Christina Shin, Erika Serrano and James Keeves outline the key takeaways from the recent penalty decision for unconscionable conduct.
The Federal Court of Australia’s recent decision in ACCC v Productivity Partners Pty Ltd (t/as Captain Cook College) serves an important reminder of the seriousness with which the Court treats systematic unconscionable conduct under the Australian Consumer Law (ACL) and the willingness of the ACCC to pursue individuals for civil penalties in appropriate cases.
Facts
Productivity Partners Pty Ltd, trading as Captain Cook College (the College), delivered online vocational education and training (VET) courses funded under the Commonwealth’s VET FEE-HELP (VFH) scheme. Its parent company was Site Group International Ltd (Site), Ian Cook was the College’s CEO, and Blake Wills, Site’s COO, briefly acted as the College’s CEO.
The College had previously relied on commission-based recruitment agents to enrol students and employed two system controls to mitigate the known risks that agents would enrol unwitting or unsuitable students. However, in 2015, the College changed its process for enrolment of students and removed the system controls. As a result, students enrolled during this period were more likely to be accepted without fully understanding the VFH scheme or without being suited to the course. Despite its awareness of this heightened risk, the College continued to claim and retain Commonwealth VFH tuition fees for these students, thereby increasing its enrolment numbers and revenue. Consequently, each affected student incurred a VFH debt equal to the tuition fees advanced on their behalf plus a 20% loan fee.
Procedural history
In November 2018, the ACCC commenced an enforcement proceeding against the College, Site, Mr Cook and Mr Wills alleging unconscionable conduct and false or misleading representations in breach of the ACL.
In July 2021, Stewart J found that the College had engaged in a system of conduct or a pattern of behaviour which was, in all the circumstances, unconscionable in contravention of s 21 ACL. The College was also found to have contravened ss 18, 21, 29, 78 and 79 of the ACL in respect of five identified consumers. Justice Stewart further found that Mr Wills and, through him, Site, were knowingly concerned in the College’s unconscionable conduct and therefore also liable for that conduct by operation of s 224(1)(e) of the ACL and s 139B of the Competition and Consumer Act 2010 (Cth).
In April 2023, the matter was unsuccessfully appealed to the Full Court of the Federal Court by the first, second and fourth respondents. A further appeal was made by the respondents in May 2023, with the High Court dismissing the appeal in August 2024.
In March 2025, less than a month before the penalty hearing, both the College and Site were placed into voluntary administration. The Court granted leave to the ACCC to continue the proceeding against the two companies in administration, with the administrators electing not to appear at the penalty hearing.
Penalty decision
The ACCC sought penalties of $35 million against the College, $17.5 million against Site, and $500,000 against Mr Wills. After engaging in the requisite synthesis of the relevant penalty factors, Stewart J considered it appropriate to impose lower penalties, as set out in the table below:
| Relevant party | Relevant conduct | Penalty |
| The College | Breach of ACL s 21 for systemic unconscionable conduct | $20 million |
| Contraventions against ACL ss 21, 29, 78 and 79 relating to individual consumers | $150,000 per consumer for Consumers A-E, totalling $750,000 | |
| Site | Knowing involvement in the College’s contravention of ACL s 21 by reason of Mr Wills’ knowledge and conduct being attributable to Site | $10 million |
| Mr Wills | Involvement in the College’s contravention of ACL s 21 | $400,000 and a 3-year disqualification from managing corporations pursuant to ACL s 248 |
In a separate judgment, a penalty of $250,000 was imposed on Mr Cook, alongside a contribution to the ACCC’s costs fixed in the amount of $250,000, and an order disqualifying him from managing corporations for a period of three years, on the basis that Mr Cook was knowingly concerned in, or a party to, the College’s contravention of s 21 of the ACL.
Deterrent effect of civil penalties
In imposing the above penalties, Stewart J focused on the need for deterrence, noting it was necessary to ensure that the penalty was not to be viewed as a mere ‘cost of doing business’ (at [42]). His Honour also confirmed that given the College and Site were in external administration, general deterrence was the ‘critical component’, rather than specific deterrence, which had little relevance (at [42]).
Calculating the maximum penalty
A key issue for the Court was whether the systematic unconscionable constituted a single contravention or multiple contraventions of s 21 of the ACL and, in turn, how large the theoretical maximum penalty would be. The respondents sought to contend that the systemic misconduct found by the Court should be characterised as a single contravention, relying on the primary judgment of White J in ASIC v Kobelt [2017] FCA 387. Stewart J rejected this submission, instead taking the view that the enrolment of each individual student during the relevant period should be viewed as a separate act to which s 21 applied, and that the maximum penalty should be calculated by reference to the number of students enrolled (at [48]). Nevertheless, because there were many thousands of affected consumers, his Honour took the view that, ultimately, ‘there is no point in calculating the maximum penalty’ (at [51]-[53]).
Key penalty factors
In determining the appropriate penalty to be imposed, the Court considered the following key penalty factors:
- Penalty floor set by reference to operating profit: The ACCC submitted that the benefit derived by Cook from the impugned conduct ‘should set the floor, not the ceiling, of the penalty’ and that the yardstick for determining the appropriate penalty amount should be gross revenue rather than profit. The Court held that the penalty floor is to be set with reference to the College’s operating profit rather than its gross revenue, but that revenue generated during the relevant period was still a relevant consideration (at [65]-[66]).
- Objective seriousness of the conduct: The Court agreed with the ACCC that the objective seriousness of the College’s contravention suggested a significant civil penalty was required to satisfy the need for deterrence (at [67]). The Court focused in particular on the fact the contraventions arose from a ‘deliberate decision’ of the College, were not an isolated incident, and involved very senior officers (at [23]-[25]). It also accepted that the conduct was a ‘rort’ (at [69]).
- Size and financial position of the contravener: The Court agreed with the ACCC that the College was a substantial operation at the time of the contravention (at [68]). This weighed in favour of a higher penalty.
- Remorse or contrition: The Court agreed with the ACCC that the College did not demonstrate any contrition or remorse (at [70]). This was the case even though College undertook investigations of consumer complaints and on being satisfied of unethical conduct by its agents it reversed the affected enrolments (at [74]).
Similar matters relating to the nature and seriousness of the conduct were contemplated in relation to Site, with additional consideration given to the role of Mr Wills as COO, and that as the parent company of the College, it was Site that ultimately stood to gain from the College’s systemic unconscionable conduct ([83]-[94]).
Penalties against Wills
In addition to the $500,000 penalty sought against Mr Wills, the ACCC sought an order prohibiting Mr Wills from being indemnified for the penalty under an insurance policy. Mr Wills had made a claim under a directors and officers insurance policy, the effect of which was he would be indemnified for any civil penalty he would be ordered to pay. The ACCC argued that the policy would render the penalty devoid of any sting or drastically reduce the specific or general effect of the penalty.
The Court ultimately declined to make a non-indemnification order on the basis that although Wills’ conduct was deliberate, he was not aware that it was unconscionable conduct, and hence the conduct was not wilful (at [126]). The Court found that, in contrast to the ‘wilful and furtive misconduct’ of an individual in which case a non-indemnification order would be made, Mr Wills was not dishonest and did not intend to cause harm (at [126]).
Key takeaways
Justice Stewart’s decision is yet another victory for the ACCC in a succession of penalties imposed on education providers for systemic unconscionable conduct and other contraventions of the ACL, including Unique International College, Cornerstone Investment Aust Pty Ltd (trading as Empower Institute), Australian Institute of Professional Education and Acquire Learning. The penalties imposed on Captain Cook College are still eclipsed by the record-breaking $438 million penalty ordered against Phoenix Institute and CTI in 2023 for its unconscionable conduct against its students, as well as the $82.5 million fine against Cornerstone Investments Aust Pty Ltd in 2019. However, the decision confirms that systemic unconscionable conduct can attract significant penalties and that directors and managers may be in the ACCC’s sights as accessories to such conduct.
Image Credit: Photo by Mikael Kristenson / Unsplash / Remixed to B&W and resized
