling him the different things that she had told me, and he was a little bit concerned in regard to the validity of things that she had said.

79    When Ms Byrne raised whether she wanted to continue with Employsure, Ms Richardson replied by saying:

Yes, yes, all right. Well, I know that we are going to be growing, because we’re going to be advertising for more staff very shortly. And, you know, so we’ve sort of had a – I’ve had a look at – it’s really hard for an employee to get information off the internet or from the Fair Work Ombudsman or whatever to actually know what we have to do, you know, what our responsibilities are. So that is the reason why I’m going to go ahead with it.

…

Yes, yes. No, I’m happy to go ahead with it, and – yes, we will just move forward from here.

80    Ms Richardson said she agreed to go ahead because she believed that she had no choice and that she still believed at this stage that Employsure was a “trustworthy authority associated with the Government”.

81    Under cross-examination, Ms Richardson confirmed that when she talked to Ms Byrne on 24 August 2015, she had read all the terms and conditions of the contract with Employsure (including the further terms). She also confirmed that she understood that Ms Byrne made it clear to her that she was willing to “engage” with her if she wasn’t happy to continue with the contract. Furthermore, she confirmed that, after looking at the contract closely over the weekend and discussing it with her husband, she was happy to proceed with the contract. In particular, although Ms Richardson said that she was initially concerned about the automatic renewal clause, her concerns were met when it was explained to her that she could give notice not to renew at any time. Ms Richardson declined Ms Byrne’s invitation to take a few more days if she wished to consider her position and, instead, elected to proceed with the contract.

82    Ms Richardson gave evidence regarding the compliance review teleconference held with an Employsure representative on 28 August 2015, as well as other advice and services BPP obtained from Employsure.

83    In July 2016, Ms Richardson did some Google searches about Employsure. She did so because of her dissatisfaction with the response she had received from Employsure concerning a prospective employee from New Zealand and she was told that she needed to get the information elsewhere. The Google searches revealed reviews of other people’s experiences with Employsure. Ms Richardson deposed that, based upon those reviews, she understood for the first time that Employsure was not associated with the FWO. On that day, she made a complaint with the ACCC through its website about Employsure. In part, her online complaint was that the “further terms were not read out” and she was not given a copy of the policy before signing.

84    Ms Richardson gave evidence of her attempts to terminate the contract with Employsure in August-September 2016. BPP continued to pay Employsure’s fees under the contract until 19 April 2018. BPP ceased business the following month.

85    Subject to the following significant qualifications which are based upon the cross-examination of Ms Richardson, I generally accept her evidence as summarised above.

86    First, as previously stated, I do not accept Ms Richardson’s claim that Ms Miners only told her in their meeting on 20 August 2015 that she “did not work for” the FWO. I prefer the accuracy of the audio recording of Ms Richardson’s conversation with Mr Keenan in 2016, when she told him that Ms Miners had said that she was “not affiliated” with the Department of Fair Trading (which Ms Richardson used interchangeably with the FWO).

87    Secondly, whether or not Ms Richardson continued to believe that Employsure had some association with the FWO, the evidence is clear that Ms Richardson made a considered decision, after closely reading the contract she had signed, to continue with that contract, as is made clear by the terms of her conversation with Ms Byrne on 24 August 2015. Not only did Ms Richardson decline Ms Byrne’s offer to take a few more days to consider her position, but it is also evident that, within Employsure, Mr Nicholson had given his formal approval for the contract with BPP to be cancelled and without any charge to BPP.

88    Thirdly, perhaps unsurprisingly given the passage of time since Ms Richardson met with Ms Miners, her recollection of some of the details of that meeting was not sound, as she frankly acknowledged in her cross-examination. I do not accept these aspects of Ms Richardson’s evidence unless they are confirmed by contemporaneous documentary evidence.

(B) Active Community OOSH (ACO)

89    ACO conducted a before and after school care business. Its director is Ms Heather Martindale, who gave evidence for the ACCC. She provided two affidavits.

90    Ms Jenny Fahy was the next senior member of staff at ACO. Ms Fahy was also called as a witness by the ACCC.

91    ACO is a small business which currently employs about nine staff members, being two permanent staff and about seven casual staff. When ACO dealt with Employsure in 2016, there were four permanent part-time staff and about three to five casual staff.

92    Ms Martindale described how, after she first set up ACO in 2012, she sought assistance from the Fair Work office in Newcastle about industrial relations matters, including pay rates. She went to the Newcastle Fair Work office two or three times after her initial visits in 2012.

93    Ms Martindale deposed that in late January 2016, she wanted some advice from the FWO about paying staff. Because she did not have time to drive to Newcastle, Ms Martindale did a Google search for the terms “Fair Work Ombudsman” to find the telephone number to call. Although Ms Martindale said that when she made this call she had never heard of Employsure, she accepted that there was an accurate Employsure business record which detailed a phone call it had received from her in 2013. Thus her contact in January 2016 was not the first time she had approached Employsure.

94    Ms Martindale described how she clicked on a phone number which was displayed in the Google search result, believing that it was the number for FWO. The transcript of the audio recording of the phone call with a representative of Employsure, Ben, records him answering Ms Martindale’s call by saying:

Fair Work Help, Ben speaking.

95    Ms Martindale said that when she heard these words, she thought she was speaking to Fair Work because she believed that she had called their number.

96    After giving Ben her personal name and the ACO business name, Ms Martindale said that she was not surprised that her business was recognised by Ben because she assumed that Fair Work kept records of their past contact. She told Ben that she had “been in a few times over the years with a few things” and that she liked to get things right. She deposed that she said these things because she thought she had called Fair Work and she was referring to her previous attendances at that agency’s Newcastle office.

97    When Ms Martindale told Ben about the information she was seeking, Ben asked her whether she had a staff handbook and whether there was a bullying and harassment policy. In confirming that she had both these things, Ms Martindale said that she thought Ben was asking her about these matters acting in his capacity as an officer of the FWO’s office and that she felt obliged to answer. She said that if she had known that Ben was from a private company, she would not have answered his questions.

98    The audio recording captures Ben telling Ms Martindale:

Well, look, if – if you like, I’ve got something I can suggest for you, if you want a bit of peace of mind… Just check over your bullying and harassment policy and that side of things… We do something on this line here with one of our sponsors, a private company called Employsure… I don’t know if you’ve ever come across them before or not.

99    Ms Martindale deposed that when reference was made to Employsure being a “sponsor”, she thought that this meant that Employsure was part of Fair Work and was part of the government. It should be noted that the ACCC did not contend that Ben’s reference to Employsure being “one of our sponsors” was itself a misleading or deceptive representation. The ACCC’s case relating to the concept of sponsorship was directed to two separate complaints, being the claim summarised in [9(b)(ii)] above with respect to the seven Google Ads and in its claims concerning unconscionable conduct summarised at [41]-[43] above.

100    After Ben offered a free consultation and review with a field consultant, arrangements were made for an Employsure consultant, Ms Cassy Bailey, to come to Ms Martindale’s home. Ben never told Ms Martindale at any point that he was employed by Employsure.

101    When Ms Martindale sought subsequently to confirm an appointment with Ms Bailey (which had to be rescheduled), she said that her telephone call was answered by a man called Daniel who said “Welcome to Fair Work Help, my name’s Daniel”.

102    Ms Martindale then gave detailed evidence of the meeting with Ms Bailey at Ms Martindale’s home on 1 February 2016. Ms Fahy also attended the meeting. Ms Bailey told them about Employsure’s services, which included a complimentary review of ACO’s policies, the ability to call Employsure 24/7 with queries, that the contract was for one, two or three year periods, that it was cheaper to sign up for three years and that the fees for a one year contract worked out at about $40.00 a month.

103    Ms Martindale said that Ms Bailey was keen to sign ACO up for three years and she told Ms Martindale that they could offer a cheaper rate for that period. Ms Martindale told her, however, that they could only sign up for one year. Ms Bailey said that she could do a special deal and she wrote a price down on a piece of paper. Although Ms Martindale couldn’t recall the exact amount, she understood that it worked out at around $40.00 a month. Ms Martindale said that Ms Bailey did not tell her that the total contract price would be $3,854.

104    Ms Martindale explained how she rationalised that a fee of $40.00 a month to Employsure was approximate to the cost of her internet charges and storage shed rental. She was looking at that time to acquiring a second storage lock-up for ACO’s business equipment and that Ms Fahy said to her that that money could be spent on the Employsure contract instead. As will emerge, Ms Martindale was closely cross-examined on this evidence.

105    Ms Martindale also gave evidence of her signing a blank screen on Ms Bailey’s iPad or tablet. She said that this was the first time she had ever signed an iPad or tablet and she believed that she would have to actually sign a formal hardcopy of the contract later. Ms Martindale had no recollection of signing a direct debit form during her meeting with Ms Bailey.

106    Ms Martindale subsequently received a copy of the one year contract, which required a payment of $3,854 excluding GST. She said that if she had known that the contract was for that amount, she would never have agreed to it.

107    When Ms Martindale complained to Ms Bailey that she did not want to continue with Employsure’s services, she was told for the first time that there was no cooling off period.

108    Ms Martindale gave detailed evidence of her subsequent dealings with various Employsure representatives regarding the contract and the services which Employsure provided to ACO, including her attempts to terminate the contract. Ms Martindale’s contract was ultimately cancelled in November 2016 after she paid an early termination fee of $352.96.

109    Ms Martindale was closely cross-examined. I found her to be an honest and responsive witness and I generally accept her evidence, subject to the following important qualifications which reflect the fact that, as Ms Martindale herself candidly acknowledged, her recollection of the details of some events was poor. Moreover, at times her evidence was confusing.

110    Although it is plain that there was some discussion at the meeting on 1 February 2016 regarding the cost of the contract, Ms Martindale’s recollection of the details was poor. Ms Martindale said that Ms Bailey wrote down on a notepad the cost for a two or three year contract and that after Ms Martindale said that she could only enter into a one year contract, Ms Bailey wrote down a new figure and passed it to Ms Martindale for her approval. Ms Martindale acknowledged, however, that she could not remember the precise figures provided by Ms Bailey. For the following reasons, as well as those given at [361] to [365] below, I believe that Ms Martindale was mistaken when she said that Ms Bailey told her that the cost of the contract would be $40.00 per month. As will also shortly emerge, I do not accept Ms Fahy’s evidence that Ms Bailey told them that the cost of the contract would be $40.00 per month.

111    Ms Martindale’s evidence concerning the issue of contract fees was not consistent. An audio recording of Ms Martindale’s conversation with an Employsure representative on 8 March 2016 captures her saying that she understood the cost of the contract would be “about $50.00 a week – a month, you know. So I thought two something, like $200 a year just to having someone to phone up and just get the rates for wages and things like that”.

112    Ms Martindale is recorded as subsequently telling an Employsure representative in a telephone call on 17 March 2016 that the cost of the ACO storage shed was $40.00 a week. In her evidence, Ms Martindale said that she meant to say $40.00 a month but that she’d got her months and weeks “muddled up”.

113    At [101]-[102] of her first affidavit, Ms Martindale said that she thought that the first direct debit ACO paid to Employsure in the amount of $353.00 was the total contract sum for a year’s worth of services. If so, this would work out at around $29.00 a month. Ms Martindale said that she later found out that the contract cost was $40.00 per week, when the figure was in fact $74.11 per week. When it was put to Ms Martindale in cross-examination that it was possible that she had got some of her numbers wrong, she candidly responded by saying “I don’t know”.

114    It should also be noted that after the meeting with Ms Bailey on 1 February 2016, Employsure forwarded to ACO a copy of the contract by email on three separate occasions (3, 17 and 24 February 2016), all of which clearly disclosed the contract price. On 8 February 2016, a separate email was sent to ACO with a statement detailing the amounts to be debited from ACO’s account.

115    As mentioned, Ms Fahy was also called as a witness by the ACCC. Ms Fahy swore two affidavits. I accept Employsure’s submission that Ms Fahy “presented as a formidable character who was capable of protecting ACO’s interests”.

116    Ms Fahy described the meeting with Ms Bailey at Ms Martindale’s home on 1 February 2016. She described the services which Ms Bailey said Employsure could provide to ACO. Ms Fahy said that Ms Bailey told them that the cost of the services was around $40.00 a month. Ms Fahy said that, at the end of the meeting, Ms Bailey said that she needed Ms Martindale to sign the iPad because she needed “to show that I have been here and explained to you what we do, and that you are happy with what I’ve explained to you”. Ms Fahy saw Ms Martindale sign the iPad with her finger.

117    Ms Fahy described her subsequent dealings with various representatives of Employsure, including calling Employsure’s advice line on 1 February 2016 with a query regarding a pregnant staff member who was employed by ACO on a casual basis, as well as calling the next day with a query about a traineeship pay rate.

118    Ms Fahy was cross-examined. As a result of that cross-examination, I would make some qualifications to my otherwise general acceptance of her evidence. Those qualifications are as follows. First, as to Ms Fahy’s claim that she and Ms Martindale were told by Ms Bailey that the cost of Employsure’s services was around $40.00 a month, I do not accept that evidence (see [110]-[112] above and [366]-[369] below).

119    Secondly, I do not accept Ms Fahy’s evidence that she did not appreciate at the 1 February 2016 meeting that Ms Martindale was entering into a contract when she signed Ms Bailey’s iPad. This is inconsistent with what Ms Fahy recorded in the ACO diary that day where she stated that ACO had “[j]oined up with employsure for all fair work, legal advice & policies help”. On that same day, Ms Fahy spoke to Employsure and is recorded as saying “look, we signed up this afternoon, or around lunchtime, and we were talking to Cassy”.

120    The ACCC also called Ms Linda Green as a witness in the case against Employsure relating to ACO. Ms Green provided accounting services to ACO. She gave evidence that she advised Ms Martindale in January 2016 to contact the FWO regarding the pay rates of two trainees who were about to start work with ACO. Ms Green stated that, in late January or early February 2016, Ms Martindale informed her by telephone that she had “Fair Work coming out to visit”. Ms Martindale subsequently informed her that the meeting had gone well. There is no need to summarise the other parts of Ms Green’s evidence because they were not relied upon.

121    Ms Green was not required for cross-examination. I accept her evidence.

(C) TDB

122    TDB is a small café in Perth, which was bought by Mr Johannes Ottes in May 1980. In 2017, the café had about 8-12 employees, including Mr Ottes’ daughter, Kim Ottes, who at that time was the General Manager of the business. Both Mr Ottes and Ms Ottes were called as witnesses by the ACCC, and both were cross-examined. The ACCC filed an affidavit by Mr Henry Koldenhoven, who provided accounting services to TDB for 25 years. Ultimately, however, the ACCC did not read Mr Koldenhoven’s affidavit so nothing more needs to be said about it.

123    In her affidavit, Ms Ottes said that she managed the daily running of the business along with her father. She said that her father relied on her to help with any technical aspects of running the business, including attending to such matters as getting a large commercial printer or computers fixed. Both Ms Ottes and her father each had a computer in the office, as did their bookkeeper.

124    Annexed to Ms Ottes’ affidavit were several transcripts of audio recordings of conversations she had with Employsure representatives, the accuracy of which was not disputed.

125    Ms Ottes gave evidence of some problems the business was experiencing in 2017 with one of its employees. Mr Ottes told her that he had contacted Fair Work about the matter, that there was to be a meeting with Fair Work at the shop and that they would “sort our issue out”. Ms Ottes described a meeting she and her father had at the shop with Mr Greg Langton, whom she believed was from Fair Work. In her affidavit, Ms Ottes said, as best she could recall, Mr Langton mentioned that he was from Employsure but she assumed that this was a division of Fair Work. Under cross-examination, when it was put to Ms Ottes that, once he had sat down at the meeting, Mr Langton told them that he was from Employsure, she responded “Correct”. When it was also put to her that he told them that Employsure was a private company, Ms Ottes said “I can’t quite remember”. Ms Ottes also gave evidence in cross-examination that Mr Langton never told them that he was from the FWO or from Fair Work.

126    Ms Ottes candidly acknowledged that while she participated in the meeting along with her father and Mr Langton, she was often distracted because she had to keep an eye on what was happening in the café. Ms Ottes had no detailed recollection about the advice Mr Langton gave as to the particular employee, but she recalled that he talked about other services which Employsure could provide, particularly if the business had issues with other employees.

127    Ms Ottes recalled that Mr Langton talked very quickly and that she found it “really hard to keep up”. She added that, towards the end of the meeting, “he was pushing all of this stuff on us to sign” and that he mentioned Employsure’s fees. She recalled Mr Langton handing a tablet, like an iPad, to her father, and asking him to sign on it.

128    Ms Ottes said that when she recently reviewed a copy of the contract dated 30 June 2017, she saw that the contract was for workplace relations services for three years for a total fee of $19,471.92, excluding GST.

129    Ms Ottes gave evidence of her dealings with Employsure, including arranging for a compliance review and a separate work health and safety check. As to the latter, Ms Ottes recalled that her father and she met with a woman from Employsure about work health and safety. She did not remember the specific content of the discussion but had a vague recollection that a further contract was signed at that meeting.

130    Ms Ottes also described her participation in the compliance review with an Employsure representative, Ms Melissa George.

131    Ms Ottes said that at some point the business’s bookkeeper told Ms Ottes and her father the total figure of the contracts with Employsure. She “got a fright” because the figure was about $19,000. She considered this to be a big sum, particularly because the business had been struggling financially. Ms Ottes asked her father how he had got in touch with Employsure. She said that around this time she had real doubts and concerns about whether he had ever been in contact with Fair Work or the government. Her father responded to her question as to how he found Fair Work’s telephone number by saying that it was “just off their website”. Mr Ottes told her that he had Googled “Fair Work” and then clicked on a link. He demonstrated this to her on his computer. She saw her father type in something like “Fair Work” into Google and she saw a link that had been previously clicked on because it was coloured in purple.

132    Ms Ottes gave evidence of her dealings with Employsure in October 2017, when attempts were made to cancel the contracts the business had with Employsure. Ms Ottes said that, having left the business, she did not know how things ended up with Employsure and that it was mainly her father and Mr Koldenhoven who were involved with Employsure after she left.

133    Ms Ottes said that overall she had “a bad feeling towards Employsure”, particularly because she considered that the business did not need Employsure’s services on a regular basis and she added that the emailed newsletters TDB received from Employsure “were just forwarded straight to my junk inbox and were not very helpful for us”.

134    I found Ms Ottes to be an honest and responsive witness and I generally accept her evidence, which largely reflected her subjective state of mind while noting that she frequently acknowledged that she did not have a good or clear recollection of many matters, including the meeting with Mr Langton. This may be because, as she said, during the course of the meeting she was distracted by managing the business.

135    Mr Ottes, who is now 81 years old, swore an affidavit and was cross-examined. Mr Ottes owned the TDB and ran a successful business there for almost 40 years. Several transcripts of audio recordings of conversations he had with Employsure representatives were attached to his affidavit. The accuracy of those transcripts was not disputed.

136    Mr Ottes said that during the period he had dealings with Employsure in 2017, TDB had about eight employees. He described some difficulties he was having with one of those employees in mid-June 2017. He decided he needed to get some advice so he decided to call the government for help. He said he remembered wanting to call Fair Work or Worksafe, which meant the same thing to him. As best he could recall, Mr Ottes said that he used his computer in the office above the café to Google “fair work” or “work safe” and that he rang the number which appeared on the screen. He said he recalled seeing something about “free advice”. He confirmed that when he made the call, he both intended to call, and believed that in fact he was calling, a government organisation for free advice. He had never previously heard of Employsure and he said that he did not use the term “Employsure” in his Google search. His call was answered by a recorded message which said “Welcome to Employsure Fair Work Help. This advice line has been specifically designed to assist employers and business owners…”.

137    Having relistened to the recording, Mr Ottes acknowledged that he could hear Employsure’s name mentioned but he said this would not have meant anything to him at the time because there were “so many sections within government organisations, and I do not know what they are all called”.

138    Mr Ottes then addressed various aspects of the transcript of the telephone conversation he had with an Employsure representative called “Nate”. He told Nate about the problems he was having with the particular employee. Nate told him that they had to be careful because the employee might be mentally unstable and sue TDB. Mr Ottes deposed that he was concerned that the business could be in trouble, even though he thought that they had done nothing wrong, and that the matter might cost a lot of money. He said that because of what Nate said, his impression was that “I could be up for a lot of money and that this issue I was having was my employee could go further”.

139    Mr Ottes said that, at this time, he didn’t understand that Employsure was a private company, even though he acknowledged that Nate told him that fact during the course of their conversation. Even after Nate arranged for Mr Greg Langton to meet with Mr Ottes to discuss the situation, Mr Ottes said that he still thought he was dealing with someone who was either part of the government or recommended by the government.

140    Mr Ottes was cross-examined on this and other parts of his evidence. The transcript of Mr Ottes’ telephone conversation with Employsure records Nate as saying that he was “from a private company” and that the business was “actually called Employsure”. Mr Ottes was told that Employsure was “the largest workplace relations consultancy in Australia” and he was given a broad description of the services it provided. He was also told that while the initial advice would be free, Employsure could provide an obligation-free quote to offer further assistance.

141    Mr Ottes then gave evidence of the meeting held at the café on 30 June 2017, which was attended by Mr Langton from Employsure, Mr Ottes and his daughter. Mr Ottes reiterated that he thought Mr Langton was from the government or from a body recommended by the government. Mr Ottes recalled Mr Langton saying that it could cost around $80,000 in legal fees if we ever “stepped out of line” and were sued. He recalled Mr Langton saying that under a contract with Employsure the business would be “covered by their lawyers” and that there was no need to worry because “they would take care of everything for us”.

142    Mr Ottes said that Mr Langton spoke very quickly and sounded very professional and convincing but that the more he talked Mr Ottes became more frightened.

143    Mr Ottes was not sure if he was shown a copy of the contract at the meeting or had its terms explained to him. He had no recollection of reading the contract at the meeting. He said that he was worried that he could be in a lot of trouble if he didn’t sign it. So he signed, for fear that he would not otherwise be protected. He recalled that he chose a three year contract from the three options that were available but that he did “not think this through at the time”. He said that he now realised that, given the history of the business, he didn’t need the ongoing services of Employsure and simply needed to get advice on the particular employee. Mr Ottes had no recollection of Mr Langton explaining to him the total cost of the contract.

144    Under cross-examination, Mr Ottes had an incomplete recollection of what he and his daughter were told by Mr Langton. He could not remember whether the contract terms were read to him by Mr Langton or whether he read them himself, but he did not deny that one or other of those things occurred.

145    Mr Ottes acknowledged that he signed something on Mr Langton’s iPad. He had no recollection of getting a hard copy of the contract at that time, however, he acknowledged that he was sent an electronic copy by email later that day, together with a copy of an insurance policy.

146    Mr Ottes gave evidence of his response when he read the contract, highlighting terms contained therein which he said he had not previously appreciated, including that there was no provision for early termination, that the contract would automatically renew for the same period unless notice was given and that failure to adhere to the payment schedule would result in the total balance outstanding becoming payable immediately in full.

147    Mr Ottes described the meeting he had on 13 July 2017 with another Employsure representative, Ms Barbara Channing. He assumed that he was still dealing with the government because he believed they were the ones he originally rang. Although Mr Ottes had no specific recollection of signing another contract with Employsure, he did not dispute that in fact he did sign a three year contract with Employsure for workplace health and safety services for a total of $9,207.08.

148    Under cross-examination, it was evident that Mr Ottes did not have a full recollection of the meeting with Ms Channing. Mr Ottes could not remember signing the further contract but he accepted that he had.

149    Mr Ottes said he didn’t realise at the time how much the two contracts would cost the business. He had no recollection of anyone from Employsure explaining to him exactly what he was signing up for and how much it would cost.

150    Mr Ottes described how he attempted to cancel his contracts with Employsure and how he discussed how that should be done with both his bookkeeper and Mr Koldenhoven, who handled it on his behalf.

151    Mr Ottes said that he could “vaguely recall” his bookkeeper contacting the FWO and that a teleconference was arranged for 13 September 2017. He acknowledged, however, that he had no recollection of meeting with the FWO on that day. Mr Ottes made reference to an email exchange between the FWO and his bookkeeper.

152    Finally, Mr Ottes said that he felt that the whole experience with Employsure was “a big disappointment and an absolute waste of time and money”. He explained that, upon reflection, all he needed was advice about the one particular employee but that he was worried that if he didn’t have Employsure involved “something drastic would happen and I was worried about expensive lawyers’ fees if something went wrong”. He emphasised that he wanted to deal with the government and that he had never heard of Employsure before.

153    I found Mr Ottes to be an honest and responsive witness, however, as he himself repeatedly acknowledged, he did not have a good recollection of all his dealings with Employsure. For that reason, I would not base a finding of fact on Mr Ottes’ personal recollection unless it was supported by contemporaneous documentary material or other evidence.

(b) Employsure’s witnesses’ evidence summarised

154    As previously mentioned, Employsure called Mr Mallett and Mr Nicholson as witnesses. Both were subjected to lengthy cross-examinations. Employsure did not read the affidavits filed by it of several Employsure representatives who had had dealings with BPP, ACO and TDB (namely, Ms Bailey, Ms Miners, Mr Langton and Ms Channing).

(i) Mr Mallett’s evidence summarised

155    Mr Mallett is the managing director of Employsure and has held that position since its incorporation in September 2010. Previously, Mr Mallett was a barrister based in London who specialised in employment law. He studied law at Cambridge University and obtained an LLM from Duke University in the United States. He practised at the London Bar from 2004 to 2010, when he moved to Australia with his Australian wife. He saw an opportunity to develop a business model here based upon that operated by Peninsula Business Services Limited (Peninsula) in the United Kingdom, the features of which involve providing clients with the following four services:

(a)    a review of the client’s current documentation, including employment contracts, workplace policies and manuals, and the preparation of any new documentation required;

(b)    advice which is available at all times all year round;

(c)    representation in courts and tribunals; and

(d)    an insurance policy which provides an indemnity against the costs associated with any court or tribunal proceedings with no excess payable by the client.

156    This business model was adopted by Employsure, which started offering the four services in April 2014 and after Peninsula agreed to invest in Employsure two years earlier.

157    Although Employsure’s model expanded into a much larger scale, it did not record a profit until the financial year 2014-2015. As at 30 May 2019, Employsure had approximately 20,500 clients, which included both large employers (i.e. with more than 20 employees) and many small to medium sized enterprises (SMEs). It had over 600 employees in various roles. As at 30 May 2019, 13 percent of Employsure’s clients were large employers.

158    In April 2016, Employsure expanded its operations to New Zealand, where it had over 4,000 clients and almost 200 employees in mid-2019.

159    Mr Mallett emphasised that Employsure’s services are designed specifically for employers and that the advice it provided to clients was independent from the dispute resolution and investigation functions of the FWO and FWC.

160    Initially, Employsure offered only its employment relations services, but in around March 2014 it expanded to offer its workplace health and safety (WHS) services.

161    Mr Mallett described how in 2013, Employsure began offering three different standard services to its clients. The “Tier 1” service is Employsure’s basic service for businesses with less than five employees and where the review of the client’s business is typically done over the telephone rather than fact-to-face. The “Tier 2” service is Employsure’s original standard service, which included face-to-face meetings with clients. The “Tier 3” service is an enhanced offering which includes all elements of the Tier 2 service, plus additional on-site consultancy services (such as staff training, internal management of disciplinary processes and risk reviews). In addition to these standard services, Employsure also offers an “add-on” service called “Safe Check”, for which clients are typically charged $500 but may sometimes be offered free of charge as part of a contract price negotiation. Safe Check was introduced in around 2015.

162    Mr Mallett described what was involved in Employsure providing services such as the initial compliance review, an employment relations review and the WHS services. He described what was involved in preparing a corrective action plan following an assessment of a client’s documentation, as well as the “implementation meeting” which Employsure consultants conducted with a client after providing a corrective action plan. Mr Mallett annexed to his affidavit copies of the corrective action plans and related documents provided to both TDB and BPP.

163    Mr Mallett described how all of Employsure’s clients had access to Employsure’s ongoing advice service at all times during the duration of their contract. He emphasised that the advice service was not limited in any way by call time, length or volume of calls. He described how the telephone advice service operated 24 hours a day. He gave examples of the type of requests Employsure received over the advice service, either by telephone or email. Mr Mallett estimated that Employsure had one advisor to every 250 clients and that during the 12 months from 1 April 2018 to 31 March 2019, Employsure’s advisors sent and received a total of approximately 300,000 emails with clients who requested advice. During the same period, approximately 220,000 telephones calls were received from clients seeking advice and approximately 94,000 calls were made by Employsure advisors to clients concerning requests for advice.

164    Mr Mallett gave a detailed description in relation to its clients (who are all employers) in relation to workplace claims by employees. This included claims made in regulatory bodies such as the FWO, the Australian Human Rights Commission, SafeWork NSW and Work Safe Victoria. Employsure also provided representation in courts and tribunals. Prior to mid-2018, Employsure’s legal representation services in courts and tribunals were provided through Sparke Helmore lawyers but subsequently such representation occurred through Employsure’s internal law firm, Employsure Law. Outsourcing claims only occurs if the matter is beyond Employsure Law’s resources or expertise.

165    Mr Mallett described how from around August 2012 until March 2019, Employsure’s clients had an option of taking out insurance policies which were underwritten by QBE Insurance Group Limited. One kind of policy related to the employment relations service while the other was for Employsure’s WHS clients. The insurance policies covered clients’ legal expenses.

166    Mr Mallett gave detailed evidence regarding Employsure’s online marketing practices. He described Employsure’s objective in using online marketing as “to find SMEs, or other businesses, who might have use for Employsure’s services, and ultimately to form a relationship with those employers to see if they want to become clients”. He described the marketing practices known as search engine optimisation (SEO) and search engine marketing (SEM). SEO is the marketing practice by which websites are sought to be “optimised” to respond “organically” to search engine enquiries, such that when a consumer searches for a term a website is returned as high as possible in the search results (below the advertisements). SEM involves bidding on search terms, known as “keywords”, with a view to Google accepting a bid and an advertisement appearing in response to a particular search. The presentation of an advertisement in response to a given search is determined by Google’s proprietary algorithms, which undertake an almost instantaneous calculation of the maximum amount an advertiser is willing to pay to present an advertisement, multiplied by a “Quality Score”. The presentation of advertisements did not depend only on the amount paid by the advertiser, but also on the quality of the advertisement as assessed by Google. Advertisements with the highest “Ad Rank” as assessed by Google are presented above Google’s organic search results. In his oral evidence in cross-examination, Mr Mallett explained that by using the words “fair work” in the URL in Employsure’s Google Ads, the cost of the advertisements was reduced because it increases the “Quality Score”. Mr Mallett explained that Employsure used the term “fair work” in its URL so as to reduce the cost of its advertising with Google. I accept that evidence.

167    Mr Mallett gave detailed evidence as to the three constituent parts of Employsure’s SEM strategy, namely its keyword strategy, its Ad Copy strategy and its landing page strategy. The keyword strategy involved Employsure selecting a series of keywords which it believed prospective clients might search for. Many of those keywords included the phrase “fair work” because such terms are likely to be relevant to employers who may be prospective clients for Employsure. Mr Mallett also emphasised that the words “fair work” are part of the name of two relevant regulatory bodies operating in the employment relations area, namely the FWC and FWO. The words “Fair Work” also appear in the name of the primary legislation. Mr Mallett deposed that the purpose of Employsure bidding on the search terms, including the words “fair work”, is to seek to present Employsure’s advertisements to internet users who might wish to use Employsure’s services and that there was no purpose of conveying any organisational association with, or endorsement from, either the FWC or FWO.

168    Mr Mallett described how Employsure used negative keywords so as to prevent Employsure’s advertisements appearing in response to a search. Employsure currently uses 60,000 negative keywords, such as “fair work employee”, which are intended to exclude employees accessing Employsure for information about fair work.

169    Mr Mallett pointed out that part of Employsure’s keyword strategy was the price that Employsure was willing to pay for each click. Employsure limits price per click by budgeting through Google’s advertising platform. If the price per click budget is set too low, Employsure’s advertisements would not be preferentially placed. If the price per click budget is set too high, Google may accept the higher bid unnecessarily or SEM could otherwise become too expensive as a way of finding new clients. For these reasons, Mr Mallett said that Employsure closely monitors the price per click to ensure that it is budgeting optimally. Finally, he said that Employsure’s keyword strategy is designed to have its advertisements only being presented to employers who require advice, or who may be prospective clients of Employsure.

170    Mr Mallett’s description of Employsure’s Ad Copy strategy involved three elements, namely the headline, the display URL and the description. Google Ads are distinguished from organic search results by the term “Ad” appearing in the box just below the headline, although this may vary if a mobile device was being used. Some Employsure Google Ads also included the phone numbers that could be dialled without clicking through to a website or landing page.

171    Mr Mallett said that Employsure had two objectives in its Ad Copy drafting. First, to exclude searchers who were not employers or prospective clients (particularly employees). Thus Employsure’s advertisements clearly stated that the services were for employers only. Despite this, many employees still click on Employsure advertisements, which take them to an Employsure website and this has the consequence of generating a payment to Google from Employsure.

172    Secondly, Mr Mallett stated that Employsure seeks to attract potential clients to its website or landing pages by advertising a free advice service. He said that this is intended to help the potential client with the problem that has led the person to the search engine in the first place.

173    Mr Mallett described how during the relevant period Employsure used not only its own website but also the following landing pages – fairworkhelp.com.au, employersupport.com.au and employerline.com.au. These landing pages are websites with different domain names. Their main benefit, according to Mr Mallett, is that they offer a simple “call to action” for an employer to call Employsure and request advice, as opposed to navigating Employsure’s more complex main website (www.employsure.com.au).

174    As to the URLs used by Employsure for its landing pages, Mr Mallett said that this was done for several reasons. For example, in using “fairworkhelp”, this URL incorporated the name of the legislative regime about which Employsure advises its clients, who are employers seeking help with that regime. He said that this URL also incorporated keywords used by Employsure, which can have the effect of increasing the landing page’s Quality Score. Mr Mallett stated that Employsure’s use of landing pages was based on Peninsula’s practice in the UK. It is intended to provide a wider range of possible audiences and increase the likelihood that a larger number of people will come into contact with Employsure’s services, including its free advice helpline. He said that Employsure’s landing pages were not intended to produce confusion or suggest an association with any government body, such as the FWO and the FWC.

175    Mr Mallett acknowledged that Employsure made changes to its “fair work help” landing page between January 2016 and 30 November 2018. For example, in September 2017, Employsure added this statement:

This free helpline is provided by Employsure, Australia’s largest provider of workplace relations advice to employers. It is a private business with no affiliation to any government agency. It provides this helpline as part of its commitment to helping all business owners achieve fair and safe workplaces.

176    At the same time, Employsure added a further statement that it had no affiliation to any government agency, including the FWO. Under cross-examination, Mr Mallett explained that these changes were made after Employsure had been contacted by the FWO, who complained that its intellectual property was being misused. Mr Mallett explained that changes were made, not because Employsure accepted that there was any substantial issue with either intellectual property or consumer protection matters, but rather because he wanted to avoid Employsure becoming involved in litigation, such as that which has now occurred. I accept that evidence.

177    Mr Mallett gave detailed evidence regarding Employsure’s free advice helpline, including the recorded telephone message played to a caller when the number is dialled. He described how various changes were made to the pre-recorded welcome message. Those changes are reflected in the following extracts:

(a)    during the period from around 31 December 2014 to around 25 November 2016, the pre-recorded ‘welcome’ message stated:

Welcome to Fair Work Help. This advice line has been specifically designed to support employers and business owners. Please listen carefully and select from one the following options. If you are an employer or business owner, press 1. If you are an employee calling on behalf of an employer, press 2. If you are an employee requesting advice about your own situation, press 3.

(b)    during the period from around 26 November 2016 to around 22 August 2017, the pre-recorded ‘welcome’ message stated:

Welcome to Employsure Fair Work Help. This advice line has been specifically designed to assist employers and business owners. This call may be recorded for quality assurance purposes. Please listen carefully to the following options. If you're an employer or business owner, press 1. If you're an employee calling on behalf of an employer, press 2. If you're an employee requesting advice about your situation, press 3.

(c)    during the period from around 23 August 2017 to around 4 June 2018, the pre-recorded ‘welcome’ message stated:

Welcome to the Employsure's Fair Work Help. As Australia's leading independent workplace relations provider, we offer this service to support employers and business owners. We can provide you support with fair work matters but we are not affiliated with the government. This call will be recorded for quality and training purposes. Please listen carefully to the following options: If you are an employer or business owner, press 1. If you are calling on behalf of an employer, press 2. If you are an employee requesting advice about your situation, press 3.

(d)    during the period from around 5 June 2018 to around August 2018, the pre-recorded ‘welcome’ message stated:

Welcome to Employsure's help line for business owners. Employsure is not affiliated with any government agency. This call may be recorded for quality assurance purposes. If you're an employer or calling on behalf of an employer, press 1. If you're an employee requesting advice on your own situation, press 2.

178    Mr Mallett explained that the recorded message was designed to divide callers into different categories, namely employers, people calling on behalf of employers and employees. He emphasised that Employsure only wanted to engage with people in the first two categories. Callers who select the option designated as “employees” are diverted to a pre-recorded message that informs them that Employsure works only with employers. Employees are directed to the telephone number for the FWO.

179    On the issue of the class of persons to whom Employsure’s Google Ads were directed, the ACCC submitted that Mr Mallett accepted in cross-examination that the target audience was not confined to employers alone and included employees. It relied upon the following exchange:

… I want to suggest to you that you do have the information because you are aware of the design of the ads, which I suggest to you are intended to appeal to persons who are searching for the Fair Work Ombudsman website, be they employers or employees?---No. The intention of the advertisements is to appeal to anyone seeking help, which may include people that are seeking the Fair Work Ombudsman website, but is also people that might be seeking information about the Fair Work Ombudsman may be involved in a wages dispute with the Ombudsman. There are a whole range of reason people might search, and we’re seeking to attract as much traffic as we can off that group of people. (Emphasis added by ACCC).

180    I do not accept that submission. Mr Mallett made it quite clear in both his written and oral evidence that Employsure’s target audience was limited to employers. For example, earlier in his cross-examination Mr Mallett said:

We would like less employees to call us, but, notwithstanding changes that we do make, it still happens.

Employsure had a strong commercial incentive to limit the number of employees who contacted it via Google Ads because Employsure was obliged to pay Google each time such a person called even though Employsure would not provide services to an employee.

181    The ACCC also relied upon what Mr Mallett said when it was put to him that if an employer entered the terms “fair work” with the intention of locating the FWO for the purpose of getting free advice, it was possible that Employsure’s Google Ad might be displayed as a result of that search. Mr Mallett agreed that that was a possibility. When it was then put to him that an employer making such a Google search “is the very person who you reach out to by publishing your Google Ads”, Mr Mallett responded as follows:

We – we publish ads to – to those people but that’s not necessarily the same thing to say that they are always the people that we want as clients.

182    When read in context, I do not accept the ACCC’s submission that Employsure’s Google Ads were directed to a wider class than employers. I understand Mr Mallett to be saying that employers are Employsure’s target audience but that is not the same as saying that all employers are necessarily sought by Employsure as clients. This was made clear by Mr Mallett later in his evidence when he drew the distinction between employers simply seeking free advice as opposed to employers seeking free advice and who might also become clients of Employsure:

But my point is confined to a circumstance in which the employer is seeking free advice from the Fair Work Ombudsman and that’s how you understood my question, wasn’t it?---I believe I did – that we were seeking to get those people to click on our ads. I think that was the question and the answer is not unless they might want to be a client. If they simply wanted free advice and nothing else our intention would be to not have them come to us or at least at some stage in the process with us, identify that they’re not going to be clients.

183    Mr Mallett stated that the free advice helpline gave Employsure’s potential clients the opportunity to experience the nature and quality of Employsure’s advice before entering into a formal contract. In this way, the free advice helpline also performed a marketing function in the sense that, if a potential client found that advice to be useful, the person was more likely to agree to meet with one of Employsure’s BDMs to discuss Employsure’s services. Mr Mallett was closely cross-examined on this topic. When it was put to him that the primary function of the helpline was to market Employsure’s services to potential clients, Mr Mallett responded:

… The – the overall, or overarching, function of the helpline is indeed marketing, in a number of perspect – in a number of respects. And the – even the advice element to it is a form of marketing in that, in providing advice, we are showing ourselves to give advice of a certain standard. And even if the person doesn’t want or need a meeting with us at that stage, they’re left with a good feeling about Employsure. That’s undoubtedly the overarching intent, along with the other marketing purpose, which is to seek to book an appointment with those who might become clients.

Well, can I say that, one of my questions was going to be, and you may have pre-empted it, do you agree that your advice is a form of marketing?---Yes. I agree. It – in – as I was once told in my career, we all work in sales to some degree, and so, yes, everything that we do is a form of putting our best foot forward to – to show what we can do for clients.

184    Earlier in his cross-examination, Mr Mallett described the purpose of the helpline as “first of all to provide them with some support to show the level of service that we can provide” and to enable potential customers “to consider whether our services might be useful for them”. Later, Mr Mallett said:

We want to have the ability to speak to them, show them a, if you like, a taste of the service that would could provide to them, and we will subsequently explain the fuller version of what we do and the costs associated with that.

185    Several times in his cross-examination, Mr Mallett explained how the free advice service was set up separately from Employsure’s paid services, so as to separate out the Employsure commercial brand. He expressly denied that Employsure set out to mislead consumers by not including the name Employsure in the advertising. I accept that evidence.

186    The ACCC relied upon this evidence as supporting its claim that the Free Advice Representation was misleading and deceptive (or likely to be so) because that is not how the helpline was represented to consumers in the Google Ads and landing pages. For reasons which will be given below, I do not accept that claim.

187    Mr Mallett gave a detailed description of the usual content of an initial meeting by a potential client with one of Employsure’s BDMs. This generally entailed a discussion of the length of any contract, the particular contract tier, the services to be provided under the contract, the total contract price and the frequency and amount of payments. He described how some clients sign their contract with Employsure during the initial face-to-face meeting and, on other occasions, a copy of the contract is subsequently emailed to the client for their review to sign at their convenience or at a subsequent meeting with Employsure.

188    Mr Mallett gave detailed evidence concerning Employsure’s standard contracts (copies of which were annexed to his affidavit), which did not change during the period 12 November 2016 to October 2018. Mr Mallett was personally involved in formulating the standard contract terms in place during this period.

189    I accept Mr Mallett’s evidence that there were legitimate commercial reasons for Employsure to not change the impugned terms during the period the subject of the ACCC’s case. With specific reference to the particular terms of the standard contract which are the subject of the ACCC’s claims of unfair contract terms, Mr Mallett’s evidence may be summarised as follows.

190    As to the no termination clause, Mr Mallett said that its principal commercial justification is “to ensure that, absent fundamental breach by other party, the contract remains on foot for the term agreed”. He said that this protects Employsure against the possibility of a client terminating a contract before Employsure has recovered the costs it has incurred in providing services. He further explained that Employsure undertook significant work for a new client in the initial phase of the contract period and at significant cost (including the costs associated with the compliance review, as well as out-of-pocket expenses such as travel, stationery and other document production costs). In circumstances where most of Employsure’s clients paid monthly fees rather than up-front fees, Mr Mallett said that in the initial phase of the contract period there was a mismatch between the costs incurred by Employsure in servicing the client and the receipt of contract fees.

191    Mr Mallett added that another reason for not permitting early termination related to the volume of contracts Employsure had on foot with clients at any point in time, each having differing levels of service requirements. He said that the aggregate level of demand cannot be predicted with certainty by Employsure in advance. To cater for this, Employsure had to maintain a sufficiently large workforce and other resources to meet the level of services that could be required over a lengthy period from all Employsure’s clients. He said that this resulted in Employsure having a high fixed cost base. He added that the no early termination clause helped Employsure mitigate the risk of not being able to meet those costs. Mr Mallett was closely cross-examined on this evidence, but I accept his explanation as providing a legitimate commercial justification for the clause. I refer in particular to the following response from Mr Mallett in cross-examination:

Well, I suggest to you that that’s a more appropriate means of protecting your commercial interest than a no early termination clause without that qualification?---As I say, we have learned that and that’s why we have adjusted it. But the contract as it was was built upon the basis that, at the beginning of 2012, middle of 2012, I should say, when the terms first came into effect, we only had 100 clients and had no idea – we didn’t make a profit until the end of the financial year in 2015. It took us a number of years to get to profit and we had no idea what the metrics of the business would be to get us to profit.

192    As to automatic renewal, Mr Mallett said in cross-examination that its business justification is that his “experience of emailing and contacting clients is that it is actually administratively very difficult to contact and get active responses from a 25,000-plus client base”. He accepted that an email could be sent asking clients to express any objection to an increase in price but that Employsure believed that “it is better to put it up front that that is what will happen to the client upon renewal so they can see it there on agreement in the contract”. I accept that evidence. Mr Mallett amplified this by saying that, as at 30 May 2019, Employsure had approximately over 20,000 contracted clients in Australia, with approximately 1,000 of them renewing their contracts each month. This had significant resource implications for Employsure and staff costs.

193    With reference to the clause in Employsure’s contracts regarding automatic price increases on contract renewal, Mr Mallett explained that this provision was intended to protect Employsure against the effects of inflation over the long term. The proposed increases are designed to be consistent with CPI increases over time.

194    As to the clause relating to default in payments resulting in the total contract balance price becoming payable immediately in full, Mr Mallett repeated and adopted the reasons advanced in respect of the clause prohibiting early termination. In particular, he emphasised that Employsure’s contract for services is a contract for an upfront sum paid by clients in instalments over the course of the term. He added that the clause was justified because Employsure’s consultancy service represented a large portion of the costs in providing services to Employsure’s clients and those costs were incurred early in the contract term. Mr Mallett said that the clause was “intended to protect Employsure from the commercial risk of clients stopping payment early in the contract term after these costs had been incurred by Employsure but not yet covered by the payments made by the client”.

195    When it was put to Mr Mallett in cross-examination that in 2015 the company was voted as Australia’s fastest growing company and it was quite profitable and successful at that time, with the implication that it should have changed the impugned contract terms earlier than it did, Mr Mallett responded by saying:

… We reached profitability in 2015, we still had significant – we weren’t cash profitable at that point, I should add, but we still had significant loans to pay back, and so forth. So we were becoming established as a business I would say, and that has been a process that we’re continuously on.

I accept that evidence.

196    Mr Mallett described the role and responsibilities of Employsure’s BSCs, which he divided into Inbound and Outbound roles. Outbound BSCs are responsible for contacting potential clients by telephone and email. They do not give advice to potential clients. Outbound BSCs make calls to employers who have previously contacted Employsure or have had some other interaction with the business, including downloading information from Employsure’s website. Employsure had in place practices, policies and procedures which applied to BSCs. These matters included Employsure’s company values, which included a requirement that BSCs conduct business honestly. Mr Mallett annexed to his affidavit a copy of Employsure’s current values and behaviours guide dated June 2019, together with an earlier version of the document that was used from 2015 to mid-2019.

197    Mr Mallett described a package of documents which were sent to all new BSCs. Those documents included an employee handbook which contained a company-wide code of conduct (a copy of which was annexed to his affidavit). The material also included a position description, which explicitly required the employee to adhere to Employsure’s honesty value. A customised code of conduct was also supplied to all BSCs, which included rules relating to “misselling” and misrepresentation. Mr Mallett annexed to his affidavit a copy of the code of conduct dated July 2016. Since March 2014, the code of conduct included the following statement with respect to what Employsure described as “Premier leads” (which refer to a consumer’s response to Employsure’s marketing actions):

4 Premier leads

I confirm that when contacting or speaking with potential new clients, who have come from a Premier campaign, I will ensure that I make it absolutely clear that I am a representative of Employsure Pty [sic] and not from Fair Work Australia (FWA) or any other related government body.

Moreover, if any potential new client gives me the impression that they believe that I am a representative of FWA, or that Employsure are in some way connected to FWA, then I will not allow them to remain under that misapprehension. I will make it perfectly clear to them that Employsure has no connection with FWA; that Employsure services are very different to those of FWA, and that I am speaking with them to offer an overview and to discuss the products and services available from Employsure.

And, if that should ever happen, then I will also always ask the potential new client whether they are willing to continue with the meeting in the light of the clarification that I have provided.

198    Mr Mallett said that BSCs were also supplied with a copy of Competition and Consumer Legislation Guidelines.

199    Mr Mallett described the induction and training provided to BSCs. He said that prior to around April 2018, this involved a standard two-week induction training. A list of training sessions attended by the inbound BSC team during the period 2016 to December 2018 was put in evidence, upon which Mr Mallett was cross-examined.

200    In addition to training courses, Inbound BSCs have at various times been provided with versions of Employsure’s BSC Guide and the BSC Script Book. Mr Mallett personally drafted the first Business Sales Guide, which described the role of an inbound BSC, Premier 1 leads, suggested script and how an inbound BSC should approach the “Pitch” stage of a call. He annexed to his affidavit a copy of the BSC Script Book dated December 2015, which included scripts for both Inbound and Outbound BSCs. He also supplied copies of a BSC Guide dated January 2017, the Employsure’s Inbound User Guide dated February 2017, and the BSCs script book dated June 2017.

201    Mr Mallett described how BSCs were remunerated by way of a base salary and a commission based on the value of business contracts signed. He elaborated upon this evidence at some length under cross-examination.

202    Mr Mallett separately described the role and responsibilities of BDMs, who attended meetings booked by BSCs with potential clients. He gave similar detailed evidence about induction, training and remuneration with respect to BDMs as he did with BSCs. Mr Mallett annexed copies of relevant materials to his affidavit. Mr Mallett was also cross-examined at some length on the subject of commissions paid to BDMs.

203    Mr Mallett described the role and responsibilities of Employsure’s consultants, who typically have tertiary qualifications in human resources, specialising in employment relations or some other relevant area such as employment law. He said that consultants are responsible for conducting an initial compliance review of a client’s business. He described the training given to consultants.

204    Mr Mallett described the role and responsibilities of Employsure’s advisors who operated the 24 hour Advice Line. As at June 2019, over 170 people were employed in the Employsure Advice Team in Australia and New Zealand. Mr Mallett described the processes which occurred when the helpline was called. He explained that some inbound calls were answered by Employsure’s “First Respondents”, who are client service representatives trained to determine where inquiries, including client advice inquiries, should be directed.

205    Mr Mallett described the general ongoing training provided to all Employsure employees, including access to the company’s online training program called “Litmos”.

206    Initially, the ACCC submitted that “Mr Mallett was not being candid” in respect of some of his evidence. When the Court invited the ACCC’s senior counsel to clarify what the ACCC’s submission was concerning Mr Mallett’s reliability and credibility, he asked for an opportunity to obtain further instructions. Subsequently, senior counsel confirmed that the ACCC’s position was that the Court should not accept some aspects of Mr Mallett’s evidence but “we don’t ask your Honour make some general adverse finding as to his credibility”. One matter on which the ACCC asked the Court to reject Mr Mallett’s evidence was his denial that the use of the keywords and the design of the Google Ads was done with the intention of misleading consumers.

207    I found Mr Mallett to be an impressive witness. He gave his evidence thoughtfully and honestly. He was also responsive in what proved to be a searching cross-examination. He displayed an impressive knowledge and command of all aspects of Employsure’s operations, which may reflect his extensive personal involvement in establishing and growing Employsure’s business. The ACCC quite correctly did not press its initial request that the Court make an adverse finding regarding Mr Mallett’s credibility. I accept all his evidence, including his evidence concerning the reasons why Employsure selected particular keywords and designed the Google Ads as it did. I reject the ACCC’s criticisms of Mr Mallett’s denial that the selection and design were done with the intention of misleading consumers. Mr Mallett gave a convincing explanation for why Employsure acted in the way that it did, which did not appear to contravene any regulatory prohibition. As previously mentioned, I also accept Mr Mallett’s explanation as to why Employsure did not change the impugned terms of its standard contract during the relevant period, which evidence provides a legitimate commercial justification for those terms.

(ii) Mr Nicholson’s evidence summarised

208    Employsure’s finance director, Mr Stephen Nicholson affirmed two affidavits and was cross-examined. That evidence, which I accept without reservation, may be summarised as follows.

209    Mr Nicholson has been employed by Employsure since early 2015. He was initially employed as Head of Finance and was subsequently appointed Finance Director in December 2018. He has more than 25 years of experience in the accounting and finance sector, including his work as a financial controller at various entities between 2001 and 2015 in the United Kingdom, Australia and Thailand. In addition to his professional experience, in 1996 he qualified as a Chartered Accountant and in 2017 he obtained an Executive MBA from the University of Sydney (where he has also completed continuing education in taxation law and corporations law).

210    Mr Nicholson described the consultancy services which Employsure provided, its advice service, its representation service and the insurance policy it offered. Mr Nicholson gave detailed evidence concerning the costs incurred by Employsure in providing these services. He divided the costs into various categories. First, he described Employsure’s fixed costs in the form of occupancy expenses for leased office space in Sydney, Perth, Melbourne and Brisbane in Australia, and Auckland in New Zealand. Secondly, Employsure incurs employee benefit expenses, such as salary costs and management and administrative staff costs. Thirdly, Employsure incurs stationery and other costs in producing new documentation as part of a compliance review, as well as travel costs. Fourthly, Employsure incurs costs to acquire and maintain its information technology infrastructure etc. Finally, Mr Nicholson said that Employsure incurs substantial marketing and business development costs in order to acquire its clients. He described how these five categories of costs were dealt with in Employsure’s Annual Reports, including the Annual Reports for the financial years ending 31 March 2016, 31 March 2017 and 31 March 2018, copies of which were annexed to his affidavit.

211    Mr Nicholson described Employsure’s subscription business model, as opposed to a fee for service model. He said that consultancy services were typically provided at the start of a client’s contract term, even though some clients required additional consultancy visits thereafter. He said that clients’ businesses often become larger and more complex during the term of their contract and that a client’s business size and staff numbers also often increased during the term of the contract. He explained that, apart from annual CPI increases which apply to renewal of contracts entered into during the period 12 November 2016 to October 2018, Employsure did not seek to adjust contract fees during the contract term or upon renewal of the contract.

212    Mr Nicholson explained the necessity for Employsure to maintain sufficient staff in order to provide services as and when required by clients at any point in time, even when there was high demand from all clients. Because of the skilled nature of its workforce, Mr Nicholson explained that it was not possible for Employsure to match employee numbers to actual client activity or requirements on a reactive basis. Instead, Employsure had to have sufficient staff available at all times to cater for all potential activity based on assumed or expected requests for advice or representation.

213    For these reasons, Mr Nicholson said that Employsure’s operating costs effectively constituted fixed costs. Employsure had to commit to these costs for the length of a client’s contract term, and any renewed term.

214    At [31] of his first affidavit, Mr Nicholson said:

As a result of the matters outlined above, it is not possible for Employsure to accurately apportion specific costs to particular client contracts or to specific services, and Employsure does not do so for its internal accounting purposes. Employsure does record all actual usage by individual clients of the Advice and Representation services throughout the contract term, however, this is done to maintain a record of the advice given and the individual client's circumstances. These records do not include a record of actual time taken for each activity. Therefore, it is not possible for Employsure to accurately calculate the cost of service at an individual contract level.

215    Mr Nicholson explained that Employsure’s income is principally derived from contract payments by clients in exchange for the provision of services and that the income is recorded as “revenue” in the Annual Report. There is also a small proportion of income which is recorded in the Annual Reports as “consulting fees” and “commission fees” in managing insurance claims.

216    Mr Nicholson described the manner in which Employsure recognises revenue on its contracts, which he described as Employsure’s revenue recognition policy.

217    Mr Nicholson provided the results of an analysis he conducted to calculate the total average hours of service provided to Employsure’s clients on each contract term in each month of the contract term. This data showed that a higher proportion of hours of cumulative total services (including consultancy, advice and representation) is consumed in the first four months of the contract term with consistent levels of hours of service for advice and representation being consumed over the remaining months of the contract term.

218    Mr Nicholson described the methodology he used to determine the average client usage assumptions in respect of Employsure’s advice service, consultancy service and representation service.

219    Under cross-examination, Mr Nicholson was asked to explain why Employsure left it to January 2019 to change the terms in cll a, b and e of its standard form contract:

Well, in 2015, 2016 and 2017, Employsure could have introduced a term of the kind that you introduced in January 2019, I take it?---It could have, but we – it was a different business then. It wasn’t as – it wasn’t profitable. It wasn’t cash flow positive then. So it wasn’t in a position to be able to offer that kind of term.

220    Later, Mr Nicholson provided the following additional response:

… Why couldn’t you have introduced a term, in 2015 or 2016, which provided that the client could terminate after, say, month 4 on the payment of a termination fee of the kind that you’ve recently introduced?---Because this – the costs you’re referring to there are the costs of delivery of service. The other – the other main costs is, the cost of acquisition reached with those clients, which has occurred up front – which isn’t included in these percentages.

221    When Mr Nicholson was asked why a clause permitting early termination on payment of a termination fee was not introduced in 2016 or 2017, he said:

Why couldn’t you have introduced such a term back in 2016 or 2017?---Because, as I said earlier, the business was a lot more – it wasn’t as profitable them and didn’t have as – the sufficient cash flow. It’s a lot bigger business now, we can afford to make those changes as the business develops, and we change our terms in relation to – in to feedback from customers and legal advice.

222    Finally on this topic, Mr Nicholson gave evidence as follows:

During the period that these contracts were provided by Employsure that had the no early termination term, why couldn’t Employsure have introduced, for example, after month 4, in respect of each of the one, three and five-year term contracts, a provision whereby the client could terminate early on the payment of a termination fee?---We could have introduced do it back then. We didn’t because of where the business was in its development and its growth. It wasn’t – we didn’t – we were just learning to understand our client base. We were learning to understand how – how our terms were working for them. And we – we developed our terms over time. So we have developed and we have changed our terms now. We wouldn’t have been in the position back in 2015 or 2016 to make that change then because of where the business was in its – in its development.

223    The ACCC also relied upon answers given by Mr Nicholson in cross-examination concerning why Employsure delayed so long in changing the relevant clauses. For example, in relation to cl b (unilateral price increase on automatic renewal), the ACCC pointed to the fact that Mr Nicholson agreed that Employsure could use the email which it sent to clients notifying them of the imminent termination of the contract that a price increase was proposed, but it did not do so even though he accepted that it would not have been difficult to add that to the email.

224    When asked about Employsure not changing cl e (payment default) until January 2019 and when it was put to him that Employsure could have introduced that change earlier, he said:

… We could of, but as – as I’ve explained before, it – it – you know, the business was – was at a certain point in its development, and each of these changes take time. And because we weren’t – we weren’t enforcing that – those particular terms – that particular term, we didn’t change it in – in the contract. Our – our business practice has always been that we don’t enforce the – the remaining contract balance if a client needs to terminate early.

225    The ACCC also relied upon Mr Nicholson’s evidence in cross-examination concerning Employsure’s cash flow position in the period 2015-2019 and, in particular, the following exchange:

And those two years, being 2019 and 2018 showed significant increases in the net cash inflow position for the company as compared with 2017 in prior years?---Yes, that’s correct.

And that would suggest that there had been significant growth in the company for the financial year 2018 compared to earlier years?---That’s correct.

All right. Now, the – the cash flow position – or the net cash flow position in 2019 is about $800,000 more than it was in 2018?---That’s correct.

And don’t you agree that the cash flow – or the net cash flow position of the company by the end of financial year 2018 permitted the changes of the kind that your company made to its terms in February 2019?---That’s correct.

226    At the end of his first affidavit, Mr Nicholson set out the results of his review of Employsure’s dealings with TDB, ACO and BPP. In the case of TDB, Mr Nicholson said that, based on his review of Employsure’s file concerning this client, Employsure offered it a reduction to a one-year term on 28 September 2017 and the offer was rejected. On 21 November 2017, Mr Nicholson received an email from Employsure’s credit control team in relation to TBD. The email attached a legal authority review for that client which was used by Employsure to instruct external lawyers to commence legal proceedings. The particular legal authority review for TDB stated:

Client originally [sic] reason for requesting to cancel is that he didn't see value for money and felt he was mislead [sic] that we were FairWork. Our client experience specialist listened to the original call recording and our sales had clearly explained that we were not FairWork and explained our services prior to booking the BDM visit. The ES contract was signed at POS infront [sic] of the BDM. The contract included a SafeCheck. The client later signed on for WHS at the SafeCheck, once again signing at POS. The client's accountant is now claiming that the client did not sign the contracts or the direct debit form.

227    Employsure sent three letters of demand to TDB in December 2017 and January 2018, to which no responses were received.

228    Mr Nicholson sent an email on 26 February 2018 to the credit control team in which he asked that a default be registered for TDB and its debt be written off.

229    As to ACO, Mr Nicholson described various correspondence exchanged with Employsure’s credit control team in which he was requested to approve an early termination fee. On 3 June 2016, Mr Nicholson approved one unpaid payment as an acceptable early termination fee in ACO’s case. He noted that an amount of $352.96 was paid on 7 November 2016 by ACO as an early termination fee and that the contract was then terminated.

230    As to BPP, Mr Nicholson described his involvement in assessing a request by Ms Byrne that BPP’s contract be cancelled as a “buyer’s remorse case”. This was a phrase used by Employsure staff to refer to an agreement by Employsure that it would not attempt to recover any amount payable from a client where no service had been provided and the request to cancel was made within two months of the contract having been signed. On 24 August 2015, Mr Nicholson approved Ms Byrne’s request and he instructed her to cancel the contract and to deduct the value of the contract from the total new business sales numbers for the month.

231    As noted above, I found Mr Nicholson to be a truthful and responsive witness. I accept his evidence without reservation, including his explanation as to why Employsure did not change the impugned terms of its standard contract until 2019. I find that Mr Nicholson’s evidence strongly corroborated that given by Mr Mallett concerning the legitimate business reasons for not changing those terms earlier.

PART D: CONSIDERATION AND DETERMINATION

232    To avoid adding unnecessarily to the length of these reasons for judgment, I will summarise and address the ACCC’s primary submissions in this section, and explain why I consider that it has failed to establish any of its five causes of action.

(A) GOVERNMENT AFFILIATION REPRESENTATIONS

(a) Legislation and legal principles

233    Section 18 of the ACL provided:

18    Misleading or deceptive conduct

(1)    A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

(2)    Nothing in Part 3-1 (which is about unfair practices) limits by implication subsection (1).

Note    For rules relating to representations as to the country of origin of goods, see Part 5-3.

234    Sub-sections 29(1)(b) and (h) of the ACL provided:

29    False or misleading representations about goods or services

(1)    A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:

     (a)    …

(b)    make a false or misleading representation that services are of a particular standard, quality, value or grade; or

…

(h)    make a false or misleading representation that the person making the representation has a sponsorship, approval or affiliation; or

…

235    The parties were in substantial agreement concerning the relevant legal principles guiding the meaning and application of ss 18, 29(1)(b) and 29(1)(h) of the ACL.

(i) Section 18 of the ACL

236    Conduct may contravene s 18 if it has a tendency to lead into error (Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; 250 CLR 640 at [39]). It is unnecessary to show actual deception to establish a contravention of s 18 (Google Inc v Australian Competition and Consumer Commission [2013] HCA 1; 249 CLR 435 at [6]). It is unnecessary to establish any intention on the part of the respondent to engage in the impugned conduct (Google at [9]).

237    Importantly, it is necessary to consider the effect of the relevant representation upon ordinary and reasonable members of the relevant class of consumers to whom the representation is made (Campomar Sociedad, Limitada v Nike International Ltd [2000] HCA 12; 202 CLR 45 at [102]-[103]; Google at [7]). Where the persons in question are not identified individuals to whom a particular misrepresentation has been made but are members of a class to which the conduct in question was directed in a general sense (as is the case here), it is necessary to isolate by some criterion a representative member of that class (Nike at [103]). Whether the conduct is misleading or deceptive (or likely to be so) is to be evaluated by reference to an ordinary or reasonable member of that class (Nike at [100]-[103]).

238    The effect or likely effect of the impugned conduct is to be evaluated in context with regard to the circumstances in which the impugned conduct is said to have occurred. Particular statements or representations must not be divorced from the circumstances in which they were made, which includes circumstances that may qualify the character of the representations (Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; 218 CLR 592 at [39] and Specsavers Pty Ltd v Luxottica Retail Australia Pty Ltd [2013] FCA 648 at [49] per Griffiths J).

239    At this point the parties approached the matter differently. The ACCC submitted that the “reasonable members” of a class include the inexperienced as well as the experienced, and the gullible as well as the astute, citing Sportsbet Pty Ltd v Crownbet Pty Ltd [2018] FCA 1045 at [85]. The assessment as to whether the conduct is misleading or deceptive or likely to mislead or deceive must exclude reactions to the conduct that are extreme or fanciful (citing Nike at [105]). This hypothetical construct avoids using the very ignorant or the very knowledgeable to assess the effect or likely effect; it also avoids using those credited with habitual caution or exceptional carelessness; it also avoids considering the assumptions of persons which are extreme or fanciful (citing Flexopack SA Plastics Industry v Flexopack Australia Pty Ltd [2016] FCA 235; 118 IPR 239 at [261] per Beach J). Whether the hypothetical, ordinary or reasonable member of the class is likely to be misled or deceived may involve questions as to the characteristics or knowledge properly to be attributed to members of the class (citing TPG at [45] and [53]). The ACCC submitted that, relevantly, the objective characteristics that one attributes to ordinary or reasonable members of the relevant class may differ depending on the medium for communication being considered; here, online advertisements in Google search results.

240    In contrast, Employsure relied upon what Gibbs CJ said in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; 149 CLR 191 at 199, where his Honour observed that the predecessor provision of s 18 (i.e. s 52 of the Trade Practices Act 1974 (Cth)) did not impose burdens which operated for the benefit of persons “who fail to take reasonable care of their own interests”. In that case, Mason J reasoned that, whilst it was unlikely that an ordinary purchaser of domestic furniture would notice the very slight differences in the appearance of the two relevant items of furniture, nevertheless such a prospective purchaser could reasonably be expected to attempt to ascertain the brand name of the particular type of furniture on offer (at 210-211). These observations by Mason J were referred to approvingly by the plurality in Nike at [102]. It is also important to note that in Puxu at 209, Mason J noted that the class protected by the provision “must vary according to the facts of each case”. Accordingly, in the particular facts there, where the product the subject of the contravening conduct was the sale of an expensive item of furniture, Mason J reasoned at 209 that with “furniture of this price range in the order of $1,500 for a three-piece lounge suite one would in the ordinary course expect persons within the admittedly wide range of potential purchasers to exercise somewhat more vigilance than may be the case for the purchase of items of less financial significance having less impact on the appearance of the home”. As will be developed below, I consider that these observations are particularly apposite (by way of analogy) with the facts and circumstances in the present proceeding where the relevant class of consumers is business owners, including small business owners, who use the internet to seek employment related advice.

241    While it is true that the nature of an erroneous assumption underpinning a claim of misleading or deceptive conduct is a relevant and sometimes decisive factor, in an assessment of the reactions or likely reactions of the “ordinary” or “reasonable” members of the class of prospective purchasers of a mass-marketed product for general use (such as athletic sportswear or perfumery products), “the court may well decline to regard as controlling the application of s 52 those assumptions by persons whose reactions are extreme or fanciful” (Nike at [105]).

242    The following observations of Colvin J in Australian Competition and Consumer Commissioner v Geowash Pty Ltd (subject to a deed of company arrangement) (No 3) [2019] FCA 72; 368 ALR 441 at [622]-[623] provide a helpful summary of the approach to be taken in a s 18 case in which gullibility is relevant (noting that an appeal has been lodged in that matter):

There are various statements in the cases concerning whether the views of the not so intelligent, the extremely stupid or unusually gullible or those who are guided by misconceptions are to be disregarded when it comes to evaluating whether particular conduct has a tendency to lead those who make up the audience for the conduct into error. The evaluation as to whether conduct has a tendency to lead into error must be undertaken objectively having regard to the characteristics of a reasonable member of the class of persons to whom the conduct is in fact directed (irrespective of the intentions of the party engaging in the conduct as to who may comprise the audience). This is the case both where the audience is the public in general and where the audience is a particular identifiable person and therefore a class of one.

If the audience for the conduct in issue comprises the less educated, the gullible or those prone to misconceptions then a determination as to whether the conduct is misleading or deceptive is to be undertaken in that context. The legislation does not afford protection for a member of the audience who responds unreasonably, but unreasonableness is to be evaluated having regard to the characteristics of the audience members in the particular case.

243    It is a question of fact whether a representation is made in the terms alleged, having regard to what was said and done against the background of all relevant surrounding facts and circumstances (Puxu at 198-199). It is also a question of fact whether conduct is misleading or deceptive, or likely to mislead or deceive, which is to be resolved by consideration of the whole of the impugned conduct in the circumstances in which it occurred (Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; 238 CLR 304 at [24]-[25], [102] and We Buy Houses at [53] per Gleeson J). Authorities have illustrated that conduct may be misleading if it is likely to entice members of the relevant class of consumers into a “marketing web” (TPG at [48] and [50]), or to create a mistaken impression so that a consumer “opens negotiations” or “invites approaches” (see Homart Pharmaceuticals Pty Ltd v Careline Australia Pty Ltd [2017] FCA 403 at [30]). The statutory proscription is not contravened merely because members of the relevant class of consumers “would be caused to wonder whether it might not be the case that two products come from the same source” (Puxu at 210 per Mason J). Moreover, whether a particular representation is false, misleading or deceptive (or likely to be so) is a question of fact which should not be complicated or over-intellectualised (We Buy Houses at [57] per Gleeson J).

244    Another significant point of difference between the parties in the present proceeding is the relevant class of consumers to whom the impugned representations were directed. The ACCC contended that the particular class is a broad one, constituted by members of the public who searched for employment-related advice on the Internet, which class included both employers and employees. In contrast, Employsure contended that the relevant class is a narrower one, constituted by business consumers or employers seeking advice on employment-related matters.

(ii) Sub-sections 29(1)(b) and (h) of the ACL

245    In contrast with the terms of s 18, these provisions use the term “false or misleading” rather than “misleading or deceptive”, but it is established that there is no material difference (see Coles at [40] per Allsop CJ). No issue of “likely” to mislead or deceive arises under these provisions.

246    Justice Davies helpfully summarised some general principles concerning s 29 in Insight Radiology Pty Ltd v Insight Clinical Imaging Pty Ltd [2016] FCA 1406 at [143] (which principles substantially overlap with those relating to s 18):

(a)    conduct is, or is likely to be, false or misleading if it has a tendency to lead into error, notwithstanding that there was no intention to mislead or deceive;

(b)    whether the conduct is, or is likely to be, false or misleading is objectively determined by reference to the class of the public likely to be affected by the conduct;

(c)    the issue is whether a “not insignificant number” of “reasonable” or “ordinary” members of that class of the public would, or are likely to, be misled or deceived; and

(d)    although it is not necessary to demonstrate actual deception, conduct that may cause some confusion or uncertainty is not necessarily false or misleading (see Google at [6] and [8]).

247    In Australian Competition and Consumer Commission v Optell Pty ltd [1998] FCA 602; ATPR 41-640, the ACCC unsuccessfully alleged that the respondents had contravened the predecessor provision of s 29(1)(h) (i.e. s 53(d) of the Trade Practices Act) in promoting a paid registration service called the “Australian Business and Companies Guide”. The respondents represented that the registration with them of a business would give supply purchasing departments confidence in the services they acquired. The distributed material included application forms and invoices which the ACCC contended implied that their publication had some form of government affiliation, contrary to ss 53(aa), (c), (d) and (f) of the previous legislation.

248    In Optell, the Court accepted that because the contents of the application forms inferred some form of government affiliation and that their distribution constituted conduct that was misleading or deceptive, the ACCC had established a breach of s 53(aa). This was because the services were not “Government services” and were therefore not of the represented standard or quality. But the Court rejected the ACCC’s claims that the conduct also contravened s 53(c) and (d). As to s 53(d), O’Loughlin J said that there was no scope to find that there was a “sponsorship approval or affiliation” because that “would import the existence of some third party and that is not the case here”. His Honour said that the respondents were not saying that they were a private organisation which had the sponsorship or approval or an affiliation with the Government, but rather they said that they were the Government.

249    In contrast, the ACCC’s claim regarding the Government Affiliation Representations is that, by those representations, Employsure represented that it is affiliated with, or is endorsed by, a government agency.

(b) The seven Google Ads

250    The seven Google Ads and the ACCC’s primary claims in relation to them are set out at [12] to [20] above.

(c) The relevant class of consumers

251    The ACCC submitted that the relevant class is members of the public who are searching for employment-related advice on the internet. Accordingly, the ACCC’s suggested class was not confined to business owners, but the class included business owners.

252    In response to Employsure’s claim that, by [2] and [3] of its amended concise statement, the ACCC had confined the relevant class to “business owners”, the ACCC said that when read in context those paragraphs were not so confined. The ACCC added that the generality of the search terms that resulted in the Google Ads being displayed made it clear that the relevant class is not limited to persons who had heard of Employsure and underscores that the relevant class is persons (not confined to business owners) searching online in relation to employment-related advice. The search terms included “fair work ombudsman” (Google Ad No. 1, No. 4 and No. 7); “fair work australia” (Google Ad No. 2); “fair work commission” (Google Ad No. 3); “australia government fair work” (Google Ad No. 5) and “australia fair pay” (Google Ad No. 6). Nothing about these search terms indicates that the class is narrowed to “business owners”, so submitted the ACCC.

253    In its oral submissions, the ACCC submitted that it was significant that Employsure did not refer to itself in the Google Ads. It submitted that this was “a deliberate marketing ploy” so as to encourage persons seeking free advice from an agency such as the FWO to call them, even if the cost of doing so was that Employsure had to deal with employees who were not its target audience. The ACCC described this as “the cost of doing business” in the course of Employsure seeking to have its Google Ads produce a significant flow of calls from employers. It submitted that Employsure did not want to use its own name in the Google Ads because it might discourage employers from contacting it. As will be explained below, I reject that submission.

254    The ACCC contended that Mr Mallett’s oral evidence as follows identified the class of persons to whom Employsure’s Google Ads were presented which supported the ACCC’s nominated class:

…I want to suggest to you that you do have the information because you are aware of the design of the ads, which I suggest to you are intended to appeal to persons who are searching for the Fair Work Ombudsman website, be they employers or employees?---No. The intention of the advertisements is to appeal to anyone seeking help, which may include people that are seeking the Fair Work Ombudsman website, but is also people that might be seeking information about the Fair Work Ombudsman may be involved in a wages dispute with the Ombudsman. There are a whole range of reason people might search, and we’re seeking to attract as much traffic as we can off that group of people.

255    The ACCC submitted that the relevant class of persons searching for employment-related advice on the internet would have:

(a)    access to a computer, smartphone or other such device (e.g. iPad) that is connected to the internet; and

(b)    some basic knowledge and understanding of computers, the internet and search engines (e.g. Google).

256    The ACCC acknowledged that there is a question whether persons in the relevant class are also to be taken to understand that Google search results include both organic results and paid advertisements. Even if this characteristic is attributed to the relevant class as a general understanding, the ACCC submitted that Google Ads 1 to 7 nevertheless conveyed an association with government. This was said to be so for two reasons. First, this is evident from the impugned aspects of the advertisements when viewed in context. Secondly, this is confirmed by evidence of persons who actually were misled.

257    The ACCC added that there is no evidentiary basis for any assumption that ordinary reasonable members of the class know that governments do not use Google Ads. It is common experience that governments engage in advertising campaigns of many varieties. The ACCC contended that this is not a case where only a careless or an “extraordinarily” or “unusually stupid” consumer would be misled by Google Ads 1 to 7 into thinking that the services were being offered by an entity that was, or was affiliated with and/or endorsed by, a government agency. The degree to which such misapprehension in fact occurred indicates that consumers in the present case are not “outliers”, so submitted the ACCC.

258    The ACCC contended that conduct may be misleading if it is likely to entice members of the target audience into a “marketing web” or to create a mistaken impression so that a consumer “opens negotiations or invites approaches” (citing TPG and Homart as referred to at [243] above).

259    I accept Employsure’s submission that the appropriate class is a narrower one, namely business owners who are employers and who search for employment-related advice on the internet. As explained above, that is effectively the way in which the ACCC initially described its case in its amended concise statement and I think it inappropriate that the class now be broadened in the manner belatedly advanced by the ACCC (see also [290]-[292] below).

(d) Misleading or deceptive?

260    The ACCC emphasised that the relevant context in which a statement is to be viewed in assessing whether it is misleading or deceptive, or is likely to mislead or deceive, includes both internal and external factors operative at the time the representation was made. For example, in Unilever Australia Ltd v Beiersdorf Australia Ltd [2018] FCA 2076 Wigney J stated at [20]-[22]:

The question whether conduct is misleading or deceptive, or is likely to mislead or deceive, is an objective question of fact that is to be determined on the basis of the conduct of the respondent as a whole viewed in the context of all relevant surrounding facts and circumstances. Viewing isolated parts of the conduct of a party “invites error”: Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 625 [109] (per McHugh J); Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at 341-342 [102] (per Gummow, Hayne, Heydon and Kiefel JJ).

Where the conduct or representation is in the form of words, it would be wrong to fix on some words and ignore others which may provide relevant context and give meaning to the impugned words. It is necessary to have regard to the whole context: Butcher at 638-639 [152] (per McHugh J).

The relevant context may include consideration of the type of market in which the goods are sold, the manner in which such goods are sold and the habits and characteristics of purchasers in such a market: see, generally, TPG Internet at 656 [52]; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199; Reckitt & Colman Products Ltd v Borden Inc (1990) 17 IPR 1 at 16-17; 1 WLR 491 at 509; Coles Supermarkets at [41].

261    Having regard to both the internal context of the Google Ads, and the external context in which they were conveyed (being external factors operative at the time that the representations were conveyed, and not subsequently), the ACCC submitted that representations were conveyed by the Google Ads that the promoted services were being offered by an entity that was, or was affiliated with and/or endorsed by, a government agency.

262    In its oral submissions, the ACCC urged the Court to give effect to the fact that the representations complained of were made in the course of advertising and that “much advertising is given little attention by consumers”. This is particularly so when the Google Ads which are delivered when a person uses a search term such as “fair work ombudsman” contain that term in the headline, which can then be clicked on immediately and the hypertext would take the caller through to, for example, the Fair Work Help landing page of Employsure. In other cases, a telephone number is displayed which enables the consumer to call immediately without reference to a landing page. In those circumstances, the ACCC submitted that “the time and effort and concentration that one might apply to these ads is probably not as significant or as great as one might apply in other circumstances where there are significant implications arising from the material that the consumer is reading and digesting”.

(i) Internal context

263    The ACCC contended that the Government Affiliation Representations were conveyed by the headline, other words and phrases in the Google Ad and the URL (which included “Fair Work Ombudsman”, “Fair Work Australia” or “Fair Work Commission”, being key government agencies dealing with workplace relations). By using these words (which included the names of government agencies), the Google Ads took on an “official” or “authoritative air”. This was reinforced by the use of these terms in their capitalised form because it suggests an agency, rather than merely a reference to the subject matter that the agency regulates. Employsure’s submissions regarding the absence of formal, “governmental” language in the Google Ads did not answer this point, so contended the ACCC.

264    The ACCC said that it was significant that none of the Google Ads referred to Employsure in the headline, or at all. Google Ads 1 to 6 all contain the name of a government agency as prominent words at the beginning of the headline.

265    The ACCC submitted that the Government Affiliation Representations were further conveyed by:

(a)    the URL www.fairworkhelp.com.au/Fair-Work/ being displayed in Google Ads 1 to 7 immediately under the headline;

(b)    the references to “free” advice, which appeared in all of the Google Ads, and which was expressed as “Free 24/7 Employer Advice” in relation to Google Ads 1 and 4 in particular; and

(c)    the reference to Employsure’s hotline as “the” advice service, or “the” free advice service, with the use of the definitive article reinforcing the alliance or the resemblance of the service to the FWO helpline.

(ii) External context

266    In addition to the statements conveyed on the face of the Google Ads themselves, the ACCC relied on the relevant external context in which the representations were made. It submitted that it is contextually relevant that Google Ads 1 to 7 were generated following an internet search for the terms “fair work ombudsman” (Google Ads 1, 4 and 7), “fair work Australia” (Google Ad 2), “fair work commission” (Google Ad 3), “Australia government fair work” (Google Ad 5) and “Australia fair pay” (Google Ad 6). Employsure knew that “fair work ombudsman”, “fair work Australia” and “fair work commission” were search terms commonly used by consumers searching for the FWO.

267    Another contextual matter (as referred to above) was said to be the fact that some of the Ads (Google Ads 1, 3, 4, 5 and 6) displayed a phone number which allowed consumers to call directly from the Google Ad. In such cases, the customer only had the search terms it had used and the information displayed on the Google Ad before speaking with an Employsure representative.

268    An additional contextual matter raised by the ACCC is that persons searching for employment-related advice on the internet and to whom Employsure’s Google Ads are presented are likely to have an immediate problem for which they require advice and assistance. The ACCC pointed to the following evidence given by Mr Mallett:

And do you agree that many of Employsure’s premier one leads fall into the urgent category?---Yes. A number of them do fall into what might be described as the urgent category.

And do you agree that as a result of many of them falling into the urgent category, they are likely to be persons looking for help and an immediate solution to their problem?---They may well be needing immediate help, hence the reason for calling, yes.

…

And I want to suggest to you that you were aware, when those ads were being published, that there was a real risk that persons reading those Google Ads might believe that the ads were published by a government agency?---Sorry, the – are we talking about the old ads subject to this proceeding.

Yes, the old ads – yes, the old ads, one to seven, that we looked at before?---I accept that there’s a risk of confusion but there was never intent to create any confusion.

Well, I suggest it was more than confusion, Mr Mallett, that there was a significant risk that persons would be misled?---I’m not sure I understand the distinction but I –I would say there’s a risk of confusion.

You don’t draw a distinction between confusion and misleading?---I – yes, I do, I suppose. That one seems to have intent, confusion, as I say, there was no intent.

But for that distinction, you would regard confusion and misleading as the same?---I – what I’m trying to say is that I accept and I know from the behaviours of people contacting us, and even today with these ads I know from these behaviours as well is that with Google advertising people contact you thinking that you might not be something that you have said you are in an advertisement. So notwithstanding everything that you see in that ad today, I know that as we speak we will be receiving phone calls today from people looking for resources which are not Fair Work Act help, they’re not Employsure, they’re not free 24/7 advice. The – the complexity of behaviours in response to Google Advertising is something that advertisers like ourselves are constantly looking at to seek to understand the ..... but I – I’m therefore accepting broadly that there can be confusion with Google Ads. We’ve tried to improve over time to reduce that confusion but it doesn’t change that there is still confusion.

269    The ACCC rejected Employsure’s claim that the presence of “.com” in the URL (and the absence of “.gov”) and the word “[Ad]” in the Google Ads detracts from or dispels the Government Affiliation Representations as part of the relevant context. Rather, the misleading impression created by the Google Ads was said by the ACCC to be a product of the following contextual matters:

(a)    the search terms that generate the Google Ads (being the context in which they were published in response to a search term used by the consumer);

(b)    the text of the Google Ads themselves and what is said there and what is not said there (as already noted, none of the ads refer to “Employsure” and Google Ads 1 to 6 contain the name of a government agency prominently at the beginning of the headline); and

(c)    the fact the FWO provides a similar free business helpline that provides free advice.

270    The ACCC emphasised that paid search results are published at the top of the page because such positioning gets attention, and once a user identifies the result that responds to their query, there is no need for them to keep searching.

271    The ACCC acknowledged that conduct is misleading or deceptive if it induces or is capable of inducing error. It is not necessary to show actual deception to establish a contravention of s 18 of the ACL.

272    Nevertheless the ACCC contended that it is not “wholly irrelevant” that some consumers were in fact misled into thinking that Employsure was affiliated with government. The ACCC pointed to the following evidence in support of that contention:

(a)    Representatives of the three small business owners who used a Google search thought that they were communicating with a government entity (variously and interchangeably characterised as “Fair Work”, “Work Safe, or “Department of Fair Trading”). While it is not known what particular version of Employsure’s Google Ad the representatives viewed, it is nonetheless relevant that Employsure’s style of Google advertising misled these consumers.

(b)    Employsure’s own internal documents demonstrate the frequency with which employees would click on the ads, and call through to Employsure. The number of employee interactions in November 2016 was “still very high”. The ACCC submitted that there is a reasonable basis to infer that a significant proportion of these individuals called Employsure in the mistaken belief they were contacting a government entity. Indeed, the ACCC submitted that this was the conclusion that Employsure’s own digital performance manager drew, when he said in November 2016 that the ads could be made “even more relevant”. On 30 January 2017, the same digital performance manager emailed Columbus (a digital marketing agency engaged by Employsure) stating that Mr Mallett had advised “to trial some creative on Fair Work Help vs. Fair Work to help reduce the number of Employees and increase leads as well as increasing our level of transparency that we’re a private organisation”. The Columbus representative responded on 31 January and stated that “… basically you would like to keep the attractive message although make more clear that Employsure is not a government related organisation?”. The Employsure digital performance manager replied with the following email:

Can the team come back with some options? The idea is to make clear that we’re not ‘Fair Work’ to reduce the number of Employees as there will be an increasing volume of employees with the increasing minimum wage rates close towards EOF.

(c)    Mr Mallett’s oral evidence as to the fact that employees (who are not “potential clients” of Employsure) are also regularly reviewing Employsure’s advertisements and contacting Employsure. Indeed, Mr Mallett conceded: “we do receive a volume of employees each day”. Similarly, it was Mr Nicholson’s evidence that, since he commenced with Employsure in March 2015, he was aware that Employsure routinely received calls from employees who were not prospective clients. In its oral submissions, the ACCC submitted that the Court should infer that the reason why a not insignificant number of employees contacted Employsure was that they, like employers, believed that the Google Ads had been published by a government agency.

(d)    The complaints received by the FWO, which caused the FWO to issue a media release, also demonstrate the scale on which members of the public were misled or deceived by Employsure’s Google Ads campaign connected with its landing pages, of which the seven Google Ads formed a part.

(e) Conclusions on Government Affiliation Representations

273    Viewing the seven Google Ads as a whole and taking into account both internal and external contextual features, I consider that the representations were not misleading or deceptive (or likely to be so) when viewed through the prism of a reasonable member of the relevant class. There is, of course, no express representation that any affiliation existed and the relevant question is whether an ordinary reasonable business owner would infer that such an affiliation existed, when all relevant circumstances are taken into account. The following features are significant.

274    First, it is made clear on the face of each of the seven Google Ads that they are advertisements, as is indicated by the word “Ad” which appears at the top of the advertisement adjacent to the hyperlink. An ordinary reasonable business owner, to whom should be attributed some knowledge of basic features of the internet and the Google search engine and its operations, would understand that this symbol demonstrated that the search result was a paid advertisement.

275    As previously mentioned, the ACCC placed great emphasis on the fact that the word “Employsure” did not appear in the Google Ads. In my view, the significance of that omission is overstated, particularly when reference is made to Mr Mallett’s evidence that even when the term “Employsure” was added in 2019, there was no material change in the number of employees contacting the business. The following matters are also important in assessing the significance of the omission.

276    Secondly, there are significant differences between the Google Ads and the organic search results linked to government agencies. The Google Ads are coloured differently from the government websites, which appear immediately below them. Moreover, the language used is quite different. For example, the government search results include language such as:

(a)    “Welcome to the Fair Work Ombudsman website. Information and advice about Australia’s workplace rights and rules”;

(b)    “The Fair Work Ombudsman promotes harmonious, productive and cooperative workplaces. They help employees, employers, contractors and the community to …”;

(c)    “News & media · Fair Work Commission logo ... Coverage · National employment standards · The Commission & the Fair Work Ombudsman”;

(d)    “Fair Work Commission. Australia’s national workplace relations tribunal”;

(e)    “Fair Work Commission is the national workplace relations tribunal. It is an independent body with power to carry out a range of functions relating to: the safety net ...”;

(f)    “Visit the Fair Work Ombudsman’s Consultation & cooperation page for detailed information about best practice consultation in the workplace”; and

(g)    “The Fair Work Ombudsman and Fair Work Commission (the Commission) (previously called Fair Work Australia) are independent government organisations”.

277    Thirdly, the domain description “.gov” appears prominently in both the FWO and FWC websites, clearly identifying them as government agencies, which is to be contrasted with Employsure’s Google Ads, which use the “.com” domain. I accept Employsure’s submission that ordinary reasonable business owners would understand the distinction between a “.gov” domain and a “.com” domain, which indicates the domain of a commercial organisation.

278    Fourthly, the Google Ads are, in their terms, directed to employers. This is reflected in the terminology used, such as “The Free Advice Service for Employers”; “The Advice Service Line for Employers”; “Free 24/7 Employer Advice”; “Business Owner HR Advice” and “Pay Rates for Your Staff”.

279    Fifthly, the words “fair work” have a broad descriptive meaning, which is not limited to particular government agencies such as the FWO or the FWC. Indeed, the expression reflects the name of the Fair Work Act 2009 (Cth). I also accept Employsure’s submission that the expression “fairworkhelp” is descriptive and advertises a place where advice may be obtained as to the meaning and operation of that legislation and other employment related matters. Furthermore, as indicated above, I accept Mr Mallett’s explanation as to how the use of the words “fair work” increases the Quality Score and accordingly reduces the cost of Employsure’s Google advertising.

280    Sixthly, although there is evidence that three witnesses who were associated with the three relevant small business owners mistakenly believed that they were dealing with a government agency when they used particular search words which took them to Employsure’s Google Ads or landing pages, the weight to be accorded to this evidence should not be overstated. As Employsure pointed out, there is no evidence to establish that each of the three relevant representatives was misled by one of the impugned representations. Mr Ottes’ evidence was that he could not recall whether he performed the Google search or whether it was someone else in the office that did it (see [413] below). Ms Richardson could not say precisely what search terms she entered or what she saw (see [374] below). Similarly, Ms Martindale was not entirely certain what search terms she entered and in any event it was not clear what results she was presented with (see [392] below). Further, Ms Richardson and Ms Martindale gave some evidence relating to Google Ads which falls outside the pleaded period. To my mind, of more evidentiary significance is the material which suggests that the vast majority of consumers who were presented with the Google Ads did not click on them. Presumably they were not led into error.

281    Seventhly, I accept Employsure’s submission that a reasonable business owner who wished to contact the FWO or FWC or other similar government agency would be expected to take reasonable steps to verify that they are calling the correct number. The point is well illustrated by Puxu and the observations of Mason J which are set out at [240] above. The object of the consumer protection provisions is not to protect persons who do not take reasonable steps in their own self-interest. As already highlighted, the Google Ads indicate on their face that they are an advertisement and from a body which, at the very least, does not clearly identify itself as a government agency. Moreover, it is notable that the Google Ads are closely followed by organic search results which explicitly relate to specific government agencies, such as the FWO or FWC.

282    For these reasons, I find that the ACCC has failed to establish that a not insignificant number of ordinary or reasonable members of the relevant class would infer that Employsure was, or was affiliated with and/or endorsed by government. Accordingly, the Government Affiliation Representations were not likely to mislead or deceive, nor were they false or misleading.

(B) USE OF KEYWORDS AND DESIGN OF GOOGLE ADS

(a) The 16 relevant Google Ads

283    The agreed facts relating to the operation of the Google search engine (see Annexure A to these reasons for judgment) are central to this part of the case. It will be recalled that the key aspects of this cause of action are the ACCC’s allegations that Employsure sought out search terms used by persons visiting the official websites of the FWO and FWC, bid on keywords that were the same as those terms and designed the 16 relevant Google Ads in a fashion so that the headline repeated or incorporated those keywords.

284    A central part of the ACCC’s case is that Employsure adopted a strategy which was designed to result in its Google Ads being presented to as many people as possible who were searching online for employment related advice (whether employers or employees) and to optimise the chance that such people would click on an Employsure Google Ad. The ACCC asked the Court to reject Employsure’s claim that it was only interested in employers contacting it. Although the ACCC accepted that employees were not part of Employsure’s target market, it emphasised that in fact many employees did click on Employsure Google Ads.

285    The ACCC explained that this cause of action went beyond the mere selection by Employsure of particular keywords as misleading or deceptive. The cause of action went wider than that and encompassed the use of relevant keywords (being keywords associated with known search terms used by the public to access government agencies) as part of the design of its Google Ads campaign. In oral address, the ACCC contended that its case was not confined “simply to the use or selection of the keywords”, but also that Employsure’s conduct “was liable to mislead because of the way in which these keywords, in conjunction with the design of the ads, was likely to mislead persons”. Later, the ACCC confirmed in its oral submissions that the use of the keywords was not a standalone aspect of conduct which it alleged to be misleading or deceptive, but needed to be looked at in conjunction with the Google Ads. In response to Employsure’s claim that there was no independent complaint by the ACCC regarding the keywords, the ACCC pointed to [4] and [14] of its amended concise statement.

286    The ACCC claimed that the following matters supported this part of its case:

(a)    Employsure’s admission in [3(b)] of its concise response that its search engine marketing involves requesting that Google include an advertised link or “Google Ad” when an internet user enters particular search terms (i.e. keywords) in Google, and making a payment to Google in the event that an internet user clicks on the Google Ad.

(b)    Employsure engaged a digital marketing agency, Columbus, to start a “pay per click” campaign, which it closely monitored as is reflected in Employsure’s budgetary evidence.

(c)    In late 2015, Columbus provided Employsure with a report which identified the number of visitors to the websites of the FWO and FWC, in comparison with various other industry sites, which included two of Employsure’s landing pages as well as its main website. Columbus identified the top referring search terms for what it described as the “HR industry” as including “fair work Australia”, “fair work”, “fairwork”, “fair work ombudsman” and “fair work commission”.

(d)    In February 2017, Columbus provided Employsure with statistics concerning the number of visits made by the public to the FWO and FWC websites and the most frequent search terms used in accessing those sites online. This report was emailed to Employsure on 18 February 2017. The ACCC emphasised that Columbus described the FWO as a “competitor” in this context. It also relied upon Mr Mallett’s evidence under cross-examination that in early 2017 Employsure regarded “fair work” as a “highly converting term”. He explained this as meaning that the ads show up with a higher frequency and that people seeing the ads click on them at a higher frequency than other converting terms, such as “redundancy, workplace relations, bullying”.

(e)    With the information provided by Columbus during the period February 2017 to 30 November 2018, Employsure bid on keywords associated with government agencies as a part of the design of its use of Google Ad campaigns. Those keywords included “fair work commission”, “fair work Australia”, fair work”, “fwc”, “fair work ombudsman”, “fair work Australia advice line”, “fair work Australia helpline”, “call fair work Australia” and “contact fair work commission”. There is no dispute that between 10 August 2016 and 30 November 2018, some consumers who searched for “fair work ombudsman” and “fair work commission” and other similar keywords selected by Employsure were presented with one or more Employsure Google Ads.

(f)    The ACCC relied upon Mr Mallett’s evidence in chief that Employsure included keywords associated with a particular Google Ad to increase the likelihood that its advertisements would be presented to, and clicked on by, the searcher. Moreover, Mr Mallett accepted under cross-examination that the relevant keyword that someone searches for might appear in the ad itself.

(g)    Similarly, if a person searched the words “fair work commission” this might also appear in the Google Ad headline, as occurred with the third Google Ad (see [14] above). Similarly, the URL of “fairworkhelp.com.au” might also have been presented as an aspect of such an advertisement.

(h)    The ACCC invited the Court to reject Employsure’s explanation for the selection of its keywords. The ACCC emphasised Employsure’s acknowledgement that it was aware of certain search terms being used frequently by online visitors to the FWO and FWC websites. Those search terms included the terms set out at (e) above. The ACCC also submitted that for Employsure’s relevant conduct to be misleading, it was not necessary for the ACCC to demonstrate that Employsure intended to mislead.

(i)    Finally, the ACCC relied upon Mr Mallett’s evidence under cross-examination and his response to propositions which were put to him that Employsure’s ads could have been designed so as to avoid a risk of being misleading. For example, when it was put to him that an ad could include the words “Employsure can help you with Fair Work Ombudsman advice”, he said that he would need to look at that possibility because there were limitations about how many words can appear in a headline”. When it was further put to Mr Mallett that even if those precise words were not used, Employsure could have indicated in the headline that it gave assistance in relation to a particular type of advice, Mr Mallett accepted that Employsure could have been mentioned in the headline.

287    In its oral submissions, the ACCC submitted that Employsure wanted to get the attention of persons searching for the FWO for free advice and that to do so the Google Ads needed to be designed in a way to convey to the consumer that they had identified a search result that promoted free advice and also to convey that it was a publication promoted by the FWO. It pointed to the use of the words “Fair Work Ombudsman” and similar terms in the headline. The ACCC contended that a deliberate decision was taken not to promote Employsure as the provider of the free advice because “that would run the risk that employers would not be enticed to call or contact Employsure because they were seeking to access the Fair Work Ombudsman website”. Accordingly, it submitted that it was “an irritant” for Employsure to have to bear the cost of having to deal with employees, but it treated this “as a cost of doing business which was significantly outweighed by the revenue that was being generated by employers who were contacting the helpline”.

(b) Conclusions concerning use of keywords and design of Google Ads

288    Employsure raised the following pleading point in relation to the ACCC’s case. In both its amended concise statement (at [4]) and the amended originating application ([2] of the declaratory relief sought), the ACCC alleged that Employsure deliberately used keywords in a manner which was liable to mislead the public that it was, or was affiliated with and/or endorsed by, government. In its opening oral submissions, the ACCC summarised its claims in relation to the use of keywords without any reference to deliberateness. Employsure emphasised that the ACCC should be limited to its pleaded case, with the consequence that the central allegation is that Employsure deliberately used keywords of a particular nature in its Google Ads campaigns. Employsure rejected the ACCC’s claims that the terms of [14] of the amended concise statement changed the position. That paragraph stated:

14    Since at least February 2017 to 30 November 2018, by using keywords associated with government agencies as part of the design of its use of Google Ads, in circumstances where Employsure was aware of the matters referred to in paragraph 4, Employsure has engaged in conduct which was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18(1) of the ACL, and that was liable to mislead the public as to the nature and characteristics of its services in contravention of s 34 of the ACL.

289    While accepting that the amended concise statement is not a traditional pleading and ought to be read with appropriate leniency, I consider that Employsure’s pleading point has substance. It is notable that [4] of the amended concise statement, which contains the phrase “[b]y deliberately using keywords of this nature…”, appears in a part of the amended concise statement which is headed “Important facts giving rise to the claim”. Necessarily, therefore, the ACCC’s claim that Employsure deliberately used keywords should be read as an important factual allegation underpinning the ACCC’s case. In contrast, [14] of the amended concise statement appears in a section of the amended concise statement headed “Primary legal grounds for relief claimed”. The word “deliberately” is not repeated in [14]. But no particular significance lies in that omission, particularly when the content of [14] is contrasted with [2] of the amended originating application, in which the relevant declaratory relief sought repeats the phrase “deliberately using keywords…”. For these reasons, I accept Employsure’s contention that, to make good this part of its claims, the ACCC bore the onus of establishing that Employsure deliberately used keywords associated with government agencies as part of the design of its Google Ads campaign, in circumstances where Employsure was informed of the search terms used by consumers in searching online for the FWO and FWC websites.

290    The relevant class of consumers are “business owners” who have employees and who search the internet with a view to obtaining employment related advice. This broadly reflects the way the ACCC outlined its case in its amended concise statement, noting that the phrase “business owners” is referred to multiple times throughout that document. For example, at [2] of that document, the ACCC stated (without alteration):

In issue are representations by Employsure which are likely to mislead business owners and cause them to contact Employsure in the belief that Employsure is primarily concerned with the provision of free advice, including on the basis that Employsure is, is affiliated with, or is endorsed by government.

291    Accordingly, the impugned conduct must be viewed by reference to a reasonable member of that class of business owners (see Puxu at 199). Such a person will have some understanding of commerce and how the internet operates, including Google advertisements. They will understand that they have legal obligations in the running of their business, including legal obligations to their employees. They will understand that they need to be diligent and responsible in the conduct of their business, and take reasonable care of their own business interests.

292    In my view, contrary to the ACCC’s position, the relevant class of consumers does not extend to employees. The identification of the relevant class is not affected by the fact that it is undisputed that some employees contact Employsure presumably in response to Google Ads. Those persons are not the target of the advertisements and there is no prospect of employees being drawn into a marketing web. Employees who ring Employsure are politely turned away, usually by referring them to the FWO. Moreover, as already indicted, Employsure has no commercial incentive to attract employees; indeed, it has a commercial incentive not to do so.

293    As noted above, the relevant question is whether a not insignificant number of potential consumers in the relevant class would be likely to be misled or deceived (see, for example, Insight at [143]; Conagra Inc v McCain Foods (Australia) Pty Ltd [1992] FCA 176; 33 FCR 302 at 380-381 per French J and Australian Competition and Consumer Commission v Get Qualified Australia Pty Ltd (in liq) (No 2) [2017] FCA 709 at [42] per Beach J).

294    The evidence is clear that in the relevant period (February 2017 to 30 November 2018) Employsure:

(a)    was aware of certain search terms (including “fair work commission”, “fair work Australia”, “fair work”, “fwc” and “fair work ombudsman”) being used frequently by consumers for on-line visits to the FWO and FWC websites; and

(b)    it selected those search terms as keywords in its search engine marketing strategy.

295    But what was Employsure’s object in adopting this strategy? This question arises not because Employsure’s intention is a relevant consideration, but rather because it forms part of the overall context. I accept Mr Mallett’s evidence that Employsure was not deliberately trying to lure people away from the services offered by agencies such as the FWO or the FWC. I also accept his evidence that Employsure’s strategy was to select keywords that it considered reflected search terms that might be used by a prospective client, to try to have Employsure’s Google Ads displayed to the people to whom Employsure wished to direct its advertising (i.e. prospective customers who were business owners and may have employment-related issues). I also accept Mr Mallett’s evidence that the object of the strategy was to separate and promote Employsure’s own core brand, Employsure, which offers paid services from the free services that Employsure uses as landing pages.

296    That is sufficient to reject this part of the ACCC’s case. But there is a further separate reason why that case fails. It turns on the fact that the deliberate use of keywords is not conduct that is capable of misleading or deceiving reasonable members of the relevant class of consumers. That is so for the following reasons. First, the use of keywords in a Google Ads campaign has the consequence that, depending on various other matters, some generally known and some known only to Google, if a person enters search terms into a Google search that are in the same or similar terms to the keywords, a particular advertisement may appear among the results of that Google search as a displayed advertisement (see Annexure A at [29], [32]-[34] and [36]). The thing communicated to the person who performed the search is the advertisement, not the keywords.

297    Secondly, Employsure's selection of keywords occurs in the private commercial dealings between Employsure and Google. Those keywords are not communicated to any consumers. As Katzmann J stated in Veda Advantage Ltd v Malouf Group Enterprises Pty Ltd [2016] FCA 225; 241 FCR 161 at [127] (see also at [242] and [279]):

… How could it appear to consumers that, by Malouf's designation of the Veda keywords to Google, the words are used to denote a connection in the course of trade between Malouf's services and the services provided by another trader, or to distinguish its services from the services of others, when the consumers have not seen or otherwise perceived the keywords?

298    The ACCC’s response to this matter was to acknowledge that the consumer was unaware of the internal relationship between Employsure and Google in selecting keywords but it submitted that the real issue is the “knowledge that those keywords reflect search terms commonly used by consumers to access the Fair Work Ombudsman website”. The ACCC reiterated that not only are the Google Ads misleading, but that Employsure’s conduct also meant that members of the public were liable to be misled. The conduct was identified as “the choosing of those keywords and the use of those keywords in relation to the design of the ad. The use of the keyword in the design of the ad increases the chance of the ad being published in response to the search term”. I do not accept that response. I repeat and adopt what is said above as to the reasons why the Google Ads are not misleading or deceptive (or likely to be so).

299    In my view, no significance should attach to the fact that Columbus described FWO as a “competitor” in the 2017 report it provided to Employsure. As Mr Mallett said in his evidence, this language was not the language that he would use or had heard any member of Employsure use. It is the language used by a third party service provider to Employsure. Furthermore, I accept Mr Mallett’s evidence that it was possible that Columbus viewed an agency such as FWO as a “competitor” in the particular world of search terms, but they were not a commercial competitor. Additionally, for what it is worth, it may be noted that an internal Employsure document which lists Employsure’s competitors does not include the FWO or the FWC. There is also some evidence that suggests that the FWO may compete with Employsure for keywords. That indicates that there may be competition between buyers of keywords from Google.

300    In any event, it makes rational commercial and legitimate sense for a business organisation to use keywords that are associated with a competitor’s business. The point is well illustrated by the following example provided by Employsure. The law firm Corrs Chambers Westgarth may think that a person who searches “Webb Henderson” may be a person in need of high quality legal advice and may wish for a Corrs Chambers Westgarth advertisement to be displayed to that person, in the hope that the person will learn that Corrs Chambers Westgarth can provide high quality legal advice and may choose to send their business in that direction. In those circumstances, it could not be misleading for Corrs Chambers Westgarth to identify “Webb Henderson” as keywords in its dealings with Google.

301    I accept Employsure’s submission that any company would rationally hope to target its advertising as much as possible to consumers who acquire goods or services from the company’s competitors. That is at the very core of reasonable competition (subject, of course, to any relevant legal and regulatory constraints). A competitor’s customer is an obvious prospective customer. The bald proposition that a company cannot use keywords that are associated with a competitor’s brands is untenable, and would, if accepted, bring about a radical shift in search engine marketing.

302    For all these reasons, the ACCC’s claims that the use of keywords and the design of the Google Ads contravened s 18 of the ACL are rejected. In the case of the alleged contravention of s 34, it is most improbable that conduct which does not contravene s 18 may nevertheless contravene s 34. That is because, as previously mentioned, the phrase “liable to mislead” in s 34 is a narrower concept (see [22] above). Secondly, a contravention of s 34 may give rise to a civil pecuniary penalty, which has implications for the standard of proof borne by the ACCC (see, for example, We Buy Houses at [44] per Gleeson J). Thirdly, it is necessary to demonstrate that there is an actual probability that the relevant consumer class will be misled, which the ACCC has failed to demonstrate.

(C) FREE ADVICE REPRESENTATIONS

(a) The relevant source materials

303    The subject of the ACCC’s claims relating to Employsure’s Free Advice Representations are 16 Google Ads and three different landing pages linked to Employsure.

(i) Google “Free Advice” Ads 1 to 16

304    The 16 Google Free Advice Ads are described at [25] to [40] above.

(ii) Employsure’s three landing pages

305    The three landing pages are identified at [23] above.

(b) The ACCC’s claims summarised

306    The ACCC claims that the prominent advertisements by Employsure during the period January 2016 until 30 November 2018 of a free advice helpline contravened ss 18, 29(1)(b) and 34 of the ACL. It contended that, when viewed in relevant context, these advertisements represented that the free advice was the primary function of Employsure’s helpline. The ACCC contended that this representation was false because the online advertisements and landing pages do not offer free “initial advice” or promote a “first consultation free” service. They simply offered “free advice”. By boldly representing free advice in this manner, the ACCC claimed that Employsure misrepresented the nature of the free advice helpline and did not convey that the helpline operated as a marketing exercise or a sales opportunity.

307    The ACCC emphasised the prominence given to the representation of free advice. It also drew attention to the fact that a number of the advertisements described the service being promoted as “The Free Advice Service For Employers On All Fair Work Topics” (Google Free Advice Ads Nos 1 and 2 and No 15 which is in substantially similar terms) or words to that effect (such as Google Free Advice Ads Nos 10 and 11 and, in substantially similar terms, Ads Nos 6 and 14).

308    The ACCC contended that the context in which the representations were made is critical, citing Coles at [47] per Allsop J. The ACCC acknowledged, however, that the impugned conduct must do something more than “confuse, or to cause questions to be asked”, citing iNova Pharmaceuticals (Australia) Pty Ltd v Reckitt Benckiser (Australia) Pty Ltd [2018] FCA 1209 per Bromwich J at [24(8)]. Part of the broader context is the fact that 13 of the 16 advertisements displayed a phone number, which permitted a consumer to call the Employsure hotline directly and without having to visit a landing page. Consequently such a customer only had the search terms used by the customer and the information displayed on the Google Ad before speaking with an Employsure representative.

309    As to the landing pages, the ACCC emphasised the following matters (footnotes omitted):

The Free Advice Representation is conveyed on the relevant landing pages by a range of references to "free" advice as the headline and focus of what is being promoted. For example, in 2016, the www.fairworkhelp.com.au landing page referred in large, bold text to "Free Fair Work advice for all Employers and Business Owners" and to "FREE EMPLOYER ADVICE" and a number that could be called "24/7". It also stated: "Why call Fair Work Help?"; "FREE Straight forward advice". Similarly, in 2016, the www.employersupport.com.au landing page in large, bold text at the top of the webpage referred to "Offering free 24/7 Fair Work advice for business owners" sitting above a large 1300 telephone number. In addition, it stated: "Why call Employer Support?"; "FREE Straight forward advice". The www.employerline.com.au landing page in 2016 also in large, bold text at the top of the webpage, promoted "FREE EMPLOYER ADVICE" and stated: "Gain free advice and understand your obligations as a business owner under the Fair Work Act". The call to action on the landing page stated "WE ARE HERE TO HELP. Call our skilled advisors today!", and pointed to a 1300 telephone number, available "24/7". The significance of the key components of the representation appearing at the top of the webpage as the “dominant message” is that the “footer” of the webpage is a part of the webpage that “[u]sers do not care much about” and which “does not obtain enough visitors”. This is underscored by the fact that there is nothing in the “headline” by way of asterix or that otherwise indicates the “headline” is qualified in some way by what appears at the bottom of the page.

(c) Were the Free Advice Representations false?

310    The ACCC submitted that the offer of free advice was false because the primary purpose was to generate leads for paid services. The ACCC claimed that Employsure had admitted that this was the primary purpose, as evidenced in internal Employsure documents, which included the Business Sales Guide dated September 2014. BSCs were instructed there to “turn these leads into opportunities”, being a reference to arranging for a potential client to meet with a BDM. This purpose was said to be further highlighted by the fact that Employsure referred internally to the free advice lines as “pitch calls” to a “prospect”.

311    The ACCC contended that the falsity of the representations is demonstrated by the fact that the helpline performs a marketing function regardless of whether substantive advice is provided to a caller. It relied upon Mr Mallett’s evidence under cross-examination (ACCC’s emphasis):

Mr Mallett, you’ve accepted that Employsure is a profit-making enterprise, and I want to suggest to you, in those circumstances, from Employsure’s perspective, the primary function of the helpline is to market the services that Employsure can make available to potential clients?---The – the overall, or overarching, function of the helpline is indeed marketing, in a number of perspect – in a number of respects. And the – even the advice element to it is a form of marketing in that, in providing advice, we are showing ourselves to give advice of a certain standard. And even if the person doesn’t want or need a meeting with us at that stage, they’re left with a good feeling about Employsure. That’s undoubtedly the overarching intent, along with the other marketing purpose, which is to seek to book an appointment with those who might become clients.

Well, can I say that, one of my questions was going to be, and you may have preempted it, do you agree that your advice is a form of marketing?---Yes. I agree. It – in – as I was once told in my career, we all work in sales to some degree, and so, yes, everything that we do is a form of putting our best foot forward to – to show what we can do for clients.

312    The ACCC also contended that the purpose of the free advice offer was not to provide free advice to resolve a caller’s particular problem. Rather, it was to demonstrate how Employsure’s paid advisory and other services could be beneficial to the caller. It pointed to Mr Mallett’s evidence when he said:

… We want to have the ability to speak to them, show them a, if you like, a taste of the service that would could provide to them, and we will subsequently explain the full version of what we do and the costs associated with that.

313    Finally, the ACCC relied upon the following matters as reinforcing the nature of the helpline as a marketing tool:

(a)    Telesales experience: The sales emphasis of Employsure’s recruitment and training of its BSCs. Calls to Employsure’s “free advice” inbound call centre are answered by the BSCs who were relevantly recruited for their experience in telesales. The position description for BSCs focused on marketing, creating leads and generating appointments, and key performance indicators for BSCs were centred around appointments booked and sales targets.

(b)    Lack of substantive advice training: The alleged paucity of evidence in relation to the substantive training of BSCs concerning employment related matters. The provision of such advice was not the focus of their training; rather, achieving sales was claimed by the ACCC to be the emphasis. Indeed, Mr Mallet deposed in his affidavit that it was not until July 2018 that employees of Employsure wishing to perform the role of inbound BSC were required to show competency in employment relations and WHS issues by completing two units of training.

(c)    Sales-based commissions: Employsure’s commission regime for BSCs was based on “sales achieved”.

(d) Conclusions on Free Advice Representations

314    I accept Employsure’s contention that a fundamental problem with ACCC’s case is that it begs a critical question: from whose prospective is the primary function to be determined? The word “primary” introduces the notion of relativity between multiple functions. The word “function” conjures notions of purpose, and a particular thing can serve multiple and different purposes for different people. A representation merely that the primary function of the helpline is to provide free advice does not have any clear meaning unless there is a representation as to function from a person’s perspective.

315    It follows that a distinction should be drawn between the function of the helpline and the purpose of making a call to the helpline. The ACCC conflated these matters. It may be accepted that, for some or even many callers, the purpose of making a call, or the function of a call, from the caller’s perspective, is to obtain free advice. Even if it is accepted that many business owners would not be making a call to the helpline for the purpose of receiving a pitch for further services, this is different to the question of the function of the helpline. The fact that the primary purpose of making a call from the business owner’s perspective is to obtain free advice does not mean that the provision of free advice is the primary function of the helpline.

316    The function of the helpline, from Employsure’s perspective, was to give business owners the opportunity to obtain free advice in order to secure for Employsure the opportunity to make a pitch for new clients. Accordingly, from Employsure’s perspective, the immediate function of the helpline was to provide free advice and the ultimate function was to generate profit through new leads. This was made clear in Mr Mallett’s oral evidence, which I accept.

317    As Mr Mallett explained, a prospective client who was impressed with the quality of the free advice would be more inclined to enter into a contract with Employsure to obtain further advice for a fee.

318    I also accept Employsure’s submission that any reasonable business owner who gave the matter a moment’s thought would have appreciated that Employsure (another business) would likely be offering something for free in the hope that it may lead to a profit generating opportunity for Employsure. That business owner would appreciate that the provision of free advice is not an end in itself for Employsure. No reasonable business owner could expect that Employsure would be incurring the cost of maintaining the helpline without expecting that the helpline would serve as a mechanism to seek to secure leads for new business. That would be divorced from commercial reality.

319    As to the landing pages, the following features are noted:

(a)    By the time the consumer arrives at the landing page, they have clicked on what they know to be a paid advertisement from a commercial organisation.

(b)    It is not alleged that the landing page conveyed an affiliation with the government. This is not surprising. It is clear from the contents of the landing pages that Fair Work Help, Employer Support and Employerline are not so affiliated.

(c)    Each version of the Fair Work Help landing page contained a statement in the footer in these terms (save that in earlier versions the reference to “workplace relations” was to “workplace regulations”):

www.fairworkhelp.com.au is an intermediary of Employsure - Australia's leading expert in the field of workplace relations. Information provided here will only be used by Employsure and www.fairworkhelp.com.au for advice and/or a quote.

          If Employsure’s raison d’etre was to provide free advice to consumers, there would be no need for it to provide a quote.

(d)    There are additional references in the landing pages to Employsure, or to the fact that it is a commercial organisation including, for example:

(i)    “Backed by the worlds [sic] leading provider of workplace regulation advice and assistance, collectively we assist over 37,000 employers tackle the everyday issue you face as employers, no matter of the size or sector of your business”.

(ii)    “Customers rate Employsure [5 stars] based on [X] reviews”.

(iii)    “Employsure is rated [5 stars] across a [96/97]% customer satisfaction”.

(iv)    “Employsure Fairworkhelp allows you to stay focused on your business while we keep it safe and fair”.

(v)    “I would recommend Employsure. Employsure have extremely helpful and knowledgeable staff”.

(vi)    “Employsure have been valuable to our new business as we now have peace of mind”.

(vii)    “The company offers peace of mind for employers, in what now is an employee focused workforce”.

(e)    An Employerline logo and an EmployerSupport logo appears in all versions of those landing pages.

(f)    From November 2016, the caption “Why call Employsure [for your] Fair Work Help?” was added to the Fair Work Help landing page.

(g)    From January 2017, the QBE logo was added.

(h)    From September 2017, the following statements were added to the Fair Work Help landing page:

This free helpline is provided by Employsure, Australia's largest provider of workplace relations advice to employers. It is a private business with no affiliation to any government agency. …

Is Employsure affiliated with any Government Agency? No, we have no affiliation to any government agency, including the Fair Work Ombudsman (FWO). Unlike the FWO we only provide advice to employers, focussing on how they can manage their business in accordance with the Fair Work Act and related regulation. We are proudly independent, advising over 15,000 employers in ANZ, helping them to achieve their business goals through fair and safe workplaces. …

When calling Employsure, you may be offered a meeting to discuss your ongoing workplace relations needs, including being offered Employsure's paid services. There is no obligation to accept this meeting or in any way engage Employsure and any advice give is not conditional of such.

320    I accept Employsure’s contention that these matters all speak against the notion that the landing pages conveyed an implicit representation that the primary function of the helpline was to provide free advice. For all these reasons, this cause of action is rejected.

(D) UNCONSCIONABILITY

(a) Legislation and relevant principles

321    Section 21 of the ACL relevantly provided:

21    Unconscionable conduct in connection with goods or services

(1)    A person must not, in trade or commerce, in connection with:

(a)    the supply or possible supply of goods or services to a person (other than a listed public company); or

(b)    the acquisition or possible acquisition of goods or services from a person (other than a listed public company);

engage in conduct that is, in all the circumstances, unconscionable.

…

(3)    For the purpose of determining whether a person has contravened subsection (1):

(a)    the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and

(b)    the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section.

(4)    It is the intention of the Parliament that:

(a)    this section is not limited by the unwritten law relating to unconscionable conduct; and

(b)    this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and

(c)    in considering whether conduct to which a contract relates is unconscionable, a court's consideration of the contract may include consideration of:

(i)    the terms of the contract; and

(ii)    the manner in which and the extent to which the contract is carried out;

and is not limited to consideration of the circumstances relating to formation of the contract.

322    Section 22 provided a non-exhaustive list of matters to which regard may be had for the purposes of s 21:

22    Matters the court may have regard to for the purposes of section 21

(1)    Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier) has contravened section 21 in connection with the supply or possible supply of goods or services to a person (the customer), the court may have regard to:

(a)    the relative strengths of the bargaining positions of the supplier and the customer; and

(b)    whether, as a result of conduct engaged in by the supplier, the customer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and

(c)    whether the customer was able to understand any documents relating to the supply or possible supply of the goods or services; and

(d)    whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the customer or a person acting on behalf of the customer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and

(e)    the amount for which, and the circumstances under which, the customer could have acquired identical or equivalent goods or services from a person other than the supplier; and

(f)    the extent to which the supplier’s conduct towards the customer was consistent with the supplier’s conduct in similar transactions between the supplier and other like customers; and

(g)    the requirements of any applicable industry code; and

(h)    the requirements of any other industry code, if the customer acted on the reasonable belief that the supplier would comply with that code; and

(i)    the extent to which the supplier unreasonably failed to disclose to the customer:

(i)    any intended conduct of the supplier that might affect the interests of the customer; and

(ii)    any risks to the customer arising from the supplier’s intended conduct (being risks that the supplier should have foreseen would not be apparent to the customer); and

(j)    if there is a contract between the supplier and the customer for the supply of the goods or services:

(i)    the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the customer; and

(ii)    the terms and conditions of the contract; and

(iii)    the conduct of the supplier and the customer in complying with the terms and conditions of the contract; and

(iv)    any conduct that the supplier or the customer engaged in, in connection with their commercial relationship, after they entered into the contract; and

(k)    without limiting paragraph (j), whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the customer for the supply of the goods or services; and

(l)    the extent to which the supplier and the customer acted in good faith.

(2)    Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the acquirer) has contravened section 21 in connection with the acquisition or possible acquisition of goods or services from a person (the supplier), the court may have regard to:

(a)    the relative strengths of the bargaining positions of the acquirer and the supplier; and

(b)    whether, as a result of conduct engaged in by the acquirer, the supplier was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the acquirer; and

(c)    whether the supplier was able to understand any documents relating to the acquisition or possible acquisition of the goods or services; and

(d)    whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the supplier or a person acting on behalf of the supplier by the acquirer or a person acting on behalf of the acquirer in relation to the acquisition or possible acquisition of the goods or services; and

(e)    the amount for which, and the circumstances in which, the supplier could have supplied identical or equivalent goods or services to a person other than the acquirer; and

(f)    the extent to which the acquirer’s conduct towards the supplier was consistent with the acquirer’s conduct in similar transactions between the acquirer and other like suppliers; and

(g)    the requirements of any applicable industry code; and

(h)    the requirements of any other industry code, if the supplier acted on the reasonable belief that the acquirer would comply with that code; and

(i)    the extent to which the acquirer unreasonably failed to disclose to the supplier:

(i)    any intended conduct of the acquirer that might affect the interests of the supplier; and

(ii)    any risks to the supplier arising from the acquirer’s intended conduct (being risks that the acquirer should have foreseen would not be apparent to the supplier); and

(j)    if there is a contract between the acquirer and the supplier for the acquisition of the goods or services:

(i)    the extent to which the acquirer was willing to negotiate the terms and conditions of the contract with the supplier; and

(ii)    the terms and conditions of the contract; and

(iii)    the conduct of the acquirer and the supplier in complying with the terms and conditions of the contract; and

(iv)    any conduct that the acquirer or the supplier engaged in, in connection with their commercial relationship, after they entered into the contract; and

(k)    without limiting paragraph (j), whether the acquirer has a contractual right to vary unilaterally a term or condition of a contract between the acquirer and the supplier for the acquisition of the goods or services; and

(l)    the extent to which the acquirer and the supplier acted in good faith.

(i) General legal principles summarised

323    With one exception, the parties were in general agreement regarding the relevant principles applying to statutory unconscionability. Those principles may be summarised as follows. First, a finding of unconscionable conduct is not a finding to be made lightly. There is also a difficulty in defining with precision the content and limits of unconscionable conduct (see the observations of Allsop P (as his Honour then was) in Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 at [291] (with whom Bathurst CJ and Campbell JA agreed)). Some further helpful guidance is found in the Full Court’s observations in Paciocco v Australia and New Zealand Banking Group Limited [2015] FCAFC 50; 236 FCR 199 at [347] per Allsop CJ, with whom Besanko and Middleton JJ agreed (and which necessarily reflect the particular facts and circumstances there):

In all the circumstances, in particular, the lack of any proven predation on the weak or poor, the lack of real vulnerability requiring protection, the lack of financial or personal compulsion or pressure to enter or maintain accounts, the clarity of disclosure, the lack of secrecy, trickery or dishonesty, and the ability of people to avoid the fees or terminate the accounts, I do not consider the conduct of ANZ to have been unconscionable. To do so would require the court to be a price regulator in banking business in connection with otherwise honestly carried on business in which high fees were extracted from customers.

324    These observations by the Full Court were referred to with apparent approval by the High Court in Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28; 258 CLR 525 (Paciocco High Court) at [292] per Keane J (with whom French CJ and Kiefel J agreed).

325    Secondly, careful attention must be paid to the particular facts. As Bathurst CJ observed in Ipstar Australia Pty Ltd v APS Satellite Pty Ltd [2018] NSWCA 15; 356 ALR 440 at [196] (with whom Beasley P agreed):

In this context, it is important to bear in mind that the question of whether certain conduct is unconscionable does not involve an idiosyncratic determination of what is “fair” and “just” in a particular case. Rather, it involves a consideration of all the circumstances to conclude whether or not the conduct in question falls below acceptable norms, standards or values such as to warrant it being determined to be unconscionable.

326    Thirdly, statutory unconscionability is not limited to unconscionable behaviour under the general law, but builds upon that law (Tonto at [291], citing Australian Securities & Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226; 148 FCR 132 at [30]).

327    Fourthly, additional guidance concerning statutory unconscionability was provided by Beach J in Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) [2018] FCA 751; 266 FCR 147 at [2177]:

ASIC referred to my decision in Australian Competition and Consumer Commission v Get Qualified Australia Pty Ltd (in liquidation) (No 2) [2017] FCA 709 at [60] to [63] and also Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199 at [296]. In ACCC v Get Qualified Australia Pty Ltd (in liquidation) (No 2) I applied Paciocco and summarised the principles that were applicable to the cognate provisions in the Australian Consumer Law, in terms that are equally applicable to ss 12CB or 12CC (and which neither party disputed before me), as follows:

First, “unconscionability” means something not done in good conscience or conduct against conscience by reference to the norms of society. But that is to be understood and applied in the context of trade or commerce, but including consumer protection objectives directed at the requirements of honest and fair conduct free of deception. But one must be careful in using the phrase “norms of society” to ensure that the identification thereof is not interlarded with some distorted subjective view of social philosophy. It is fraught with risk to move beyond the explicit and implicit norms enshrined in and bounded by the statutory language of ss 21 and 22 construed in context, being trade or commerce, notwithstanding the apparent breadth of s 21(4) and the non-limiting prefatory words of s 22(1). Moreover, the evaluation of unconscionability must not be decontextualised from the particular case under consideration.

Second and relatedly, in order to determine whether conduct is unconscionable, it is necessary to look at all the conduct, by “[s]tanding back and looking at the whole episode”.

Third, as the norms of society include statutory prohibitions on deceptive conduct … deceptive practices … can form part of the “whole episode”, for the purpose of assessing whether, in all the circumstances, the conduct in question is unconscionable.

Fourth, s 22(1) of the ACL sets out a non-exhaustive list of factors to which the Court may have regard for the purpose of determining whether a person has contravened s 21. The matters enumerated assist in understanding the scope of the meaning of unconscionable conduct, but the presence of one or more matters contained in s 22(1) (or indeed their absence) is not necessarily determinative. (citations omitted)

328    Fifthly, the parties did not agree on the question whether “special disadvantage” is a necessary component of establishing statutory unconscionable conduct. The ACCC contended that it was not a necessary component, citing the Explanatory Memorandum to the relevant Bill at [2.20] and [2.23]. The ACCC’s position is that “special disadvantage is not a requirement and that one is concerned with looking at the conduct of the respondent rather than examining whether the consumer was under a special disability or disadvantage at the time”. In contrast, relying upon Colvin J’s recent summary of the relevant principles in Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd (No 2) [2020] FCA 802 at [29], Employsure submitted that the majority view in Australian Securities and Investments Commission v Kobelt [2019] HCA 18; 368 ALR 1 required there to be exploitation of disadvantage by a party in a stronger position by conduct that is well outside what is generally regarded as acceptable commercial behaviour. Ultimately, however, Employsure submitted that it was not necessary to resolve the precise boundaries of Kobelt because, even under the most expansive approach, Employsure’s conduct fell well short of the relevant standard.

329    Sixthly, it is necessary to consider whether the impugned conduct involved “doing what should not be done in conscience” or is “conduct contrary to the norm of conscientious behaviour” (National Exchange at [33] and [44]). That is not to say, however, that unconscionability necessarily involves dishonesty (see Paciocco at [262]). As Allsop P observed in Tonto at [291], it is neither possible nor desirable to provide a comprehensive definition of unconscionability, which can involve a wide range of conduct including “bullying and thuggish behaviour, undue pressure and unfair tactics, taking advantage of vulnerability or lack of understanding, trickery or misleading conduct”.

330    Seventhly, there would ordinarily need to be a deliberate (in the sense of intentional) act, or at least a reckless act (Australian Competition and Consumer Commission v Allphones Retail Pty Ltd (No 2) [2009] FCA 17; 253 ALR 324 at [113(c)] per Foster J).

331    Eighthly, as an aspect of the need to pay careful attention to the particular facts and surrounding circumstances, as well as the context in which the relevant conduct occurred, appropriate regard must be paid to the particular circumstances in which the impugned conduct occurred. For example, in Australian Competition and Consumer Commission v Accounts Control Management Services Pty Ltd [2012] FCA 1164, Perram J emphasised at [14] that the respondent’s business in that case as a debt collector is a “confronting business” and that it should not be expected that the debt collector conduct itself “as if at a prayer meeting”.

332    Finally, the list of factors in s 22 of the ACL is not exhaustive as is made clear by the text of that provision.

(ii) The High Court’s decision in Kobelt

333    Kobelt is currently the leading authority on statutory unconscionability notwithstanding that the Court was not unanimous on the relevant principles and their application to the particular facts of that case. The allegation of unconscionability there related to the operation of a “book-up” system in an area with a large number of indigenous people living in remote communities. The system involved customers giving the respondent (Mr Kobelt) their debit cards which were linked to a bank account in which the customers’ wages or social security entitlements were deposited, along with the personal identification number for each account. The customers authorised the respondent to withdraw funds from their accounts to reduce their debt, in return for the supply of goods (primarily the supply of second-hand motor vehicles, groceries and fuel) between pay days.

334    The alleged statutory unconscionability arose there under s 12CB(1) of the Australian Securities and Investments Commission Act 2001 (Cth), which is in substantially similar terms to s 21 of the ACL.

335    The High Court split four to three. As will become evident, there are nuances in the reasoning of the majority.

336    At [14], Kiefel CJ and Bell J described the term “unconscionable” as bearing its ordinary meaning and proscribing conduct “that objectively answers the description of being against conscience”. Their Honours adopted Allsop CJ’s description in Paciocco at [296] of the following values which inform the standard of conscience fixed by the statute:

… certainty in commercial transactions, honesty, the absence of trickery or sharp practice, fairness when dealing with customers, the faithful performance of bargains and promises freely made, and:

“the protection of those whose vulnerability as to the protection of their own interests places them in a position that calls for a just legal system to respond for their protection, especially from those who would victimise, predate or take advantage.”

337    In Kobelt, in upholding the decision of the Full Court of this Court that the respondent had not engaged in unconscionable conduct, Kiefel CJ and Bell J reasoned at [15] that a finding of unconscionable conduct required “not only that the innocent party be subject to this special disadvantage, but that the other party must also unconscientiously take advantage of that special disadvantage”. Their Honours described this requirement as “requiring victimisation, unconscientious conduct or exploitation” (at [15]). Importantly, therefore, Kiefel CJ and Bell J regarded the protection of the vulnerable and the taking advantage of that vulnerability in a manner that might be viewed as predatory or exploitative as essential elements of statutory unconscionability.

338    The Chief Justice and Bell J identified as determinative of the appeal in Kobelt that there was an absence of evidence that the respondent had taken “unconscientious advantage” from the supply of credit to his customers under the book-up system (at [19], emphasis in original).

339    It is also relevant to note Kiefel CJ and Bell J’s observations at [75], which assist in defining the boundaries of statutory unconscionability:

Mr Kobelt was not required to act in an altruistic or disinterested way in his dealings with his customers. Nor was Mr Kobelt required to devise an alternative, superior form of book-up credit. The statutory proscription is on engaging in unconscionable conduct. The difficulty with ASIC’s system case of statutory unconscionability lies in identifying any advantage that Mr Kobelt obtained from the supply of book-up credit that can fairly be said to be against conscience.

340    The other two Justices forming the majority in Kobelt were Gageler and Keane JJ, who each published separate reasons for judgment. Justice Gageler described the statutory unconscionability provision as prescribing a normative standard of conduct applicable to the supply or possible supply of financial services. At [87], his Honour described the Court’s function as to administer that normative standard of conduct in the context of the totality of the circumstances. His Honour emphasised at [88] “the gravity of the conduct necessary to be found by a court in order to be satisfied of a breach of that standard”, which his Honour further reinforced at [92] when he referred to the “conduct proscribed by the section as unconscionable is conduct that is so far outside societal norms of acceptable commercial behaviour as to warrant condemnation as conduct that is offensive to conscience”. Moreover, at [93], Gageler J stated that “[f]or a court to pronounce conduct unconscionable is for the court to denounce that conduct as offensive to a conscience informed by a sense of what is right and proper according to values which can be recognised by the court to prevail within contemporary Australian society”.

341    Justice Keane emphasised the need to scrutinise the exact relations between the parties to a transaction before a finding could be made of unconscionable conduct (at [115]). Focusing upon the particular factors in that case, Keane J concluded that the appellant had not established that the book-up system exploited the customers’ “socio-economic vulnerability in order to extract financial advantage from them” (at [115]). His Honour stated that unconscionable conduct required an element of exploitation or similar conduct such as victimisation, unconscientious conduct or a predatory state of mind (at [118]).

342    The minority Justices (i.e. Nettle and Gordon JJ, who gave a joint judgment, and Edelman J who wrote separately) took a different view to the majority. Their Honours appeared to favour a lesser standard of conduct. That is not to say, however, that the minority Justices (together with Edelman J) did not view unconscionability as requiring that there be vulnerability and an exploitation of that disadvantage.

343    The difference between the majority and minority views in Kobelt appears to lie in the fact that the minority did not require conduct to attract a high degree of moral disapprobation for it to amount to statutory unconscionability.

344    I accept Employsure’s submission that it is unnecessary to define the precise boundaries of statutory unconscionable conduct in this proceeding. For the reasons that follow, I consider that the ACCC has fallen far short of demonstrating unconscionable conduct on Employsure’s part, even if it be accepted, as the ACCC contends, that special disadvantage is not an essential and necessary component (which is not to say, however, that the absence of special disadvantage is irrelevant).

(iii) The Full Court’s decision in Lux

345    The ACCC placed heavy reliance upon the Full Court’s decision in Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90 in support of its unconscionability claims. That case related to whether Lux engaged in unconscionable conduct in the course of supplying vacuum cleaners to three elderly women, contrary to s 51AB of the Trade Practices Act and s 21 of the ACL. The primary judge dismissed the ACCC’s claims but the Full Court allowed an appeal.

346    It is important to note several primary features of the facts in Lux which indicate that the case is distinguishable. First, it is notable that the ACCC’s case there relied in part upon particular aspects of impugned conduct which contravened Commonwealth and State statutory requirements applicable to direct sales transactions. Those Commonwealth and State laws were summarised by the Full Court at [10] to [22].

347    The importance of this feature of the case is reinforced by what the Full Court said at [71]:

Breaches of statutes regulating direct selling must be seen as important: see [23] above. The vulnerability of people to pressure by skilled sales persons who gain entry into their homes is sought to be regulated in furtherance of fairness and the elimination of aspects of vulnerability. In assessing the conscionability or not of a particular instance of such selling, the compliance with public regulations will be centrally important.

348    The Full Court made clear that it regarded those laws as relevant to an evaluation of the facts relied upon as involving unconscionability because those laws provided content to the norms and values against which the impugned conduct was to be judged. The Full Court stated at [23]:

… These laws of the States and the operative provisions of the ACL reinforce the recognised societal values and expectations that consumers will be dealt with honestly, fairly and without deception or unfair pressure.  These considerations are central to the evaluation of the facts by reference to the operative norm of required conscionable conduct.

349    Secondly, the Full Court placed great weight on what it described as the “deceptive ruse” which was used by Lux’s salespeople to gain entry to the homes of the three relevant consumers. This involved the consumer being contacted by Lux and being told there would be a Lux staff member in their area giving a free maintenance check to all vacuum cleaners. If the person agreed to a free maintenance check, a sales agent would attend their home to carry out a maintenance check as part of an attempt to sell the person a new vacuum cleaner. The Full Court found at [26] that the offer to carry out the free maintenance check was a ruse to get the representative past the door and constituted the first part of conduct which would “lead seamlessly to the creation of an apparent need for a replacement machine” (emphasis in original).

350    The ACCC submitted that the Court should find that Employsure used a similar “deceptive ruse” by publishing Google Ads which were misleading or deceptive in that they conveyed the Government Affiliation Representations, as well as the prominence given in the 16 Google Free Advice Ads to the availability of free advice. As will emerge, I reject the ACCC’s claims in respect of both these matters. Although the relevant conduct might be described as forceful marketing, I do not consider that Employsure’s conduct amounted to a “deceptive ruse” or fell within any of the epithets set out at [329] above. The sales techniques used by Employsure’s representatives fall well short of the techniques used in Lux.

(b) The ACCC’s unconscionability claims summarised

351    The ACCC’s claims of unconscionability are broadly summarised at [41]-[43] above. The conduct engaged in by Employsure which the ACCC submitted was, in all the circumstances, unconscionable involved the following essential elements in respect of each of the three small businesses:

(a)    conducting an internet search in the context of having an employment-related problem in respect of which assistance was sought;

(b)    having a telephone conversation with an employee of Employsure;

(c)    misapprehending (whether for a short or longer period) that the caller was in fact speaking with a government agency, or a body endorsed by government;

(d)    having a face-to-face meeting with an Employsure representative in the consumer’s home or workplace; and

(e)    entering into a contract with Employsure for paid services during the course of the initial face-to-face meeting and not being left with a copy of the contract.

352    The ACCC contended that the impugned conduct occurred in the context of the business model implemented by Employsure and Employsure’s Google Ads campaign. It submitted that, in this contextual setting, from the moment the small businesses were presented with Employsure’s Google Ads, they were drawn into Employsure’s “marketing web”, which was designed to delay alerting them to the fact that they were in Employsure’s “marketing funnel” and would ultimately be “pitched” Employsure’s various paid services.

(c) Does the Jones v Dunkel principle apply?

353    The ACCC contended that the Court should draw an inference from the fact that Employsure did not call its employees who dealt with the three small businesses that they would not have given evidence that would have assisted Employsure’s case. In brief, the ACCC submitted that the inference was available for the following two purposes:

(a)    in deciding whether to accept any particular evidence that has in fact been given, either for or against the party, and which relates to a matter with respect to which the person not called as a witness could have spoken; and

(b)    in deciding whether to draw inferences of fact which are open upon the evidence which has been given, in relation to matters with respect to which the person could have spoken (citing in support of both those propositions O’Donnell v Reichard [1975] VR 916 at 929 per Newton and Norris JJ, which the ACCC said was approved by the High Court in Brandi v Mingot (1976) 12 ALR 551 at 559 per Gibbs ACJ, Stephen, Mason and Aickin JJ).

354    The ACCC contended that it was appropriate for the Court to draw inferences that the evidence of each of Ms Miners, Ms Bailey, Mr Langton and Ms Channing would not have assisted Employsure’s case in circumstances where:

(a)    Employsure was plainly in a position to call each of those witnesses and, indeed, filed affidavits prepared by them which were ultimately not read;

(b)    the evidence of these witnesses was directed towards elucidating key questions relating to the face-to-face meetings with the representatives of the three small businesses at which it is alleged that undue influence and scare tactics were used by Employsure’s representatives, as well as alleged unfair practices in, for example, failing to allow those small business representatives to review and reflect upon the terms of Employsure’s contract before signing up; and

(c)    no explanation was provided by Employsure for the failure to call these witnesses.

355    For the following reasons, I consider that the principle in Jones v Dunkel has no application here. First, the relevant passage in Brandi at 559 may not go so far as to endorse both the propositions which are set out at [353] above. The relevant passage is as follows (emphasis in original):

… ln the authority relied upon by the Full Court, O'Donnell v Reichard [1975] VR 916, the joint judgment of Newton and Norris JJ does, we think, correctly state the law when it says (at 929) that a jury may infer that the evidence of the absent witness “would not have helped that party’s case”. This is just what the jury were told in the present case. With this may be contrasted the view expressed in the judgment now under appeal, that the proper inference is that the absent witness’s evidence would have exposed facts unfavourable to the case of the party failing to call that potential witness. This latter approach reflects the views of Wigmore (3rd ed, par 285 et seq), as Street J observed in Dilosa v Latec Finance Pty· Ltd (1966) 84 WN (Pt l) (NSW) 557 at 582. Like Street J, we too regard a narrower view, as expressed in the joint judgment in O'Donnell v Reichard, as that which has come to be accepted in Australia: Insurance Commissioner v Joyce (1948) 77 CLR 39 at 61, Jones v Dunkel (1959) 101 CLR 298, especially at 308, 312 and 321; Lopes v Taylor (1970) 44 ALJR 412, per Windeyer J at 418 and per Gibbs J at 422; Nuhic v Rail & Road Excavations [1972] l NSWLR 204 per Jacobs and Mason JJ A.

356    The plurality in Brandi simply affirmed the correctness of the “narrower” statement of the relevant principle in O’Donnell, namely that an inference may be drawn from the absence of a witness who might have been called by a particular party that the evidence of that witness would not have helped that party’s case. That narrower statement is to be contrasted with the broader view, which has not been accepted in Australia, that an inference could also be drawn that the absent witness’s evidence would have exposed facts unfavourable to the case of the party failing to call that potential witness (see, for example, Australian Securities and Investment Commission v Hellicar [2012] HCA 17; 247 CLR 345).

357    The ambit of the principle in Jones v Dunkel is conveniently summarised by the plurality in Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; 243 CLR 361 at [63]-[64] (per Heydon, Crennan and Bell JJ) in the following terms (footnotes omitted):

The rule in Jones v Dunkel is that the unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party’s case. That is particularly so where it is the party which is the uncalled witness. The failure to call a witness may also permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn. These principles have been extended from instances where a witness has not been called at all to instances where a witness has been called but not questioned on particular topics. Where counsel for a party has refrained from asking a witness whom that party has called particular questions on an issue, the court will be less likely to draw inferences favourable to that party from other evidence in relation to that issue. That problem did not arise here. The plaintiff's counsel did ask the plaintiff relevant questions.

The rule in Jones v Dunkel permits an inference, not that evidence not called by a party would have been adverse to the party, but that it would not have assisted the party. …

358    Secondly, it is to be recalled that the ACCC’s claims of unconscionable conduct relate to s 21 of the ACL, which is a civil penalty provision. Accordingly s 140 of the Evidence Act 1995 (Cth) applies, with the consequence that the ACCC’s onus of proof must reflect the seriousness of the allegations made against Employsure. The ACCC has to establish those allegations to the Briginshaw standard (Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336).

359    Thirdly, the principle in Jones v Dunkel does not absolve the ACCC from discharging that onus.

360    Fourthly, and perhaps most significantly, for the reasons given below, I do not accept that, with one possible exception, the evidence of the representatives of the relevant small businesses is sufficient either to establish facts which are essential to the success of the ACCC’s unconscionability claims or, alternatively, permits an inference of fact to be drawn based upon that evidence, so as to attract the Jones v Dunkel principle.

361    The possible exception relates to the evidence of Ms Martindale and Ms Fahy that Ms Miners told them on 1 February 2016 that the cost of the Employsure contract to ACO would be $40.00 per month. Ms Miners was not called as a witness to contest that evidence. After some initial doubts, however, I do not consider that the Jones v Dunkel principle applies to this particular evidence. That is essentially because there are so many inconsistencies in the relevant evidence on the topic given by Ms Martindale and Ms Fahy that I am not persuaded to make a finding of fact or draw an inference that Ms Miners did tell them that the contract would be $40.00 per month.

362    Fifthly, the inconsistencies in Ms Martindale’s evidence on this issue are reflected in the following matters. Whilst there was confusion about the costs of the contract, it is not in issue that at the meeting on 1 February 2016 there was discussion about the cost of the contract. Ms Martindale gave evidence that Ms Bailey wrote down on a notepad the cost for a 2 and 3 year contract, and that she passed the notepad to Ms Martindale for approval; and further that, when Ms Martindale said she could only do a 1 year contract, Ms Bailey wrote down a new figure and passed it to her for approval.

363    At different times, Ms Martindale identified a range of different weekly, monthly and annual figures. It was clear that Ms Martindale did not have a good recollection of the figures discussed during the meeting on 1 February 2016.

364    On 8 March 2016, for example, Ms Martindale told Employsure that she understood the cost of the contract would be “about $50 a week – a month, you know. So I thought two something, like $200 a year just to have someone to phone up and just get the rates for wages and things like that”. A total cost of $200 for the year would be around $16.67 per month. There is also confusion between weeks and months in that statement (“$50 a week – a month, you know”). Although Ms Martindale suggested that the figure of $200 was in relation to all fees (and not just the fees for the advice service), she could not recall what she thought about the total cost at the time of that phone call.

365    Similarly, on 17 March 2016, Ms Martindale told Employsure that the cost of the ACO storage shed was $40 a week. Ms Martindale gave evidence that she had meant to say $40 a month, but that she was muddled up: “So I’ve gotten my months, I meant weeks, so many things muddled up”. However, both Ms Fahy and Ms Martindale gave evidence that Ms Bailey left a voicemail in which she explained that she had spoken “in weeks”.

366    Turning now to the inconsistencies in Ms Fahy’s evidence on this topic, they are demonstrated by the following matters. In her second affidavit, dated 26 July 2019, Ms Fahy reiterated the evidence in her first affidavit to the effect that she recollected that Ms Bailey told her and Ms Martindale on 1 February 2016 that Employsure could do a contract for 12 months and it “would be roughly $40 a month”.

367    In her second affidavit, Ms Fahy also confirmed that she had listened to the voice mail message which Ms Bailey had left on Ms Martindale’s phone in early March 2016. Although Ms Fahy could not recall the precise words used by Ms Bailey in her voice message, she recalled Ms Bailey saying something along the lines that Ms Martindale and Ms Fahy could have misunderstood what Ms Bailey had said about the total contract fee and that they “must have mistaken the weekly contract fee for a monthly fee”.

368    Ms Fahy was closely cross-examined on this evidence, as is reflected in the following exchange (which highlights some tension in that evidence):

Now, you say in your second affidavit – and I don’t think it’s necessary for you to go to it, but if you would like to, let me know. You say in your second affidavit that you recall listening to a voicemail message from Cassy Bailey?---Yes.

You recall that evidence?---Yes.

And you say that one of the things that Cassy Bailey said in that voicemail message was that she talked in weeks and not months?---Yes.

And she did, in fact, speak in terms of weeks, rather than months in your meeting on 1 February, didn’t she?---Yes.

And she – what she actually said to you was that the cost was $74 a week, correct?---No, because I was on the understanding it was a month.

Yes, but you’ve just given evidence that in the meeting on 1 February 2016, Ms Bailey spoke to you in terms of weeks and not months, and that’s correct?---That’s what she said in her message, that she could understand how we misunderstood. She was talking in weeks, but we were thinking she was talking in months.

All right. So she actually quoted a weekly figure to you?---We thought it was monthly.

All right. I want to suggest to you that she told you that the weekly figure was $74 a week; do you agree with that?---No.

And that the total cost of the contract was $3854?---No. (Emphasis added).

369    In my view, Ms Fahy’s evidence goes no higher than indicating that she understood that Ms Fahy was referring to monthly fees, yet she also accepted the proposition that Ms Bailey had in fact spoken in terms of weeks, rather than months. The tension in this evidence is clear.

370    Having regard to the inconsistencies in the evidence on this topic by both Ms Martindale and Ms Fahy I am not prepared to make a finding of fact or draw an inference that Ms Bailey failed to provide Ms Martindale and Ms Fahy with sufficient information at their meeting on 1 February 2016 to enable them to calculate the full cost of a 12 month contract with Employsure. Consequently, there is no room for the principle in Jones v Dunkel to apply in circumstances where Ms Bailey was not called by Employsure as a witness.

(d) Conclusions concerning ACCC’s unconscionability claims

371    I will now set out my conclusions regarding the ACCC’s claims of unconscionable conduct with reference to each of the three relevant small businesses in turn. In doing so, I draw extensively on Employsure’s closing submissions, with which I am in substantial agreement.

(i) BPP

372    First, without saying anything inconsistent with what is said above regarding Kobelt, Ms Richardson did not suffer from any special disadvantage. On the contrary, she presented as someone well able to look after BPP’s interests. The financial statement for the GKC Family Trust (for which BPP was the trading name), for the financial year ending 30 June 2016 discloses that BPP had revenue of $362,769 and gross profit from trading of $260,997. Although the business made a net loss in that financial year, Ms Richardson anticipated substantial growth in the business at the time of her dealings with Employsure.

373    Secondly, Ms Richardson performed a Google search but it is not possible to determine precisely what it entailed.

374     She may have entered “Fair Work Ombudsman” or “Department of Fair Trading” or “Fair Work” or “award wages”. She could not recall whether she called directly from a Google Ad or went to an Employsure landing page. It is not possible to identify what Ms Richardson saw, let alone whether it may have been misleading.

375    Thirdly, during her initial call Ms Richardson was told by an Employsure BSC that she was being offered a meeting with Employsure, which was a resource to protect small business owners, and to protect businesses from both a financial and legal viewpoint. I accept that Ms Richardson thought that she was dealing with the FWO but I do not accept that this erroneous belief was due to Employsure’s conduct. Moreover, as will shortly be emphasised it was made clear to Ms Richardson by Ms Miners that Employsure was not affiliated with the government. By the end of her initial call with the BSC, Ms Richardson understood that Employsure was a consultancy, and that it would work side by side with business in a way that a company would work side by side with an accountant.

376    Fourthly, at the meeting on Thursday 20 August 2015, Ms Miners told Ms Richardson that Employsure was “not affiliated” with the government. I do not accept Ms Richardson’s evidence that Ms Miners simply said that she did not “work with the FWO” (see [86] above).

377    Fifthly, after the meeting on 20 August 2015, Ms Richardson carefully considered the terms over the following weekend, and conducted her own investigations (which included speaking with friends who owned businesses into “what my responsibilities as an employer were and the policies that I should have in place”. She concluded that she wished to proceed with a three year contract with Employsure.

378    There is a question as to whether Ms Miners read out the terms to Ms Richardson on 20 August 2015. It is true that Ms Richardson prepared some virtually contemporaneous notes which record that the “Further Terms” were not read to her. In cross-examination, however, Ms Richardson could not recall which parts of the contract were or were not read out to her.

379    In any event, the issue is not determinative. When Ms Richardson decided on 24 August 2015, to proceed with the Employsure contract, she had closely read and was comfortable with all of the terms and conditions of the contract with Employsure. She was initially concerned about the automatic renewal clause. That was the only aspect of the contract that concerned her, but that concern was addressed when it was explained that she could give written notice not to renew at any time.

380    The decision to proceed with Employsure was made because BPP was hoping to expand the business. Ms Richardson wished to implement appropriate employment policies and procedures that would stand BPP in good stead as it expanded. Ms Richardson accepted in cross-examination that she had concluded that BPP’s employment practices were potentially deficient and that she thought Employsure was well-placed to assist with putting BPP’s affairs with respect to employment relations in good order.

381    Sixthly, and significantly, on 24 August 2015 Ms Richardson was given an opportunity to cancel the contract, or to take a couple of days to consider her position, but she decided to proceed. Ms Richardson accepted that, at least after her conversation with Ms Byrne on 24 August 2015, it was not correct to say that she had no choice but to proceed with the contract with Employsure.

382    Mr Nicholson had also given approval internally within Employsure for the contract to be cancelled without charge to BPP which is a relevant aspect of all the circumstances even if the fact of the internal approval was not conveyed to Ms Richardson (see [230] above).

383    Seventhly, Ms Richardson had a meeting with an Employsure Consultant and BPP received the following extensive employment-related documentation from Employsure: a corrective action plan, a review letter, an employee handbook, a proposed independent contractor agreement, a proposed full time employee contract, a proposed full time apprentice contract, a proposed contract for a casual employee, an independent contractor fact sheet, a Fair Work Information Statement, a proposed letter of offer to a new employee, a proposed letter confirming employment terms for existing employees and a vehicle pre-start checklist.

384    In her affidavit, Ms Richardson referred to an enquiry she made with Employsure in early December 2015 regarding a painter from New Zealand who was to work with BPP. Ms Richardson stated that she did not get an answer and was referred to another agency. Under cross-examination, Ms Richardson accepted that she had received some relevant information from Employsure by email, including a request from an Employsure representative that Ms Richardson return a call she had missed from Employsure. Ms Richardson accepted in cross-examination that this interaction with Employsure could not be characterised as her “being fobbed off”.

385    On 20 July 2016, Ms Richardson was provided with advice about a wage rate. Although the adviser was courteous, professional and helpful and gave Ms Richardson the answers that she sought (as accepted by Ms Richardson in cross-examination), Ms Richardson considered his demeanour was unsatisfactory because he “sounded very mumbley, and at the time I just felt as if he wanted to get me off the phone”. The audio of the conversation (which was played during the course of cross-examination) does not support Ms Richardson’s characterisation of the exchange. The Employsure representative responded politely and comprehensively to Ms Richardson’s queries and Ms Richardson indicated she was satisfied with the answers she received.

386    Eighthly, Ms Richardson had a poor recollection of the events that took place in 2015. She gave evidence about undertaking some Google searches in about July 2016 and found some reviews of Employsure and says she learned certain things. One of these things was that the contract automatically renewed if the consumer did not purposefully cancel it. That was plainly wrong as Ms Richardson was aware of this by no later 24 August 2015 (see [81] and [379] above). Ms Richardson could not explain how she made the error and she apologised for it.

387    Finally, in all these circumstances, I accept Employsure’s submission that there was nothing remarkable, let alone unconscionable, about its refusal to agree to BPP’s request to terminate, without charge, one year into a three year contract. BPP subsequently stopped making payments to Employsure in April 2018. This was apparently because BPP ceased to trade in May 2018. Employsure agreed to the early termination without the need for payment of the balance or any early termination fee.

(ii) ACO

388    First, with reference again to Kobelt and without saying anything inconsistent with what is said above, ACO did not suffer from any special disadvantage.

389    Although Ms Martindale did not present in cross examination as being commercially proficient, she appeared able to look after her own business interests. Ms Martindale had managed the ACO’s business for many years and was responsible for managing its seven to nine staff members, recruitment of new staff members and budgeting for the business.

390    Ms Martindale did not simply agree to everything that was proposed by Ms Bailey in their meeting on 1 February 2016. For example, while Ms Bailey wanted to her to sign a contract for 3 years, she said she could only sign up for one year.

391    Further, Ms Fahy was also at the meeting with Ms Bailey on 1 February 2016. As mentioned, Ms Fahy presented as a formidable person, who was well capable of assisting Ms Martindale in protecting ACO’s interests (see [115] above). Neither Ms Martindale nor Ms Fahy gave any evidence to suggest that either suffered from any special disadvantage.

392    Secondly, the phone which Ms Martindale used to conduct a Google search before contacting Employsure was not available. Under cross-examination, Ms Martindale was “nearly 100 per cent” certain that she would have used the search term “Fair Work Ombudsman” but could not be completely certain due to the passage of time. She rejected the proposition that it was possible that she entered the search term “Fair Work”. In any event, it is not clear what organic results and Google Ads (if any) she was presented with, or whether she visited an Employsure landing page. It is not possible to conclude that she was misled by anything Employsure did without being able to identify the results of her Google search.

393    Thirdly, it appears that, at the time of making her initial call to Employsure, Ms Martindale understood that she was speaking with the FWO.

394    However, I do not accept that anything Ms Martindale said should have alerted the Employsure representative to the fact that Ms Martindale was labouring under this misapprehension. Employsure did not seek to take advantage of that misapprehension. Ms Martindale’s comment that she had “been in a few time over the years for a few things” was made in response to the Employsure representative saying that ACO had “popp[ed] up” on the system as “Lambton Before and After School Care”. A fair reading of the transcript suggests that the BSC understood Ms Martindale was referring to previous contact with Employsure back in 2013.

395    Fourthly, before the end of that call, it was clear to Ms Martindale that she was being offered a meeting with Employsure and that it was a private company.

396    The BSC said to Ms Martindale: “We do something on this line here with one of our sponsors, a private company called Employsure”. It may be noted that this statement – although not a full description of the relationship between Fair Work Help and Employsure – does not suggest that Employsure had the backing of the government. Rather, it suggests that the Fair Work Help line had the backing of Employsure (which, in fact, was correct). Ms Martindale also understood that she would be provided with a quote by Employsure, and that she could decide whether she wanted to pursue a relationship with Employsure after she received that quote.

397    Further, in her affidavit Ms Martindale says that she thought the first direct debit of $353 was the total contract sum – which would be around $29 a month. She later said that she “found out” that the contract cost was $40 per week when it was, in fact, $74.11 per week. When it was suggested to Ms Martindale that it was possible that she had got some of her numbers wrong in preparing her affidavit, her response was “I don’t know” (see [110]-[113] above).

398    Sixthly, while Ms Martindale said that she did not appreciate she was signing a “contract” at the 1 February 2016 meeting with Ms Bailey, she stated in cross-examination that she “signed the iPad with an agreement, we were happy to go ahead with a contract with Employsure” and that she was happy “with what she has explained to us and the price, and that we were happy to go ahead for a year”.

399    Sixthly, Ms Martindale’s recollection of the meeting is poor, and was poor shortly after it occurred (see [110] above). For example, she provided her bank details on 1 February 2016 and again on 22 February 2016, but by 28 April 2016 she had forgotten providing her bank details either on 1 February 2016 or at all. The fact that there was some confusion about the dishonour of the direct debit does not change the fact that Ms Martindale had apparently completely forgotten about providing those details to Employsure within the space of two months. Further, although Ms Martindale accepted under cross-examination that she signed the iPad more than once during the meeting on 1 February 2016, she could only recall doing so once.

400    The fact that Ms Martindale and Ms Fahy understood that they were committing to a contract is also supported by contemporaneous communications. Ms Fahy recorded in the ACO diary that ACO had “[j]oined up with employsure for all fair work, legal advice and policies help”. Later on the same day, Ms Fahy said to Employsure “we signed up this afternoon, or around lunchtime, and we were talking to Cassy” (emphasis added).

401    Seventhly and as referred to at [114] above, after the meeting on 1 February 2016, Employsure had sent the contract, which clearly disclosed the contract price, to ACO on three separate occasions. It sent a further email with a statement detailing the amounts to be debited from ACO’s account. Employsure was entitled to proceed on the basis that ACO understood the total contract cost.

402    Eighthly, Ms Martindale did not say that she understood that Employsure was endorsed by Fair Work or the government. By the end of her evidence, it was clear that, as at 1 February 2016, she understood that Employsure was the government and that she thought that she was dealing with “Fair Work”, not a company affiliated with it.

403    Ms Martindale gave evidence that she understood Ms Bailey was from “Fair Work”. She thought it was unusual that the government would be charging her money, but apparently concluded that this was possible given that the service to be provided after 1 February 2016 was “above and beyond” what she had previously obtained from the government. Indeed, even at the time that Mr Baker conducted a compliance review on 3 March 2016, Ms Martindale’s evidence was that she understood that he was from “Fair Work”. This is also the effect of Ms Fahy’s evidence.

404    However, as noted above, Ms Fahy recorded in the ACO diary on the day of the meeting with Ms Bailey that ACO had “[j]oined up with Employsure” (emphasis added). On the following day she wrote “[r]ang Employsure spoke to Karen about Trainee Award wage … EMPLOYSURE email through correct pay rates” (emphasis added). The transcript of that call reveals that the phone was answered as follows: “It’s Maria from Employsure” (emphasis added). Ms Fahy accepted in cross-examination that this did not come as a surprise to her. The email with the correct pay rates that was sent through later that day was sent by “Karen Yu, Employment Relations Adviser, Employsure Pty Limited” (emphasis in original).

405    Finally, I accept that both Employsure and Ms Martindale made various good faith attempts to resolve the matter between March and June 2016. Employsure ultimately agreed to resolve the matter by Ms Martindale paying an early termination fee in November 2016, which nevertheless resulted in Employsure realising a loss.

406    It was evident from some of the communications during that period that there was some confusion on the part of Ms Martindale. On 30 May 2016, for example, Ms Martindale said in a call with an Employsure representative (in which Ms Fahy also participated) regarding switching to an advice-only contract, “I thought we agreed on that on the day. Sorry. Sorry. A bit muddled up here. Yes”. Ms Martindale accepted that, however, throughout all of her dealings with Employsure everyone that she dealt with was from Employsure was “[a]bsolutely courteous when they’ve spoken to me. They never raise their voices or got angry. They tried to explain themselves to me the best they could”.

407    Employsure initially attempted to resolve the matter in a way that preserved an ongoing relationship with ACO. For example, on 22 March 2016 Employsure offered ACO an advice only contract (i.e., not including Employsure’s representation and insurance services) at a cost of $750 per annum in addition to the two direct debits already paid – a total cost of approximately $1,400. Employsure made another offer on 20 April 2016 for an advice only contract at a cost of $750 per annum, although at this time a further direct debit had been paid – so that this offer entailed a total cost of approximately $1,800.

408    When it became clear that Ms Martindale did not wish to maintain any ongoing relationship with Employsure, on 6 June 2016 Employsure proposed an early termination of the contract upon the payment of an early termination fee of $352.96.

409    ACO ultimately accepted that proposal by paying the early termination on 9 November 2016. By that time ACO had paid $352.96 on 23 February 2016, 8 March 2016 and 11 April 2016. Accordingly, ACO paid the sum of $1,411.84 including GST out of a total contract fee of approximately $4,240 including GST.

410    A business record prepared by Employsure in 2016 calculated the costs incurred by Employsure in relation to the ACO contract. It discloses that the total costs incurred by Employsure in relation to the ACO contract were $2,000 plus GST. This figure does not make any allowance for the cost of Ms Bailey’s time and it assumes that advice was only obtained once (when it was in fact obtained at least twice). However, even adopting the figure that appears in that document, Employsure suffered a loss of $788.16 including GST in relation to its dealings with ACO.

(iii) TDB

411    First, again with reference to Kobelt and without saying anything inconsistent with what is said above, TDB did not suffer from any special disadvantage.

412    At the time of his dealings with Employsure, Mr Ottes had run TDB successfully for almost 40 years. His daughter attended the initial face-to-face meeting with Employsure and Mr Ottes had assistance from his bookkeeper throughout his subsequent dealings with Employsure. He also had the assistance of his friend, Mr Koldenhoven, an accountant, in relation to the termination of the relationship with Employsure. The financial report for the JCBR Family Trust trading as TDB Lunch Bar and Café, for the financial year ending 30 June 2017 discloses that the revenue for 30 June 2016 and 30 June 2017 was $1,345,118 and $1,092,965 and gross profit from trading was $742,285 and $636,077 respectively. Whilst the business made a small net loss in each of those years, it was evidently a substantial business.

413    Secondly, Mr Ottes’ evidence was that he could not recall whether he performed a Google search or whether it was someone else in the office who did it.

414    Thirdly, from his first telephone conversation with Employsure, it was made clear to Mr Ottes that Employsure was not the government, or associated with it (see [140] above). The BSC with whom he spoke made the following statement

So I’m — I’m from a private company. We’re actually called Employsure. We’re — we’re the largest workplace relations consultancy in Australia. Okay. We help almost 15,000 small to medium businesses with, you know, staff issues and — and day-to-day management of their staff and show you how you can reduce all of these costs.

415    The BSC made clear that the initial advice would be free, but (as noted at [140] above) Employsure would also provide a quote to offer further assistance:

In addition to that, he — he will talk to you a little bit about what we do, you know, and, you know, he would tell you what you need to put in place and you can thank him very much and you can take that meeting and you — and you can try to do that yourself, but, if you wanted some extra help we would, you know, show you things, you know, that you can do in terms of help, in terms of legal-indemnified advice and representation and — and advice is supplied. And he will give you an obligation-free quote so you — you still don’t even have to take that then.

416    Fourthly, at the subsequent meeting with Mr Langton, Mr Langton clearly identified himself as being from Employsure. Ms Ottes accepted in cross-examination that Mr Langton most likely said that Employsure helps customers with obligations around Fair Work and occupational health and safety. She also accepted that Mr Langton did not say that he was from the FWO or from Fair Work. The situation relating to the troublesome employee was discussed, although there is no evidence as to the detail of the discussion.

417    Fifthly, the various complaints made about the way in which Mr Langton conducted the initial meeting with TDB are without foundation. Mr Langton provided advice in relation to the employee that prompted the call. There is also no dispute that Mr Langton quoted a figure of $250 per week; or that Mr Ottes signed a contract on an iPad. Mr Ottes received a copy of the contract by email later on the same day. There is no good evidentiary foundation for the submission that Mr Langton failed to disclose all of the terms of the contract to Mr Ottes. Mr Ottes could not remember one way or the other whether the contract terms were read to him or he read the terms for himself. He did not deny that either the terms were read to him or he read them to himself. Neither Ms Ottes nor Mr Ottes had a good recollection of the meeting.

418    The high point of the ACCC’s complaint about the meeting is that Mr Langton may have spoken quickly, that he was a “charmer” or a “salesman”. However, there was nothing to prevent Mr Ottes and Ms Ottes from asking Mr Langton to slow down or repeat what he had said.

419    Sixthly, Mr Ottes subsequently met with an Employsure Consultant, Ms Channing, on 13 July 2017 (see [147] above). During that meeting Mr Ottes signed a further legally binding contract on behalf of TDB. Neither Mr Ottes nor Ms Ottes gave any evidence that suggested any impropriety on the part of Ms Channing. Neither had a good recollection of the meeting. Ms Ottes’ evidence was that she understood that her father was entering into a contract on behalf of TDB. Mr Ottes could not remember signing the contract, but did not dispute that he did so.

420    Seventhly, following various meetings with Employsure, TDB was provided with an extensive body of workplace relations documents and occupational health and safety documents. This included, for example:

(a)    The following workplace health and safety documents: a covering letter with recommendations to improve health and safety; a corrective action plan which identified 6 matters as “High Risk”; a workplace review report which identified 3 matters as “High Risk”; a health and safety manual; a health and safety handbook; a workplace health and safety induction checklist; and an Incident Report form.

(b)    The following workplace relations documents: a covering letter with a corrective action plan; a Guide to Employment Services; a schedule of applicable pay rates; a guide to implementing the documentation provided by Employsure; an Employsure welcome guide; a Fair Work Information Statement; position descriptions and employment contracts for casual and full time employees; a proposed letter of offer to a new employee; a proposed letter confirming employment terms for existing employees; an employee handbook; a template application for employment; and a disciplinary record.

421    Finally, TDB stopped paying any fees from September 2017. Other than registering a default with CreditorWatch in November 2017, Employsure did not take any recovery action against TDB, despite it having realised a significant loss from its dealings with TDB.

422    The final dealings between TDB and Employsure can be summarised as follows. On 30 August 2017, TDB advised that it wished to terminate the contract. On 1 September 2017, Employsure offered to reduce the term of the contract from three years to one year. TDB did not respond to that offer but simply stopped paying amounts due under the contract at around this time. There has been no further contact between Employsure and TDB since around November 2017.

423    TDB paid a total of $1,469.30 to Employsure. Employsure’s internal calculations of the costs incurred by it in relation to TDB show that, in total, Employsure realised a loss of approximately $4,800 in relation to its dealings with TDB.

424    For all these reasons, I reject the ACCC’s statutory unconscionability claims.

(E) UNFAIR CONTRACT TERMS

(a) The alleged unfair contract terms

425    There is no dispute that during the period November 2016 to October 2018, Employsure used three versions of its standard form contract in respect of contracts which ranged from one to five years in duration. During that period, the standard form contract contained the following provisions in cll a, b and e. As set out in Annexure A to the amended originating application, throughout that period, those clauses were in the following terms (with the square brackets indicating minor changes to cl b made in April 2017):

a.     The contract shall be for the duration of the initial contract period, with no provision for early termination.

b.     Employsure reserves the right to increase the Total Fee (excl GST) for any Renewed Contract, as follows:

(i) if the initial contract period is [1 / 2] year or less. The Total Fee wil1 increase by 2%:

(ii) if the initial contract period is between [1 year and 3 years / 2 years and 3 years], the Total Fee will increase by 6%; or

(iii) if the initial contract period is greater than 3 years, the Total Fee will increase by 10%.

e.    Failure to adhere to the above payments will result in the total balance outstanding becoming payable immediately in full.

426    The issue is whether each of these clauses is an unfair contract term and thereby void by operation of s 23(1) of the ACL.

(b) Changes to Employsure’s standard form contract

427    After these proceedings were commenced, cll a, b and e were removed from Employsure’s standard form contract and replaced as follows:

[Clause a.]        Termination before end of contract period

    l.    During the initial contract period, you can terminate your contract after the first full year has passed by paying an early termination fee of 30% of the remaining contract balance. If you wish to terminate your contract before the first full year has passed, you will also be required to pay the remainder of the first year’s fees.

    m.    During any renewed contract, you can terminate your contract at any time by paying an early termination fee of 30% of the remaining contract balance.

[Clause b.]        Automatic renewal

    g.    At the end of the initial contract period and any future contract period, the contract will automatically renew for the same period (renewed contract). We will send you an email reminder of this auto-renewal at least 90 days before the end of any contract period.

    h.    If you do not want your contract to automatically renew, we require you to give us notice of any decision not to automatically renew your contract at least one month before the end of your contract period. You can contact us at any time and we will record your notice.

    i.    We also have the right to end your contract at the end of any contract period, but we must provide you with notice in writing of any decision not to automatically renew your contract at least one month before the end of any contract period.

[Clause e.]        Failure to make payments

    j.    If you fail to make the payments that you have agreed to in this contract and the total amount remains unpaid for more than 60 days, a default may be registered with our credit agency and we may suspend access to our services until payment is received.

    k.    If you fail to make payment and the total amount remains unpaid for more than 90 days, we may take legal action to recover the overdue amount and an early termination fee of 30% of the remaining contract balance.

(c) Relevant statutory framework and legal principles

428    It is desirable to set out ss 23 and 24 of the ACL:

23    Unfair terms of consumer contracts and small business contracts

 (1)    A term of a consumer contract or small business contract is void if:

(a)    the term is unfair; and

(b)    the contract is a standard form contract.

(2)    The contract continues to bind the parties if it is capable of operating without the unfair term.

   (3)    A consumer contract is a contract for:

(a)    a supply of goods or services; or

(b)    a sale or grant of an interest in land;

to an individual whose acquisition of the goods, services or interest is wholly or predominantly for personal, domestic or household use or consumption.

  (4)    A contract is a small business contract if:

(a)    the contract is for a supply of goods or services, or a sale or grant of an interest in land; and

(b)    at the time the contract is entered into, at least one party to the contract is a business that employs fewer than 20 persons; and

   (c)    either of the following applies:

(i)    the upfront price payable under the contract does not exceed $300,000;

(ii)    the contract has a duration of more than 12 months and the upfront price payable under the contract does not exceed $1,000,000.

(5)    In counting the persons employed by a business for the purposes of paragraph (4)(b), a casual employee is not to be counted unless he or she is employed by the business on a regular and systematic basis.

24    Meaning of unfair

(1)    A term of a consumer contract or small business contract is unfair if:

(a)    it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and

(b)    it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and

(c)    it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

(2)    In determining whether a term of a contract is unfair under subsection (1), a court may take into account such matters as it thinks relevant, but must take into account the following:

(a)    the extent to which the term is transparent;

(b)    the contract as a whole.

(3)    A term is transparent if the term is:

(a)    expressed in reasonably plain language; and

(b)    legible; and

(c)    presented clearly; and

(d)    readily available to any party affected by the term.

(4)    For the purposes of subsection (1)(b), a term of a contract is presumed not to be reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term, unless that party proves otherwise.

429    Again, there was substantial agreement between the parties as to the relevant principles. Under s 24(1) a term of a small business contract is unfair if:

(a)    it causes a significant imbalance of the parties’ rights and obligations arising under the contract; and

(b)    it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and

(c)    it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied upon.

430    Sub-section 24(2) provides that, in assessing whether a term is unfair, the Court must also take into account the contract “as a whole” and the extent to which the term is “transparent”. The parties also accepted that the assessment of whether there is “unfairness” is an “evaluative process” (see Australian Competition and Consumer Commission v Ashley & Martin Pty Ltd [2019] FCA 1436 at [181]).

431    It was also uncontroversial that s 24(4) creates a rebuttable presumption that a term of a contract is presumed not to be reasonably necessary to protect the legitimate interests of the party who would be advantaged by it unless the party proves otherwise. Thus Employsure has the burden in this respect.

432    Employsure contended that the relief sought by the ACCC is misconceived because it seeks a simple declaration that the relevant clauses are unfair contract terms, which is relief that the Court cannot grant. This is because Employsure contends that the Court could only declare that particular terms and particular contracts between Employsure and specified customers are unfair. This reflects the requirement that for a term to be “unfair” requires consideration of the circumstances of the counterparties to each contract. Accordingly, while a particular form of words might be unfair in respect of one customer, it may not be in respect of another. Employsure contends that each contract must be identified in order for the Court to be satisfied that the terms are unfair in the context of the particular circumstances. Employsure added that it is important to bear in mind that as at 30 May 2019, it had approximately 20,000 clients in Australia.