FEDERAL COURT OF AUSTRALIA ACCC v Lux Pty Ltd [2001] FCA 1705 PROCEDURE – trade practices – allegations of unconscionable conduct, undue harassment and coercion – intellectual disability – evidence of prior contractual dealings – whether admissibility of such evidence should be tried as a separate issue Evidence Act 1995 (Cth) ss 55, 97, 135 Trade Practices Act 1974 (Cth) s 51AB Federal Court Rules O 29 r 2 POS Media On-line Limited v Queensland Investment Corporation [2000] FCA 1451 cited Orison Pty Ltd v Strategic Minerals Corporation NL (1987) 77 ALR 141 cited Smith v Maloney (1998) 19 WAR 209 cited Dunstan v Simmie & Co Pty Ltd [1978] VR 669 referred to ACCC v Black On White Pty Ltd t/as Australian Early Childhood College (1998) FCA 1569 cited Jacara Pty Ltd v Perpetual Trustees WA Ltd [2000] FCA 1886 cited AUSTRALIAN COMPETITION & CONSUMER COMMISSION v LUX PTY LTD and DENNIS PODGER W 124 of 2000 RD NICHOLSON J 5 DECEMBER 2001 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W 124 of 2000 BETWEEN: AUSTRALIAN COMPETITION & CONSUMER COMMISSION APPLICANT AND: LUX PTY LTD (ACN 054 882 852) FIRST RESPONDENT DENNIS PODGER SECOND RESPONDENT JUDGE: RD NICHOLSON J DATE OF ORDER: 5 DECEMBER 2001 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The applicant's motion dated 12 July 2001 be dismissed. 2. The applicant's pay the respondents' costs of the motion. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W 124 of 2000 BETWEEN: AUSTRALIAN COMPETITION & CONSUMER COMMISSION APPLICANT AND: LUX PTY LTD (ACN 054 882 852) FIRST RESPONDENT DENNIS PODGER SECOND RESPONDENT JUDGE: RD NICHOLSON J DATE: 5 DECEMBER 2001 PLACE: PERTH REASONS FOR JUDGMENT 1 A motion is brought on behalf of the applicant seeking orders for the determination of a question prior to trial. The application is brought in reliance upon O 29 r 2 of the Federal Court Rules, which reads: "1. In this Order, "question" includes any question or issue in any proceeding, whether of fact or law or partly of fact and partly of law, and whether raised by pleadings, agreement of parties or otherwise. 2. The Court may make orders for- (a) the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings; and (b) the statement of a case and the question for decision." 2 The "question" in relation to which the orders are sought is as follows: "Is evidence of and in relation to the purchase by Janice and/or Mark Standing of real estate and a motor vehicle or of any other form of property on credit or other terms prior to the events and conduct alleged in the Statement of Claim relevant to a determination of the issue of whether, in the circumstances pleaded in the Statement of Claim, the Respondents have engaged in: 1. Conduct that was unconscionable in contravention of section 51AB of the Trade Practices Act 1974? 2. Undue harassment, alternatively, coercion, in contravention of section 60 of the Trade Practices Act 1974?" The proceeding 3 The application in this matter seeks the following relief. Firstly, in respect of the first respondent, declarations are sought that, in connection with the supply of a vacuum cleaner to a Mrs Standing on 26 August 1999, the first respondent engaged in unconscionable conduct in contravention of s 51AB of the Trade Practices Act 1974 (Cth) ("the Act") and used undue harassment or, alternatively, coercion in contravention of s 60 of the Act. As against the second respondent it is alleged that he directly or indirectly was knowingly concerned in each of the contraventions alleged against the first respondent. Injunctive relief is also sought against each of the respondents together with an order for implementation of a Trade Practices Corporate Compliance Program. A declaration is additionally sought that the sale of the vacuum cleaner is void ab initio. 4 The statement of claim filed on behalf of the applicant alleges that the first respondent carried on business as the supplier of goods, including vacuum cleaners, to consumers. The second respondent was its duly authorised agent. Mrs Standing is said to have been a consumer. She and her husband, it is claimed, were at all material times illiterate to the extent that they were unable to read or write other than simple words in their respective names and intellectually disabled such that they were unable to understand contracts. 5 It is further claimed that on 26 August 1999 as a result of a discussion between Mr Standing and the second respondent, the second respondent attended at the Standing's residence where Mrs Standing was alone. It is alleged that the second respondent, standing in close physical proximity to Mrs Standing, conversed with her, insisting that her vacuum cleaner was going to blow up and that she should purchase a Lux vacuum cleaner. The allegations then proceed that at all material times it was evident to the second respondent that Mrs Standing was intellectually disabled such that she was not able to understand contracts and unable to make a voluntary, alternatively worthwhile, judgment as to whether purchasing the Lux vacuum cleaner would be in her or her husband's best interests and that she was threatened and further and alternatively, intimidated, by his presence. It claims also that the second respondent gave the clear impression to Mrs Standing, which she gathered, that he would continue to press her unless she agreed to purchase the new vacuum cleaner. It was for this reason, it is claimed, that Mrs Standing agreed to purchase the vacuum cleaner. 6 The statement continues by claiming that the second respondent produced a contract to Mrs Standing for signature. It is said that she then stated to him that she could not read and could only write her name. In response to that he stated that she did not need to read it and was only required to sign it or words to that effect. It is alleged that the second respondent did not explain any of the requirements of the contract to Mrs Standing. It is then alleged that it was also evident to the second respondent that Mrs Standing was not able to understand the contract and was unable to make a voluntary, alternatively a worthwhile, judgment as to whether entering into the contract would be in her or her husband's best interests. Additionally it is claimed that the second respondent gave her the impression, which she gathered, that he would not leave the residence and would continue to press her to sign the contract unless and until Mrs Standing agreed to sign it. She signed it, it is claimed, in order that he would leave the residence. 7 The defence of the first and second named respondent generally comprises a denial of the claims made against them. Additionally, it is further stated that all payments have been made pursuant to the contract since the date of it and that on or about 29 September 1999, Mr Standing, for and on behalf of Mrs Standing, telephoned Lux and requested to increase the amount of the monthly repayments. Following such increase, the monthly payments have been made as required by the contract. Additionally it is pleaded that Mr and Mrs Standing purchased a property in Port Pirie, South Australia on 19 September 1994 and in order to do so executed a mortgage dated approximately that date in favour of a mortgagee. Preliminary question – applicant's submissions 8 For the applicant it is said that it became apparent during the interlocutory stage of the proceedings that the respondents wished to adduce evidence of at least two and possibly three prior but unrelated transactions entered into by Mrs Standing but unrelated to the purchase of the vacuum cleaner. It is said that these are irrelevant to any fact in issue and therefore inadmissible. 9 Counsel for the applicants conceded that the relevant authorities indicate the need for some caution or care in deciding whether to deal with the matter by way of a preliminary issue: see POS Media On-line Limited v Queensland Investment Corporation [2000] FCA 1451. However, it is said that that approach is more particularly relevant to a case where there are separate aspects of the claim rather than when the question arises on the admissibility of a discreet body of evidence. 10 Here it is said that if the issue of evidence is not dealt with as a separate question, the Court will be asked to rule on it the moment the evidence is sought to be led. If the matter were ruled on prior to trial that would, it is submitted, assist the progress of the matter and avoid incurring costs unnecessarily. That will assist in significantly reducing the time taken to dispose of the matter at trial. 11 Reliance in the submissions for the applicant was placed on the statement in Orison Pty Ltd v Strategic Minerals Corporation NL (1987) 77 ALR 141 at 150 per French J to the effect that where there was an agreed statement of facts before the Court, a determination of the issue identified there as a preliminary issue adversely to the applicant would dispose substantially, if not entirely of the litigation. Reference was also made to Smith v Maloney (1998) 19 WAR 209 at 223, where it was said that a further justification for resolving a question as a preliminary issue is whether it will lead to a reappraisal by the parties of the strengths and weaknesses of their respective cases, thereby increasing the likelihood of settlement. There, at p 223, Ipp J referred to Dunstan v Simmie & Co Pty Ltd [1978] VR 669 as authority to the proposition that the power to order the trial of a preliminary issue of fact will generally only be appropriate when its outcome will put an end to the action, or where there is a clear line of demarcation between the issues and the determination of one issue in isolation from the others is likely to save inconvenience and expense. 12 In the affidavit of a solicitor filed in support of the applicant's case, there is evidence that the determination of the question as a preliminary issue would dispose of a significant part of the litigation by reducing the matters to be investigated and prepared; the matters and documents to be considered by expert witnesses; the number of witnesses to be called; the number of documents to be tended; the length of time required for Mr and Mrs Standing to give evidence; the length of time required for the experts to give evidence; the length of submissions at trial and the time and number of days required to complete the trial. This is supported by further evidence that the applicant would need to lead evidence at trial in relation to each previous contractual dealing. It is said that this would involve evidence being led as to the manner in which the goods and/or services were purchased by Mr or Mrs Standing on each occasion; any support which they avail themselves of on that occasion; the extent to which they understood the terms and effect of any documents involved in such purchase; the performance of such agreements; the nature and extent of their intellectual disability at the time of each previous contractual dealing; and any improvement or deterioration in the level of their intellectual disability between each previous contractual dealing and also between any previous contractual dealing and the transaction the subject of the present dispute. However, it was accepted in oral submissions that the position of Mr Standing was not relevant because it was Mrs Standing who signed the contract in issue on the present pleading. Preliminary question – respondents' submissions 13 For the respondents it is submitted that the discovery process has shown that there are only a few documents which exist in relation to the purchase and mortgage pleaded in defence. Consequently, it is said that there will not be a lot of extra time at trial by trial of the question there. 14 Next the case for the respondents points to par 10.1 of the statement of claim where it is pleaded in respect of Mrs Standing that she was "intellectually disabled such that she was not able to understand contracts". By this pleading, it is submitted, it is the applicant which has put into issue the understanding of Mrs Standing in relation to contracts other than the particular contract in issue in the present pleadings. That being the material issue, the respondents say that they must adduce relevant evidence relating to previous contractual dealings. Additionally par 6.2 of the statement of claim pleads that at all material times the Standings were intellectually disabled, such that they were unable to understand contracts. 15 It is then submitted that the most appropriate time for the Court to determine the relevance of the admissibility of evidence is when it has had the opportunity to have regard to all the other evidence and to the ambit of the dispute and to know what is before the Court at that point in time. 16 Turning to the authorities, the submissions for the respondents emphasise the need to approach the matter with caution: ACCC v Black On White Pty Ltd t/as Australian Early Childhood College (1998) FCA 1569 and POS Media On-line. In the latter attention was directed to the passage where Lehane J emphasised that the determination of matters prior to trial will result in the judge being called on to make a discretionary judgment at an early stage in the proceedings, "a stage at which a number of matters which may be highly relevant are to a large extent a matter of speculation." 17 The case for the respondents relies upon an affidavit of their solicitor. In that it is stated that the applicant has, by its pleading in par 10.1 of the statement of claim, raised the issue of whether Mrs Standing was able to understand contracts. The applicant's witness statements include those of two witnesses each of whom deal with what have been described as "previous contractual dealings" and were served and filed prior to the issuing of the present notice of motion. 18 Attention is also directed to the paragraph in the affidavit that the applicant's expert in consultation with the respondents' expert stated in a combined report dated 10 September 2001: "It was agreed evidence that demonstrated the required payments were made on time, at the initiative of [Mr or Mrs Standing], may provide some information regarding some level of understanding of the nature of the contract. Conversely the failure to pay instalments could reflect the lack of understanding in the nature of a contract." This, it is said, is contrary to the view expressed in the affidavit of the applicant's solicitor. 19 Attention is next directed to the fact that the applicant's solicitors, after the issue of the present notice of motion, advised the respondents by letter that the applicant wished to amend its application in the proceeding although no notice of motion to that effect has yet issued. 20 Additionally, in an affidavit of Mrs Standing filed in connection with an application for injunction she addressed other commercial types of dealings in which she had been involved prior to the conclusion of the Lux contract. 21 Then it is submitted for the respondents that it would be proper for the Court to have at its disposal the sort of evidence relating to prior contractual dealings, as is foreshadowed in the witness statements, in order that it can determine whether or not the intellectual capacity of Mrs Standing was such that she could not understand the Lux contract. It is submitted that one contract cannot be viewed in isolation from others. 22 Furthermore, it is submitted that as the pleadings against the respondents involve the issue of unconscionable conduct it is appropriate that all the circumstances relevant to the pleadings be put before the Court. 23 Consequently, the respondents oppose the trial of the admissibility of the evidence as a preliminary issue. Preliminary question – applicant's reply 24 For the applicant it is said that the proposed amendment to the statement of claim relates solely to the terms of the injunction sought and has no relevance to the present issue. 25 In relation to the fundamental issue that the statement of claim in par 10.1 has made a reference to "contracts", it is sought to be met by the submission that evidence in relation to Mrs Standing's understanding of any prior contract cannot be relevant to the determination of the ultimate fact in issue on the pleading which is namely, whether she understood the Lux contract. It is said although the pleading includes par 10.1, what is ultimately relevant on the pleading is the particular incident in relation to which the claim is brought. It is only in relation to that claim involving the purchase of the Lux vacuum cleaner that the issue of the claim of unconscionability is made. It is said it is sufficient that the case against the respondents establishes that the intellectual disability and its impact on capacity to enter into a contract existed at the relevant moment that Mrs Standing entered the Lux contract. 26 The point is further made that evidence of prior contractual dealings on the part of Mrs Standing will establish nothing more than she has contracted in the past and that, without more, such evidence would not go to the issue of her capacity. Reasoning 27 In my opinion the applicant's motion for separate trial of the evidentiary question should be refused. My reasons are as follows. 28 Firstly, the statement of claim in pars 6.2 and 10.1 raises the issue of Mrs Standing's understanding of contracts generally. Mrs Standing's evidence to date contains the previously mentioned reference to other dealings. The case is not therefore confined in its terms to Mrs Standing's capacity to understand the Lux contract alone, but rather, in relation to her capacity as then in turn applied in the instance of the Lux contract. 29 Secondly, the joint expert report in the above quoted passage brings into the evidentiary matrix aspects of Mrs Standing's contractual performance other than upon entry to the Lux contract. The joint expert report reserves the position of the respondents' expert that "past history is a better indicator of an ability to cope in a particular transaction, especially if the transaction is a fairly straightforward one". The applicant reserves the right to object to that statement as being beyond the witness's expertise. Assuming for present purposes that the statement is directed only to issues of psychology, both it and the statements in the joint expert report make apparent the Court would be assisted by cross-examination and elucidation during trial. 30 Thirdly, it is not the case that the respondents would only seek to call evidence of other contracts entered into by Mrs Standing without more. It is open to them to call evidence on all additional circumstances relevant to Mrs Standing's understanding (subject to determination of any objections). 31 Fourthly, the number of other contractual experiences of Mrs Standing sought to be relied upon is limited. 32 Fifthly, any issues of trial management arising from the calling of such evidence can be managed by appropriate directions designed to avoid unnecessary cost and delay in trial. 33 Sixthly, similar fact evidence may not ipso facto be inadmissible. Whether it is admissible will depend upon considerations of relevance to be determined in the light of the particular evidence to be addressed and the law applicable, the latter of which has not been yet addressed on behalf of either party: see ss 55 and 97 of the Evidence Act 1995 (Cth) and cf: Jacara Pty Ltd v Perpetual Trustees WA Ltd [2000] FCA 1886 and the authorities referred to in pars [70] and [71]. Again, the Court would be assisted by argument and elucidation of the precise nature of the proposed similar fact evidence and its effect at trial. 34 Seventhly, there is the possibility that the applicant will seek to rely on s 135 of the Evidence Act 1995 (Cth) to exclude the evidence of Mrs Standing's prior contractual dealings. That would require a ruling in relation to evidence precisely identified. It is a further reason why the evidentiary question should not be separately tried. 35 Eighthly, the above circumstances make it appropriate that the Court approach the proposed separate trial of the evidentiary question with caution. Conclusion 36 For these reasons I conclude the evidentiary issue should not be tried as a separate issue. It follows that it is not necessary to address arguments addressed to the substantive issue of whether the evidence of prior contractual dealings by Mrs Standing (so far as presently identified) is relevant to the facts in issue. When it becomes necessary to do so, the Court will require to be addressed on the relevant case law concerning similar fact evidence in civil cases. 37 Parties should now formulate and seek any directions to be sought in the light of the above ruling. I certify that the preceding thirty- seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice RD Nicholson. Associate: Dated: 5 December 2001 Counsel for the Applicant: Ms N Johnson QC Solicitor for the Applicant: Phillips Fox Counsel for the First and Second Respondents: Mr AP Hershowitz Solicitors for the First and Mills Oakley and Second Respondents: Pullinger, Readhead Stewart Date of Hearing: 29 October 2001 Date of last written submissions: 13 November 2001 Date of Judgment: 5 December 2001