Productivity Partners Pty Ltd (trading as Captain Cook College) ACN 085 570 547 & Anor v Australian Competition and Consumer Commission & Anor; Wills v Australian Competition and Consumer Commission & Ors [2024] HCATrans 5 (7 February 2024)

Last Updated: 7 February 2024

[2024] HCATrans 005

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S118 of 2023

B e t w e e n -

PRODUCTIVITY PARTNERS PTY LTD (TRADING AS CAPTAIN COOK COLLEGE) ACN 085 570 547

First Appellant

SITE GROUP INTERNATIONAL LIMITED ACN 003 201 910

Second Appellant

and

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

First Respondent

BLAKE WILLS

Second Respondent

Office of the Registry
Sydney No S116 of 2023

B e t w e e n -

BLAKE WILLS

Appellant

and

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

First Respondent

PRODUCTIVITY PARTNERS PTY LTD (TRADING AS CAPTAIN COOK COLLEGE) ACN 085 570 547

Second Respondent

SITE GROUP INTERNATIONAL LIMITED ACN 003 201 910

Third Respondent

GAGELER CJ
GORDON J
EDELMAN J
STEWARD J
GLEESON J
JAGOT J
BEECH‑JONES J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 7 FEBRUARY 2024, AT 10.03 AM

Copyright in the High Court of Australia
MR J.C. GILES, SC: May it please the Court, I appear with my learned friend MR R.B. DAVIES for the appellants in matter S118/2023 and the second and third respondents in S116/2023. (instructed by MinterEllison)

MR M.R. HODGE, KC: May it please the Court, I appear with my friend MR C.E. BANNAN on behalf of the appellant in matter S116/2023 and the second respondent in matter S118/2023. (instructed by HWL Ebsworth Lawyers)

MR S.P. DONAGHUE, KC (Solicitor-General of the Commonwealth of Australia): May it please your Honours, I appear with MR O. BIGOS, KC, MS S.A.C. PATTERSON and MR L.G. MORETTI for the first respondent in both matters. (instructed by Johnson Winter Slattery)

GAGELER CJ: The Court has been assisted by the parties providing a proposed order of address and an estimate of time. We will proceed according to both of those, and we will begin with the Productivity Partners appeal.

MR GILES: May it please. Your Honours have our outline. Following that outline, could we start with the language of the Act before coming to the central findings in the Full Cour – and with some reference to the findings of the trial judge – and the error in the analysis below. Our essential point is that the conduct the system has identified is not unconscionable within the meaning of that word in section 21, as explicated in section 22 of the ACL.

That is not to say, of course, that the outcome was desirable or defensible. The outcome was, of course, quite terrible. Nor is it to say that each decision made along the way by our clients would be regarded as being the preferable, better or anything else. The sole question, as we put the appeal, is whether the conduct – that is, the system – was unconscionable.

If we could start with section 21 of the ACL, which is in volume 1 of the authorities. It is authority number 3 at page 43 of the book.

GAGELER CJ: We tend to work from loose leaf extract, so if you can go straight to the section number.

MR GILES: May it please. Section 21.

GAGELER CJ: Thank you.

MR GILES: Starting with the, in effect, obvious proposition, it is a section addressing actions in trade or commerce, which are actions that may benefit one party to the detriment of others, of course. It is also directed – one sees from section 21(1) – to conduct:

in connection with:

(a) the supply or possible supply of goods or services . . . or

(b) the acquisition or possible acquisition of goods or services –

So, one sees the subject immediately to which the prohibition or norm is directed. The conduct that is prohibited is:

conduct that is, in all the circumstances, unconscionable.

“Unconscionable” is a word that, of course, identifies the degree of departure from appropriate – because that is what we are talking about – commercial conduct. It identifies, in our submission, a serious departure.

GAGELER CJ: There is a formulation one finds in the Full Court judgment, at paragraph 415 – a quotation from Justice Gordon in Stubbings. The final paragraph of that contains an explication of the meaning of unconscionable conduct. Do you depart from that or qualify that in some way?

MR GILES: Subject to what is meant by the word “assist” and the degree of assistance, no, we do not depart from that.

GAGELER CJ: Thank you.

MR GILES: “Unconscionable”, as a term, has a meaning – to put it at a level of generality, a known meaning in equity. I say “at a level of generality” because there is a debate, of course, on any given case as to its precise scope and application. “Unconscionable” as it appears in section 21 necessarily goes beyond that equitable meaning, although we rather suggest it goes beyond, not in the sense of wholly subsuming the equitable conception. We say that because of section 20(2), which identifies – necessarily, otherwise section 20 would be robbed of its content – that section 20, the concept of the unwritten law can have application in a field, and section 21 has a different field of application, as we say. Otherwise, section 20 would be robbed of content.

Section 21 is then itself, so to speak, explicated by section 21(4). One knows from sub-subsection (a), that is not limited to the unwritten law. Thinking about it in context of section 20(2), one sees that conceptually the ideas will overlap; we rather suggest by grammatical analogy, similar to a Venn diagram, at least with two circles of operation. The question then falls to (b), that which is within the conception – the statutory meaning – before coming to section 22, of course one – in this case, at least – has to identify subsection (4)(b) 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 the behaviour.

The system itself, though, must still bear, in order to be prohibited, that character, but the system must be unconscionable. In our submission, parting company with our learned friend, the Solicitor‑General, the conception of unconscionability does not change because of subsection (4)(b). It is still the same idea which must be applied to the system of conduct. Here, because of the case that has been found against us, it is the system as characterised that must bear the hallmark of unconscionability.

True it is, that is necessarily because it is a system as applied at a level of abstraction. That may have the consequence that sometimes it is difficult to prove that a system has the necessary character because often one knows – and one knows from section 22 – that it may be particular characteristics as the customer which mean that the conduct is unconscionable. But the fact that subsection 4(b) facilitates the proof of unconscionable conduct by reference to a system does not change the meaning, in our submission.

Turning, then, to section 22. In our submission, the operation of section 22 gives content to the word “unconscionable”, albeit non‑exhaustively. It identifies the types of conduct to which section 21 may apply. It does so, first of all – and given the content of 21, unsurprisingly – by reference to conduct that amounts to the – is in relation to, or “in connection with” – to use the statutory words – “the supply of goods or services”:

the supply or possible supply –

and section 22(2) does the same with respect to the:

acquisition or possible acquisition of goods or services –

The second functional operation of section 22 is that it identifies, by reference to those matters or conduct, the type of matter or conduct or circumstance to which the word “unconscionable” in section 21 is directed.

GLEESON J: To some extent.

MR GILES: Not exhaustively. Necessarily, your Honour, not exhaustively. We accept that, but it tells one the types of conduct.

GLEESON J: Some of it tells something about some of the types of conduct. For example, if one looks at (b), (d) and (i), those subparagraphs seem to identify conduct that might be regarded as unconscionable, but (a) is more opaque.

MR GILES: Subparagraph (a) is, in effect, circumstantial. That is, it is directed to the circumstance of the – I will limit it for grammatical ease – supply or possible supply. Subparagraph (b) is directed to both conduct and consequence, but the consequence is tied necessarily to conduct. Subparagraph (c) is directed to, perhaps, primarily a characteristic of the customer to use the word. It is not solely directed to the characteristic of the customer because, undoubtedly, the behaviour of the supplier informs the customer’s ability to understand.

Your Honours will understand we embrace (c) as identifying something which, whatever else may have been said about our client’s conduct, points against the conduct being characterised as unconscionable because, even with the inbound call, the customer was informed of the fees that were to be charged in simple language. There is some criticism of the use of acronyms and also the consequence of failing to withdraw by the census date.

The critical piece of information, that is that which saw the customer ultimately subject to the debt to the Commonwealth, was explained in our submission briefly and in a manner consistent with the obligation, as explicated by section 22 (1)(c).

GORDON J: I speak only for myself, Mr Giles, but I do not find that kind of analysis very helpful, I must say, for this reason. As you have, I think, properly identified, it is in all the circumstances, and I think that, for my part at least, I would be assisted by identifying the facts which were found that which you say are relevant to the system of conduct that was found unconscionable, identifying where you say there is error. There will be great debate, I think, about picking up (1), and then seeking to analyse it in isolation from all the circumstances.

MR GILES: Quite. Your Honour Justice Gordon, I had not intended to do that by any means today.

GORDON J: I am not being critical. I just think that is a fraught exercise.

MR GILES: Of course, one of the problems with the analysis or expressing the analysis, by reference to section 22, is, as a matter of expression or grammar, one tends to fall into identifying one area. What I was seeking to do at this stage of the argument was to identify the different nature of what the subsections are doing. I will come back, because we have to grapple with the system as found and why we say that as a whole it was not unconscionable.

GAGELER CJ: So, you are saying that section 22 in some way limits the concept of unconscionability that is referred to in section 21?

MR GILES: Ultimately, by reference to the types of conduct, or circumstance, that that conception is directed to, yes.

GLEESON J: Can I give you an example, before I forget it. A natural disaster, many people in the local community lose the roofs on their houses. Prior to the natural disaster, the roofer is charging $2,000 to repair roofs. Now there is a massive demand and the roofer charges $200,000 to repair the roof. The customer is able to understand the deal but is placed in a position of extreme need. In those circumstances, does it really matter that the customer is able to understand that they are being faced with a very high price for a service that would cost something quite different if the demand was not so great?

MR GILES: It does matter, but it does not tell one, necessarily, the answer to the question as to whether the roofer’s conduct is unconscionable. One of the other circumstances, of course, is the relative strengths of the bargaining position.

It may be, in your Honour’s example to me, that the conduct, bearing in mind the relative strength of the bargaining position – albeit, also bearing in mind the ability of the customer to understand – and such others of those factors in section 22, or factors of a similar character will either result in the conduct having a proper characterisation as being unconscionable or not.

GLEESON J: Really, we need to have some understanding of the case about the value which is said to render the conduct unconscionable before we can work out what matters are relevant to deciding whether or not that value is being breached by the conduct.

MR GILES: Ultimately, one does. That is exactly right. At this point, I am seeking only to identify that section 22 captures either conduct – as your Honour Justice Gleeson identified – by the supplier, or potential supplier, sometimes matters directed to the customer, and sometimes circumstances.

GAGELER CJ: You seem to be making some point of statutory construction.

MR GILES: I am.

GAGELER CJ: What is the point?

MR GILES: The point is that the word “unconscionable” in section 21 has a meaning. Its meaning is one which is derived from not only, of course, the actual concepts in section 22, but of concepts of that type. That is, section 22 tells one the metes and bounds, or the type of conduct or circumstances which will mean, when considered as a whole, conduct is either unconscionable or not.

GAGELER CJ: How do you reconcile that construction with the opening words of section 22(1)?

MR GILES: Because:

Without limiting the matters –

That is why we identify that these are non‑exhaustive, and why I have used the language of the “type” – indeed, your Honours will see in our argument that we rely on reasoning by analogy. What it is is a level without seeking to identify all of the matters or circumstances that are going to be relevant, nonetheless, but it directs attention to the type of matters or circumstances.

GAGELER CJ: An ejusdem generis kind of argument.

MR GILES: I hope it is not that blunt, but it is ‑ ‑ ‑

EDELMAN J: I think there may be a little confusion between “meaning” and “application”, “connotation” and “denotation”, “sense” and “reference”. You are talking about meaning, but I think you really mean application. The meaning of “unconscionable”, as you have accepted, is probably best explicated the way Justice Gordon does in Stubbings v Jams, which is, it is a set of values.

What your concern is, as I understand in your submission, is what is the sphere of its application, what are all of the circumstances as you look to when you are applying that meaning. I think the difficulty that arises from that is that section 22 sets out a number of circumstances but, as you say, not exhaustively.

MR GILES: Quite. But one has to start with the meaning of “unconscionability”. Where I might part company in what your Honour has just put to me is that we do not limit the effect of section 22 in our argument to the denotation or the application, but rather that it also gives content to what is meant by “otherwise” the word “unconscionable” with all of its open‑textured nature.

STEWARD J: Can I ask you a question for you to think about. “Unconscionability” is often described as “sharp practice”. It is one of the many words used to describe it. It seems to me that nub of this case may be this: your client introduced safeguards for good and prudent reasons, the two ones in question.

MR GILES: Quite.

STEWARD J: It then removes them and there were consequences, which you have described as “terrible”, I think. What are the circumstances where a person in trade and commerce can remove safeguards that they have knowingly put in to protect consumers, knowing that their removal must lead to a measure of unprotection? When does that not become “sharp practice”?

So, to give you an example: imagine an unregulated world in which a tobacco company sells cigarettes. It knows that cigarettes could cause cancer, so it puts a warning on its packets. Sales deplete, so it removes the warning. Is that sharp practice? Is that unconscionable? You do not have to answer, I just want you to think about it. That seems to me to be at least one potential nub of this case: when can you remove safeguards that you, yourself, have thought were necessary?

MR GILES: Your Honour will not be surprised to know that we have thought about that, and we have thought about the analogy with respect to tobacco.

STEWARD J: Yes.

MR GILES: There are difficulties with analogy, immediately ‑ ‑ ‑

STEWARD J: Of course, I understand.

MR GILES: ‑ ‑ ‑ but there is also difficulty with the application of unconscionable conduct in a world where, at the time it was introduced, there is commercial behaviour which is known to have undesirable consequences. We also pause on the paraphrase, albeit one which is frequently used of “sharp practice” as a paraphrase of conduct that may be unconscionable. Certainly, some conduct that will be described, in effect, in common English language as “sharp practice” will also be unconscionable.

STEWARD J: But you would say not all sharp practice.

MR GILES: Not necessarily.

STEWARD J: No, I understand.

JAGOT J: Could I just ask one question. I had more understood your submissions as not raising so much a point of statutory construction but of duty of consideration. As in, the presence and absence of each of the things in 22 were, themselves, relevant matters that you had to turn your mind to in order to reach a view, one way or another. I had understood you were not saying you construed 22 as setting the metes and bounds of the types of things that could be within 21. Is it different from statutory construction? Because statutory construction is one thing. The duty imposed on the decision‑maker, I guess, under the statues – another form of analysis. You said yes to the Chief Justice’s answer. You said, yes, it did; the meaning is derived from the metes and bounds – or it sets, even, or identifies the metes and bounds. To me, at least in terms of types – and ejusdem generis was put back to you. But is it a construction issue, or is it both? I am not quite following.

MR GILES: I am terribly sorry. That is undoubtedly my fault. We just start with the construction and identify how we say section 22 intersects with section 21, and I postulated our ‑ ‑ ‑

JAGOT J: So, you do say it limits the types, even though it has the words “without limiting” at the beginning? Which, to me at least, would indicate that it is not limiting the types or anything. I am only talking about as a matter of statutory construction. I am not saying that there may not be a duty. I am just trying to work out where the argument fits.

MR GILES: The argument fits, indeed, by the – ultimately, it comes to the importance of the presence and absence of conduct of the types identified in section 22. Whether that starts, as I put it so far today, with identifying what “unconscionable” means, or whether it is at the point of denotation and application, as Justice Edelman put to me.

BEECH-JONES J: Mr Giles, do you not say that, at least at this level, a court assessing unconscionability must address the criteria in section 22 in relation to the case, and that is what the Full Court, you say, did not do here? Do we at least have that?

MR GILES: Yes, absolutely.

JAGOT J: Which is nothing to do with a statutory – I mean, it emerges from the statute, but it is not really an issue of statutory construction in the way that you agreed with the Chief Justice – or am I missing something? It just seems to be in a different legal category from what you started with, to me.

MR GILES: Your Honour, as we see it, one starts with the construction of section 22. One thing, of course, having agreed with Justice Beech‑Jones that it is the presence and absence of the matters in section 22 to which we draw attention, we also draw attention to the fact that that which was found against us, which perhaps I should come to immediately ‑ ‑ ‑

GAGELER CJ: No, let us just clear up this question of what your argument of law is for the moment. Let us just clear that away, Mr Giles. Is it some implied limitation on the scope of unconscionability in section 21 or is it, as Justice Beech‑Jones put to you, simply a requirement to properly evaluate each of the factors in section 22, which is obvious on the face of the provision?

MR GILES: Quite.

GAGELER CJ: Well, the third option: is it both?

MR GILES: Or is it slightly between that, because there will be some matters, some things that are outside the concept of “unconscionable”, even taking into account the words “without limiting the matters”. That is, there will be ‑ ‑ ‑

GORDON J: We need to cut through this. In Stubbings, I said, rightly or wrongly, that what 22 was, was it assisted you to provide a framework of the values. Not the types of conduct, not the things, the values that underpinned the idea of unconscionable, contrary to conscience.

MR GILES: Yes.

GORDON J: And “without limiting” identifies that the things that you might look to in assessing that value – I am not using the words “sharp practice”; I am using values that underpin it – is not limited. Do you challenge that?

MR GILES: No, I do not challenge that. No.

GORDON J: Then what is the submission on statutory construction if you accept that passage in Stubbings in terms of the construction of 21 and 22?

MR GILES: I do not think I am parting company from that, and having meant to by starting with the concept of what “unconscionable” means by reference to – I have used the words circumstances and conduct, rather than values ‑ ‑ ‑

GORDON J: Values can be demonstrated by a range of facts and circumstances in matters. What section 22 does, it gives you a list of some things that might assist you in reaching that conclusion. It says “may have regard to”.

MR GILES: In our submission, some things, the presence or absence of which will assist you ‑ ‑ ‑

GORDON J: In a particular case. It will vary from case to case.

MR GILES: Quite.

GORDON J: If that is right, is it one, two, or three of the options put to you by the Chief Justice?

MR GILES: We do not depart from your Honour’s description in Stubbings. So, it is ‑ ‑ ‑

GAGELER CJ: I think it is two.

MR GILES: It is two, yes.

GLEESON J: For my part, I would not assume that the Chief Justice has identified the range in one, two, and three. Perhaps I could give you an example to illustrate that. Let us say that the reason that a system was argued to be unconscionable was because it was an appalling waste of taxpayers’ funds. Let us say that that was the case that was put. Why would you need to look at section 22 in order to decide whether the conduct was unconscionable?

MR GILES: Because the fact – no doubt, an important fact – of the appalling waste of taxpayers’ funds may itself not be conduct that when one looks at, as I have described it, the circumstances or the conduct in section 22, or as Justice Gordon has said, the values, one does not find in terms – and hence, your Honour’s question – the value of not having appalling wastes of taxpayers’ funds in section 22. One sees something which is ‑ ‑ ‑

GLEESON J: So, therefore, the mere fact that something involved, say, fleecing or taking advantage of a government scheme could not be unconscionable within the meanings of section 21 as read with section 22?

MR GILES: One is driven in answer to that to at least consider that which appears in section 22 and immediately, section 22(1)(a) will inform that analysis.

GAGELER CJ: Mr Giles, I do not want to detain you too long, I know you want to get to the facts, but to the extent that you may have a point of statutory construction, would you articulate that, please, in one or two sentences?

MR GILES: Of course. The word “unconscionable” in section 21 takes its meaning, albeit non-exhaustively, from those whether it be described as values or conduct and circumstances. That is, the type of conduct and circumstance in section 22.

EDELMAN J: So, Mr Giles, if the only words in section 22 were, the matters to which a court may have regard for the purpose of determining whether conduct is unconscionable are unlimited, if those were the only words, would you say that the scope of section 21 – the scope of its application – would be wider, and that, actually, by listing these particular subsections, the meaning has somehow contracted the scope of application?

MR GILES: Not necessarily, because one would still have posed the question of what does “unconscionable” mean in section 21, but one would answer the question without the, as I would have it, assistance of the identification of the values or circumstances or conduct in section 22.

GAGELER CJ: Mr Giles, just for completeness, I asked you to state the proposition in one or two sentences. There was one sentence. Was there going to be another?

MR GILES: I was taking up your Honour’s first option on this occasion.

GAGELER CJ: Very good, thank you. Well, I think we understand the submission. Thank you.

MR GILES: Can I come to the essence of the factual case. The Full Court’s central finding – they expressed it on a number of occasions in greater and lesser detail – is at paragraph 121 of the Full Court’s judgment, page 270 of the book. And that is – to pick up the subparagraphs following on page 271 and 272 of the book – that as at, relevantly, 7 September 2015, the date on which the so‑called process changes were implemented, Productivity Partners knew the two types of risks that were identified. The Full Court explains, of course, that the two types are not unconnected. That is, misconduct can lead to unsuitable enrolments.

Secondly, that Productivity Partners knew that the two controls, the outbound QA call procedure and the campus driven withdrawal procedure, were controls over/protections against that risk. They were not the only ones that we had. That, with that knowledge, and for the purpose of profit maximising, Productivity Partners removed those two controls. We knew that there were immediate consequences – perhaps that is not as at 7 September, but the substance of the finding is that it was necessarily shortly afterwards, because the increase of enrolments has to have happened after the controls were changed – and we knew that a dramatic increase in revenues and turnaround in profits was substantially built on VET FEE‑HELP revenue in respect of students who may have been the victims of misconduct who were unwitting or unsuitable in the way explained.

I say “in the way explained” because the Full Court did identify the concept of “unsuitable students” somewhat more narrowly than his Honour the trial judge did. One finds that at paragraph 58, page 248 of the book – starting on page 248 at about line 8. Your Honours see that the bolded term:

unwitting or unsuitable students . . . The description of “unsuitable students” is not intended to include students who willingly (and with knowledge of the obligations being incurred) enrolled in a course –

Et cetera. So, a student who makes a decision and then changes their mind, or just does not engage, or tries to engage and finds it too hard, or any number of things happens, it is not within the Full Court’s conception of “unsuitable”.

GLEESON J: Is it just unstated why it is that it is against conscience to enrol an unwitting or unsuitable student?

MR GILES: Yes.

GLEESON J: So, it is not because that would be a waste of taxpayers’ money? It is not because that would potentially embarrass or humiliate the student? It is not because the student might find themselves saddled with a debt that they have not usefully incurred?

MR GILES: Certainly, at this stage of the explanation, that is the case. There are references to the last of your Honour’s alternatives. That is, that students will be, so to speak, saddled with a debt for which they have received no benefit. So, I do not think I can say that it is wholly unstated.

BEECH‑JONES J: So, the premise of this is that the unwilling or unsuitable student is vulnerable in the sense of, they are exposed to incurring a debt for a course they do not want or they cannot do.

MR GILES: Certainly that they cannot do. “Do not want” may carry with it a question of how they come to make the decision to – because people ‑ ‑ ‑

BEECH‑JONES J: Or do not voluntarily engage in.

MR GILES: Quite.

GORDON J: There are two categories of vulnerability identified by the unsuitable students. It is those who do so without – not do so willingly and with full knowledge. That is one vulnerability; that is lack of knowledge. The second is lack of personal skills, sufficient language literacy or numeracy, technology, or access. You might have a student who is in the first, or a student who is in the second, or a student who has both.

MR GILES: Quite.

GORDON J: So, there are two kinds of vulnerabilities.

MR GILES: There are two kinds, yes.

GORDON J: Thank you.

GLEESON J: But it is only vulnerability to incurring an unwanted debt. The harm.

MR GILES: Perhaps the consequence of the vulnerability is the incurring of the unwanted debt.

STEWARD J: Can I just ask about that. Were there any findings made about whether the Commonwealth enforced these debts? I recall, at the time, section 48 of the Higher Education Support Act provided that the Commonwealth could forgive the debt in special circumstances, and there were time limits to apply for that. Did any of that happen? Do we know?

MR GILES: There is no finding about that, your Honour. That was not a subject that was litigated at trial.

STEWARD J: But if it were the case that the Commonwealth did not enforce any of the debts, and there are now more sophisticated provisions dealing with that, would that make a difference, in your view?

GORDON J: Or does it go to relief?

MR GILES: Yes.

STEWARD J: Anyway, perhaps have a think about it.

MR GILES: I think the answer to that is it is likely – that is, usually – would go to the question of relief, unless there was a component part of the unconscionable conduct that, in effect, touched on – the reason I put it that way, your Honour, is – it is not this case, I immediately say, but had there been a forgiveness of debt while Productivity Partners was – to use the slightly unfortunate language that this case has developed – claiming and retaining revenue.

One could postulate a circumstance where, perhaps, the forgiveness of the debt, by the Commonwealth, of the student would inform whether the claiming or retaining added to the unconscionable conduct. But I hasten to add in putting it that way, I do not suggest that that is this case.

STEWARD J: Thank you.

MR GILES: Picking up on the claiming and retaining, and how the Full Court addressed that part of claim. There were the circumstances, so to speak, of the assistant for the enrolment, and the fact that my client then passed students through census, claimed the revenue, and, to the extent it was paid, retained some. When I say “to the extent it was paid”, that is left a little unresolved by the trial judge in a paragraph in the low 500s of the trial judgment.

The Full Court addressed the significance of claiming and retaining at paragraphs 200 and 201, at page 307 of the book. In effect, finding in the first sentence of 201 read with 200, that the conduct was unconscionable at its inception, and the significance of thus having later claimed and retained is, in substance, that had we not done so that may have, in effect, ameliorated or provided an answer to the unconscionable conduct taken as a whole.

GORDON J: Where does it say that, please? In the Full Court. Did the Full Court adopt that approach?

MR GILES: The Full Court picked up the trial judge. I will just ask Mr Davies to pick up the paragraph at which they adopted that approach.

GORDON J: Thank you.

MR GILES: They endorsed the trial judge’s finding to that effect, as we read the Full Court’s judgment.

BEECH-JONES J: Mr Giles, can I ask this. As I understand it, the student, under the statutory scheme then in place, incurs the debt on the census date. Is that right?

MR GILES: Yes.

BEECH-JONES J: In terms of what happens when your clients, quote, claimed the revenue – and I think this happened throughout 2016 – was there some mechanism whereby if your client did not claim the revenue the student would be relieved of the debt?

MR GILES: That seems to have been assumed, but there is no statutory basis for that assumption.

STEWARD J: Other than it might have been special circumstances under section 48.

MR GILES: Quite. Your Honour Justice Steward is right. Post the census date, in the event of special circumstances, our client had the power to cancel the enrolment, which would then cancel the debt.

GLEESON J: One thing I was not clear about was exactly when in the process your client would actually – would receive the funds. It seemed to be fairly early in the process.

MR GILES: I think ultimately in the evidence at trial in this case, there are no findings that tell your Honour the answer to that, and it was not dealt with at the trial of the case, but certainly the sense of it is yes, and there was provision – which escapes me – for, in effect, payment in advance as well. Now, whether that happened in this case, the evidence and the findings do not tell us, your Honour.

JAGOT J: I think at paragraph 123 there is at least a reference to the primary judge having concluded that the unconscionability could have been undone or ameliorated.

MR GILES: Yes, and I think in answer to ‑ ‑ ‑

JAGOT J: Or cured, had you not claimed the money from the Commonwealth.

MR GILES: Quite, and as we read 121 and 123, it is the Full Court’s description of the ‑ ‑ ‑

JAGOT J: Which I think they do embrace. I just cannot find exactly where, but 123 seems to be about, ultimately, claiming the money is a necessary part of the unconscionability in this case. That is how I understood it, because even though it was unconscionable from the outset it was that final step that ‑ ‑ ‑

MR GILES: Completed it, so to speak.

JAGOT J: ‑ ‑ ‑ completed.

EDELMAN J: Why should that be so? Why should that final step be necessary? So, if the conduct was not unconscionable until that point, what is it about claiming or retaining that makes it unconscionable; or if the conduct was unconscionable, what does it add?

MR GILES: We agree, might I say? We agree and we think the sense of the analysis starting at 121 – although the sense becomes a little bit confused for the reason we are discussing – the sense of the analysis, and that which we went to in the first sentence of 201, is that the conduct was unconscionable at the point of possibly enrolment, at least passing through the first census date, because, as your Honour says, if it was not unconscionable then claiming and retaining cannot change the character of that conduct.

EDELMAN J: But the very purpose of the system was to obtain the money.

MR GILES: That is right.

JAGOT J: Is not the reasoning as explained, though, simply that it was unconscionable because at the time of enrolment, or whatever under the new system, you must have foreseen – in the ordinary course you would be claiming the money, bar some other – and then, all that the primary judge was saying – and, subject to finding it, the Full Court endorsing – was that you could undo that quality of unconscionability if you did not claim the money, because you did not claim the money from the Commonwealth and the student has no debt.

I am assuming that is how it all worked, but you did claim the money for students enrolled within a certain period; the impugned conduct. So, it did not make the conduct unconscionable. A factor did not happen that would have unmade the conduct as unconscionable, which is a different conception. It is not transforming “non-unconscionable” to “unconscionable”, it is just the non-occurrence of a fact that, had it occurred, would have transformed the conduct from unconscionable to not, because no debt would have been fallen upon the student and the Commonwealth. That is how I understand it, that is all I am saying.

MR GILES: Can I add one caveat to that which I think against me? When your Honour says that it was foreseeable that we would claim the money, it was intended that we would claim the money.

JAGOT J: Intended, exactly.

MR GILES: Quite, but the object of enrolling students and ‑ ‑ ‑

JAGOT J: Yes, all I am saying is that ‑ ‑ ‑

MR GILES: ‑ ‑ ‑ of course, I had to provide the cause was to make money.

JAGOT J: ‑ ‑ ‑ I do not read the reasoning as a case of saying something non-unconscionable was transformed by the step of claiming the money. That is not how they reasoned.

MR GILES: No.

GORDON J: Or another way of putting it is it was probably unconscionable, or arguably unconscionable, or put against you, absent that step.

MR GILES: We agree.

GORDON J: In other words, it is contextual – but I do not know how that helps you, Mr Giles.

MR GILES: I am not sure that it does. I am certainly not putting it that it helps me, but rather is to direct attention to the fact that it is the system of enrolment, albeit – I think I have to accept – with the intention that we would claim the revenue, that must be unconscionable. If we do claim the revenue, it does not change that if it is unconscionable or, indeed, does not change and if it is not unconscionable. What was seemingly contemplated was that if we had not claimed the revenue, and there may be an unstated predicate in it – not claimed the revenue and cancelled the students’ enrolment, therefore the student would not incur the debt to the Commonwealth – then our conduct may, by that further step, cease to be unconscionable.

GORDON J: Are you going to give those first paragraphs at some point to make good that proposition?

MR GILES: I thought I had, in adopting what Justice Jagot said ‑ ‑ ‑

GORDON J: Paragraphs 121 to 123.

JAGOT J: I said that was the Full Court’s – yes, sorry, Justice Gordon, 123. I had not found the bit where the Full Court embraced that; that is a summary of the Full Court. I am not doubting that they did, but there is another paragraph somewhere.

MR GILES: Mr Davies tells me it is page 306, paragraph 198. Although – no, that, I think, is no more than reciting of how his Honour addressed the case.

GORDON J: We will leave it; you will give it to us.

GAGELER CJ: Mr Giles, just to go over perhaps what you have already been telling us. We are looking for the identified system of conduct that is said to be unconscionable. There are perhaps two ways of looking at the findings. One is that you had a system of enrolment which included claiming and retaining, which had in it certain safeguards. Those safeguards were removed, and the system of conduct with which we are concerned is the removal of the safeguards in context, or another way of looking at it is the system of conduct that we are looking at is the system of enrolment, which includes the claiming and retaining with the safeguards removed.

MR GILES: Quite.

GAGELER CJ: Is it the latter?

MR GILES: It is the latter. The system must be the latter. The act of removing the safeguards that were in the prior system is not itself the system ‑ ‑ ‑

GAGELER CJ: I thought so, but it is not, perhaps, pellucidly clear in the material.

GORDON J: That is one of the difficulties. Do you say that there are findings by the Full Court in those terms?

MR GILES: The answer is – we think fairly – that the Full Court is directing its attention to the system as implemented. Some of the language – picking up, I might say in fairness to the Full Court – picking up the language of the pleading of the case, I think. Some of the language tends to focus on the removal of the controls, but they do make clear that they are addressing a systems case and that they are addressing the system without the controls.

GORDON J: Thank you.

EDELMAN J: Is there not a difference between the system itself and the effect of the operation of the system? One could have, for example, a system which, on its face and in its likely intended operation, is unconscionable, yet in its actual operation might turn out not to have any of the intended or anticipated effects. Would that system be unconscionable?

MR GILES: The answer, ultimately, is likely yes. I caveat that with “likely” because, of course, the presentation of the two options – there may well be circumstances where the two rather merge, if I might say, but ‑ ‑ ‑

EDELMAN J: That is the ambiguity that the Chief Justice points to in the Full Court’s reasons. It seems that at some points the system that is being discussed is the intended system of enrolment with all of the safeguards, minus the safeguards that are removed. At other points, it is that system plus its actual effect and implementation, but your submission, as I understand, is that it is the former. That when one is talking about systems, it is the process that is set up in its anticipated and/or intended effect, rather than the actual consequences of the operation of that system.

MR GILES: Yes, which is why we place, of course, not inconsiderable weight on the finding at paragraph 176, page 292, that we did not intend misconduct to occur.

GORDON J: Why is that important to you?

MR GILES: Because the system we have in place is not one which carries with it – perhaps, Justice Edelman’s example – a system that is unconscionable because it has an ill‑intention built into it, but the intention is not carried through because it is ineffective to give effect to the ill‑intention. The intention of putting the system into place must, in our submission, be important because, at least in this case, that is the object that the systems sought to achieve. We do not intend misconduct to eventuate.

Our system is one that still has controls. At the risk of the very allusion that your Honours have been asking me about, one knows with hindsight that the controls that remained failed. They were lesser controls than we had at the earlier date, but, nonetheless, what there was was an enrolment system that involved providing information which met the regulatory minimum to, at that point in time, potential students; a charging system that accorded with the regulatory minimum. It was a system that also involved us having resources to provide the teaching.

GLEESON J: Was there not a finding that when you claimed the revenue, you intended to provide the services?

MR GILES: Not in terms. There are findings about employing student support officers, but there is no finding in terms, either way, as to whether we intended to provide the services. Although, there is an express finding by the trial judge, which is also picked up by Justice Downes, that we did not act dishonestly. That having never been alleged against us.

EDELMAN J: But you did know or anticipate what the consequences and effects would be, other than the agent misconduct.

MR GILES: I think it is fair to say that the effect of the findings is that we foresaw that students would pass through census and incur the debt in circumstances where they did not engage with the course, although I do not think it goes, in our submission, no more precisely than caveating that with “for one reason or another”.

JAGOT J: The idea was, as 121(c) makes clear – I mean, this was not the removal of two safeguards because those safeguards, for example, were hard for students to navigate – or, only hard for students to navigate, or hard for the College to manage. It was to increase the number of students who made it through to census so you could make more money.

MR GILES: Yes.

JAGOT J: That is part of the system because that was the intention.

MR GILES: Quite.

JAGOT J: Yes.

MR GILES: I have to accept that.

JAGOT J: Yes. So, that is all part of the system, the relevant system. Namely, the removal for a particular purpose.

MR GILES: That is right.

JAGOT J: With a particular intended effect, which in fact occurred, as it happened.

MR GILES: Quite, quite.

BEECH-JONES J: Mr Giles, your client knew of the likelihood that people would pass through the census date who were unsuitable, and that there would be more people who did that if you removed the safeguards. Is that right?

MR GILES: No, the finding goes no further than ‑ ‑ ‑

BEECH-JONES J: Reasonably foreseeable.

MR GILES: ‑ ‑ ‑ subsection (c).

BEECH-JONES J: Okay. We knew that that was reasonably foreseeable, and based on your previous experience that had been a relatively high number. I think there was an earlier time where they had that. Is that not, in effect, intending to take advantage of that reasonable possibility?

MR GILES: A caveat in answer to that is, yes, but in circumstances where the particular regulation of this field of commercial endeavour did not require us to have either of the controls ‑ ‑ ‑

BEECH-JONES J: I understand that.

MR GILES: ‑ ‑ ‑ and the operation of the market was such that our business had rather contracted, if I might put it that way. So, true it is, we were reducing the controls, but we were reducing the controls to a state which was not below that required by the regulation. That is not to overlook the expression of the department’s expectation that there would be something in the nature of a campus driven withdrawal process, but it is to identify that, when forming the judgment about whether conduct is unconscionable, the endeavour – that is, commercial endeavour – specific regulation sets a standard and, in our submission, it is wrong to judge our conduct, at least in this case, against a higher standard or a different standard.

BEECH-JONES J: All right. I am just trying to pick up what you say about intent. Intent, in effect, was, we know we will pick up some unsuitable students if we drop this.

MR GILES: That is reasonably foreseeable, therefore, one can join that dot.

STEWARD J: A phrase that is often used in this context is “normative standards”. Is your submission that the normative standard here is an industry of high risk which is largely unregulated?

MR GILES: Sorry, your Honour, I just missed that.

STEWARD J: Do you say that, when considering what the normative standards are here, you ask us to consider that the industry that your client was in was one with high risk for consumers, which was unregulated in part?

MR GILES: I accept the part of the risk for consumers; I do not accept “unregulated in part” in that there was the regulation – indeed, some regulation specifically designed to control agent behaviour – and in circumstances where that was the regulation, the normative standard, in effect, matches that level of regulation. It does not operate to require a higher standard of behaviour – have controls that are not required by the regulation is our base point.

GAGELER CJ: Mr Giles, can I just ask a question of litigious history, really. I note that the order of Justice Stewart that appears at page 192 of the amended core appeal book contains a declaration which is really quite specific about what the relevant conduct is, and what is conduct, and what are the circumstances in which conduct occurred, which is slightly different, I think, from the way you characterised the system in an answer to me earlier. But at page 403, I see that paragraph is set aside by the Full Court. I had not quite picked that up earlier.

MR GILES: Yes.

GAGELER CJ: Why was it set aside?

MR GILES: It was set aside because it was inapt, because it carried with it the chronological difficulty of finding the conduct was unconscionable at and from 7 September, yet the conduct in claiming and retaining had not then occurred.

GAGELER CJ: And it was remitted to the primary judge, but as a replacement?

MR GILES: It was.

GAGELER CJ: Yes. Where do we find that?

MR GILES: Paragraph 377, page 367. Their Honours query whether a declaration in this case is in fact sensible or appropriate at all, for the reasons they identify. Their Honours then make a suggestion as to a form of declaration which does accord with their Honours’ reasoning. Then at 378, one sees an explanation. One also has an explanation earlier in the judgment, paragraph 16(a), page 233.

GORDON J: Sorry, what was that paragraph, Mr Giles?

MR GILES: I am terribly sorry, 16(a).

GAGELER CJ: Are you proceeding on the basis that paragraph 377 captures the contravening conduct as found by the Full Court?

MR GILES: Yes. I think we are right to do that when one goes to paragraph 17 on page 234, which is a more abbreviated paragraph, but in effect rejecting – subject to that which had appeared in 16 – our challenges to the trial judge’s finding. It is a more abbreviated statement than at paragraph 121 of the “unconscionable system”. But as we understand paragraph 17, and indeed the proposed declaration at paragraph 363, their Honours with, so to speak, their tweaks or caveats identified in 16 except in his Honour’s reasoning.

GLEESON J: That declaration focuses on the idea that the conduct was an abuse of the VET FEE‑HELP scheme. It is turgid. Does it focus at any point on the fact that the debt is saddled on the student, or does it focus on the fact that the money is extracted from the Commonwealth?

GORDON J: It may be that – I had read paragraph (c) of proposed declaration as picking up:

circumstances where the student did not do so willingly and with full knowledge of the obligation being incurred –

under the scheme, and that might pick up the debt.

MR GILES: Might I say, your Honour, that is why I hesitated on answering Justice Gleeson’s judgment, and tried to find whether there was some more explication of it later in the declaration, but that is the extent to which the focus is on what might be described as “harm” to the customer.

GORDON J: It is identified in (d) as “risk”, referred to in paragraph (c), and the risk would include the debt.

MR GILES: That is because, then, the conception was not that there was a cohort of students who would necessarily be enrolled, but rather that there was a risk that that would happen.

GLEESON J: What seems incredibly unsatisfactory about this is it looks like some kind of instinctive synthesis exercise, where everyone grabs it, as many things as they can from section 22, pulls them all together, and then says, in the circumstances unconscionable. But there is no identification of the value. The government, the taxpayers were fleeced, the students were saddled with debt. There is a failure to really identify what is unconscionable about the conduct.

MR GILES: Subject to the fact that, of course, we come back to the factors in 22 as the framework for the analysis, our complaint has been – and your Honours see this. Our complaint as recorded in the Full Court was that, effectively, that which has been characterised as unconscionable is a judgment formed by the – not sure that I’ll necessarily do well by picking up “instinctive synthesis”, but of the conduct.

That is why we go to 121 as what we see to be actually the conduct and the system said to be unconscionable. Our ultimate submission is that when one analyses that by reference to the conception of unconscionability, whether it is informed by section 22, or looking at, amongst other things, the values, the circumstances, and conduct in section 22, it does not meet the statutory criteria of “unconscionable”. Your Honour referred to fleecing the Commonwealth. You will not find in the judgment reasoning by reference to inflicting harm on the Commonwealth.

JAGOT J: No, it is that the conduct results through the Commonwealth burdening the student with the debt. Is that not what the – I am pretty sure the Full Court, at least, clearly distinguishes that, at some point, the issue is the landing of the debt on the student by the Commonwealth.

MR GILES: I say that because of the litigious history that your Honour Chief Justice Gageler has referred to. The case has been by reference to the effect on the student, or the risk of effect on a set of students, as opposed to the effect on the Commonwealth.

JAGOT J: I am fairly sure that that is expressly addressed somewhere in these lengthy reasons. I just cannot put my finger on it right now.

GORDON J: It is set out in 17, which you took us to, to the extent where they say:

It was entirely foreseeable that the College’s conduct would result in large numbers of students being enrolled in the online campus in circumstances where the student did not do so willingly and with full knowledge of the obligation being incurred (the VFH debt) –

MR GILES: Quite. That is why I accept entirely that the focus is in this case on the harm – that is, the debt – to the students.

GAGELER CJ: Mr Giles, that might be a convenient time to take the morning adjournment. According to your schedule, you have about 45 minutes left, I think.

MR GILES: Yes. I think we are more or less on time. Your Honours understand the substance of what we say.

GAGELER CJ: Yes. Thank you. The Court will take the morning adjournment.

AT 11.16 AM SHORT ADJOURNMENT

UPON RESUMINGAT 11.30 AM:

MR GILES: May it please. In answer to your Honour Justice Gordon’s question as to the extent of the finding with respect to, if I might use the language, the claim and the retain and the effect of that, their Honours addressed that at paragraphs 259 to 262 on pages 326 and 327. And in the actual way it is put at its perhaps highest – I say that because the word “may” is the first sentence of 261 – we do observe while in this part of the judgment that there is, at paragraph 260, in the third sentence, which starts in the third line ‑ ‑ ‑

GORDON J: So, it is a pleading point. It was not pleaded, is the way it is put. Is that right? That is the second sentence:

It was no part of the ACCC’s case, nor any finding . . . that the College’s conduct was unconscionable because it claimed fees ‑ ‑ ‑

MR GILES: That is right. That is what was said to be the answer to the contention that we put below.

GLEESON J: But that is claimed fees in contravention of the terms of the scheme.

MR GILES: Quite. That is right. That is what I was going to say. The submission that had been put that your Honours see from fourth line of 259 was one relying on compliance with the regulatory scheme which we deployed by way of analogy to compliance with codes of conduct in the sense referred to in section 22. We accepted that that required some analogy. But the answer given in 260 does not quite meet ‑ ‑ ‑

GORDON J: What about the next bit, where it says:

As discussed earlier in the context of appeal ground 2, claiming and retaining the VFH revenue that was derived from student enrolments that occurred during the impugned enrolment period . . . completed the unconscionable conduct.

MR GILES: There is a difficulty with that for the reasons that we identified before the morning tea adjournment. We think that what their Honours meant by that is shown by the first sentence of 261. But certainly we do not ‑ ‑ ‑

GORDON J: Is that borne out by the last sentence, their adoption, in a sense, of what the primary judge had said about:

the relevant issue was the unconscionability of the College’s system towards students who were saddled with . . . debt.

MR GILES: Probably. That is an available characterisation of that sentence, I might say.

GORDON J: Thank you.

MR GILES: Paragraph 261 – just while we are there – dealt with, again, a slightly different submission without, in our submission, quite grappling with the point that we were making. Perhaps, this goes no higher than being part of our system – namely, that we have a system where the system included investigating the circumstances of the enrolment of a student where there was complaint, which is part of, when one returns to – to use the language – the values of section 22, honesty in commercial conduct. As far as it goes – and I accept the limitation of it – that we did investigate complaints and we cancelled enrolments where they were found.

The way their Honours dealt with it raises the difficulty that your Honour Justice Edelman identified – and our submissions raises the difficulty that earlier this morning – namely, their Honours’ reasons focus on shortcomings on the implementation of the investigation process. Our point was rather, when one comes to evaluate whether Productivity Partners engaged in unconscionable conduct, the fact that it had a process in place – the intention of which is not criticised – to investigate complaints and to cancel the enrolment of students where found to be a problem – that is, wrongful, in a rather generic sense, agent conduct – it is part of the system that, in our submission, tends against the conclusion of unconscionable.

It does not sit by itself. None of what I say is intended to sit by itself. But the answer given by the Full Court at 261 to point to its implementation being flawed is, in our submission, not an answer to the systems case at that level of abstraction. Failings in the implementation or the investigation system may well have said something about an individual’s claim or an allegation by the respondent that, with respect to an individual, Productivity Partners engaged in unconscionable conduct. But, when one looks at the system, the existence of the complaint investigation process is the proper subject.

EDELMAN J: That must also mean that you disagree with the first sentence of 261, that “the ultimate evaluation” could not “have been different” if the College had not actually “claimed and retained the VFH revenue”. If, for example, the issue of unconscionability is exposing the students to this serious risk, then why would it become more conscionable if a discretion might ultimately be exercised in their favour by the College?

MR GILES: We accept entirely that one has to look at the implementation of the system on 7 September. Not the ultimate application of it but what is the system said to be unconscionable – or, put another way, it is the system said to be unconscionable.

Returning then to the form of analysis that we submit is correct, and that which should have occurred in the Full Court and indeed at trial, is to at least include consideration of, as we have put it, the types of conduct and the circumstances in section 22. We can accept the description of the values which are disclosed by section 22, and that does require, rather than an instinctive synthesis – or one looks at it effectively and says this conduct – I look at this conduct and I think it is sufficiently appalling or sufficiently bad that it amounts to unconscionable conduct, or, more precisely, the system does.

When it comes to doing so, one value or matter we point to is the lack of dishonesty. We are not said to have engaged in a dishonest system. Never has it been conceptualised in the language of section 22 of a lack of good faith. Your Honours will not find description in the judgment of a lack of good faith because that is not how the case was ever conceptualised.

BEECH-JONES J: Mr Giles, there are states of mind and there are states of mind.

MR GILES: There are, of course.

BEECH-JONES J: I mean, the states of mind here is not – dishonesty would be taking money you know you are not legally entitled to.

MR GILES: Quite.

BEECH-JONES J: Well, that would have no sense in this context, but the state of mind is going ahead with the system knowing that at least some people will incur a debt in circumstances where they should not.

MR GILES: That there is a risk of doing so.

BEECH‑JONES J: A risk of doing so, yes; a foreseeable risk that will materialise, because the numbers are so high.

MR GILES: Foreseen to materialise, yes.

BEECH‑JONES J: Yes. So, that is a state of mind, whether you call that good or bad faith, there is a subjective component to that.

MR GILES: Undoubtedly, that is why in part I made the point that the case was not conceptualised by reference to good faith. That is not to diminish the fact that I have got to grapple with that, and we took your Honours to the finding that there was no intention for agent misconduct to occur. I have to accept that I do not have an equivalent finding that there was no intention, or no foresight, that students would be enrolled who did not wish to be enrolled in – if I might deliberately put that at a level of generality.

BEECH‑JONES J: You do not have a finding a good faith.

MR GILES: No, quite, but one is talking about whether we are to be characterised as having engaged in unconscionable conduct, and the absence of dishonesty, and indeed the absence of a finding of bad faith – accepting exactly what has fallen out – is one of the factors in the judgment, or the evaluation exercise. Not by itself, but one we do rely on.

STEWARD J: Can I ask you then how you put it in short form, in circumstances where I think prior to the change in the system, your client’s system is weeding out 50 per cent of students before census date, and as a result you have declining revenues. How is it put that it is consistent with normative standards for you to remove two of the safeguards, knowing that that would increase the risk of students incurring debts which they should not incurred?

MR GILES: Because in a field of commercial endeavour which had bespoke or directed regulation, those two safeguards were not required by the regulation. We did not breach either the standards or the regulations – or indeed any of the bespoke legislation, and we were meeting ‑ ‑ ‑

STEWARD J: So, you were operating within the law; point 1?

MR GILES: We are operating within the law directed to this field of endeavour. I accept simply complying with the law cannot mean ‑ ‑ ‑

STEWARD J: Correct, so what else – you have other factors? There is no finding of dishonesty.

MR GILES: No finding of dishonesty.

STEWARD J: No intention that the people out there selling the courses act in a bad way.

MR GILES: No finding that the two controls that we removed were usual or generic across the industry.

STEWARD J: Anything else?

MR GILES: And that we gave the students on the inbound call information about incurring – if I might put it at a generic level – incurring the debt.

STEWARD J: I see, thank you.

MR GILES: That is the nub of it. Providing the information in an understandable manner is one of the values or matters identified in section 22.

The intention that there not be misconduct by the agent shows an absence of at least an intention that subparagraph (d) occurred, and the system itself was not one to apply undue influence. Indeed, it had controls or unfair tactics. It retained controls, it retained the inbound call, and your Honours will appreciate my client did confirm the contact details of the student.

STEWARD J: The nub of it is that in all those circumstances it was permissible for you to effectively increase or transfer risk to the consumers.

MR GILES: It was not unconscionable for us to do so, yes.

STEWARD J: Yes, I understand.

MR GILES: Quite. That is the nub of it, analysed through the values or the circumstances or conduct in section 22. I have, in answer to your Honour’s question, identified the substance of that which we rely on, which is when ‑ ‑ ‑

STEWARD J: I think you have now, yes.

MR GILES: Yes. That involves a combination of, in effect, positive factors and the absence of conduct of a particular type. For example, there is no failure to disclose within the sense of section 22(1)(i). Could I just pause on section 22(1)(i). That is also the only reference in section 22 to risk – and the cognate provision in subsection (2), but when one directs attention to risk, it is that the supplier unreasonably failed to disclose to the customer intended conduct of the supplier that might affect the interest of the customer. The inbound call – we did tell the customer that we would charge the fee, that the customer would – through the Commonwealth – have the fee charged.

The reference to risk is informing the customer, or an unreasonable failure to disclose to the customer, of risks of the potential conduct. When one is talking about the values – the values touched on by section 22, or the circumstances, only in a very attenuated sense are expressly directed to risk. This is a case where what our conduct characterised found to be unconscionable is one of exposing customers to risk. The dealing in section 22 with risk is about an unreasonable failure to disclose to the customer the risks. We did that. That is, we did so disclose through the inbound core.

GORDON J: I assume that is right for the moment, is that a complete picture given the circumstances of the inbound call and the findings made about that process? By that I mean, for example, that – at least in some instances, as I understand – the finding says an agent sitting there, they are doing it, they are controlling it, it is difficult for the College to address what is going on in the sense of more difficult. Does that matter? Do we need to engage at that level of granularity, or are you addressing it at a higher level?

MR GILES: I am addressing it – could I answer that with a little caution? I am addressing it at a higher level. That is not to say that one disregards the risk that the agent would, in effect, procure the student and enrol, despite being given that information; but, of course, I meet that with, we did not intend that risk to come home and we had systems, that is, to investigate agents where that allegation was made.

GORDON J: Thank you.

BEECH-JONES J: Otherwise they were going through section 22 finely attuned to the particular – literally applying its words to this system, as opposed to what Justice Gordon talked about in Stubbings, treating it as setting a framework for values.

MR GILES: I hope not.

BEECH-JONES J: Because we were talking about – picking up what Justice Gordon – when we looked at the inbound call and the context of everything else, it is a little bit artificial to simply say, well, that brought home the risk because your clients were aware of the foreseeable likelihood that that would not do the job.

MR GILES: Foreseeable risk, and we did not intend it to come home. I have to accept that we foresaw, because there had been prior examples of agent misconduct, but the inbound call does say to the student these are the fees. Now, that is not going to be an answer in a circumstance such as the examples – customers A through E, which were litigated at trial – where the particular facts of agent misconduct, ultimately, were attributed to us through section 139B of the Competition and Consumer Act, but in a systems case, at the higher level of abstraction, in our submission, that which we did is sufficient to take us outside unconscionable conduct.

Now, your Honour Justice Beech‑Jones, I do not intend to, in effect, express the idea that the sub-subparagraphs of section 22 deal at a granular level. Indeed, we need to embrace a wider expression of the effect of those for the purpose of the argument that no dishonesty is of significance and compliance with the law is of – that is, the, in effect, bespoke regulation is of significance because (g) refers only to the requirements of any applicable industry code, which is a code made under either the competition law or the – so, our answer is as expressed in summary form in paragraph 6 in the outline, but I hope as expressed in answer to Justice Steward’s question to me. Taking those factors of the system and taking the problem identified is one of risk, as opposed to one of actually inflicting harm, that is, taking, for example – taking an extreme example – taking advantage of a vulnerability of a particular consumer.

Risk is only identified within the values, or the circumstances, and conduct in section 22 in an attenuated way which does tell one something: that a case directed to risk is unlikely to be one suitable for the application of section 21, in our submission. That is not to say it cannot be, but one has to evaluate the system with the precision which we hope that we have done in answer to Justice Steward’s question and by reference to the existence of the controls and the lack of the intention that at least one part of the risk would come home. That is the nub of the argument. Viewed through that prism, accepting as we did in opening, that the consequences have been terrible – and accepting in opening that one would not, at a level of commerce, endorse every decision that our client made, it is, nonetheless, not unconscionable within the meaning of section 21. That is the system imposed. The thing that has been litigated is not unconscionable.

GAGELER CJ: The consequences were terrible because the identifying risk came home, were they not?

MR GILES: I have to accept that.

GLEESON J: Is that right? Because the way you have put it is that the risk is risk of wrongful behaviour.

MR GILES: There are two risks, as I hope I have accepted. There is the risk of wrongful behaviour by agents. That is what we did not – there is not the express finding we did not intend that to occur. One does not know the extent to which that risk came home. We know that it did to an extent because there were the investigations, and his Honour the trial judge spent some time on and there is criticism of the quality of, but one knows that at least to that extent there was wrongful conduct and our system dealt – albeit in a way which is criticised – with that wrongful conduct.

The other risk, that is that students enrol when they are unsuitable in the more attenuated sense, would seem to have come home because very many students who did enrol never accessed the course or did so in only a very limited way. Having said that, it is no less amorphous than how I have just put it, in that one does not know, with respect to any particular student or what part of the cohort. That is because people change their mind or were driven by simply inertia not to change, but one would accept that the numbers are such that there must be people who enrolled – and in a not insignificant portion, who enrolled who are within the Full Court’s conception of unconscionable. I have to accept that.

GAGELER CJ: Just going back to an earlier part of your wrap‑up submission, you said that commercial decisions were made that were undesirable but not unconscionable.

MR GILES: Quite.

GAGELER CJ: What made the decisions undesirable?

MR GILES: Affected by hindsight, which a judgment of that consequence is. One knows the consequences, and it is commercially undesirable for the outcome of so many people to enrol, and, indeed – without a moral overtone – at a commercial level for my client. It had to conduct investigations, it was deploying resources to try and contact the students, it was spending money. That is no doubt not – and the profit that was made – overwhelming the income generated, so to speak.

GLEESON J: Section 22 does not identify factors that are really focussed on outcomes much, does it? Is that relevant to your case?

MR GILES: It is. We rather suggest that section 22 generally – and I cannot put it absolutely – directed to the obtaining of the customer’s consent. That is consistent, of course, in the broad with the actual conception. Consent is obtained, but it is how it is obtained.

STEWARD J: Can I ask you a follow‑up question from the Chief Justice. Would you accept that if you acquired knowledge that the risks had come home and you had persisted with your system, that would be unconscionable conduct? I know that is not what happened here, but I am just trying to tease it out.

MR GILES: Could I answer that in a slightly incomplete way? It would depend on all of the circumstances, but there is no doubt my argument would be different, and it would be facing a more difficult – possibly even a furthermore difficult – hurdle.

STEWARD J: Thank you.

MR GILES: Can I just pick up on something that I was saying to Justice Gleeson. I cannot say that section 22 is solely referable to the conduct in procuring consent. Section 22(1)(b) will generally be referable to consent but not necessarily, and (j)(iv) is about conduct that occurs in the performance of the contract.

GLEESON J: And (l) may operate post‑contract formation.

MR GILES: Indeed. But with those caveats, the generality is about procuring the consent. That does mean that where the risk exposed is the misconduct of the agent. The lack of intention for that is important. We did not intend something that vitiated the consent to come home.

BEECH‑JONES J: Section 21(3)(a) would suggest that reasonably foreseeable circumstances can be considered, could they not?

MR GILES: That does pose a construction argument, but could I say immediately – against any dissent from that proposition – 22(1)(i)(ii) talks of foreseeable risks. I think read together, while it might simply have been said that (3)(a) as a matter of construction necessarily excluded that which was unforeseeable, it does contemplate – at least the two sections read together do contemplate that that which is foreseeable can matter. But that would depend on the circumstances or the values as identified in section 22, and as we say, the attenuated reference to risk tends against the characterisation of this case – that is, the systems case – directed to risk being unconscionable.

Could I also, perhaps, pick up further on your Honour Justice Steward’s question to me and tease out, while without accepting, that case – that is, one has perhaps implemented the system – the risks have, to be colloquial, come home, and then one continues the case ‑ ‑ ‑

STEWARD J: The system, in that case ‑ ‑ ‑

MR GILES: That is a different systems case ‑ ‑ ‑

STEWARD J: It is. It is the continuation.

MR GILES: It is implementing a system knowing the consequences of it.

GORDON J: And often the declaration is broken up between implementation and then continuing that which has been implemented.

MR GILES: The declaration at trial or the ‑ ‑ ‑

GORDON J: Well, no, not in this case, but in some cases, because the conduct that is relevant to each in assessing unconscionability is different.

MR GILES: Well, a case run in that way; I do not quibble with that, your Honour.

GORDON J: Can I ask just one question just about – you keep saying, we had no intent. What do you say about those cases, including Justice Gageler in Kobelt – lack of intent may be accepted, but it is not determinative?

MR GILES: We accept that.

GORDON J: I see.

MR GILES: But it does direct attention to why conduct without the intent has the necessary character of being unconscionable which would, at least likely, pick up one of the other values or circumstances, as I would have it, in ‑ ‑ ‑

GORDON J: Because there have been authorities, including a decision – I cannot recall the name of now – in the Victorian Supreme Court, where they talk about people having good intentions, and yet it is still unconscionable.

MR GILES: For the whole series of reasons, one can have a system that one intends – indeed, taken to its absolute, one could intend it to have good intentions, and it could, by luck, come out with good intentions, but would still be unconscionable if it had the sufficient other character. That may be highly unlikely, of course, but ‑ ‑ ‑

STEWARD J: When you say good intentions or lack of intention, you did intend to increase revenues as a result of the removal of the safeguards by enrolling more students past the census date.

MR GILES: That is true.

STEWARD J: And that intention includes the reasonable foreseeability that that would occur in circumstances where there would be a higher risk of students who would be inappropriate, either because of the risk as a result of course advisors, or because of the other risk that they just did not understand the process or what have you.

MR GILES: That is true. I have to accept that. Increasing revenue, I have to accept, although I do caveat that increasing revenue ‑ ‑ ‑

STEWARD J: There is nothing wrong with increasing revenue, I understand that.

MR GILES: No, indeed. But that is why we do also point to the fact that the inbound call is criticised, and it is criticised with hindsight. It can be criticised in the way in the Chief Justice has identified to me that it exposes the risk, but the inbound call still provided the information. There was still the investigation. I am at risk of just going back into the factors that I identified, your Honour.

STEWARD J: I understand.

BEECH-JONES J: Mr Giles, can I ask just one brief question about this thing of claiming expenditure. As I understand it, by early, I think it is 2016, your client knew that the significant or large majority of these people had not taken up their courses and then it continued to, quote, claim the revenue. Is that right?

MR GILES: That is right.

BEECH-JONES J: Was a case – so all the risks were now real. Was the case on unconscionability put – a discrete case put in relation to that circumstance? That is, actual knowledge of what had happened, but continued to claim.

MR GILES: We do not think so. I have to be careful because there was some movement and there is the difficult paragraph 124 of the statement of claim, which is in our learned friend Mr Hodge’s materials and is in the Full Court judgment. But we put it that the way that the claiming and retaining was ultimately conceptualised is how it is identified in paragraph 123 of the Full Court’s judgment.

BEECH-JONES J: Which is not what I have just put to you.

MR GILES: It is not what you have just put to me, no.

BEECH‑JONES J: Okay. All right.

GORDON J: Is that because the impugned period was 7 September 2015 to 18 December 2015?

MR GILES: In part. I say “in part” because there were two periods. There was that impugned period and then there was the period through to a date in late 2016 when the claiming and retaining occurred.

GORDON J: That is not before us though, is it?

MR GILES: No.

GORDON J: We are only concerned with that period. Is that right? The impugned ‑ ‑ ‑

MR GILES: As we understand it, because is the subject of the declaration and it is the subject of the finding that conduct was unconscionable when the system was implemented, so on 7 September. So, claiming and retaining cannot inform that.

EDELMAN J: When it was implemented then, and from that date?

MR GILES: Yes, although the finding is that it was unconscionable at all times from that date.

GAGELER CJ: Well, within that period.

MR GILES: Yes.

GAGELER CJ: Within the defined period, 7 September to, what, 18 December?

MR GILES: 18 December.

GORDON J: 18 December. Because if you look at your notice of appeal, is it limited to what has been described as the initial enrolment period? The reason why I ask is because, of course, the Commission has a notice of contention directed at a different period.

MR GILES: Which was found in relation to Mr Wills.

GORDON J: Yes. I am going to put that to one side. I am just concerned with what period we are actually concerned with in this notice in your appeal.

MR GILES: We are concerned with the period commencing on 7 September and, as we understand the Full Court’s findings, completing on 18 December, because that is the time that the system was in place although, for reasons that we regard as – and has fallen out – not capable of changing the character, the Full Court did take into account in the way identified in paragraphs 123 and 261 the retaining.

GORDON J: Just to make clear, was that submission to be inferred from the declaration they proposed at 377 which is limited to that period?

MR GILES: Yes, your Honour.

GORDON J: Thank you.

GLEESON J: I do not read it that way at all. I mean, I read those dates as referrable to the processing of the enrolments and the conduct that is unconscionable extends to conduct that is in connection with the people who were enrolled during that period.

MR GILES: But the unconscionability, having been completed when the system was implemented – the implementation of the system during the period is a necessary component of the unconscionability. It is, after all, the system which is criticised.

BEECH‑JONES J: I am just looking at – say you struck out (e) in the declaration at 368 and you just looked at (f) ‑ ‑ ‑

GLEESON J: Paragraph 377.

BEECH‑JONES J: In paragraph 377. I am just wondering whether that is referable to acts of claiming after 18 December 2015 when all the risks had come home and were known to have come home. That was my query, whether that was a case.

GORDON J: Can I put it in different terms. If you take paragraph (e) of what is on 368, that is, I think, implementing, maintaining during the enrolment period the two changes about which the complaint is made.

MR GILES: Yes.

GORDON J: That is inboard rather than outboard, and the giving up of the campus driven withdrawal processes. Then what do we make of (f)?

MR GILES: That that is a component part of the implementation of the system during the period that it was implemented, in our submission.

GORDON J: And, to pick up Justice Beech‑Jones, does that extend beyond 18 December? It must, must it not?

MR GILES: That is unclear, but the logic of it would seem to be, although there is the claiming and retaining, as explained by the Full Court, in the paragraph that we started after morning tea.

JAGOT J: I must say, I do not read (f) as necessarily occurring in the enrolment period – could occur after – and, in one view, more relevantly, based on what we have said previously, the point of (f) is not waiving – taking the final step and thereby not ameliorating or undoing everything in (a) to (e), which was in itself the risk which was unconscionable, in and of itself, without (f), and then you did not take the step of undoing everything in (f).

MR GILES: That would accord with the conception as we understood both the trial judge and the Full Court to have seen the claiming and retaining, that it is relevant to not undoing or may undo ‑ ‑ ‑

JAGOT J: That is how I would see it in context.

MR GILES: But the unconscionable conduct is the system for the enrolment, that is the system without it. Yes.

GAGELER CJ: Mr Giles, what, if anything, occurred on 18 December 2015?

MR GILES: Shortly before 18 December, the Commonwealth informed us that it was not going to pay any further – it imposed a cap ‑ ‑ ‑

JAGOT J: The cap occurred.

MR GILES: ‑ ‑ ‑ on the 2016 fees. We had already exceeded that by reference to the students enrolled, and therefore, if we enrolled anyone further, we were not going to get paid for it.

GAGELER CJ: So, the claiming and retaining stopped then, did it?

MR GILES: No.

JAGOT J: Because the claims came after.

MR GILES: No, that is right. Some, at least, of the claiming came after.

GORDON J: So, the chronology is you get a letter on the 18th from the Department saying there is a cap. You have reached the cap already, so you stop enrolling students. So, in a sense, that enrolment period ends because you go cannot enrol any more, but (f), claiming and retaining, continues.

MR GILES: That is right.

BEECH‑JONES J: And in terms of your argument about risk, that falls away then, because they were not risks anymore, they were known.

MR GILES: Well, no, because it is the system that is complained about. I mean, (f) does not stand by itself and, as conceptualised, that we did (f) was – we missed out on an opportunity to, in effect, arguably render the conduct not unconscionable by not claiming and retaining. I think, as your Honour asked earlier this morning, that carries with it as predicate of ‑ ‑ ‑

BEECH-JONES J: Unravelling the debt.

MR GILES: Unravelling. Quite. None of that is particularly helped by paragraph 124 of the statement of claim which – I forget exactly where it is in the judgment, but it is replicated. That chronological difficulty is built into it.

GLEESON J: Just for the transcript, it is at page 24 of the core appeal book.

MR GILES: Grateful, your Honour. But my answer to the proposition is ultimately claiming – the fact that we claimed and retained had significance because we did not take up a course of conduct that may have ameliorated the conduct that was already unconscionable and there may then be, as your Honour Justice Edelman asked me about earlier this morning, and your Honour Justice Gordon, if the conduct was unconscionable at the earlier stage, if we had not claimed, that may not change – there would have been a real debate about whether that changed the character of the conduct. It would certainly have gone to penalty.

GORDON J: Certainly gone to penalty, but may not have affected the legal analysis of the characterisation of the conduct.

MR GILES: Quite, because the system was either unconscionable or not at the anterior point in time.

GORDON J: And that can be demonstrated by the fact that – put this case aside – one could have applied – the Commission, on becoming of these facts, could have applied for an injunction to restrain the conduct.

MR GILES: That is right.

BEECH-JONES J: But just on your argument – so your argument is risk is not good enough. I am just asking about a period where it was no longer risk.

MR GILES: My answer to that is ‑ ‑ ‑

BEECH-JONES J: That was not the case run?

MR GILES: That is not the case, yes.

BEECH-JONES J: Right. Okay.

MR GILES: One could conceptualise a case at some point in time and, to take the notice of contention with Mr Wills, perhaps that date was a point in time which could have been picked up as instead of a case pleaded about risk – because the pleading is only about risk – the system then was that which Justice Steward postulated, one applied in a circumstance of the knowledge that it had come home in the weeks beforehand. But that is not this case.

May it please. Unless there is anything further, I think that has covered our submissions.

GAGELER CJ: Thank you, Mr Giles. Mr Solicitor.

MR DONAGHUE: Your Honours, as this appeal has developed, it now no longer appears to raise any significant point of legal principle. It initially appeared as if it might be intended to raise a methodological point about how courts should assess an allegation of systemic unconscionable conduct, contrary to section 21 of the ACL by reference to the section 22 factors and, in particular, whether it was mandatory to analyse the case against all of those factors as if they were a checklist and perhaps – and there was some echo of this in the debate this morning, particularly in the exchanges between my friend and your Honour the Chief Justice about whether there was a constructional point that involved some kind of limiting work that section 22 was said to do in terms of cutting back the things that were capable of being unconscionable in all the circumstances in the terms of section 21.

But there does not appear to be much left of that. So, we met that case in writing and were told by our friends in reply that we had mischaracterised their case and that they accepted two important things. One, that sometimes some of the factors in section 22(1) will be irrelevant – which we submit is clearly right. The Chief Justice in Kobelt said that, and your Honour Justice Gordon in Stubbings said the same thing. So, sometimes, depending on the nature of the unconscionability alleged, one can just put aside some of the 22(1) factors as unhelpful. That was the first thing they accepted in reply.

The second thing was that section 22 is not exhaustive. Again, that is clearly correct and consistent with the authorities, but once one accepts that, the proposition that, in some constructional sense, section 22(1) is limiting what can be unconscionable in all the circumstances under 21, is hard to accept. A non‑exhaustive list does not lend itself to a limiting role.

GLEESON J: The point seemed to be that the ACCC could not choose which factors were relevant.

MR DONAGHUE: Your Honour, we accept that once the factor is objectively relevant to the nature of the unconscionable conduct alleged, one cannot pick and choose between them. But that is not to say that – to take an easy example, in this case, there is no industry code that is relevant to VET providers. So, section 22(1)(g), the factor as defined in the statute is not relevant on the facts of this case. Our failure to allege that it is relevant does not assist in some way against a conclusion of unconscionability. The same could be said of any other factors that are objectively irrelevant. But once it is in play on the allegation as raised, it must be considered.

A good example of that, if I might respectfully say so, is your Honour Justice Gleeson’s example about the roofing. So, that is an example where the key feature that would render the conduct unconscionable, if it is unconscionable, is the disparity in bargaining power in the circumstances posited. It tells you nothing about whether that is or is not unconscionable – that there is no allegation of undue influence – because the posited unconscionability is just not about that. It is about a wrongful exploitation of a bargaining position and so you get nothing. But none of that, as I say now, really appears to be in issue. Where we are now, in my submission, is really in a debate about whether the factual allegations made, accepted at first instance, accepted by the majority below, when properly analysed, in all of the circumstances, demonstrate unconscionable conduct.

GLEESON J: Is (a) always relevant?

MR DONAGHUE: No, in my submission, it is not. So, one might have a trickery, dishonesty, deception‑type case where it just does not matter. In my submission, it actually was not really a relevant factor here.

Can I start then with the facts because that is really, in my submission, what this appeal is all about. There are five features of the factual substratum upon which the ACCC relied, and the courts below relied in concluding that the conduct was unconscionable – and we say, quite clearly, so. Before I come to those five matters, can I just take up the debate the Court had with my friend about time periods at the end of his submissions and ask your Honours to go to page 229 of the core appeal book, in paragraph 4, which is at the commencement of the joint majority reasons.

When your Honours get there, you will see that there are two defined periods. There is an impugned enrolment period and an impugned conduct period. The impugned enrolment period is the 7 September 2015 to 18 December 2015 period. The impugned conduct period is 7 September 2015 to September 2016; the difference being that it is the claims for revenue, continued well beyond the enrolment period until September 2016. And in the middle of paragraph 4, you can see:

The ACCC alleged that the unconscionable conduct involved the implementation of certain changes to the College’s enrolment process for the online campus (which changes took effect from 7 September 2015), and also involved the College claiming VET FEE-HELP (VFH) revenue . . . up to and including September 2016 –

So, in our submission, what your Honours have before you is that whole period, not just the roughly three months at the start; because the consequences of what happened in that three‑month period continued to play out for another nine months involving the claiming of millions of dollars in revenue, and that was part of the unconscionability that is alleged.

So, your Honours, five facts. The first is that the College charged students substantial fees for its courses, which it was able to do because of a government scheme, the VET FEE-HELP scheme, or the VFH scheme, that existed to assist students to pay those fees. And your Honours will see a convenient summary of how that scheme worked – which was, really, the critical context for what the College then did – in the Full Court’s reasons at paragraphs 24 to 31 on page 236 and 237.

The essence of it was as follows. The Commonwealth paid in full the tuition fees for students who enrolled in courses with the benefit of the VET FEE-HELP scheme to cover the course fees, and it paid those amounts to the registered training provider or the College directly. The Commonwealth, having paid the fees directly to the College, the students owed what is called a VFH debt to the Commonwealth, which comprised the amount of the loan, plus 20 per cent, which was a loan fee, repayable in a way familiar to your Honours, no doubt, through the HECS system, through the tax system once the student earned a particular income, which, in the relevant time, was about $54,000 – you see that recorded in paragraph 29 by the Full Court.

GLEESON J: Was the debt incurred on the day that the payment was made to the provider?

MR DONAGHUE: The debt was incurred on the census date. If the student remained enrolled on the census date, the debt crystalised. And as it happened, relevantly, that was also the magic date for the perspective of the agent, because the agent got their 20 per cent commission if the student was enrolled on the census date. So, they needed – for this to work for the agents – students to stay enrolled until the census date, because that is when the agent got their money. And the reason the agent got their money then is because then it crystallised for the student as well, and the student would then owe the amount back to the Commonwealth.

GLEESON J: So, the College always get the revenue before the debt crystallises?

MR DONAGHUE: There was no evidence about this below. I am instructed that it was complicated. Some money actually came in advance, some money came afterwards, so that it is not a straightforward picture.

GORDON J: Who paid the agents?

MR DONAGHUE: I believe the College did, your Honour. Critically, in our submission, at paragraph 30 in the Full Court’s judgment, you see recorded that the VET provider, the College:

was required to repay any VET tuition fees paid by a student in respect of a VET unit of study if the student withdrew on or before the census date.

So that under the campus driven withdrawal policies, where students were withdrawn just before that date, the student did not suffer, they got their money back, but the College did not get to keep anything, the agent did not get anything. That was the way that that policy was designed to work.

The fees that we are talking about were very substantial. You see that in paragraph 45 of the Full Court’s reasons. There were a few different courses which were offered, which are summarised in paragraph 44. This is on page 243 of the book. Four different courses. You can see in the right‑hand column that the total fees for those courses ranged from $13,000 to $20,000. The loan was that amount plus 20 per cent, so we are talking about a minimum loan of $15,000 for people involved in these courses.

EDELMAN J: Were there not separate census dates for each unit of study?

MR DONAGHUE: Yes, and that is what you can see between the unit one and unit two. The courses were of different lengths. Some of them ran – these facts are summarised in the paragraph above, in paragraph 43. The courses either had two units or four units, and there was one census date per unit of study. The more units of study you had to do, the more times we would go through the process I have just summarised.

The census date occurred two weeks after the commencement of the course, which you see recorded in paragraph 43. That is the first fact. The second fact is that prior to the changes made in September 2015 that are at the centre of this case, the College was aware of two different risks which were, on the findings below, regularly materialising in the College’s business. One has to be a little bit careful with the word “risk”. These were things that were actually happening to many of the students who were enrolled in the College, and the College knew that they were actually happening to many of the students who were enrolled before the changes were made.

The two risks were first the CA misconduct risk, which your Honours see a useful description of in the primary judge’s reasons at paragraph 494 on page 132. This is part of the primary judge’s conclusions on the system case. His Honour found, from three lines down, that key officers of the College:

knew of the CA misconduct risk and the unsuitable enrolment risk. That is to say –

And we are dealing here with the CA risk:

they knew that there was a real risk, that regularly materialised, that CAs would use a range of prohibited or deceptive stratagems to pressurise or trick consumers to enrol in courses at the college . . . The prohibited or deceptive stratagems might include making false and misleading statements to consumers to the effect that the online courses were free, failing to properly inform consumers that they would incur VFH debts if they enrolled in online courses . . . pressuring consumers to enrol in online courses, offering consumers inducements, such as free laptops or other devices, to enrol in an online course –

So, it looks a little bland when one just talks about CA misconduct risk, but this is one of the things that was manifesting, regularly materialising in the College’s systems before it made its changes. The second risk one can – I will take your Honours to the Full Court judgment if I might, at paragraph 58, on page 247.

In the first part of paragraph 58, you see the Full Court summarising the risk that I have just identified – the CA misconduct risk – and then in the last line on page 247:

The expression “unsuitable enrolment risk” is used in the pleading to describe the risk of persons being recruited for enrolment who do not in fact want to study, or who are unsuitable for the course of study by reason of lacking sufficient language, literacy or numeracy skills or technology skills or access that would enable them to undertake a course of study online.

And then the court acknowledges that the risks “overlap” – a point your Honour Justice Gordon made:

both describe the risk, arising from unethical or careless conduct of recruitment agents, of persons being enrolled where the person does not do so willingly and with full knowledge of the obligation –

The debt. So, when we talk about obligations – and Justice Gordon also made this point – we are clearly talking about the student incurring the debt of 15,000 or more, or where the student is unsuitable because of lack of language, literacy or numeracy skills. And they are collectively referred to by the Full Court as the unwitting or unsuitable students.

Our friends, in writing, make a bit of an attack upon that phrase, and they suggest there is a non‑alignment between what the Full Court meant and what the primary judge meant. We dispute that, but I will come to that in due course. As I have submitted, the College knew these risks were regularly materialising. You have that finding, you saw it in the primary judge’s reasons I went to at 494. The Full Court accepted at 121A, on page 271, they accept it again at 184 on page 300.

So, we would respectfully submit that this is not a case – I think at one point my friend said, with hindsight you knew that there was a problem. That is just not right, in our respectful submission. There is no hindsight about this. These were risks that affected many, many students. If one asks, well, how many, we know from the finding at paragraph 50 in the Full Court at page 245 – and one your Honours has mentioned this already today – that prior to the change – so in May 2015, only a few months prior to the change:

50% of the students enrolled at the College’s online campus withdrew before the first census date, and a significant reason was campus driven withdrawals –

And their Honours say, in the last sentence:

This is a very significant factual finding to which it will be necessary to return.

Their Honours do return to it at paragraph 177 in the reasons. And they do so in a way that picks up a point that your Honour Justice Beech‑Jones has made about there being different levels or descriptions of states of mind. Because our friends make much of their suggested lack of intention. I will come back to that as well. But you see recorded at the start of 177 a submission that:

the primary judge’s findings do not demonstrate that the College took advantage of the risk of agent misconduct. The findings demonstrate precisely that, and that is what the primary judge found.

EDELMAN J: Which paragraph is this?

MR DONAGHUE: Sorry, this is 177, your Honour, in the first sentence. So, their Honours are rejecting a submission that there was no taking advantage of the conduct. And this is the paragraph, I should say, that immediately follows the finding of lack of intent upon which our friends place such reliance. So, one needs to read the reasons in context. They make a finding of lack of intent in 176, and then in the very next paragraph they make a finding of taking advantage of the risk of agent misconduct and they say that is precisely what occurred. I am reading now from five lines down:

There could not be a more powerful demonstration of the risks and problems than the fact that, prior to the enrolment process changes, about 50% of enrolled students withdrew or were withdrawn before the first census date. This was not merely a theoretical risk; it was a manifest problem. It was plain that the College’s agents had been recruiting large numbers of students who did not understand what they were committing to.

Now, this is all before the changes that were alleged to be unconscionable. The College had this system, and it was resulting in half of their enrolled students being withdrawn.

BEECH-JONES J: So, Mr Solicitor, in context we should read that as the College knowingly took advantage, should we?

MR DONAGHUE: Yes.

BEECH-JONES J: Yes, all right.

MR DONAGHUE: Indeed. I am about to develop that point but, yes. The third fact is that the changes on 7 September were driven by sales and marketing objectives. That is not problematic in and of itself, but in the wider context, it is. Your Honours can see this explained well by the Full Court at paragraph 76 of their Honours’ reasons on page 253. Really, I rely on this whole paragraph. So, the Full Court starts by recognising that:

It is apparent . . . that the College’s revenue had declined because the recruitment agents were dissatisfied with the College’s enrolment process and wanted the enrolment process to change.

Why were they dissatisfied:

The obvious inference, drawn by the primary judge . . . is that the College’s enrolment process was adversely affecting the agents’ commission revenue –

because:

the agents would not receive any commission unless the student passed the first census date and would not receive their whole commission unless the student passed the second census date.

So, that is the dissatisfaction problem that needed to be addressed, that students were not reaching the census dates:

The management documents recorded that the proposed changes to the enrolment process arose from the feedback given by agents . . . and had also been development in consultation with the College’s marketing department.

Then the finding:

The changes . . . were thus driven by sales and marketing objectives. The changes were to remove two impediments to a prospective student being enrolled and passing first census –

The impediments being the outbound:

QA call . . . and campus driven withdrawals –

At the top of the next page:

Removing those impediments would increase the likelihood of prospective students being enrolled and passing first census, and would therefore increase the likelihood of agents receiving their commission. In turn, this would increase the attractiveness of the College to recruitment agents, leading to an increase in prospective students being recruited for the College by agents.

That is what they were doing. The purpose of this scheme was to remove the disincentive that was causing agents to direct customers elsewhere by deliberately making changes that would stop students who would otherwise have been withdrawn before the first census date, and so would otherwise not have incurred a debt. The plan was to make sure they did incur a debt.

STEWARD J: It is a bit more than that, it is removing two safeguards which the College believed were necessary to protect student welfare.

MR DONAGHUE: Absolutely, absolutely. Sorry, I did not read the very last part of that paragraph.

STEWARD J: Sorry, Mr Solicitor.

MR DONAGHUE: No, sorry, your Honour, I distracted myself. But by removing two important safeguards against known risks and problems in the scheme, the changes are likely to increase the number of students being enrolled in courses for which they were not suited, and students being enrolled without full understanding. Again, when one looks at that, the submissions about lack of intent really are a little hard to correct, because it all depends on what you mean by “intent”.

This was a scheme designed to redress decreasing revenue by removing safeguards that were getting in the way of agents making commission revenue. That was what they were intended to do. They did so – if your Honours go to the next paragraph – despite the fact that one of the College’s senior managers at the time, a Ms Edwards, was, to put it mildly, it seems not happy with these changes. There are recorded, in paragraph 77, some heated exchanges between Ms Edwards and the then‑CEO of the College, Mr Cook:

Ms Edwards reiterated the importance of having a rigorous QA process “to support the onboarding of students who are ABLE and WILLING to do the course” –

With her emphasis in capitals, and the CEO’s response in the last two lines was I need to have an:

enrolment process that is competitive with others in my industry so I can regain market share”.

GLEESON J: Mr Donaghue, is the fact that the scheme was government‑funded relevant to the ACCC’s case?

MR DONAGHUE: Only in this sense, your Honour: we did not put the case as the Commonwealth being the victim of this scheme. The victim is the students who were incurring the debts of a large amount for nothing in return, but it is relevant that the Commonwealth scheme – the court puts it, I think, in terms of moral hazard. It created a capacity to take advantage of the unwitting or unsuitable students who did not have the same incentives as they would otherwise have had to protect their own interest to the extent that they were able to do so.

It was a scheme designed to get access to Commonwealth revenue, but it is not part of our case that it succeeded in doing that. Our case is the College tried. The College’s conduct is at the focus of the unconscionability allegation and what it was trying to do was to put in place a scheme that allowed it to make a large amount of money out of students who were unwitting or unsuitable.

GLEESON J: So the claiming and retaining of the revenue is relevant only because of its relationship with the incurring of the liability by the student?

MR DONAGHUE: By the student, and it was the way that the College made the money. Its students incurring the liability is what crystallised the loan obligation and their entitlement to keep it. That is how it is relevant, on our case. All of this, the court found – and I will take you to it – was driven by the College’s parent company, Site, and you see a finding at 121(c) in the Full Court. The changes were made:

for the purpose of profit maximisation substantially driven by budget expectations set by Site –

It was also done despite the fact that the College knew – and I think there has been passing reference to this, but I will just make sure your Honours have seen it. Going back a few pages to 251, the relevant Commonwealth department – this is 66 and 67 I am looking at – just a month before these changes were made had published an updated addendum to it’s booklet “VET Administrative Information for Providers” which had expressly said – and you will see the bolded text near the bottom of the page – that the department had an expectation that students who:

could not be contacted and/or had not participated in the unit before the census date, a provider would cancel the enrolment to avoid the student incurring the debt.

The Commonwealth had said that that was his expectation, that was what the campus‑driven withdrawal process, and – sorry, I should add the next paragraph:

The update was emailed to Mr Cook –

who was the CEO, and he circulated it within the College and Site. In abolishing campus driven withdrawals, they were doing the exact opposite of the expectation that had been set by the department. Next, your Honours, the effect. The effect was described by the primary judge as “the dramatic and sharp increase in enrolments and revenue”, and that was not an understatement.

To pick up a question that your Honour Justice Steward pursued with my friend about the nature of this case, these effects that I am about to detail, or at least many of them, were not only known after the enrolment period ended. Part of the issue that will be worked through in the next appeal involving Mr Wills concerns the level of knowledge, but that will reveal that there was knowledge at least by October, in the middle of the period of the significant revenue and enrolment effects that the changes had been made. They manifest very quickly. In our submission, we would not accept that this is a case where the College did not continue to act and give effect to this enrolment process with knowledge of the consequences. It knew it was working.

STEWARD J: We know it expected to get more revenue, so that was its intention, its object. We know how. The question is: was there a finding of fact about when they knew that their plan was working?

MR GILES: That is what I am saying, your Honour. That is one of the issues that is in play, but ‑ ‑ ‑

STEWARD J: But, leaving aside Mr Wills’ knowledge, the knowledge of the College?

MR GILES: Mr Wills was relevantly the acting CEO of the College in November, within the enrolment period.

STEWARD J: Because the reason I say – because I would have imagined management would have been saying to the board, there is a flood of new enrolments coming in, the phones are ringing, you know.

MR GILES: There is evidence to that effect, that it was looking good and it was working well. I am not going to take you through that, but you will see it in due course.

GORDON J: There is one, I think, dealt by the Full Court as early as September 2015 where they report to the board about:

“implementation of the revised enrolment process on September 4, 2015 has increased sales volume, but the full positive effect . . . will not be realised in the accounts until Oct/Nov due to delay from sales activity to revenue recognition –

MR DONAGHUE: Is that 87 your Honour is reading?

GORDON J: Paragraph 87, yes it is.

MR DONAGHUE: Yes, indeed. So, that is part of what I am referring to. That is a week after the changes, there starts to be reporting of the kind that Justice Steward was talking about. The changes are ‑ ‑ ‑

EDELMAN J: But does it matter? You are talking about a difference between actual knowledge and knowledge as at 7 September based upon events prior to 7 September, which reveals an extremely high expectation or level of risk as to what would happen. Does one really to transform as at 7 September knowledge of an extremely high level of risk likelihood into actual knowledge?

MR DONAGHUE: Your Honour, I do not think I do in order to establish unconscionability, but a great deal seems to be being made by our friends of the word “risk”, and what I am seeking to do is to say that, to the extent that that word might be appropriate at a system level, when you are talking about an enrolment process with respect to unknown future students, we had actual real students who had been enrolled while this was happening incurring debts, and the College knew that. So, in my submission, risk is not really the right word to describe what was happening in that system.

EDELMAN J: Knowledge is not quite the right word as at 7 September, because what it is – it is knowledge of an extremely high level of risk.

MR DONAGHUE: Your Honour, I was not intending my answer to be as at 7 September. I agree with what your Honour puts to me, but the period that we are talking about, where the College was enrolling this student, went for three and a half months, and from quite early in that period it was crystallised knowledge that what had previously been a risk was eventuating.

BEECH‑JONES J: These findings will actually reveal not just an increase in enrolments but an increase in enrolments reflecting a pretty solid number of those risks having come home. That is, unsuitable students, students who are not – is that ‑ ‑ ‑

MR DONAGHUE: Your Honour, staggeringly so. 86 per cent of these students never even logged on once.

BEECH‑JONES J: Right, but I am just going to ask about the findings, but the College knew that during this period.

MR DONAGHUE: Your Honour, can I take the Court through this after the luncheon break, and I will try to cover off on that as I do so.

GAGELER CJ: Mr Solicitor, also after the luncheon break, I would be assisted by a clear differentiation, if possible, between the conduct that is said to be unconscionable and the context that might bear upon the characterisation of the conduct.

MR DONAGHUE: Yes, your Honour.

GAGELER CJ: We will take the luncheon adjournment.

AT 12.46 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.15 PM:

MR DONAGHUE: Your Honours, can I resume by answering the question that the Chief Justice asked of me just before the adjournment, and to do so, invite your Honours to turn back to the draft declaration that the Full Court set out on page 368 of the core appeal book, in paragraph 377 of their Honours’ reasons. As we noted, your Honour the Chief Justice, the question you asked for us to attempt to identify the conduct and the context or characteristics. As to the conduct component, in our submission you find it in at the bottom of the declaration, in paragraph (e):

implementing, and maintaining during the Enrolment Period –

which is defined as a shorter of the two periods:

changes to its enrolment processes –

in the terms of (i) and (ii). So, it was – one could phrase that as maintaining the process with the changes or just as operating a process that does not have the two features that were previously there, but the first part of the conduct is “implementing, and maintaining” a system with characteristics, (e)(i) and (ii), and the second part of the conduct is (f):

claiming and retaining the course fees payable . . . in respect of the –

longer period from September 15 to September 16. That is our submission as to the conduct. The characteristics of that conduct that give it an unconscionable character are those identified in the text that follows the (e)(ii) near the bottom. With their knowledge and effects that the changes to the conduct had and the context that also informs all of the circumstances under 21(1) are the factors that you see listed above in (a) to (e). There are actually two (e)s. There is an (e) at the bottom of that first list. So, (a) to (e)(i), we would identify as context. The court then says, having identified that context, the unconscionable conduct was what then follows in (e)(i), (ii) and (f), in the way I have described.

GAGELER CJ: You are taking us just to some facts. Are they really encompassed in what we see in (a) to the first (e)?

MR DONAGHUE: They are, and they particularly – the ones I am about to go to – inform the knowledge of the effects of the changes in (e)(i) and (e)(ii).

GAGELER CJ: What about the purpose referred to at the end?

GORDON J: You just referred to that as “characteristics” with the purpose of increasing enrolments and the associated revenue.

MR DONAGHUE: Yes.

GORDON J: What does that mean? Do you mean purpose?

MR DONAGHUE: Yes, I do. What they were trying to do was to extract the money from the students that were enrolling in that way.

GORDON J: So, we could substitute your word “characteristics” with “purpose”?

MR DONAGHUE: I was endeavouring to use the Chief Justice’s word but, yes, you could.

GORDON J: Thank you.

MR DONAGHUE: Can I take you, then, to the fourth of the five main facts that I identified – so, this is paragraph 6 of our outline – which are the dramatic and sharp increases in enrolment and revenue to which the primary judge referred. I am going to break this up into first revenue and profit effects, then total fee effects and then attendance effects.

If I can start with revenue and profit and ask your Honours to go to the primary judge’s reasons at 403, which is on page 109 of the book. You hopefully will there see a table that summarises the VFH income and the EBITDA for the months of July to December. We have July and August figures that are pre‑ the changes, and then September, October, November, December post‑ the changes. What you see, if you look first at the last pre‑change figure in August is VFH income, or effectively revenue, of $326,000, which has increased by December to $18.9 million, a factor of, by our maths, 58; an increase of 58 times.

If you look at the paragraph immediately above the table, 402, you see his Honour pointing out that that increase to $18.9 million was 1,150 per cent over the College’s budget, and the same figure in the last sentence was 5022 per cent above the average for the two months prior to the changes. On any view of it, very, very dramatic revenue effects. The profit effects were less extreme but also still very dramatic. An increase from $138,000, or a little over, to $1.74 million. That is a factor of 12 over the course of those few months. As to what ‑ ‑ ‑

STEWARD J: Mr Solicitor, do we know, other than increased commission fees, what increased costs there would have been as a result of the enrolment of all these ‑ ‑ ‑

MR DONAGHUE: I think we do not have precise figures, but not much, because, as I am about to take you to, almost none of these students actually attended.

STEWARD J: That is what I was thinking. I assume, because they are online sort of courses ‑ ‑ ‑

MR DONAGHUE: Online courses, with no level of student engagement. There was some cost increase, to be fair, because I think the College did engage some more students to attempt the outbound calls, and matters of that kind, but I do not believe there is any precise evidence about that.

STEWARD J: Thank you.

GLEESON J: Do we have any evidence about where the money went?

MR DONAGHUE: No, your Honour, no.

GORDON J: Did you say engage students by outbound calls; you mean call students?

MR DONAGHUE: That is what I mean. I misspoke, actually, because I said “outbound” but there was no outbound ‑ ‑ ‑

GORDON J: There were no outbound ‑ ‑ ‑

MR DONAGHUE: It was inbound. It was officers to take the inbound calls from the agent, thank you your Honour.

GORDON J: Thank you. That is how I understood the facts.

MR DONAGHUE: Yes, I misspoke, thank you. As to knowledge of that fact, your Honour Justice Beech‑Jones’ question, and I will interpolate these knowledge findings as best I can. In the Full Court at paragraph 89, on page 260 of the book, there is a reference made to the primary judge having found that:

it was recognised during the month of September by senior employees of the College and Site executives, who were driving the need for change and closely following the changes, that the enrolment process changes were not only expected to significantly increase enrolments, but that by the end of the month such increases were already being experienced.

GORDON J: I am sorry, what paragraph was that?

MR DONAGHUE: That was 89 on page 260.

GORDON J: Thank you.

MR DONAGHUE: Then, in the next paragraph, there is a reference – and I briefly mentioned an October meeting in answer to one of your Honour’s questions before lunch – there is a reference in paragraph 92, that October meeting, at which both Mr Cook, the CEO, and Mr Wills, the COO to whom Mr Cook reported, were present, and the reports at that meeting showed some of the figures drawn from the table that I have just identified.

There was the knowledge in 89, and even more knowledge by October of those results. As to the total fees, could your Honours go on a few pages in the book to 266, where you will see a table in paragraph 108. This is a table that was drawn from one of the expert witnesses called by the ACCC, and you will see at the top of 108, the second sentence:

The primary judge addressed those criticisms and concluded that Ms Thompson’s analysis can be relied on as being substantially correct. The appellants did not challenge that conclusion on the appeal.

The primary judge had made some corrections that the ACCC successfully challenged, so those corrections were effectively undone and the table is drawn in its original form. The table is striking. If you go down to row (6):

Tuition fees claimed (and not refunded, re‑credited or reversed) –

in the 10 months leading up to the process changes, those fees were $7.4 million. In the three months following, they were $54 million. If you go down a couple of rows to row (8), you see a subset figure:

Tuition fees claimed (and not refunded, re‑credited or reversed) in respect of enrolments through at least C1 –

which is census 1:

with no LMS log in –

GORDON J: Is that the numerical number of the calculations in subparagraph (7)?

MR DONAGHUE: As in, is it 86 per cent of 54?

GORDON J: Yes.

MR DONAGHUE: I think so, your Honour – I have not actually done that maths, but I think so. What it shows is that of that $54 million in total fees claimed for the impugned period, $46 million of them are with respect to students who, in a wholly online course, did not once engage with the course. So the College was operating a scheme to its knowledge where it was seeking to recover $46 million in fees from the Commonwealth for teaching no one.

BEECH-JONES J: And in item (7), that percentage increase – that is, was there a finding that that is the percentage increase due to the withdrawal of the two conditions?

MR DONAGHUE: It did, the two changes. I will check if there is a finding to that effect, but that is, in our submission, the inevitable inference that what happened – the relevant change was the removal of those two safeguards, and one went from – I think it might be that there is a finding to that effect at ‑ ‑ ‑

BEECH-JONES J: Take it on board, Mr Solicitor.

MR DONAGHUE: Yes. I think at – yes, in 110, so just a couple of paragraphs down:

The primary judge also rejected a submission made on behalf of Mr Wills that it was not proved that these results were caused by the enrolment and withdrawal process changes.

So, 86.5 per cent of students are not attending – never logged in, rather. Obviously, it is incontestable, but the primary judge did find, at paragraph 222, that plainly those students derived no benefit from having enrolled in the course. So, they incurred the very substantial debts that your Honours have seen and they recurred no benefit. As to what was known about that, if your Honours go back a few pages to paragraph 95 on page 262, you will see that the Full Court record that:

The rapid increase in the College’s enrolments and VFH revenue was matched by a rapid increase in disengaged students. Concerns were raised by –

two of the College’s senior officers:

at the College’s Management Meeting on 21 October 2015.

And then the last sentence, one of those witnesses said:

he was well aware that students were not engaging with their courses (by logging in to the LMS), and that it was sufficiently problematic that he considered it appropriate to raise it at the meeting.

in October. It may be that one can actually go a little bit earlier in time than October, because if one looks at paragraph 97, it is recorded that Ms Edwards, who was another senior officer of the College, throughout the period from 7 December to 18 December:

Ms Edwards accessed the learning management system to find out what proportion of students had logged in, and it showed that only a very small proportion of the enrolled students were actually accessing the system. Ms Edwards said that the topic of the level of student engagement was something that was regularly discussed between the management team members.

BEECH-JONES J: What paragraph was that, sorry?

MR DONAGHUE: Paragraph 97. So, they knew that they were getting a lot more students with a lot more revenue, and they knew that they were getting a very, very low level of engagement with the course.

BEECH-JONES J: So, just to get to this position on this time period issue from, say, September to December, they start off with, you say, an appreciation of a risk but a degree of likelihood that that will envisage, and as time goes on, throughout that period that becomes actual knowledge that that is in fact happening.

MR DONAGHUE: Exactly. So, I would say that the risk at the start is a risk borne on past experience of half of students being disenrolled by the college driven withdrawals. So, even then it is a pretty concrete type of risk, but other than that, yes.

BEECH-JONES J: And there is no need to differentiate that because, you say, what they knew in September was good enough, and it only got worse.

MR DONAGHUE: Exactly. So, in my submission, I could win just on September, but there you would be only getting worse. And the fact that the allegation is not just making the change but maintaining it throughout the period. So, it was maintained as all of these things were happening. The final factual part of this fourth fact that I want to emphasise is going to the table at 108, and looking at rows (9) and (11), the percentage:

of enrolments through at least C1 who did not complete any unit –

and your Honour Justice Edelman asked about the unit – so there is either two or four, depending on your course. So, the percentage who do not complete any unit: 98.9 per cent. The students who did:

enrolments through at least C1 who did not complete the course –

99.7 per cent. So, $54 million in total fees claimed for 0.3 per cent of students completing their course. That is the scheme that the College was operating as it manifest, as the results had actually produced. Now, I cannot point your Honour to a factual finding of knowledge of those last figures – and this does come from an expert report – but the evidence I have already mentioned does show that the College was well aware, at least, of the very low level of engagement, and that accounts, obviously, for a large part of those figures.

STEWARD J: In fairness, though, Mr Solicitor, the period beforehand, there is a very, very high level of people who do not complete ‑ ‑ ‑

MR DONAGHUE: There is, that is true, but it has gone from bad to ‑ ‑ ‑

STEWARD J: It has gone from very bad to extremely bad, is that how you put it?

MR DONAGHUE: To catastrophically bad, yes. There is other evidence that I will not take your Honours to about attempts by the College to engage with students that indicated that very few students could be contacted by the College. There was, for example, at 102, a reference to a “health check” that was conducted, that concluded, only about 7 per cent of the College’s over‑5,000 students were actively engaging with its courses.

I am advised, in answer to your Honour Justice Steward’s question earlier, about the costs and the new admissions officer that the facts there are the primary judge at 346(2) on page 96.

STEWARD J: Thank you.

MR DONAGHUE: Now, insert an extra fact for a – just briefly, so I do not overlook it later in my submissions, which is responsive to our friends’ reliance on the fact that they introduced what are said to have been other controls to address the risks that had been magnified by the abolition of the campus driven withdrawals and the outbound call. There are quite a number of references to these other controls in our friends’ oral outline.
You see it in paragraph 6(c), (d), (e), and paragraph 9. The Full Court dealt with those at paragraph 178 of its reasons on page 293. And responsibly, to much the same argument your Honours have heard about these other “precautions”, the conclusion was:

The appellants’ submissions fail to address, however, the primary judge’s findings with respect to those “precautions”. As his Honour observed . . . none of these elements of the College’s business system, individually or together, was sufficient to protect students and there was no evidence from the corporate respondents to support any finding that any officer on behalf of the corporate respondents believed that –

they were – that they would operate effectively to produce – so, yes, there were some other measures that were out there, but there is no evidence that anyone thought that they provided an effective counter to process changes that lie at the heart of the ACCC’s case.

GLEESON J: Is this the first time this Court has dealt with an appeal concerning the FEE‑HELP scheme?

MR DONAGHUE: I think it is, your Honour. Yes, it is. There is a specific finding in that same paragraph your Honours are reading – and this will save me coming back to it – in 178 about the “inbound QA call”, which our friends place quite some reliance upon. You will see what the Full Court had to say about that in paragraph (c), over the page, on 294, referring to the numerous deficiencies that the primary judge had identified with the inbound QA call, and I will not read them to your Honours, but you will see them there set out. Perhaps all I need to add to that critique is that – and you will see there is a very similar paragraph at 234 in the Full Court where it says much the same thing.

The primary judge, though, did give a little more detail in 299 of his reasons, at pages 85 to 86 of the book. He did so having listened to some recordings of the inbound QA calls which had been tendered. And 299 records, from the second sentence:

It was apparent on listening to one of the recordings that such a call was principally aimed at confirming the student’s identification and contact information and conveying information to the student about their course and the VFH scheme.

It seems to be that last part that our friends rely on, but the primary judge then said:

The latter information –

so, the information about the scheme:

is very limited and replete with acronyms such as VET FEE-HELP and VET which were not explained on the call and assumed prior knowledge.

Neither the primary judge, nor the Full Court was prepared to give any weight to those alternative measures, including, in particular, the inbound call procedure, and we submit that no error has been disclosed in that.

Finally, on the facts – and there has been some mention of this already – the College ceased enrolling students on 18 December because, as your Honours have heard, a cap was introduced which the College hit – which actually meant that it not only ceased enrolling students in the impugned enrolment period but was not going to enrol any students in the following year either because it could not have claimed fees with respect to them. You have findings about that at paragraphs 113 to 115, but I will not take you to them. But, as your Honours have heard, the College continued to claim, then, in respect of the students that had already enrolled in the September to December period right through until September the following year. That obviously included claiming revenue with respect to the over 86 per cent of students who had never logged in at all.

We do submit that for a College to make these changes, then have this student body that is known to it to be completely un‑engaged and nevertheless to continue to claim tens of millions of dollars is an important part of the unconscionable system that the College was operating. It was intended to derive this revenue and the College followed it through and did make the claims for the revenue arising from the students who had enrolled pursuant to the system changes that they have made. Though all of that, in our submission, amply ‑ ‑ ‑

STEWARD J: Mr Solicitor, sorry, can I ask you, were there any statutory mechanisms whereby the Commonwealth could have refused the claims in the following year?

MR DONAGHUE: So, your Honour, there was no findings about this. I am instructed that the answer is complicated because there was some capacity for the Commonwealth to refuse to pay some amounts. Some amounts had been paid in advance. There were statutory mechanisms – including the mechanism your Honour has mentioned – where, in some circumstances it was possible to cancel loans but there were gateways to be jumped through which may or may not have always been able to be jumped through – and a particular problem was a need for students to apply to have that occur. Here, we have a cohort who mostly cannot be contacted and many of whom would not have even known.

STEWARD J: I understand that. I was more thinking as between the College and Commonwealth. Was there some statutory capacity for the Commonwealth to refuse a claim that is made?

MR DONAGHUE: But part of the difficulty is that because of the design of the scheme, the debts actually were owed.

STEWARD J: I understand.

MR DONAGHUE: So, my instruction at the moment – I appreciate I am speaking from the Bar table here – is that the College got something like $34 million out of this; it did not get the full amount that it had been going to claim because there was complexity there. But the point that I emphasise is that, in our submission, whether the Commonwealth is able, ultimately, to defend itself against some or part of the claims against it, does not go to the unconscionability of this system which was exploiting students. It was the conduct of the College in dealing unfairly with its students that is the focus of our claim. The findings ultimately made by the primary judge about all of this are at 499 and 500, and the Full Court endorsed those findings.

BEECH-JONES J: Sorry, is that 499 of the book?

MR DONAGHUE: Sorry, my apologies, your Honour. Paragraphs 499 and 500, at 134 of the book.

BEECH-JONES J: Thank you.

MR DONAGHUE: So, his Honour concluded:

The result is that the college well knew that its dramatic increase in revenue and turnaround in profits was substantially built on VFH revenue in respect of students who may have been the victims of CA misconduct, were unsuitable for enrolment, should not have been enrolled and who would gain no benefit whatsoever from their enrolment, yet who incurred very substantial debts to the Commonwealth as a result of their enrolment.

That is a fair summary.

GORDON J: Yes, but at what point?

MR DONAGHUE: At what?

GORDON J: The College well knew. Sorry to be difficult about this. One can say that, but one has to tie it to a point. The reason why I ask that is because there are a number of facts which show that at least – I will not say “at least” – I have identified in the facts that there are things that occur in January and February where specific steps are taken, where it is obvious that they cannot contact the students, and so one can see that they well knew – arguably well knew – by that point. Does this cover the whole of the period? That is, the period that is the subject of what we will call the enrolment period. Or is this in relation to the broader period? And does it matter?

MR DONAGHUE: In my submission, it does not matter. It matters for the individuals, and there will be some debate tomorrow about the point at which Mr Wills was shown to have particular knowledge. My primary answer is the answer that I gave to Justice Beech‑Jones, which is that we would say, even before we could prove the knowledge, because the College undoubtedly had knowledge of how its old system had worked, including that campus‑driven withdrawals were resulting in 50 per cent of its students being unenrolled.

When it made that change for the purpose of getting more students to C1 so it could get more revenue – and in my submission, it was putting in place an unconscionable system even if it did not have the subsequent knowledge, so I was seeking to deploy the subsequent knowledge in the way that Justice Beech‑Jones put to me, to show that it made it worse because instead of it being a high risk, it was a crystallised risk throughout. I cannot show right back to 7 September, but the passages I have just taken your Honours to – particularly at 89, 90, 95, and 97 – do show knowledge in September and October.

EDELMAN J: It is important for this case, as well, maybe most importantly for the way this case feeds into the next one, but it is important for this case to identify what the elements of the system of unconscionable conduct are, because when we get to asking what knowledge there is, you need to know what the elements are to which the knowledge relates. I can see how it may not matter to have precision for the purposes just of this case as to whether you are talking about risk or high levels of risk at 7 September, or knowledge at some point almost immediately after 7 September, but the precision actually does become very important for identifying the elements of unconscionable conduct.

MR DONAGHUE: I understand what your Honour puts to me, and consistently with the answer I gave to the Chief Justice straight after lunch, I do put the conduct elements in the form of that declaration, and that goes, obviously, from the start of the enrolment period on 7 September, and it focuses it in terms of the risk. In my submission, we can make good the case in that way, without relying on the knowledge, and I hope I have not diverted your Honours unnecessarily into the knowledge, because we do not need it for the purposes of the case. But part of what is put against us is that there is something wrong with having pled or relied on this case in a risk‑type framework, and really what I was seeking to do was to say, one needs to be careful with what the word “risk” means in that context. Perhaps I have overegged that.

I have referred your Honours to the primary judge at 499, and we submit that his Honour’s findings amply support what he said there in paragraph 500, the findings made that:

the college took advantage of the consumers who were enrolled as a result of the CA misconduct or who were unsuitable –

Then, skipping a sentence:

By allowing such consumers to progress through census so that the college could claim the VFH revenue from the Commonwealth was to act against conscience; it was a sharp practice that was manifestly unfair to such consumers; it was driven by avarice without regard to the interests of such consumers –

et cetera. It:

was, in all the circumstances, unconscionable within the meaning of s 21 –

That is how his Honour captured it. The Full Court at 186 to 187, on pages 300 to 301, is to the same effect, so core appeal book page 300, and I will not read all of that to your Honours, but at the end of 186 the Full Court say – or the majority say:

In our view, the primary judge was correct to conclude that the College’s decision was unconscionable.

Then in 187 their Honours expand on that conclusion, again, in terms that we respectfully endorse.

GORDON J: Can I just ask one question – I just want to make sure I understand. The point that you made in relation to the findings that we just looked at, being the ones at page 134, is it your case that one could not have paragraph 499 and you would still succeed, given the way 498 and then 500 ‑ ‑ ‑

MR DONAGHUE: What I was endeavouring to submit to your Honours is that I could succeed without knowledge of the 498 facts, that the changes had had “immediate consequences” with spiking numbers of enrolments “very quickly”, et cetera, because to have made the changes for the purpose of bringing about those consequences – so, if your Honour has hypothesised a scenario where the College had bad internal reporting systems, so it could not actually tell what the consequence of its changes had been until January, in my submission, that would not prevent us from establishing that its system was unconscionable, given what it was intended to achieve. As it turns out, it had better systems, so it knew more. That is all I was trying to say.

GORDON J: Thank you.

MR DONAGHUE: Your Honours, as I said in my very opening remarks, it does seem to us that much of the legal debate about how 21 and 22 of the ACL work has receded in significance. We do submit, unsurprisingly, that the task for the Court is to decide whether the proven conduct is, in all the circumstances, unconscionable, that that task obviously:

is not limited by the unwritten law –

as Parliament has made clear in subsection (4)(a). It can apply to systems:

whether or not a particular individual is identified –

as Parliament has made clear in subsection (4)(b). It can permissibly have regard to conduct that is “reasonably foreseeable” as an inference drawn from (3)(a), the point your Honour Justice Beech‑Jones made. The Full Court made the same point in paragraph 155 of its reasons, and a footnote in your Honour Justice Gordon’s judgment in Stubbings, in footnote 86, suggests the same thing. But none of that appears to be particularly controversial.

As to the role that section 22 factors play, we respectfully embrace the way that your Honour Justice Gordon put it in the passage in Stubbings, to which the Chief Justice directed attention this morning. Your Honour had put it in a very similar way, together with Justice Nettle, in your Honour’s judgment in Kobelt. So, one uses section 22 as guidance as to the norms and values that are relevant in assessing unconscionability but not as an exhaustive set of criteria and not as limiting the concept of what is capable of being unconscionable.

So, it might be the case – and I hasten to emphasise that we did not plead this case in that way – but it might be the case that a practice designed to rort a governmental program, as your Honour Justice Gleeson mentioned, might be able to be proved to be unconscionable even if we cannot associate it with any of the factors in section 22, but I do not need to go there.

The kind of argument that our friends are running, which seeks to use the section 22 factors in a limiting way, has been tried before, unsuccessfully, and has been criticised before, with – I will not take your Honours to it, but I will give you a reference to a Full Court judgment in Ali v ACCC [2021] FCAFC 109; (2021) 394 ALR 227, which your Honours have in the authorities. It is volume 6, tab 40. At paragraph [299] Chief Justice Allsop and Justices Besanko and Perram make a critique of a very similar argument as having failed:

to engage with the actual conduct that gave rise to the findings –

of unconscionability:

The circumstances of the conduct and the process of their characterisation is not abstract deconstruction of a party’s behaviour into a matrix based on s 22. These factors may assist in evaluation. They do not define it.

And we submit that does capture, aptly, the appropriate approach. Here, as the argument has developed, the main point seems to be that there was something wrong with framing the case in terms of risk, that there was something wrong with finding unconscionability, given the finding in 176 about intent, and, seemingly, that it should be found that there was understanding of the documents. So, they are the three main points that I propose to address in the balance of my submissions, which, I should say, I do not expect to take the whole of the afternoon, by any stretch. Well less than that.

As to the critique based on risk. As we understand our friends’ case, and particularly their written case, it focuses in its attack on paragraph 229 of the Full Court’s reasons. And it seems to particularly critique, of the finding, about halfway down, that:

the risk and prevalence of unfair tactic used by agents, as well as undue influence, was apparent from –

various identified facts. And it was said that those matters:

bear directly on the matter referred to in paragraph (d) –

which is the undue influence or pressure factor. And, in effect, the critique that is made in writing is it says to focus on risk is not the right approach to unconscionability, because it invites a kind of hindsight reasoning of matters involving commercial judgment. The answer that we make is twofold.

The first is that – and I have already touched on this – that the CA misconduct risk and the unsuitable enrolment risk were not merely foreseeable possibilities that might arise in the College’s business. They were, rather, both problems that already regularly materialised, were prevalent, in the findings below, in the College’s business. You have findings to that effect by the primary judge, for example, at 494 and 496; your Honours do not need to go there.

The finding, particularly in 496, was that the College was aware that in making changes to remove safeguards directed to those existing problems in its business, it was aware that it was removing safeguards against an existing problem, so that, in our submission, whether or not there might be other cases far removed from the present where a business makes a change knowing that an outcome is possible but not certain, that might give rise to a different set of analyses because, obviously, businesses make judgments in uncertain contexts all the time, and it might sometimes be difficult to characterise a judgment of that kind as involving unconscionability.

Where the business is making a change to remove a protection against an existing problem that is already happening regularly in its business, we submit that that is quite different, and not properly criticised by reference to the kinds of arguments that your Honours have heard within a risk framework.

GORDON J: Is that the finding that is made at 497?

MR DONAGHUE: I think it is, your Honour, yes.

GORDON J: That is:

Notwithstanding that knowledge and appreciation –

which was identified in 496, the changes are made entirely:

for the purpose of profit maximisation substantially driven by budget expectations –

MR DONAGHUE: Yes, indeed. It also ties into the took advantage of findings I made earlier, that they were changes made knowing that they would have a particular benefit because of the removal of the safeguard.

Our friends make a point that the College is said to have believed that it was taking the necessary precautions to prevent these risks from eventuating. They cite in support of that a paragraph in the primary judge’s judgment which is not actually a finding, but is an email sent by the College, the CEO of the College to his superiors at Site.

There is no finding to the effect that the things said in that email were actually believed, and indeed, to the contrary, I have already taken your Honours to the finding in the Full Court’s reasons to the effect that it was not believed. I am not sure if I have taken your Honours to paragraph 179 in the Full Court’s reasons at 295. I do not think I have, in fact. Referring to and endorsing:

The primary judge’s findings, when read as a whole, demonstrate that the College could not have had any basis for a belief that the elements of its business systems described above –

Which is a reference back to 174 and following:

would materially reduce the risk, which arose from the unethical or careless conduct of recruitment agents and which regularly materialised –

The finding seems to be quite contrary to the idea that the College thought it was doing enough, that they could not have had any basis to have that belief.

GORDON J: Is that anything more to say that the two matters which were removed were matters directed at addressing those risks specifically, they are taken away, and they are taken away in a context where, at least, Ms Edwards said they should not be.

MR DONAGHUE: And nothing else that they were doing could reasonably have been thought to have meant that it did not matter that they were being taken away. It is possible that one could ‑ ‑ ‑

GORDON J: Is that reference to the other precautions?

MR DONAGHUE: Yes, that is right. The other precautions could not have been believed to be enough. So, you can imagine a case where a safeguard directed to a problem is removed because it is redundant, because other safeguards are already doing the work. That is not this case, on the finding.

As to intention – which is the second major focus of our friends – the finding in question is the finding at 176, on page 292 – which is nothing more than a finding that the College was not seeking agent misconduct. So, you see the emphasised word “intent” in the first line:

The submission that the primary judge’s findings do not evidence any intent . . . may be accepted but is not determinative . . . was not seeking agent misconduct –

But, as I touched on in my earlier submissions, one needs to read that in light of the next paragraph. So, it was not seeking agent misconduct, but it was taking advantage of the risk of agent misconduct.

STEWARD J: It was expecting agent misconduct.

MR DONAGHUE: Indeed, if the agent misconduct had not occurred, it would not likely have received the same bump in revenue that it did receive. So, it wanted to incentivise the agents to send more students to it. It wanted to incentivise them, despite the fact that it knew that the agent misconduct risk was real and regularly materialising and it was only if the agent succeeded in signing up lots of students that it would make the money.

STEWARD J: And the expectation was borne of the decision to remove two significant safeguards that were doing the job of stopping 50 per cent of them from reaching census date.

MR DONAGHUE: Indeed, absolutely, your Honour. So, when our friends say that finding at 176 is an answer to lots of the case against us, we say, it is just not – it is not a fair reading of what the court was saying in the context of its evaluation of these factors as a whole.

EDELMAN J: You do not invite the inference, do you, though, that the College intended agent misconduct?

MR DONAGHUE: No, I do not. But I do submit that it did intend to take advantage of such agents’ misconduct as occurred – as in 177. The other points that I make, really, briefly by way of addition is that, even if the College was completely well‑intentioned, its conduct could still be unconscionable. We think the case that your Honour Justice Gordon, had in mind in that respect in Victoria, might have been the Director of Consumer Affairs v Scully [2013] VSCA 292 at paragraph 39, where there is a comment to that effect.

We have cited a number of cases in footnote 43 of our submissions that point in the same direction. One of them is ASIC v AGM Markets, which we did not give your Honours, but at 373, Justice Beach said:

statutory unconscionability does not require only focusing on the alleged wrong doer’s . . . state of mind, whether actual intention or knowledge or what it ought to have known. It is a broader objective evaluation of behaviour –

So, even if we did not ‑ ‑ ‑

STEWARD J: What paragraph was that?

MR DONAGHUE: Sorry, that was paragraph 373, in AGM Markets. You have the full citation in footnote 43 of our written submissions. So, it would not matter as a determinative factor even if it were to be affirmatively established that the conduct of the College was well‑intentioned.

Finally, we have mentioned in our written submissions at paragraph 50 that in many areas of the law – as your Honours well know – parties are taken to have intended to produce the probable consequences of their conduct.

EDELMAN J: That is just not accepted any more, though. Justice Windeyer said a long time ago in Vallance v The Queen that the probability that harm will result from a person’s act can be so great and so apparent that it compels the inference, but compelling an inference is very different from equating the probabilities with the intention.

MR DONAGHUE: I accept that, your Honour, that one needs to be able to draw the inference of the actual intention, but, very commonly, one can properly infer that the party intended something that was very likely to occur from its conduct. We cited Smith v The Queen, but there are other cases to the same effect.

Your Honours, on the understanding of documents point – this was a factor upon which the ACCC – so this is factor 22(1)(c) and (i), but particularly (c) – we would invite your Honours’ attention to paragraphs 225, 226 and 227 in the Full Court, on page 318, where the court is discussing 22(1)(c):

consideration of whether the student would be able to understand information (including whether the student understood they had enrolled in a course and had the option to withdraw).

The appellants said:

there was no proof of any characteristics –

so that:

this factor favoured the College.

The court did not agree. And that the end of 226, you see recorded, the primary judge having said:

where “significant numbers and proportions of consumers who are enrolled as students cannot thereafter be contactable by the College and do not engage in any way with their courses, it is very clear that something is remiss”. We agree.

Then, their Honours go on in the next paragraph to refer again to the awareness that the College had of the risks and harms that might follow. Then the last few sentences of that paragraph say:

prior to the impugned enrolment period, up to 50% of enrolled students withdrew or were withdrawn. The problem of unwitting and unsuitable students being enrolled at the College was prevalent. The evidence gave rise to an overwhelming inference that large numbers of enrolled students did not understand the obligations being incurred through enrolment, and may not have understood that they had enrolled.

So that factor, we submit, contrary to our friends’ submission that 22(1)(c) favoured them, that factor very strongly favours the conclusion that this enrolment system was producing overwhelming numbers of students who did not understand the obligations that they were incurring, and that in turn supports the conclusion of unconscionability.

I have already touched on the inbound call. The final point I, perhaps, need to make, because it is dwelt upon at some length in writing, although it has not been orally – although it was touched on – is the idea that there is some difference between the way that the Full Court conceived of the category of “unsuitable students” and the way that the primary judge conceived of the category of “unsuitable students”.

I think the suggestion is that that had the consequence that the Full Court was not justified in concluding that there was a prevalent problem of “unsuitable students”. We submit that the – and I will not detain your Honours on this at any great length – but if your Honours go to paragraph 221, which is the focus of our friends’ attack, and in particular the finding there, near the end of the paragraph, that there was a prevalent problem of unsuitable students, in effect – and it said:

That is the substance of the primary judge’s findings at PJ [494]‑[497] and [500].

The argument that our friends then make fixates upon the particular finding that the primary judge made at 496. Basically, our answer to it is that the Full Court did not refer just to 496, it referred to a wider range of paragraphs. When your Honours read the wider range of paragraphs, it is apparent, in our submission, that the primary judge was not failing to distinguish or was not treating the unsuitable student risk as different, relevantly, than the way that the Full Court treated it.

There were two problems: there was a problem of unwitting students, and there was a problem of unsuitable students, and yes, they overlapped, but they were different because the unwitting students were the victims of pressure – agent misconduct; the unsuitable students were people without the language, literacy, numeracy, or computer skills needed for an online course. So, it was possible that a student might be unsuitable, even if not the subject of undue influence or other pressure, so we submit that that factual point, really, goes nowhere.

Other than the submissions that I have made, we, of course, rely upon our written submissions, but unless your Honours have any further questions then those are our submissions on the first appeal.

GAGELER CJ: Yes, thank you, Mr Solicitor. Mr Giles, do you have a reply?

MR GILES: Briefly. The case as conceptualised by the Full Court – as shown by the draft declaration at paragraph 377, page 368 of the book – is one about risk, albeit that in (c) it is the College knew that there was a real risk that regularly materialised, but nonetheless it is conceptualised by reference to risk. True it is that we removed two controls that ameliorated that risk. That removal was in the context that the particular legislation did not require those controls.

Indeed, the trial judge, as part of his findings of knowledge of the College about the risk at paragraph 193, referred to an update from the – that is, court book 60 – an update from the Minister about proposed changes which had come into force by 7 September, and made the finding at 194 that while that, in effect, cut against it because it is one of the facts that brought the knowledge of agent misconduct home – also, that Mr Cook of the College might also reasonably have concluded – that the changes that the government was introducing to the scheme would alleviate that risk, at least to a significant extent.

The reason for drawing attention to those findings is that once one addresses the unconscionable conduct case in the framework of section 22, the compliance with the law, by analogy to the conception of compliance with the required codes, becomes important. Without that, one is conceptualising the case by reference to a reaction to the conduct rather than that which is required by the norms in section 21, as informed by section 22.

Can I then raise two brief factual matters: the first, that your Honour Justice Steward asked a question about the additional cost, in addition to
the 20 per cent commission. There is a finding in the Full Court judgment at 182(a) of the addition – that is at page 297:

a substantial increase in staff recruitment within the student support officer, admissions and training teams.

That is directed to a slightly different point in time to the evidence that our learned friend referred. I do not think it becomes more precise than substantial, but there were further student support officers and other employees being engaged.

Your Honour sees from the paragraph to which we have gone, 182, that we deployed that unsuccessfully in the Full Court as being a fact demonstrating – that it was one part of our system that we actually had and employed people to try and engage with these students; part of the response to the undoubtedly appalling failure to engage. The other factual point ‑ ‑ ‑

GLEESON J: Is that finding at 182(a); the College’s assumption that there were about 80 per cent of enrolled students who would not engage? That is a state of mind?

MR GILES: I think one has to go back to the evidence in the trial judgment, at page 102 of the book, to which the Full Court has cross‑referred. It is not entirely clear, in the sense that his Honour was referring to evidence – and perhaps how equivocal it is, it seemed from paragraph 367, on page 102, the reference to a targeted performance of 75 per cent. In answer to your Honour’s question, we do not think that that is a finding about a state of mind, it goes no further than that, which is, in effect, from the recital of the largely but not entirely documentary evidence; there is some reference to the cross-examination in the trial judgment.

Finally, our learned friend was asked about what the Commonwealth did and did not pay. We do not quibble with anything that they said to your Honours. It was litigated to a somewhat inconclusive point at trial. The finding, as far as it goes, is trial judgment 504, at page 135. Unless there is anything further, those are our submissions in reply.

GAGELER CJ: Thank you, Mr Giles. The Court will reserve its judgment in this matter, and move immediately to the Wills appeal. Mr Hodge?

MR HODGE: Thank you, your Honours. There is a procedural matter I need to deal with first, which is there is a supplementary appeal book for this matter, and an application to amend the notice of appeal, which is unopposed; it is just to add a formal ground 3(a) in the event that the appeal in S118 was to succeed and your Honours would overturn the finding of unconscionable conduct, and the consequence would be that my client would also succeed.

GAGELER CJ: Yes, you have that leave that you will require.

MR HODGE: Thank you. Your Honours, I will spend, I think, all of this afternoon dealing with what is, really, our first point, and that is the legal point about what it is that is required in order to satisfy the knowledge requirement for accessorial liability. Our fundamental submission can be boiled down very simply. It is an essential – and whether one uses the word “fact”, “matter”, or “element” makes no difference, but it is essential to the primary contravention of unconscionable conduct that the relevant impugned conduct be unconscionable, and it follows, therefore, that a person who is said to be accessorily liable in the primary contravention has to have knowledge of that essential matter.

EDELMAN J: That would mean that Friar Tuck was not acting unconscionable when he assisted in stealing from the rich and giving to the poor.

MR HODGE: That may well be right. That is ‑ ‑ ‑

BEECH-JONES J: Unless he knew that was, even if not bad within his own moral code, contrary to the moral code prevailing in the shire or forest or county, wherever he was running around.

MR HODGE: Yes. What I think your Honour is hypothesising, or necessarily hypothesising, in that example is that if we are talking about being knowingly concerned in unconscionable conduct, where the unconscionable conduct springs from the contravention of another statute, in this case, say one that criminalises certain conduct – the stealing of something – there might then be a question about whether or not you have ancillary liability under unconscionable conduct in relation to that. That, with respect, is a very interesting question about what happens when the unconscionable conduct springs from something that is a contravention of another statute. It is not something that, in our submission, arises here.

EDELMAN J: No, I am just talking simply about section 21, 22‑style unconscionability. As I understand your opening submission, it is that, in order to be liable as an accessory to that, you have to subjectively believe that your own conduct is unconscionable.

MR HODGE: You have to subjectively believe that the primary contravention is wrong.

EDELMAN J: So, if you subjectively believe that it is not unconscionable to steal from the rich and give to the poor then you are not an accessory; you are not liable as an accessory.

MR HODGE: You are not liable as an accessory for a primary contravention of unconscionable conduct, one would think. Of course, there is probably another primary contravention that is involved there – assuming this hypothesis, it is Robin Hood that is stealing and Friar Tuck who is assisting with it – then there is probably an entirely different primary contravention which will have different elements and in respect of which Friar Tuck will know all of the essential facts of those elements. It is the transmogrification from that into something else which is unconscionable conduct.

BEECH-JONES J: Sorry, I missed – I thought your argument was not about the individual moral code of the person but that the person must subjectively understand, in the context of unconscionability, that what they are doing is, according to Justice Gordon in Stubbings, contrary to what is right and proper according to the values recognised in society, or that otherwise other people might recognise it as sharp practice, even if you yourself have your own moral code.

MR HODGE: Your Honour is quite right. It is bearing in mind that unconscionable conduct, as it is under the statute, is not about – when we are talking about the primary contravention, it is not about the individual moral code of any person, it is about what are the societal values or norms that are imported within it, so that that involves two factual layers: what are the societal norms; and in this case does the conduct fail to comply with those societal norms. In most cases this is unlikely to be complicated, as it is in this case, because in most cases the nature of the unconscionable conduct is simpler. It does not have the temporal issues that this conduct has and, in most cases, when one is talking about ancillary liability for a primary contravention, there is a much straighter route from what is the quality or character that renders the primary conduct unconscionable to the knowledge and behaviour of the accessory.

But this case, and the reason it throws up the issue, is because it is so attenuated, because the way in which the Full Court approached it, in the way that the ACCC urges it, is not about saying Mr Wills knew that somebody was being exploited, Mr Wills knew that somebody was being taken advantage of, Mr Wills knew that somebody was under special disadvantage and that was taken advantage of. None of those things which are the character or qualities that might be attributed to the primary conduct, and then give rise to the primary contravention, are things that it is said that he knew. Instead, there was a retreat to what are said to be as few core facts and then those core facts are said to be the primary facts from which it is possible for the court to then reason that this is against community standards or norms, or however it is put.

STEWARD J: This is not obviously an objective test. On your submission, the person must have an accurate subjective understanding of societal norms and then know that what the other person has done, the person primarily liable, is in contravention of them. What if the person is, say, a psychopath who does not have step 1, that is, subjective knowledge of what is right and wrong?

MR HODGE: For ancillary – the short answer is they could not be somebody who does not understand what is right or wrong.

STEWARD J: It does seem odd, though, that the saint who has a good knowledge of what is right and wrong is more likely to be liable than the psychopath.

MR HODGE: Yes, I understand what your Honour says. Of course at the ‑ ‑ ‑

STEWARD J: These are extreme examples, I accept.

MR HODGE: They are extreme examples. They are also examples that immediately throw up other questions. For example, when you are talking about the saint, what you are assuming is a saint who intentionally assists with doing something that they know is wrong, even though they know it is wrong, because that is the only way they even get to the point of accessorial liability.

GAGELER CJ: So, by definition, they are a sinner.

MR HODGE: Yes. So, it is impossible to fulfil the conditions of one extreme of the example, and to take the other extreme of the example which is what if you are somebody who is simply incapable of understanding right or wrong, which is extreme, not confronted in any practical reality, but let us say that you are incapable of understanding what is right or wrong. It might well be that in that circumstance for accessorial liability – in fact it presumably will be that for accessorial liability for unconscionable conduct, you cannot have the necessary knowledge, but that is a consequence of the choice that the Parliament made about what stand they apply for knowledge, for accessorial liability. I am sorry, your Honour, yes.

STEWARD J: I was just going to say it is an important issue because, having the subjective knowledge of societal norms is going to be much harder as time goes on because those societal norms are becoming less clear. Once upon a time all of this was rooted in Judeo‑Christian moral philosophy.

MR HODGE: I understand what your Honour says. Can I respond to that in one moment?

STEWARD J: Yes, of course you may.

JAGOT J: Could I just raise this. I am just struggling with the whole idea that you have to subjectively believe something is wrong. Surely, it is sufficient that if you know that according to the societal norms that the thing – you may not believe it, you may be a sociopath, or whatever; you do not adhere to those societal norms – you know that the rest of society has these norms, and that this conduct has the requisite quality of seriously falling short of those norms. You know that. You do not have to join in in a belief in the correctness or the validity of the norms. That is not what you mean by “subjective belief”. I am having trouble with eliding knowledge – which is what accessorial liability – with your subjective belief. They are two totally different things. Even the psychopath can know societal norms; they just do not adhere to them. If you are in a completely ‑ ‑ ‑

MR HODGE: Your Honour is quite right. In fact, again, to sort of take out the extremity of the psychopath example, it depends, as with all of these things, what we mean by a psychopath. I think I have defined as somebody who does not know what right or wrong is. I think what your Honour is defining as a psychopath is somebody who knows what society considers to be right or wrong but ‑ ‑ ‑

JAGOT J: Just does not agree with it.

MR HODGE: ‑ ‑ ‑ either does not agree or does not care, and is happy to act indifferently. The second category can have accessorial liability. The first – that is, somebody who is simply incapable of understanding or appreciating what society regards as right or wrong – that is different.

JAGOT J: That is right. And that is a completely different point, if you actually have someone who is – by reason of whatever – incapable of knowing. It is not incapable of believing, or adhering, it is the incapability of the knowledge of that quality. That starts to make moral sense that that person is not attributed with liability, but that is quite a different thing from saying that they have to believe it.

MR HODGE: Your Honour is right, and I do not disagree with any of that.

GORDON J: Another problem you have, I think, with the arguments currently being put, is you are going to have to address the authorities, which are inconsistent with that submission you just put, I think. There is a long line of authority which says what is required is knowledge of the essential facts giving rise to the contravention, consistent with other areas of the law. That is not a new concept. It is founded in the way in which many other statutory provisions work. For my part, I would be very grateful if you could identify how you answer that consistent with the authorities. Do you seek to have this Court overrule them? Do you seek to have us develop some new principle?

GLEESON J: I thought that you were saying that the norm is one of the essential facts.

MR HODGE: That is right.

EDELMAN J: But there is a difference between the norm and the application of the norm. That is why the questions that Justice Beech‑Jones and I asked you at the start may, on your submission, just collapse into the one inquiry, because Friar Tuck may know of all of the norms of society, but may apply those norms in a way that, in his mind, means that there is no unconscionable conduct. Otherwise, you are talking about the outcome, the actual result of unconscionable conduct, rather than – as Justice Gordon says – the facts or the circumstances that lead to that result.

MR HODGE: Yes. To return to the Friar Tuck example, which I am troubled by only because to actually bring it into unconscionable conduct we have to posit a whole series of extra facts. But the answer is, necessarily, if you know that there is a norm against stealing in society, and you know that the primary contravener is in contravention of that norm, and assume for present purposes that then, as a matter of primary contravention, a court was to find that unconscionable conduct arises from somebody engaging in stealing, and you as the accessory have assisted with that stealing and have assisted knowing that they are contravening this norm which is that they are not supposed to steal – even though, for your own idiosyncratic reasons, you consider it right – you still have accessorial liability. The problem is if you do not know – it is not about your idiosyncratic notions, it is about whether or not you understand what the norm is.

BEECH-JONES J: That could be difficult because stealing is not an element of stealing. Stealing is the offense . But here unconscionability – and, as you say, unconscionability is, in the true meaning of the authorities, a fact.

MR HODGE: Yes.

BEECH-JONES J: Because if, heaven forbid, this was to be tried before a jury, the jury would decide whether or not it was contrary to the standards.

MR HODGE: That is right.

GAGELER CJ: Well, Mr Hodge, you are aware of our difficulties.

MR HODGE: I am.

GAGELER CJ: We will let you make your submissions, I think.

MR HODGE: Thank you, Chief Justice. Can I return then to Justice Steward’s point tomorrow, which is that idea of norms and the idea that they are difficult to ascertain ‑ ‑ ‑

STEWARD J: Yes, of course.

MR HODGE: ‑ ‑ ‑ because that is really about what is the nature of a primary contravention.

STEWARD J: I will keep quiet for the rest of the day.

MR HODGE: No, no. I was not encouraging your Honour to do that. I just will come back to that. Can I then deal with Justice Gordon’s question by saying our answer is, we are not asking for any new development of the law. In our submission, the proposition that we are putting forward is consistent with what this Court has already said in Giorgianni, and then in Yorke v Lucas. That is our answer. I will go to both of those cases to explain why it is that we say that. Perhaps, if it is convenient, I will start with Giorgianni.

GAGELER CJ: We are doing that now?

MR HODGE: Yes, your Honour. That should be tab 33, volume 5.

GAGELER CJ: You should give the Commonwealth Law Report reference as well.

MR HODGE: Yes, your Honour. That is volume [1985] HCA 29; 156 CLR 473. Can we illustrate the point by reference to what was the offence in that case. So, the relevant offence, which was the primary offence, was culpable driving under the Crimes Act. And if your Honours go to page 488 to 489 of the judgment, which is 167 to 168 of the joint bundle, you will see at the bottom of that page that Chief Justice Mason has set out what the offence is, of culpable driving. And, relevantly, in that case, what was necessary was that the driving be at a speed, or in a manner, dangerous to the public.

So, there is a submission that is made by our friends in their written submissions, which is that the Court, in this case, said it was not necessary to know that the driving was culpable, and also said, not necessary to know that it was in a manner dangerous to the public. That, in our submission, is incorrect. Can we show your Honours this, first, by the instructions to the jury in that case. So, if your Honours go to page 476, page 1055 of the joint bundle, you will see, about halfway down the page:

The learned trial judge in the course of his summing up described as follows the nature of the contentions put on behalf of the Crown –

And you will see what the Crown was alleging, and what it was therefore said. The jury had to be satisfied about knowledge. It was not just that they needed to know of the defect, they also needed to know of the danger thereby to the public. And that is – to draw an analogy with our case – the evaluative judgment, that, to use the Commission’s term, needs to be made. That is, it is not enough simply to know brakes are defective. It is not enough to know a vehicle is going to be driven on public roads. You have to also know that it is a danger to the public.

That is apparent from other parts of the judgment that no member of the Court thought that that aspect of the instruction was incorrect. So, if your Honours then go to page 482 of the judgment, page 1061 of the joint bundle of authorities, and you will see at the top of the page Chief Justice Gibbs quotes from the case of R v Robert Millar (Contractors) Ltd, and sets out there an extract of what it is that it said was going to need to be known, which is – I will let your Honours read that. His Honour the Chief Justice emphasises a couple of times on that page that what needs to be known, or what there needs to be actual knowledge of, is all of the essential matters which made the act a crime. So, in that case, an essential matter which made the act a crime was not just having defective brakes, it was driving it in a manner dangerous to the public. In our case, an essential matter which makes up the primary contravention is not just the conduct, it is also that it is against societal norms, however that is so put.

If your Honours then come over to page 488 of the judgment, I will just pick up another point that I want to return to later, but it has relevance to the idea of being morally obtuse. If your Honours look at the top of page 488, page 1067 of the joint bundle, you will see that description that is there used by Chief Justice Gibbs:

knowing all the essential facts which made what was done a crime, he intentionally aided, abetted, counselled or procured the acts of the principal offender. Wilful blindness, in the sense that I have described, is treated as equivalent to knowledge but neither negligence nor recklessness is sufficient.

The reason I emphasise that, about which I do not understand there to be any controversy, is that, if one was to compare this to say accessorial liability in equity, depending upon which particular kind of issue we are talking about, the categories of knowledge that would be sufficient in that circumstance – for example, sufficient for first or second limb under Barnes v Addy would descend down to fourth category of Baden knowledge – but under the statutory accessorial liability, it does not extend so far. It would extend to what – again using Baden terminology – would be category one and, at least to some extent, category two. That is, actual knowledge or wilful blindness.

The relevance of that – as I will come to either later or tomorrow – is there is a submission that is made and also a proposition that was advanced by the Full Court that the approach that is being urged, or was urged, by us invites – and they use the phrase “the morally obtuse” to get away with things. That phrase, as your Honours know, is something that has been used historically in courts in relation to accessorial liability, starting at least with Consul Development in this Court, but that is in relation to fourth category of Baden knowledge. So, the idea of bringing in these things about being morally obtuse and being able to therefore get away with something is to introduce a concept foreign to the idea that is found within the statute and the choice that the legislature has made as to what knowledge is sufficient in this case. But, as I said, I will return to that later.

Then, if your Honours then go over the page to the decision of Justice Mason on page 489, 1068 of the joint bundle, you will see his Honour, at the top of the page after the quotes from the Crimes Act, sets out what the case for the Crown was, which was:

with knowledge of or reckless indifference to the state of the brakes of the vehicle and to the danger which they constituted to the public –

and then you will see at the bottom of the page, his Honour poses what was the second question for the Court, which was:

if the section is applicable, to the sufficiency of recklessness as to the state of the brakes and the danger which they constituted to the public as the mental element required to establish liability.

If your Honours then come to page 496 of the judgment, which is page 1075 of the joint bundle, you will see about a third of the way down the page, his Honour identifying this specific question in relation to whether it was being driven in a manner dangerous to the public. His Honour says:

The question of whether the vehicle was being driven by Renshaw or in a manner dangerous to the public at the time of impact is also one of fact and degree.

Which, presumably, is the kind of evaluative judgment that the ACCC says is somehow separate from an actual fact, and therefore is something that does not need to be known. In our submission, that is a stark illustration of why the proposition that they advance is inconsistent with what this Court has decided before.

BEECH-JONES J: Mr Hodge, just down the bottom of the previous page, Justice Mason cites Johnson v Youden, which is about secondary liability for strict liability offences. At the bottom, he uses the phrase “unless he knows the facts”, and these judgments used the phrase “facts”, “elements”, “circumstances”.

MR HODGE: Interchangeably?

BEECH-JONES J: Yes. In the context of criminal law, what we are talking about is all things to be decided by a jury. Is that right?

MR HODGE: Yes.

BEECH-JONES J: And you say that includes evaluative facts, standards.

MR HODGE: It must. As your Honour Justice Beech‑Jones pointed out earlier, if a jury was involved in making a decision about unconscionable conduct, the jury would have to decide that the conduct was against social norms.

GLEESON J: Mr Hodge, at some stage I think it would be helpful to understand how the case was put against your client. If we use the language of a serious departure from acceptable commercial standards of behaviour, it would be helpful to understand what was the standard of behaviour that your client was said to have understood, for example ‑ ‑ ‑

MR HODGE: Yes.

GLEESON J: ‑ ‑ ‑ if that is the way the case was put.

MR HODGE: Can I give you a short answer to that, which is it is not the way the case was put. That is, there was no attempt and no finding that my client understood this to be a departure from acceptable behaviour.

GLEESON J: Was it just, in all the circumstances, unconscionable?

MR HODGE: In effect, it is actually – it is more opaque than that. To illustrate just how opaque it was I will ultimately need to do two things which, if it is convenient, I will do later. One is I will show you the pleading which is in the supplementary materials. I will not take you through it in detail, but I will just show you the relevant parts. Then I will also show you the findings that were made as to what was actually found to be known by the Full Court. Your Honours will see there is no suggestion within that that my client understood something in any – whether we put this in moral terms or terms of conscience or social norms or simply wrongness, there is just nothing that is put against my client like that or found against my client.

EDELMAN J: Well, it is difficult, in any event, to talk about it as knowledge of the fact that the conduct would bear the label “unconscionability”, particularly when there is a dissent in the Full Court. It could only really be in terms of a belief, could it not?

MR HODGE: No, I do not agree with that in terms of how the case would have to be put. Your Honour is right to say different people looked at this and thought the primary conduct was or was not unconscionable. But necessarily, the premise upon accessorial liability that would have arise is that it was found that the primary contravention had arisen and that it did involve contravening certain social norms, and then it would have to also be found for accessorial liability that my client knew that the conduct was against whatever those relevant social norms are.

BEECH-JONES J: Knew or believed – it would not make any difference. Belief.

MR HODGE: I suppose that is right. In his mind ‑ ‑ ‑

EDELMAN J: Epistemologically, it does make sense to talk about knowledge.

MR HODGE: I understand what your Honour says. Yes.

EDELMAN J: Giorgianni was a case under the aiding and abetting provisions. Is your assumption that the equivalent provision that has both an aiding and abetting limb and a knowing concern limb that each of those limbs works in exactly the same way?

MR HODGE: At least in respect of knowledge, yes – that is, that they both require knowledge of the essential – I will use “elements”, if that is convenient. They require knowledge of the essential elements and intentional participation or association with whatever the conduct is with the benefit of that knowledge.

EDELMAN J: So, what does “knowingly concerned” add to aiding, abetting, counselling and procuring?

MR HODGE: It may add nothing other than when it comes to the third element, which is the conduct element, which is, it said, you can be knowingly concerned in something if you take some practical step that associates you with the conduct and there may be an argument – which does not matter for case – that that does not necessarily fall within the description of aiding, abetting, counselling or procuring.

EDELMAN J: Thank you.

MR HODGE: Can I then ask your Honours to go to the last judgment, which is that of Justices Wilson, Deane and Dawson? If your Honours go to page 500 of that judgment, which is page 1079 of the joint bundle, you will see, four lines in, it is explained what is necessary in order for there to be accessorial liability, which is intentional participation. The members of the plurality make the point, which we would say is self‑evident, which is the only way you can intentionally participate is if you have knowledge of all of the essential matters, because what you have to intentionally participate in is the thing that is a crime.

Then, at the bottom of the page, they explain the common law position in relation to the primary offence, which is you do not need a guilty mind, but that for secondary participation, you do. If your Honours then come over to page 506, on page 1085, you will see the first full paragraph begins:

In this case –

Then, about 12 lines down, you will see a sentence that begins:

The recklessness contemplated must have involved some foresight –

Then, could I just invite your Honours to read that. So, again, we would say, with this last judgment, it is uncontroversial that it was not just knowledge of the defective brakes that was required, it was also the knowledge or appreciation of the dangerousness to the public. There will then be a question about how you reason to the inference that the person had that knowledge, but that is a separate issue.

Again, they return to the point which is – and you see this at the bottom of that page and continuing over the page, that intention is a necessary element and, as they say on page 507:

Intent is required and it is an intent which must be based upon knowledge or belief of the necessary facts.

Can we then go to Yorke v Lucas (1985) 158 CLR 661, that is tab 38. I will be, I think, much briefer in addressing this decision. If your Honours go to page 667 of the judgment, on page 1345 of the joint bundle of authorities, and you will see at the top of the page the judgment of the plurality adopts the standard of knowledge in Giorgianni and says:

To form the requisite intent he must have knowledge of the essential matters which go to make up the offence whether or not he knows that those matters amount to a crime. So much was affirmed recently in Giorgianni v. The Queen –

And then at the bottom of the page, your Honours will see the explanation of what is required for being knowingly concerned in a primary contravention of misleading or deceptive conduct. And you will see the last full sentence beginning there:

A contravention of s. 52 involves conduct which is misleading or deceptive or likely to mislead or deceive and the conduct relied upon in this case consisted of the making of false representations. Whilst Lucas was aware of the representations – indeed they were made by him – he had no knowledge of their falsity and could not for that reason be said to have intentionally participated in the contravention.

Now, the way the Full Court construed that, particularly at paragraph 304 of the judgment, which I might come to later, and the way in which the ACCC seems to construe it, is to say, when the court said, “no knowledge of their falsity”, the court did not actually mean that the problem was that he had no knowledge of their falsity. What the court actually meant was that he had no knowledge of the actual figures, which was the fact from which it would have been possible for then the court to make the evaluation that the conduct was misleading or deceiving.

The only thing that is necessary to know on the account of the ACCC and the Full Court is whatever the fact is that then is going – from which the inference or evaluation is going to be made in order to decide that the representation or conduct is misleading or deceptive, it is not necessary, so the ACCC says, to find that, in fact, the person who is said to have ancillary liability actually understood that it was misleading or deceptive.

In our submission, it is not possible to draw that from what the plurality said there. It is quite plain what they are saying, and that becomes more plain if you go over to page 670 of the judgment, and page 1348. The reason we say that is because they again emphasise the same thing that falls from Giorgianni, that you:

cannot be knowingly concerned in a contravention unless he has knowledge of the essential facts constituting the contravention.

And at the bottom of the page:

the proper construction of par. (c) requires a party to a contravention to be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention.

An essential element of the contravention of what used to be section 52 of the then‑Trade Practices Act is not just fact, a representation is made; fact, there is some other fact that is contrary to that fact, but a further factual matter which is a matter of fact – and, again, would be something for a jury to decide if it was dealt with in that context – but that the representation or conduct is misleading or deceptive.

What we would say is that you do not need to know it in the language of the statute, you might describe it as false, you do not need to know that it is a contravention of the law, but you need to know that it has that characterisation because that characterisation is an essential factual element of the primary contravention.

EDELMAN J: But do you not need to go a step further? You would need to say that what Lucas needed was not just knowledge of the falsity of the representations but also that the falsity of those representations was such as to bear a character of being misleading or deceptive, or likely to mislead or deceive. I mean, there can, of course, be false representations that are not going to mislead or deceive anybody.

MR HODGE: Yes. I accept that if it was – it is not going to apply in Yorke v Lucas, which is a simple case in factual terms of what the representation is and why it is rendered false, but you can conceive of a case where a representation is made and some facts – the only way it could work is this: it would have to be that there are some facts that are known that might be contrary to the representation but other facts that are known by the person which would suggest to them that, in fact, the representation is true, and therefore they do not understand that it is, in fact – to use the colloquial expression – false, or otherwise somehow has that misleading or deceptive quality.

EDELMAN J: The analogy with this case would be to say that you need knowledge not just of the falsity but you also need knowledge that the falsity bears that character of being misleading or deceptive.

MR HODGE: No, I would disagree with that. The reason is – the point about Yorke v Lucas is, it bearing the character of being misleading or deceptive was factually simple, but as a general proposition, in order to have ancillary liability to a contravention of what was section 52 – now section 18 of the ACL – you need to know that the relevant conduct is – you need to know that it is misleading or deceptive, in the language of the statute – but you need to know that it has that character.

So, it is directly analogous to our situation. You need to know that the facts which mean that it is against a social norm – so, you need to have knowledge of the facts of the conduct, knowledge of whatever the norm is, knowledge that is contrary to that norm. I am sorry, was your Honour Justice Edelman about to ask me a question? Thank you.

In our submission, unless it is found that the unconscionable character of the conduct is not an essential factual matter making up the primary contravention, it must follow, based on these authorities, that you need to know that the conduct bears that character. As we say, you do not need to know that it contravenes the law; you do not need to think of it in the language of the statute; the way, even, that we as lawyers have thought about what the language of the statute means has shifted over time – it is highly unlikely that anyone thinks in terms of the language of moral obloquy or anything like that – but you need to understand that, in its simplest and most colloquial way, that it is wrong.

STEWARD J: In terms of knowledge – knowledge of the facts, knowledge of the norms, and it is contrary to norms, is what you said before.

MR HODGE: Yes.

STEWARD J: What level of departure from the norms must you have knowledge about?

MR HODGE: Whatever level of departure is necessary for the conduct to then meet the legal description of “unconscionable conduct”. So, whatever is the factual departure ‑ ‑ ‑

STEWARD J: How will a layperson know that?

MR HODGE: Well, a person will not know that, in the sense, that they – and they do not need to know that it meets a legal test; they just need to know what the facts are.

STEWARD J: But you said they would need to know knowledge of the norms and that it is contrary to the norms. My question to you is: what type of departure from the norms must they have knowledge about – any departure, serious departure, grave departure?

MR HODGE: Can I answer that by way of example, to illustrate that?

STEWARD J: I did not promise I would not ask you anything, so you can answer tomorrow ‑ ‑ ‑

MR HODGE: No, I am happy for your Honours to ask whatever questions you want. I certainly do not want to be seen to be discouraging. The answer to that is this: let us assume a hypothetical situation in which the only characteristic that renders conduct unconscionable is dishonesty. And let us assume that the person understands that there is some aspect of what has been done which is slightly untrue or misleading, but, in fact, the court concludes that the standard required under section 21 is something much greater than some slight level of dishonesty – in fact, it is very significant and profound dishonesty – and the court finds, as a matter of objective fact, that there was actually that profound level of dishonesty even though the person is said to be an accessory is only aware of the limited degree of dishonesty.

That would not be sufficient knowledge in order for there to be accessorial liability. What it will depend upon is having knowledge of the facts which give rise to the conclusion by the court that there is, in fact, legal liability. They do not need to know that there is legal liability, but they need to know whatever the facts are.

STEWARD J: All right.

MR HODGE: Can I then turn to deal with what are said to be the five points raised against us by the ACCC, and this is by reference to their written submissions.

GORDON J: Can I just ask, are you going to deal with Rural Press and those other authorities, or are you going to put them to one side?

MR HODGE: I am going to deal with them. Perhaps it might assist if I ‑ ‑ ‑

GORDON J: No, you do it in the order you want to do it, Mr Hodge.

MR HODGE: The second point raised by the ACCC is Rural Press. I was going to get to Rural Press at that point.

GORDON J: Thank you. That is all I ask.

MR HODGE: If your Honours go to page 11, using the pagination at the top of the page, of the written submissions of the ACCC, you will see about a third of the way down the page, there is a heading which is “Mr Wills’ suggested approach represents a wrong‑turn”, and then they offer up five reasons. The first reason begins at paragraph 29, where they say the problem with the way in which this is being put by the ACCC is that it does not adequately distinguish between what are facts and what are normative judgments about facts.

Our answer to that is, necessarily, for this kind of primary contravention, the normative judgment about it is a factual part of the contravention arising. And this comes back to the point made by Justice Beech‑Jones, or that I am picking up from Justice Beech‑Jones, this is a matter that would go to the jury to make the evaluation as to whether or not it was against a norm, and it is the same point that arises in relation to Giorgianni – there is a normative evaluation that is involved in deciding that a particular manner of driving is dangerous. The fact that there is a normative evaluation does not mean that you do not need to know that in order for there to be accessorial liability. You must know that, because it is an essential element of what is the primary contravention. The second point ‑ ‑ ‑

GAGELER CJ: I am not sure it would be correct to say the danger to the public is “normative”. Strange use of language, really.

MR HODGE: It may depend on whether you consider public danger something that involves a norm. Perhaps I will frame it another way ‑ ‑ ‑

GAGELER CJ: It is an assessment of risk, really.

MR HODGE: It is an evaluation. That is the other way that the ACCC puts it. They say an evaluative judgment is something that is different from the fact itself. So, accepting what your Honour says, which is perhaps there is no normative judgment involved, it is nevertheless an evaluative judgment. The fact that it is an evaluative judgment does not mean it is not an essential matter that gives rise to the contravention, and therefore it must follow that it needs to be known.

EDELMAN J: I suppose, to pick up on the philosophical references by the ACCC, you could say that all facts are, to some extent, evaluative judgments.

MR HODGE: Yes, where you draw the line is not explained by the ACCC other than that this one is regarded as particularly hard, and therefore a line should be drawn to make it easier to establish accessorial liability. I mean, that is really the thesis that underlies it – it is too hard to establish accessorial liability if you apply what we would say is the strict interpretation of the law.

The second reason given by the ACCC, which is on page 12 at paragraph 30, is that the approach for which we contend on behalf of Mr Wills is “foreclosed by the decision of this Court in Rural Press.” Can I take your Honours, then, to Rural Press [2003] HCA 75; (2003) 216 CLR 53 to see what was said, relevantly – it is at page 1283 of the joint bundle of authorities, volume 5, tab 37.

The limit of what is said by the Court is at page 73, or page 1303 of the joint bundle. This is part of the joint judgment of Justices Gummow, Hayne, and Heydon, and your Honours will see at the bottom of that page, three lines from the bottom, “The third Rural Press complaint: were McAuliffe and Law accessories?” Could we invite your Honours to then read that, and over the page?

GORDON J: Do you want to address footnote (71) of that judgment?

MR HODGE: Yes. I think only the Full Court judgment is in the bundle, I do not know that the single judge decision is, but it will actually be helpful to go to the single judgment. I might, if it is convenient, do that tomorrow morning, your Honour. Could I just note something about this, which is that in our submission, that short paragraph, or that paragraph at paragraph 48 of the judgment, which was agreed with by the other two judgments, is not capable of doing the work that our friends say that it does. That is, it does not, in some way, preclude the argument that we make, which is based on Giorgianni and Yorke v Lucas, that if there is an essential element, you have to know of that essential element.

The exact argument that is being addressed at this point is, in our submission, slightly obscure – and we will come back and trace through the development of that – but what is unclear is whether the way in which the argument started was that they did not think in the particular terms of the statute – that is, using the language “substantial lessening of competition” or they did not think it was actually unlawful – although your Honours will see in the recitation of the arguments that, at least in reply, Mr Douglas appears to make clear they are not suggesting that you need to know that it is unlawful.

Then, when you go back to the Full Court – which, if it is convenient, I will do tomorrow morning – the court there seems to be appreciating it as something in the nature of an argument about understanding it in the exact terms of the statute – although then they make a reference to the finding of market being a mix of fact and law. So that, ultimately – I will develop this in the morning – this short passage is not capable of taking us away from what we say arises clearly from the decisions of this Court in Giorgianni and Yorke v Lucas – which is, if it is an essential element, you have to know it.

The last point I make – which, again, I will come back to tomorrow morning – is to pick up the point made by Justice Stone in her dissent in MBF v Cassidy, which is that when you trace this back through, in fact, the trial judge had made a series of findings of the things actually understood by the businesspeople which were plainly sufficient to sustain knowledge, because he had made findings that they understood that they were seeking to, effectively, destroy competition or eliminate competition. That might not couched to the language of the statute, but it is sufficient in order for there to be the necessary knowledge of the facts which are then characterised in the terms of the Statute. But as I say, I might, if it is convenient – just noting the time – come back to that tomorrow.

GAGELER CJ: Including the argument?

MR HODGE: Yes.

GAGELER CJ: All right.

MR HODGE: Perhaps I might address the argument now – actually I have ‑ ‑ ‑

GAGELER CJ: We have it open.

MR HODGE: We have six minutes.

GAGELER CJ: Yes.

MR HODGE: So, your Honours will see, if you go to – I might begin with the reply. If you look at page 60, page 1290 – I am sorry, I think I actually misread that – I thought Mr Douglas was agreeing, there, with the submission that:

Knowledge that conduct is in breach . . . need not be demonstrated to prove accessorial liability.

But that is actually just recounting the argument made by Mr Young on behalf of the ACCC. If your Honours come back, then, to page 56, page 1286, you will see this at the start of the argument made by Mr Douglas. If your Honours come over to page 57 of the decision, page 1287 of the joint book of authorities, you will see the last three lines at the bottom of the page:

Accessorial liability for a contravention –

and could I invite your Honours to read over the page.

GAGELER CJ: Including the citation of Yorke v Lucas?

MR HODGE: Yes, so it is ‑ ‑ ‑

GAGELER CJ: Sounds like your argument, really.

MR HODGE: Well, no, in the sense that all we know is that the argument that was being made before the Court, without any explanation of it, is that in the absence of knowledge of all of the essential facts, necessary knowledge for accessorial liability is not made out. But what exactly it is that was said to be absent in that case is not revealed by the argument, and, in our submission, one then has to go and see what the joint judgment said and explained as to the proposition that they were disagreeing with. And the proposition that they say they were disagreeing with, at page 74 of the judgment, page 1304 of the joint book of authorities is, they say:

In the end the argument was only that McAuliffe and Law “did not know that the principal’s conduct was engaged in for the purpose or had the likely effect of substantially lessening competition . . . in the market as defined”.

And then they say:

It is wholly unrealistic to seek to characterise knowledge of circumstances in that way. Only a handful of lawyers –

or economists:

think in that fashion.

And so, that seems to be not about the point that we are making, which is you need to know whatever is the essential element that gives rise to the
contravention; that seems to be a point about whether they understand it in the precise terms of the statute. We do not say that somebody needs to think, this conduct is unconscionable, but they need to understand that the conduct has whatever is the relevant character which then leads to the conclusion that it is unconscionable, because otherwise they cannot intentionally participate.

GORDON J: Can I just give you some more homework, if you do not mind?

MR HODGE: Yes, please.

GORDON J: Do you also propose to deal with the two Full Federal Court decisions, the first is Stefanovski, and the second is Colin R Price & Associates, which deal directly with the way in which you would plead, or it would seem to suggest a manner in which you might plead accessorial liability for unconscionable conduct, and their reliance on both Yorke v Lucas and Rural Press in support of the views that they reach.

MR HODGE: Yes, I can do that.

GORDON J: Thank you.

BEECH‑JONES J: Mr Hodge, to add to your homework, if you want to maybe look into the question Justice Steward posed to you; you might want to look at the definition of “dishonesty” in the Criminal Code, which draws on the English authority of Ghosh, which talks about people being aware that their conduct is outside the standards of the community.

MR HODGE: Yes, thank you, your Honour.

GORDON J: Sorry, do you want those references to Stefanovski and Colin R Price? I think you have them.

MR HODGE: No, I have those references, and I know where your Honour is referring to. Is that a convenient time, your Honour?

GAGELER CJ: Yes, it is. The Court will adjourn until 10.00 am tomorrow.

AT 4.13 PM THE MATTER WAS ADJOURNED
UNTIL THURSDAY, 8 FEBRUARY 2024