Don't Get Disqualified: Penalties under the ACL

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

On 30 August 2017, the Federal Court of Australia imposed a penalty of $8million on Get Qualified Australia (GQA) and $500,000 on GQA’s chief executive officer, sole director and sole shareholder, Mr Adam Wadi.  This was one of the highest ever awarded breaches of the Australian Consumer Law (ACL).1

GQA operated a business involved in assisting and advising customers to obtain nationally recognised qualifications from registered training organisations (RTOs).  A central part of GQA’s business involved assisting customers to obtain nationally recognised qualifications by the process of “Recognition of Prior Learning” (RPL).  In doing so, GQA acted as an intermediary between the RTOs and candidates seeking nationally recognised qualifications.

Mr Wadi was the controlling mind of GQA and was responsible for, and directly involved in, the day to day operations of GQA’s business.

In September 2016, Australian Competition and Consumer Commission (ACCC) commenced proceedings against GQA for making false or misleading representations in selling RPL qualifications and for engaging in misleading and deceptive conduct.

Breaches by GQA

The Court found that GQA’s misleading conduct occurred through a range of practices which amongst other things, included the following:

  1. GQA represented to consumers who accessed and used GQAs online “Free Skills Review” (FSR) function that they may be eligible for a qualification from a RTO affiliated with GQA without the need for study when in fact, GQA did not have a sufficient understanding or knowledge of the consumers’ prior experience and learning to assess whether they were eligible to obtain these qualifications.  Further GQA’s FSR function did not perform a genuine assessment of the consumer’s eligibility to obtain these qualifications.
  2. GQA made representations on its website and by the conduct of its sales representatives in emails and in telephone calls with consumers by making representations that if the consumers were unsuccessful in obtaining qualifications through the recognition of prior learning (RPL) process, they would be entitled to a 100% refund (Money Back Guarantee) of the monies which they paid to GQA.  However, what the consumers were not made aware of was that there existed eligibility criteria for the refund.  This criteria was used a basis to reject refund requests that consumers had made in reliance on the Money Back Guarantee.
  3. GQA acted unconscionably by, amongst other things:

entering into contractor agreements with its sales representatives who did not have specialist knowledge of the RPL process;

referring to its sales representatives as “Skills Recognition (SR) Specialists” in circumstances where these sales representatives were not qualified to conduct the SR Assessments;

suggesting that consumers must agree to use GQA’s services immediately or risk missing a place in the consumer’s qualification of choice due to limited availability when this was not the case;

not providing sufficient opportunity for consumers to consider all relevant information and requiring payment from consumers before providing them with detailed information about the competency and evidence requirements for the qualifications in documentary form.

Breaches by Mr Wadi

The Court found that Mr Wadi, by his management and operational control, executive oversight, direction and approval of GQA’s business practices was directly and indirectly knowingly concerned of the conduct mentioned above.  The Court found that Mr Wadi was liable under the ACL as he had:

  1. approved the content of GQA’s website;
  2. devised and promoted the terms of the Money Back Guarantee and approved the terms of the GQA refund policy; and
  3. directed GQA’s sales representatives to identify themselves as Skill’s Recognition Specialists in their dealings with customers and approving scripts in their dealings with prospective customers,

amongst other things.

Penalties imposed by the Federal Court

Following the decision by the Court on 23 June 2017,  on 30 August 2017, the Court imposed a penalty of:2

  1. $8 million on GQA in relation to its contraventions of the ACL; and
  2. $500,000 on Mr Wadi by way of pecuniary penalty under s224(1) of the ACL.  Mr Wadi was also disqualified from managing corporations for a period of seven years.

In imposing the penalties above, the Court considered the following matters:

  1. the contravening conduct was serious, extensive and deliberate;
  2. the conduct took place within the context of a non-existent compliance culture;
  3. the cavalier attitude shown by GQA towards its consumers;
  4. the conduct took place with the knowledge and direct involvement of senior management; and
  5. the conduct by GQA and Mr Wadi generated significant revenue and caused substantial consumer harm.

The penalties were intended to serve as a specific deterrence and also sent a general message to the RPL sector that those individuals personally involved in such conduct will be personally held to account.

Lavan Comment

Under the ACL, businesses are not allowed to make representations that are incorrect, or likely to mislead or deceive consumers.  The gravity of such conduct is heightened where the consumer group is vulnerable and unwary.  The most important question to ask yourself is whether the overall impression portrayed to the consumer is false or inaccurate.  You must also be wary of whether certain information should be disclosed to a consumer.  While a business may not need to disclose information in all circumstance, situations may arise where a failure to disclose the necessary information may lead to the overall impression to the consumer to be misleading or deceptive.

A simple act by an officer such as the approval of a marketing script by senior management which will be used as part of a sales pitch is also something that a Court may take into account (as it was in this case) for the purpose of determining whether a contravening conduct took place with the knowledge and direct involvement of senior management.  It is important that such information is carefully reviewed before being presented (either in writing or verbally) to a consumer.  If you are unsure, it is important that you seek legal advice which may require your lawyer to review the material before it is presented to the consumer. 

In circumstances where such conduct is carried out with the knowledge and direct involvement of senior management, the court will not hesitate to hold the relevant officer personally liable.  It is also important that sales representatives are made aware of this obligation.

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.
AUTHOR
Iain Freeman
Partner
AUTHOR
Ahshiba Sultana
Senior Associate
SERVICES
Corporate Disputes & Investigations
Litigation & Dispute Resolution


FOOTNOTES

[1] Nour Haydar,  ‘Defunct education company and owner fined $8.5m for consumer law breaches’ (30 August 2017) ABC News  <http://www.abc.net.au/news/2017-08-30/defunct-employment-company-and-owner-fined-$8-million-in-court/8857460>.

[2] Australian Competition and Consumer Commission v Get Qualified Australia Pty Ltd (in liquidation) (No 2) [2017] FCA 709.