Accessorial Liability for company executives: The High Court’s Ruling in Productivity Partners v Australian Competition and Consumer Commission

Following on from our earlier article on the decision of Productivity Partners Pty Ltd v Australian Competition and Consumer Commission; Wills v Australian Competition and Consumer Commission [2024] HCA 27 (‘Productivity Partners’) (see our previous article Unconscionable conduct and systems liability – it’s about process and outcomes)  this article explores the aspects of the decision regarding the personal liability of company executives where they were knowingly concerned in the company’s unconscionable conduct.

Key Takeaway Points

• By virtue of your role, you may have access and control over a significant part of the business and to avoid personal liability you need to make sure that you have knowledge of the safeguards in place at your company for protecting vulnerable consumers, and that you give consideration to them to ensure that they are adequate.
• Robust compliance systems must be used to ensure these safeguards are being utilized correctly to prevent contraventions and when any potential contraventions arise that prompt action is taken.
• Be careful when balancing profit maximizing decisions with the ethical considerations relating to consumer welfare and whether what is proposed is necessary to protect your position. Whether you are aware it is unconscionable conduct or not, you may be knowingly concerned with the essential matters amounting to a contravention.
• Make sure you promote a culture of compliance within your company to promote careful consideration of potential risks across all levels so they can be dealt with appropriately.
• If you are unsure if something could be considered a contravention or what steps to take specifically for your organization to address it, obtain legal advice to be informed quickly and then act promptly on the advice.

What is accessorial liability?

Section 224(1)(e) of the Australian Consumer Law (ACL) provides that if a court is satisfied that a person has “been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision [of the ACL] … the court may order the person to pay … the pecuniary penalty in respect of each act or omission by the person…”. If a person is taken to be accessorily liable, they may be liable for the contravention which may result in their own personal assets being pursued for payment. They may also be considered ineligible from managing a company and if then made bankrupt may also be ineligible to be a director.

Could you be accessorial liable?

In the case of Productivity Partners, the High Court found that Productivity Partners Pty Ltd (trading as Captain Cook College) had engaged in unconscionable conduct because of its decision to remove two safeguard measures to protect students from enrolling in courses they could not afford or could not complete, to maximize the College’s own profit.

These two safeguard measures were the outbound quality assurance call to students which was replaced with an inbound call in the presence of the course advisor who recruited the student and the removal of the campus driven withdrawal process.

The High Court found that the CEO of Site Group International Ltd (Site) which owned Captain Cook College (College), Mr. Blake Wills, was knowingly concerned in the decision to remove these safeguards, and therefore accessorily liable for the College’s contravention.

The High Court clarified that he did not need to know that the conduct would be considered as unconscionable conduct in order to be liable. He only needed to be aware of the relevant facts that made the College’s conduct unconscionable, referred to as the ‘essential matters’.

The High Court considered the following factors to be ‘essential matters’ to the contravention:

1. The risk of unsuitable or unwitting students being enrolled into courses and agent misconduct;
2. The importance of outbound calls and campus driven withdrawal processes for the protection of vulnerable students;
3. The decision to remove the safeguards being profit driven; and
4. That the removal of the safeguard would result in unsuitable or unwitting students being enrolled.

The High Court considered Mr. Wills to have adequate knowledge of these matters for the following reasons:

• His attendance at meetings which discussed the changes;
• His role as CEO being inherently involved with decision making processes regarding the College;
• The revenue forecasting in a financial report prepared by Mr. Wills (amongst others) which reflected the confidence that the changes to the withdrawal process would result in improved financial performance.

For assistance, contact our Disputes experts who have extensive experience guiding companies and executives through circumstances that may amount to potential contraventions of the ACL and providing tailored advice for prevention systems to avoid them.