ACCC v Get Qualified Australia Pty Ltd (in liquidation) (No 3) [2017] FCA 1018

In his Honour’s judgment on the relief to be ordered in the case of the education consultancy agency Get Qualified Australia (GQA), Justice Beach was scathing of GQA’s conduct, describing the education sector as "infected by the parasitic practices of operators preying upon the vulnerable and unwary".

His Honour ordered GQA to pay an $8 million penalty for breaches of the Australian Consumer Law, one of the highest such penalties ever awarded. Justice Beach also ordered the director of GQA personally to pay $500,000 for his role in the contraventions.

While GQA, which is in liquidation, may not ultimately pay any part of the penalty, the judgment serves as a reminder of the significant penalties (against both companies and directors) that can be awarded for breaching Australian consumer laws.

The role and demise of GQA

GQA is a now defunct education consultancy agency that claimed to assist and advise job seekers to obtain nationally recognised industry qualifications from registered training organisations (RTOs) through a process known as “recognition of prior learning” (RPL) on the basis of their prior practical experience. GQA's role was essentially to act as an intermediary between the job seeker and the RTOs by compiling and submitting an applicant’s evidence of education and workplace experience required for an RPL application.

Adam Wadi was at all relevant times GQA's CEO, sole director, and sole shareholder.

Despite assurances from GQA, approximately five thousand customers were left without qualifications, some of whom had paid up to $8,500 to GQA. After the ACCC commenced proceedings against GQA, GQA went into liquidation in June 2017.

Earlier judgment against GQA

In an earlier judgment handed down on 23 June 2017, ACCC v Get Qualified Australia Pty Ltd (in liquidation) (No 2) [2017] FCA 709, Justice Beach found GQA had breached the ACL by:

  1. engaging in misleading or deceptive conduct;
  2. making false or misleading representations;
  3. including an unfair contract term in its consumer contracts;
  4. failing to provide consumers with an appropriate agreement in the case of unsolicited consumer agreements; and
  5. engaging in a pattern of behavior constituting unconscionable conduct.

In that decision, Justice Beach found that Mr Wadi, as the controlling mind of GQA, aided, abetted, counselled, or procured, and was directly and indirectly knowingly concerned in, each of GQA’s contraventions.

The matter that fell for determination in this proceeding was therefore the appropriate penalties to be imposed on GQA and Mr Wadi.

Pecuniary penalties under the ACL

Justice Beach outlined the relevant considerations when determining the scope and extent of any pecuniary penalties handed down under the ACL:

  1. the nature and extent of the contravening conduct;
  2. the amount of loss or damage caused;
  3. the circumstances in which the conduct took place;
  4. the size of the contravening company;
  5. the degree of market power that the contravening company has;
  6. the deliberateness of the contravention and the period over which it extended;
  7. whether the company has a corporate culture conductive to compliance with the ACL;
  8. whether the company has shown a disposition to cooperate with the ACCC;
  9. whether the company has engaged in similar conduct in the past; and
  10. whether the conduct was systemic or covert.

His Honour further noted that the primary objective of imposing penalties under the ACL is deterrence and that were conduct is systemic, a court has a discretion to impose penalties of more than $1.1 million.

Breaches of the ACL and associated penalties

The 100% money back guarantee representation - $750k GQA, $70k Mr Wadi

GQA had made statements, including extensively in advertising, to the effect that if a customer was unsuccessful in obtaining qualifications, they would be entitled to a complete refund.

Justice Beach found that this was a misleading or deceptive statement because GQA only issued refunds if its customers provided evidence that they had exhausted all possible avenues to obtain their qualification, and deducted a 25% "administrative processing fee" from any refund.

The refund ineligibility representation - $750k GQA, $70k Mr Wadi

GQA also represented that any refund offered to consumers was at GQA's sole discretion, which was misleading or deceptive because consumers were entitled to a refund and to terminate their relevant contract under section 267 of the ACL, given that GQA did not comply with applicable consumer guarantees contained in the ACL.

The refund policy – contract term void

Justice Beach found that GQA had imposed an unfair contract term in breach of the ACL, as the terms of GQA's refund policy were not bought to the attention of consumers at the time they entered into their contracts, caused a significant imbalance in the parties' rights, and were not reasonably necessary to protect GQA's interests, as the policy could be used to refuse a refund even if doing so would not cause GQA to be out of pocket.

The skills review representation - $750k GQA, $70k Mr Wadi

GQA had offered an online skills review tool in which potential customers entered their details and experience and received a message, regardless of what they had entered, of "congratulations, you may be eligible". Over 9,000 people had relied on this in applying with GQA.

Justice Beach found that this representation was misleading or deceptive because it was made without a sufficient understanding of the consumer's experience and learning and therefore was not a genuine assessment of the consumer's eligibility.

The eligibility representation - $750k GQA, $70k Mr Wadi

Through the online skills review tool and telephone conversations with customers, GQA represented that customers were eligible for and could obtain a qualification from RTOs using the RPL process.

This was misleading or deceptive because GQA had no reasonable grounds for asserting that customers could obtain these qualifications without conducting further inquiries as to their prior experiences, and GQA sales representatives were in any event not qualified to make this assessment, as they had not undertaken any relevant training.

Unsolicited consumer agreements (inappropriate contracts) - $125k GQA, $10k Mr Wadi

Consumers entered their contact details into the online skills review, and GQA used these details to contact the consumers by phone, meaning that any agreements reached on the basis of this contact were unsolicited consumer agreements under the ACL, which attract additional requirements.

GQA's unsolicited consumer agreements were in breach of section 79 of the ACL, as the contracts were not set out in full and did not include a notice which informed the consumer of their right to terminate.

Unsolicited consumer agreements (acceptance of payments) - $125k GQA, $10k Mr Wadi

Relatedly, GQA required and accepted payments before the contracts were given to the consumer, in contravention of section 86(1) of the ACL. That section prohibits requiring or accepting payments under an unsolicited consumer agreement within 10 days after making the agreement or, in the case of an agreement negotiated by telephone, within 10 days after the consumer receives the contract.

Pattern of unconscionable conduct - $3m GQA, $10k Mr Wadi

For various reasons, including the breaches above, Justice Beach found that GQA engaged in a system of behavior that constituted unconscionable conduct in contravention of section 21 of the ACL. Justice Beach also took into account additional matters such as the fact that that GQA used unfair sales tactics (such as erroneously suggesting spots were limited), employed telemarketers with no specialist knowledge of the RPL process, and did not provide a sufficient opportunity for consumers to consider their options.

As a result of this behavior, his Honour found that GQA held a position of unequal bargaining power with consumers. His Honour concluded that GQA used that position to entice consumers into entering agreements, require consumers to complete the payment of fees in full before an RPL application was submitted, and even take debt recovery action against customers who wished to end their relationship with GQA.

Pattern of unconscionable conduct (specific consumers) - $1.75m GQA

The ACCC also relied upon unconscionable conduct towards four specific customers, each of which involved many of the breaches outlined above and was treated by Justice Beach as a discrete course of conduct.

Mr Wadi's liability – fines as above, injunctions, disqualification

With the exception of the breaches relating to the four individual customers, Justice Beach found that Mr Wadi, as the sole shareholder, director, and controlling mind of GQA, had aided, abetted, counselled or procured and was directly and indirectly knowingly concerned in each of GQA's contraventions of the ACL.

According to Justice Beach, Mr Wadi’s behavior was unlikely to change, and his conduct and "self-justifying arrogance" meant that he was not fit to manage a corporation. This led to the penalties against Mr Wadi as outlined above, injunctions restraining Mr Wadi from being involved in any such contravention in the next seven years, and a disqualification order preventing Mr Wadi from managing an Australian corporation for a period of seven years.

Overarching considerations

In handing down these substantial penalties, Justice Beach had regard to the fact that approximately 5,000 of GQA's consumers never received their qualification, having paid average fees of approximately $3,000 to GQA. GQA received revenue of over $16 million from its 9,635 consumers in the 2015/16 financial year, which indicated the "potential effect and seriousness of the contravening conduct".

Justice Beach also found that the conduct in question was clearly deliberate and was calculated to take advantage of vulnerable job seekers for GQA’s own commercial gain. There was also evidence that senior managers were aware of the problems with GQA's system, including one email from the Director of Operations which prophetically warned against providing information that "one day will end up with the ACCC".

GQA had no policies in place to ensure compliance with the ACL, and continued to pursue consumers for debt collection and accept payment from consumers even once the ACCC had commenced proceedings, demonstrating that the company had not shown any interest in cooperating with the ACCC.

Despite the fact that GQA was in liquidation and therefore unlikely to pay any of the penalties, Justice Beach noted the general deterrence considerations when addressing a case such as this in the hopes that the penalties will deter others from engaging in similar conduct. This factor was amplified given that GQA had promoted itself as a leader in the market and because there was evidence of other companies engaging in similar practices.

Lessons for Directors

  1. The sheer magnitude of the penalties, and in particular Mr Wadi's personal penalty of $500,000, demonstrate the severe consequences if a company or its director is found to have breached the ACL.
  2. The breakdown of the separate breaches provided in the judgment shows that what might look like one course of conduct may in fact involve numerous breaches of the ACL, each of which attracts a separate penalty.
  3. Deterrence is the overriding consideration in determining the amount of penalties in cases such as this. Factors such as the size and status of the company in question are also important.