What happened to fallen wellness entrepreneur Belle Gibson? Director of Consumer Affairs v Gibson [2017] FCA 240

Belle Gibson is the fallen wellness entrepreneur who had an app, website, and book. She claimed that she had been diagnosed with brain cancer in 2009, been given four months to live and had taken and then rejected conventional cancer treatments in favour of embarking on a quest to heal herself naturally. She also made representations about proceeds she would pass on to charities. The media began to make and report allegations against Ms Gibson in March 2015 and in June 2015 on the television program 60 Minutes she admitted that she did not have cancer or undergo conventional medical treatments. I wrote a blog post identifying the potential civil and criminal offences Ms Gibson may have committed and concluded it was likely no legal action would be taken against Ms Gibson. Subsequently, the Director of Consumer Affairs in Victoria commenced consumer law proceedings against Belle Gibson. In this blog post I outline the case against Belle Gibson and the decision of the Federal Court in the liability proceedings.

Liability proceedings - Director of Consumer Affairs v Gibson [2017] FCA 240

Background

The Director of Consumer Affairs Victoria (Director) commenced proceedings against Ms Gibson on 24 May 2016 alleging contraventions of s 18 (misleading or deceptive conduct), s 21 (unconscionable conduct in connection with goods and services) and s 29 (false or misleading representations about goods or services) of the Australian Consumer Law (contained in Schedule 2 to the Competition and Consumer Act 2010) and the Victorian Consumer Law equivalent provisions.

Ms Gibson had a book (The Whole Pantry), website, Facebook and Instagram accounts, and an Apple and Android App. On all these platforms as well as in media interviews she made numerous misrepresentations relating to having brain cancer and having conventional treatment before turning to natural methods of healing.

Ms Gibson also made a number of representations about proceeds to be donated to charities. In many instances no donations were made. Other charities did receive donations but only after long periods of time had passed, and after the lack of donation had been reported by the charity.

The contraventions were brought against Ms Gibson as well as her company Inkerman Road Nominees Pty Ltd. Ms Gibson did not defend or participate in proceedings. The liability hearing was held on 13 September 2016 and judgment was delivered on 15 March 2017.  

Outcome of liability proceedings

Justice Mortimer found all of the s 18 misleading and deceptive conduct contraventions were made out and some of the s21 unconscionable conduct contraventions were made out. None of the s29 false or misleading representations about goods or services contraventions were made out. Her Honour analysed the cancer and charity representations separately

Cancer and treatment representations

Justice Mortimer found there was no difficulty characterising Ms Gibson’s statements made across her social media accounts and in media interviews as making a representation that she had brain cancer, or a brain tumour and that members of the community would erroneously be lead to believe she was suffering from terminal brain cancer when this was never the case. The implied representation that Ms Gibson had a reasonable basis for believing she had a brain cancer was also made out, as she often described her chemotherapy and radiotherapy treatment, treatment she would not be receiving had she not been professionally diagnosed. Ms Gibson had offered various conflicting explanations including that her initial diagnosis was made in her home by a man who was not a medically qualified professional and then later that he cancer diagnosis occurred at St John of God Hospital in Perth. Justice Mortimer did not have to make a finding in the liability proceedings as to whether Ms Gibson genuinely believed she had brain cancer despite there being no rational or reasonable basis for her to do so,  but this may have to be determined in the penalty proceedings.

Her Honour was not persuaded Ms Gibson had acted unconscionably in making the cancer representations as there was not sufficient evidence to find on the balance of probabilities that Ms Gibson was acting against conscience in deliberately withholding information that she did not have cancer. Ms Gibson may have a psychological or psychiatric issue causing her to be under a delusion about having cancer which is a possibility her Honour considered reasonably open on the evidence.

The s 29 contraventions were not made out. The Director alleged contraventions were made under s 29(1)(e), s 29(1)(f) and s 29(1)(g). Both s 29(1)(e) and s 29(1)(f) require a testimonial to have been made relating to the goods. Ms Gibson’s representations could not be characterised as a testimonial given the term is understood to refer to customer testimonials. The s 29(1)(g) contravention was not made out as it required the Director to make submissions that the representations that diet, health, exercise and wellness could help cure or stabilise cancer were misleading. The Director led no such evidence.

Charity representations

Five categories of representations were considered by Justice Mortimer:

a. App sales donation

Ms Gibson represented on the Whole Pantry website and the description of the android app that a portion of all sales revenue from sales of the Whole Pantry app was being, or would, within a reasonable time be, donated to charities. The implication being that donations would be made reasonably promptly. A portion of all app sales was not donated to charity. The only donation from sales of the app was $2,790 made to the Bumi Sehat Foundation in July 2015 as part of a larger $5,000 donation made over a year after the event purporting to raise money for Bumi Sehat.

b. Company earnings donation

Ms Gibson stated in the introduction to The Whole Pantry book that a large part of everything the company earned is now donated to charities and organisations which support global health, and wellbeing, protect the environment and provide education to those who otherwise wouldn’t have the opportunity. The representation was false as a large part of what the company earned was not donated on a contemporaneous and continuous basis. The evidence disclosed only two donations referrable to the company’s earnings (the Bumi Sehat donation of $5,000 and a $4,823.53 donation to Vestal Water funding a filtration system for Kinfolk Café). A little under $10,000 was donated from the company’s earnings, on no view a large part of everything the company earned when in the relevant period the company received over $420,000 from sales of the app and boo

c. App launch event donation

In notifications on social media for the virtual launch of the Whole Pantry App Ms Gibson represented that proceeds of the sale of the virtual launch tickets would be donated to four charities (the Birthing Kit Foundation, One Girl, Asylum Seeker Resource Centre (ASRC), and TWP Families including the Schwarz Family). On the evidence before the court the ASRC, Birthing Kit Foundation and the Schwarz Family received no donations from Ms Gibson or her company. One Girl received $1,000 in March 2015, only after media had started to investigate Ms Gibson’s claims. Ms Gibson’s then partner donated $1,000 to the ASRC in April 2014 but there was no evidence linking this donation to the app launch event.

d. Schwarz family app sales donation

In November 2013 Ms Gibson stated on the healing_belle Instagram account that 100% of app sales for a week would be donated to the Schwarz family. The representation was false. There was no evidence before the court the Schwarz family received a cent from Ms Gibson. While Ms Gibson maintains she collected $800 in a jar she gave to the Schwarz family, there was no evidence to support this claim and Her Honour found the $800 donation was not made.

e. Mother’s Day fundraising

In May 2014 Ms Gibson stated in media and on the company’s Facebook page that app purchases between 11 May 2014 and 18 May 2014 go straight to the 2h Project and the Bumi Sehat Foundation. The company would donate an extra $1 for each person who purchased the app that week. No funds went straight to the two organisations. More than a year later Ms Gibson made a one off $5,000 donation to Bumi Sehat but there is no evidence these funds were relatable to the Mother’s Day sales.

Justice Mortimer found all five categories of representations constituted misleading and deceptive conduct. Ms Gibson’s marketing of herself and her company centred on the image of a successful and booming enterprise with a wholesale dedication to charitable giving. There were no reasonable grounds for these representations.

Section 21 unconscionable conduct was established. Her Honour inferred that Ms Gibson well knew the potential drawing power of the statements that a portion of sales made would go to charity. Her chosen pitch used groups, such as young girls, sick children and asylum seekers that would evoke sympathy because of their vulnerabilities. Ms Gibson secured a public profile, and financial and personal benefits by deliberately playing on the Australian community’s desire to help those less fortunate.  

The orders -  Director of Consumer Affairs Victoria v Gibson (No 2) [2017] FCA 366

Orders were determined on the papers at a later date after the Director had an opportunity to submit proposed orders and submissions regarding the orders and costs. The orders included an injunction preventing Ms Gibson from making claims that she had been diagnosed with brain cancer at any time prior to 24 May 2016, that she was given four months to live, and that she had taken and then rejected conventional cancer treatments in favour of embarking on a quest to heal herself naturally. Ms Gibson was ordered to pay $30,000 towards the Director’s costs. The matter was adjourned for consideration of penalties.

Summary and penalty proceedings

Ms Gibson was found to have contravened s 18 and s 21 of the Australian Consumer Law for her misleading and deceptive cancer representations and her misleading and deceptive and unconscionable charitable donation representations. An injunction is in place preventing her from continuing to make such representations. While the contraventions have been established, penalty proceedings are yet to occur. While Ms Gibson has not participated in the Federal Court proceedings to date, she may participate in penalty proceedings to offer mitigating evidence or even appeal the decision. The maximum penalty for false or misleading and unconscionable conduct is $220,000 for individuals and $1.1m for corporations. While each course of conduct will be considered separately, regard will also be had to the totality principle to ensure the total penalty is just and appropriate as a whole. It is difficult to predict what the total penalty will be, given the unique circumstances of Ms Gibson’s case, and uncertainty as to whether she will participate in penalty proceedings to offer mitigating evidence such as medical evidence of any psychological or psychiatric conditions she may have been suffering from at the relevant times.  

High Court refuses to extend the advocates’ immunity – Kendirjian v Lepore [2017] HCA 13

On 29 March 2017 the High Court handed down its judgment in Kendirjian v Lepore [2017] HCA 13 (Kendirjian v Lepore), choosing to maintain the advocates’ immunity as recently outlined by the High Court in Attwells v Jackson Lalic Lawyers Pty Ltd [2016] HCA 16. Kendirjian v Lepore silences a NSW line of jurisprudence that attempted to extend the advocates immunity. In this blog post I discuss what the advocates immunity is, the extent of the advocates’ immunity prior to Kendirjian v Lepore, and the effect of the decision.

What is the advocates’ immunity?

Advocates’ immunity is a common law doctrine that barristers and solicitors will be protected from claims brought against them arising from their conduct of litigation. For example if a client brings an action in negligence against their barrister for failing to cross examine a key witness on a crucial point in proceedings, the barrister may be protected from the negligence claim by the advocates’ immunity. Some jurisdictions (i.e. the UK and NZ) have abolished the advocates’ immunity completely. The advocates’ immunity applies in Australia in limited contexts. 

What was the extent of the advocates’ immunity in Australia prior to Kendirjian v Lepore?

A distinction is made between advocates’ in-court work and advocates’ out of court work. In-court work such as the example given in the preceding paragraph will attract the immunity. However, out of court work will only attract the immunity if it is sufficiently connected to in court work. The connection required has been described as:

·         “Work done out of court which leads to a decision affecting the conduct of the case in court”; and

·         “Work intimately connected with work in a court”.

These tests were first formulated by the High Court in Giannarelli v Wraith (1988) 165 CLR 543 at 559-560 (per Mason CJ) and were again affirmed by the High Court majority in D’Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1 at 31 (per Gleeson CJ, Gummow, Hayne and Heydon JJ). In 2016 in Attwells v Jackson Lalic Lawyers [2016] HCA 16 the High Court again affirmed these tests and refused to extend the immunity. A very brief summary of the three cases follows:

1.       Giannerelli v Wraith (1988) 165 CLR 543; [1988] HCA 52

Mr Giannerelli commenced negligence action against his barrister who allegedly failed to advise he had a good defence to perjury proceedings and failed to object to certain inadmissible evidence tendered by the Crown. The Victorian Full Court held that the advocates’ immunity applied to protect the barrister from the negligence claim. Mr Giannerelli appealed to the High Court. The High Court majority (4:3) dismissed the appeal. Mason CJ’s leading judgment forms the basis of advocates’ immunity jurisprudence in Australia. The following extract from pages 559-560 of the CLR is frequently cited:

“Preparation of a case out of court cannot be divorced from presentation in court. The two are inextricably interwoven so that the immunity must extend to work done out of court which leads to a decision affecting the conduct of the case in court. But to take the immunity any further would entail a risk of taking the protection beyond the boundaries of the public policy considerations which sustain the immunity. I would agree with McCarthy P in Rees v. Sinclair (1974) 1 NZLR 180 where his Honour said (at p 187):

"... the protection exists only where the
particular work is so intimately connected with the
conduct of the cause in Court that it can fairly be
said to be a preliminary decision affecting the way
that cause is to be conducted when it comes to a
hearing".”

The High Court majority held that the immunity applied to Mr Giannerelli’s counsel. Counsel had overlooked the operation of a section of the Royal Commissions Act, failing to raise the section as a defence and failing to raise it as a ground of objection to the reception of evidence. Both these failures fell within the category of in court work as they were clearly incidents of the conduct and management of the case in court.

2.       D’Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1

Mr D’Orta-Ekenaike was charged with rape and alleged that his legal representatives (Victoria Legal Aid and a barrister engaged by VLA) were negligent in advising him that he did not have any defence to the charge, that he would receive a suspended sentence if he entered a guilty plea at committal, and if he did not plead guilty and contested the charge at trial and was found guilty he would receive a custodial sentence. The alleged negligent advice was supposedly given on two occasions in barristers chambers, two days before the committal hearing and on the day of but before commencement of the committal hearing.

The High Court majority approved the reasoning of Mason CJ in D’Orta. The joint judgment of Gleeson CJ, Gummow, Hayne and Heydon JJ quoted the passage of Mason CJ extracted above, summarising the test as “work done out of court which leads to a decision affecting the conduct of the case in Court” or “work intimately connected with work in a court”. I have extracted the relevant paragraph:

“Again, we consider that no sufficient reason is proffered for doing so. In particular, there is no reason to depart from the test described in Giannarelli as work done in court or "work done out of court which leads to a decision affecting the conduct of the case in court"or, as the latter class of case was described in the Explanatory Memorandum for the Bill that became the Practice Act, "work intimately connected with" work in a court. (We do not consider the two statements of the test differ in any significant way.)”

The advice given to Mr D’Orta-Ekenaike was advice about whether to enter a plea at committal. A committal effects whether the matter goes to trial. The advice on plea was work an advocate did out of court but led to a decision which affected the conduct of the case at the trial. The advocates’ immunity therefore applied.   

3.       Attwells v Jackson Lalic Lawyers [2016] HCA 16

A bank commenced proceedings against a company and its guarantors. On the first trial day of proceedings in the Supreme Court of New South Wales, counsel for the guarantors informed the court the proceedings had settled, and consent orders reflecting the settlement were made by the court. The guarantors then commenced action against counsel alleging negligence in the advice to consent to judgment being entered against them in the terms of the consent orders and in failing to provide advice as to the effect of the consent orders.  

Counsel for the guarantors sought to extend the advocates’ immunity, arguing that the immunity extends not only to negligent advice leading to a final judicial determination but also to negligent advice that leads to an agreed settlement. The High Court unanimously rejected this argument which they categorised as out of court work with insufficient connection to in court work:

“In short, in order to attract the immunity, advice given out of court must affect the conduct of the case in court and the resolution of the case by that court. The immunity does not extend to preclude the possibility of a successful claim against a lawyer in respect of negligent advice which contributes to the making of a voluntary agreement between the parties merely because litigation is on foot at the time the agreement is made. That conclusion is not altered by the circumstance that, in the present case, the parties' agreement was embodied in consent orders”.

In 2016 the High Court was constituted by French CJ, Kiefel, Bell, Gageler, Keane, Nettle and Gordon JJ. In 2017 with the departure of Chief Justice French, Justice Kiefel stepped up to the role of Chief Justice and Justice Edelman was appointed as a new judge of the High Court. The constitution of the court deciding Kendirjian v Lepore was therefore different to the High Court that decided Attwells in 2016. Nethertheless, the High Court refused to reconsider Attwells or extend the situations in which the advocates’ immunity will protect barristers and solicitors from suit.

Conflicting NSW authority

Prior to Attwells, the NSW Court of Appeal handed down the decision of Donnellan v Woodland [2012] NSWCA 433 (Donnellan). Mr Woodland commenced proceedings against his lawyers who had provided advice about offers to compromise (offers to settle outside of court proceedings usually in an effort to avoid the costs associated with court proceedings - these offers can continue to be made even when court proceedings have commenced) in drainage easement proceedings under s88K of the Conveyancing Act 1919 (NSW). It was not necessary for the Court of Appeal to decide whether the advocates’ immunity applied because they found Mr Donnellan had not been negligent. Nevertheless, Macfarlan J (with whom Leeming JA and Begin CJ in Eq agreed), found that if Mr Donnellan had been negligent, the immunity would have applied, as the omission or conduct relating to the offers to compromise had affected the conduct of the case in the court by requiring the court proceedings to continue. 

I won’t go into the details of the case too much because:

1.       It is a clear case of judicial activism on the part of the Court of Appeal (3 judges of the 5 on quorum) to extend the immunity in the face of clear High Court authority to the contrary, especially when it was not necessary to determine the issue; and

2.       Although the District Court and Court of Appeal (3 judges unanimously) in Kendirjian v Lepore relied on the case, the High Court rejected the NSW approach, as it is incongruous with both D’Orta-Ekenaike and the more recent High Court authority of Attwells.

Facts and background of Kendirjian v Lepore

Mr Kendirjian was injured in a car accident in November 1999 and commenced legal proceedings against the driver for damages. On the first day of the District Court trial the driver offered to settle for $600,000 plus costs. The offer was not accepted, the trial proceeded and Mr Kendirjian was awarded only $308,432.75 plus costs by the District Court judge. Mr Kendirjian commenced negligence proceedings against his solicitor Mr Lepore and his barrister, who both claimed that the advocates’ immunity protected them from the negligence claims.

The District Court and Court of Appeal both held that the advocates’ immunity protected Mr Kendirjian’s legal representatives from his negligence claim. Both courts relied on the obiter dicta in Donnellan to support their conclusions.

Question to be determined by the High Court

Does the immunity extend to negligent advice given to reject a settlement offer where court proceedings are on foot?

High Court analysis

The High Court unanimously held that the advocates’ immunity did not extend to protect Mr Kendirjian’s legal representatives from the negligence action. Edelmen J wrote the leading judgment. Edelman J reiterated the importance of the 2016 case of Attwells where a High Court majority held the advocates’ immunity did not extend to advice which leads to a compromise of litigation by agreement between parties, or advice not to settle proceedings which leads to the continuation of proceedings (note that Nettle J and Gordon J dissented on the advice not to settle point). There must be a functional connection between the advocate’s work and the determination of the case. Negligent advice not to settle proceedings gives rise only to a historical connection between the advice and continuation of litigation and this is not a sufficient connection for an advocate to be immune from suit.

The appellants argued that Attwells should be distinguished and in the alternative that Attwells should be reopened to reconsider the part of the decision where the joint judgment approves the remarks of Mason CJ in Giannarelli. Counsel argued that part of Mason CJ’s remarks in Giannerelli had not been approved by the joint judgement in D’Orta-Ekenaike and that therefore the scope of the immunity could be extended. Edelmen J refused to accept this argument, stating that there is no apparent difference between work done affecting the conduct of the case in court and work done affecting the way that case is to be conducted at the hearing, and even if there was a difference, this was not evident in the joint judgment in D’Orta-Ekenaike.

The appeal was unanimously dismissed by the High Court. However, Justice Nettle and Justice Gordon departed from the majority in their reasoning. Nettle J agreed that the advocate’s immunity did not apply in light of the High Court’s decision in Attwells but reiterated the view he expressed in Attwells that the advocates’ immunity should be extended to situations where negligent advice leads to the rejection of a settlement offer and a less favourable outcome at trial. The immunity should be extended as where the negligence action proceeds it is likely to result in the re-litigation of issues determined at trial.  Gordon J acknowledged the appeal should be dismissed in light of Attwells but agreed with Nettle J’s additional reasons and reiterated her position as expressed in Attwells that the immunity should be extended.

Short summary of the law today

The advocates’ immunity will apply where the work done out of court leads to a decision affecting the conduct of the case in court or where the out of court work is intimately connected with work in a court. The connection must be more than merely a plausible historical connection. There must be a functional connection between the work of the advocate and the determination of the case. The giving of advice either to stop or continue litigation does not itself affect the judicial determination of the case.

Costs in the cause v costs follow the event – what is the difference?

In this blog post I explain the related but different concepts of costs follow the event and costs in the cause. I personally find costs to be an uninteresting topic of law, but if you work in litigation, knowledge of basic costs principles and orders is essential. The simplest way to remember the difference is to understand that costs follow the event is a principle and costs in the cause is an order. While I have used examples from South Australia, the jurisdiction I work in, the content is applicable to other Australian jurisdictions.

The principle – costs follow the event

The principle that costs follow the event is a common law principle that the unsuccessful party pays the legal costs of the successful party in litigation. In simple terms, the loser pays their own costs and the costs of the winner. Where there are multiple events in an action, the costs will be allocated separately for each event, though there will often be a dispute as to whether events are separate or part of the main action. A court may decide to depart from the principle in certain situations after considering the nature of the action, the complexity of the factual and legal issues, the profile of the parties and publicity associated with the matter and the amount recovered.

The common law rule that costs follow the event had been included in statute or rules in most jurisdictions. For example, in South Australia r 263(1) of the Supreme Court Civil Rules 2006 provides that “as a general rule, costs follow the event”. This general rule is subject to more specific rules such as that “the costs of an amendment are to be awarded against the party making the amendment” (r 263(1)(a)). However, costs are awarded at the court’s discretion (see s 40 of South Australia’s Supreme Court Act 1935) and the general rule and more specific rules are subject to orders to the contrary.

The order – costs in the cause

Costs in the cause is an order that costs from an interlocutory hearing (for example) will form part of the general costs and be awarded to the successful party in the action. Costs in the cause orders have existed for over a century in Australia, with the NSW case of Dubbo Refrigerating & Co v Rutherford (1898) 14 WN (NSW) 180 often cited as authority for the interaction between costs in the cause orders and general costs principles.

In Dubbo Refrigerating the plaintiff was suing the defendant for unpaid work boiling down 17,023 of the defendant’s sheep for tallow (sheep fat, commonly used in the 1800s to produce shortening for processed foods and deep frying). Two commissions had occurred in which costs in the cause had been ordered. The plaintiffs were awarded general costs after the hearing. As the case is not readily electronically available I have extracted the key paragraph:

“The costs in both commissions were ordered to be costs in the cause, but it is now said that although the evidence was accepted by the jury as in favour of the defendant, the plaintiffs are entitled to the costs because they are entitled to the general costs of the action.  “Costs in the cause” merely means costs not now disposed of; after the trial they have to be disposed of with the costs of the trial, which are themselves costs in the cause, according to certain settled principles of law which the Prothonotary has followed. Issues are divisible, and if some issues are found for the defendant, although the plaintiff may be the successful party in the action, still the defendant gets the costs of those issues upon which he has succeeded, although they may at first have been costs in the cause. Here the Prothonotary is entitled to assess the costs of these commissions in favour of the party who was successful upon the issues to which the evidence in question was directed, and he has done so. If a plaintiff takes out a commission, and examines a witness whose evidence turns out at the trial to be absolutely immaterial, is the defendant to pay the costs merely because the plaintiff is entitled to the general costs of the action? So here, why should the defendant have to bear the cost of witnesses whom he called to establish his case, and who were in fact instrumental in establishing it? The evidence of these witnesses was within the same category exactly as if the witnesses had been present at the trial, and I am of the opinion that the Prothonotary has acted upon the proper principle in allowing them to the defendant.”

There are several advantages of obtaining an order for costs in the cause versus relying on the principle of costs follow the event, including that the order is not subject to the exceptions that apply to the principle, and the order will ordinarily be respected by the trial judge or an appellate court. It would be very unusual for a court to amend or substitute a costs order made earlier in proceedings. In the case of Koosen v Rose (1897) 45 WR 337 (often incorrectly cited as Coosen v Rose (1897) 45 WR 337) an order for costs in the cause was made in chambers for the costs of the chambers application. At trial the judge interfered with this order, making the plaintiff pay his own costs for the application in chambers. On appeal, the Court of Appeal decided that the trial judge had no jurisdiction to interfere with the costs order of the proceedings in chambers.  

Note the difference between the orders costs in the cause and “plaintiff’s costs in the cause” (more commonly made) or “defendant’s costs in the cause” (rarely made). A “plaintiff’s costs in the cause” order means that if the plaintiff is ultimately awarded costs of the action, the costs the subject of the interlocutory application become part of that. If the plaintiff is not ultimately awarded costs of the action, there is no order as to the costs the subject of the interlocutory application. Often a costs order is requested through an interlocutory application, though orders as to costs prior to the event are often made by consent or otherwise in directions hearings.