The Australian consumer law [Third edition.] 9780455237442, 0455237441

Citation preview

The Australian Consumer Law

Thomson Reuters (Professional) Australia Limited 19 Harris Street Pyrmont NSW 2009 Tel: (02) 8587 7000 Fax: (02) 8587 7100 [email protected] legal.thomsonreuters.com.au For all customer inquiries please ring 1300 304 195 (for calls within Australia only)

INTERNATIONAL AGENTS & DISTRIBUTORS

NORTH AMERICA Thomson Reuters Eagan United States of America

ASIA PACIFIC Thomson Reuters Sydney Australia

LATIN AMERICA Thomson Reuters São Paulo Brazil

EUROPE Thomson Reuters London United Kingdom

The Australian Consumer Law

S G CORONES B Com LLB (Qld), LLM (UCL), PhD (Qld)

Professor of Law, Queensland University of Technology

THIRD EDITION

LAWBOOK CO. 2016

Published in Sydney by Lawbook Co. 19 Harris Street, Pyrmont, NSW

First edition ....................................................................... Second impression with revision .................................. Second edition ................................................................... Third edition .....................................................................

March 2011 August 2011 2013 2016

National Library of Australia Cataloguing-in-Publication entry Corones, S G (Stephen G.). The Australian consumer law/S G Corones. 3rd ed. Includes index. ISBN 978 0 455 23744 2 (pbk). Consumer protection—Law and legislation—Australia. 343.94071 © 2016 ThomsonReuters (Professional) Australia Limited ABN 64 058 914 668. This publication is copyright. Other than for the purposes of and subject to the conditions prescribed under the Copyright Act, no part of it may in any form or by any means (electronic, mechanical, microcopying, photocopying, recording or otherwise) be reproduced, stored in a retrieval system or transmitted without prior written permission. Inquiries should be addressed to the publishers. All legislative material herein is reproduced by permission but does not purport to be the official or authorised version. It is subject to Commonwealth of Australia copyright. The Copyright Act 1968 permits certain reproduction and publication of Commonwealth legislation. In particular, s 182A of the Act enables a complete copy to be made by or on behalf of a particular person. For reproduction or publication beyond that permitted by the Act, permission should be sought in writing. Requests should be addressed to the Manager, Copyright Services, Info Access, Department of Communications, Information Technology and the Arts, GPO Box 1920, Canberra City ACT 2601, or e-mailed to [email protected] Editor: Lara Weeks Product Developer: Vickie Ma Publisher: Robert Wilson Printed by Ligare Pty Ltd, Riverwood, NSW This book has been printed on paper certified by the Programme for the Endorsement of Forest Certification (PEFC). PEFC is committed to sustainable forest management through third party forest certification of responsibly managed forests. For more info: http://www.pefc.org

Preface The Australian Consumer Law (ACL) commenced on 1 January 2011. By enacting the ACL, Commonwealth, State and Territory Parliaments sought to resolve the overly complex nature of consumer law in Australia, which had developed in a piecemeal way over many years. As a result of the ACL there is now one uniform consumer protection law that applies in all jurisdictions throughout Australia and across all sectors of the economy, thereby significantly reducing business compliance costs. It has been a far-reaching national reform. The drafters of the ACL sought to clarify the law by removing inconsistencies and discrepancies and using plain English to improve levels of awareness of the rights, obligations and remedies of consumers and traders. At the time of writing the ACL is undergoing its first review by Consumer Affairs Australia and New Zealand (CAANZ) to assess the effectiveness of its provisions, especially in relation to the challenges of e-commerce, digital products, and peer-to-peer transactions. The Final CAANZ Report is expected to be provided by March 2017. The purpose of this edition remains the same as that of previous editions, namely, to explain the substantive rights and remedies of consumers and the obligations of traders under the ACL. This edition includes discussion about new legislation, including the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015 (Cth) which will extend the general protection against unfair terms to contracts with small businesses that are entered into or renewed after 12 November 2016. This edition also considers important appellate decisions including those of the High Court of Australia in Google v ACCC, Forrest v ASIC, ACCC v TPG, Kakavas v Crown Melbourne, and Commonwealth v Director, Fair Work Building Industry Inspectorate, and the Full Federal Court in ACCC v Lux Distributors, and Paciocco v Australia and New Zealand Banking Group. There have been a number of new Federal Court decisions that shed light on important aspects of the ACL, including Director of Consumer Affairs Victoria v The Good Guys Discount Warehouses (promotion of extended warranties); ACCC v Chrisco Hampers (unfair terms and lay-by agreements); ACCC v Lyoness (pyramid selling); ACCC v Woolworths (mandatory reporting of injuries); and ACCC v Valve Corporation (No 3) (digital products as goods, and the enforceability of jurisdiction clauses). In addition to the considerable amount of new material, the remaining text has been substantially re-written and updated. I gratefully acknowledge the assistance provided by my Production Editor, Lara Weeks, in the preparation of this new edition. The law is stated on the basis of the materials available to me as at 24 March 2016. S G CORONES Brisbane, April 2016

Table of Contents Preface ................................................................ ................................................................ v Table of Cases ........................................................... ........................................................... ix Table of Statutes ....................................................... ....................................................... xxxv Glossary of Terms ....................................................... ....................................................... liii PART I: INTRODUCTION Chapter 1: Consumer Protection Policy and Overview of the ACL .................. .................. 1 Chapter 2: Definitions and Key Concepts ............................................................. ............................................................ 47 PART II: GENERAL CONSUMER PROTECTIONS Chapter 3: Misleading or Deceptive Conduct ....................................................... ..................................................... 77 Chapter 4: Unconscionable Conduct ...................................................................... .................................................................. 157 Chapter 5: Unfair Contract Terms ......................................................................... ..................................................................... 209 PART III: SPECIFIC CONSUMER PROTECTIONS Chapter 6: Specific False or Misleading Representations ......................................... Chapter 7: Specific Unfair Sales Techniques ........................................................ ..................................................... Chapter 8: Consumer Guarantees for Goods ....................................................... .................................................... Chapter 9: Consumer Guarantees for Services .................................................... ................................................. Chapter 10: Consumer Agreements ....................................................................... ....................................................................

249 315 357 435 455

PART IV: PRODUCT LIABLITY AND SAFETY REGULATION Chapter 11: Product Recall, Safety Standards, Safety Bans and Notices ......... ......

477

Chapter 12: Liability of Manufacturers for Goods with Safety Defects ........... ........

509

PART V: ENFORCEMENT AND REMEDIES Chapter 13: Public Enforcement ............................................................................ ......................................................................... Chapter 14: Private Remedies ................................................................................ ............................................................................. Chapter 15: Remedies Relating to Guarantees ..................................................... .................................................

537 615 671

............................................................................................................................

715

Index

Table of Cases A ACCC v 4WD Systems Pty Ltd (2003) 200 ALR 491 .................................. 4.85, 4.125, 4.130, 4.165 ACCC v A Whistle & Co (1979) Pty Ltd [2015] FCA 1447 .......................................................... 6.80 ACCC v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd) [2015] FCA 368 .............................................. 4.100, 4.120, 5.95, 5.120 ACCC v AGL Sales Pty Ltd [2013] FCA 1030; (2013) ATPR ¶42-449 .......................................................................................................................... 10.45, 13.185 ACCC v AGL South Australia Pty Ltd [2015] FCA 399 ........ 6.145, 13.175, 13.185, 13.190, 13.200, 13.395 ACCC v Advanced Medical Institute Pty Ltd (No 3) (2007) ATPR ¶42-269 .............................................................................................................................. 6.85 ACCC v AirAsia Berhad Company [2012] FCA 1413 .................................................................. 7.170 ACCC v Allans Music Group Pty Ltd [2002] FCA 1552 .................................................. 6.125, 6.155 ACCC v Allergy Pathway Pty Ltd [2009] FCA 960 ......................................... 13.145, 13.290, 13.335 ACCC v Allergy Pathway Pty Ltd (No 2) [2011] FCA 74; (2011) 192 FCR 34 .............................................................................................. 3.45, 3.195, 13.335 ACCC v Allphones Retail Pty Ltd (No 2) (2009) ATPR ¶42-274 .................................................. 4.50 ACCC v Alvaton Holdings Pty Ltd [2010] FCA 760 .................................................................. 13.145 ACCC v Anglo Estates Pty Ltd (2005) ATPR ¶42-044 ............................................................... 13.240 ACCC v Apple Pty Ltd (2012) ATPR ¶42-404 ................................................................... 1.100, 6.275 ACCC v Ascot Four Pty Ltd (2008) ATPR ¶42-251; 250 ALR 467 .......................................................................................................................... 3.90, 6.155, 13.45 ACCC v Audi Australia Pty Ltd (2007) ATPR ¶ 42-211 .......................................... 6.45, 6.125, 6.275 ACCC v Australian Communications Network Pty Ltd [2006] HCA Trans 265 ........................................................................................................................... 7.130 ACCC v Australian Medical Association (WA) (2003) 199 ALR 423 ....................................................................................................................................... 2.55, 2.70 ACCC v Australian Power and Gas Company Ltd [2013] FCA 1358 ...................................................................................................................... 4.110, 10.45, 10.90 ACCC v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238; 145 ALR 36 ............................................................................................ 13.60, 13.65, 13.70, 13.195 ACCC v BAJV Pty Ltd [2014] FCAFC 52 .................................................................... 13.170, 13.190 ACCC v Bio Enviro Plan Pty Ltd (2003) ATPR ¶41-963 ...................................... 6.180, 6.290, 7.195 ACCC v Black on White Pty Ltd (2001) 110 FCR 1 .................................................................. 13.230 ACCC v Breast Check Pty Ltd (2014) ATPR ¶42-479 ...................................................... 3.155, 6.100 ACCC v Breast Check Pty Ltd (No 2) [2014] FCA 1068 ........................................................... 13.215 ACCC v CAN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd) [2015] FCA 368 ............................................................................ 13.395 ACCC v CC (NSW) Pty Ltd (No 9) (2000) ATPR ¶41-756 ....................................................... 13.200 ACCC v CG Berbatis (No 2) (1999) 96 FCR 491 .......................................................................... 4.60 ACCC v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 ............................................. 4.25, 4.100 ACCC v CG Berbatis Holdings Pty Ltd (No 2) (1999) 96 FCR 491 ....................................................................................................................................... 4.15, 4.25 ACCC v CLA Trading Pty Ltd [2016] FCA 377 ........................................................................... 5.225 ACCC v Cadbury Schweppes Pty Ltd (2004) ATPR ¶42-001 ............................................. 6.45, 6.275

x

Table of Cases

ACCC v Capalaba Pty Ltd (2004) ATPR ¶41-976 ......................................................................... 7.210 ACCC v Carrerabenz Diamond Industries Pty Ltd (2008) ATPR ¶42-248 ..................................................................................................... 13.20, 13.35, 13.55, 13.60 ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305 ................. 1.65, 3.235, 3.245, 6.300 ACCC v Chen (2003) 132 FCR 309; ATPR ¶41-948 ............................................... 1.100, 6.90, 6.115 ACCC v Chopra [2015] FCA 539 .............................................................................. 1.100, 2.40, 6.180 ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204 ........... 5.110, 5.120, 5.145, 5.150, 6.185, 10.105, 10.110 ACCC v Chubb Security Australia Pty Ltd (2004) ATPR ¶42-041 ................................................................................... 7.50, 7.55, 13.55, 13.60, 13.65, 13.70 ACCC v Clinica Internationale Pty Ltd (No 2) [2016] FCA 62 .................................... 13.395, 13.400 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 ............................................................... 1.30, 4.90, 4.100, 4.110, 4.125, 4.150, 4.165, 13.185 ACCC v Coles Supermarkets Australia Pty Ltd (No 2) [2014] FCA 1022 .................................................................................................................................. 13.185 ACCC v Coles Supermarkets Pty Ltd [2014] FCA 634 ......................................................... 3.90, 6.50 ACCC v Commercial & General Publications Pty Ltd (2002) ATPR (Digest) ¶46-222 ..................................................................................................... 7.50, 7.100 ACCC v Commonwealth Bank of Australia (2003) 133 FCR 149 ............................................................................................................................................... 3.170 ACCC v Danoz Direct Pty Ltd (2003) ATPR (Digest) ¶46-241 ................................................. 13.290 ACCC v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513; 236 ALR 665 .................................................................................. 4.110, 4.125, 13.175, 14.230, 14.240 ACCC v Davis [2003] FCA 1227 ................................................................................................... 7.210 ACCC v Dell Computers Pty Ltd (2002) ATPR ¶41-878 .............................................................. 7.165 ACCC v Dell Computers Pty Ltd (2003) ATPR ¶ 41-910 ................................................. 6.125, 7.165 ACCC v Dimmeys Stores Pty Ltd (2001) ATPR ¶41-811 ............................................................. 13.55 ACCC v Dimmeys Stores Pty Ltd [2011] FCA 372 .................................................................... 13.145 ACCC v Dukemaster Pty Ltd [2009] FCA 682; (2009) ATPR ¶42-290 ........................................................................................................... 3.10, 4.50, 5.95, 6.290 ACCC v EDirect Pty Ltd [2008] FCA 65 ........................................................................................ 7.50 ACCC v Econovite Pty Ltd (2003) ATPR ¶41-959 ..................................................................... 13.295 ACCC v Energy Australia Pty Ltd [2015] FCA 274 ..................................................................... 6.185 ACCC v Esanda Finance Corporation Ltd [2003] FCA 1225 ....................................................... 7.210 ACCC v Excite Mobile Pty Ltd [2013] FCA 350; (2013) ATPR ¶42-437 ............................................................................................ 4.85, 6.90, 6.180, 7.215, 13.325 ACCC v Excite Mobile Pty Ltd (No 2) (2013) ATPR ¶42-454 .................................................. 13.325 ACCC v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393 .................................................................................................. 3.250, 3.285, 3.290, 6.245 ACCC v Frozen Foods Pty Ltd (1996) ATPR ¶41-515 ............................................................... 13.290 ACCC v GM Holden Ltd [2008] FCA 1428 .......................................................................... 6.90, 6.95 ACCC v Gary Peer & Associates Pty Ltd (2005) 142 FCR 506 .................................................. 6.250 ACCC v Giraffe World Australia Pty Ltd (1999) 95 FCR 302; ATPR ¶41-718 ...................................................................................................... 6.90, 7.195, 14.180 ACCC v Glendale Chemical Products Pty Ltd (1998) 40 IPR 619; ATPR ¶41,632 ................................................................... 6.105, 12.45, 12.85, 12.145, 12.170 ACCC v Global One Mobile Entertainment [2011] FCA 393 ..................................................... 13.175 ACCC v Goldy Motors Pty Ltd (2001) ATPR ¶41-801 ................................................................. 6.180 ACCC v Google Inc (2012) 201 FCR 503 ....................................................................................... 3.45 ACCC v Gourmet Goody’s Family Restaurant Pty Ltd [2010] FCA 1216 ...................................................................................................................... 7.165, 13.385 ACCC v Grant [2000] FCA 1564 ................................................................................................... 6.290

Table of Cases xi

ACCC v Grove and Edgar Pty Ltd (2008) ATPR 42-269 ........................................................... 13.145 ACCC v Halkalia Pty Ltd (No 2) (2012) ATPR ¶42-399 .................................................. 3.140, 6.290 ACCC v Harbin Pty Ltd [2008] FCA 1792 ................................................................................. 13.290 ACCC v Harvey Norman Holdings Ltd [2011] FCA 1407; (2011) ATPR ¶42-384 .................................................... 6.90, 6.180, 6.185, 13.145, 13.170, 13.190 ACCC v Hillside (Australia New Media) Pty Ltd (t/as Bet365) [2015] FCA 1007 ................................................................................................... 3.85, 3.190, 6.135 ACCC v Homeopathy Plus! Australia Pty Ltd [2014] FCA 1412 ................................................. 3.155 ACCC v Homeopathy Plus! Australia Pty Ltd (No 2) [2015] FCA 1090 .................................................................................................................................. 13.215 ACCC v Hughes (2002) ATPR ¶41-863 ......................................................................................... 1.100 ACCC v IMB Group Ltd [2003] FCAFC 17 .................................................................... 3.195, 14.190 ACCC v J McPhee & Son (Australia) Pty Ltd (1997) ATPR ¶41-570 ..................................................................................................................................... 13.220 ACCC v J McPhee & Son (Australia) Pty Ltd (No 3) (1998) ATPR (Digest) ¶46-183 ............................................................................................................ 13.220 ACCC v J McPhee & Son (Australia) Pty Ltd (2000) 172 ALR 532 ............................................................................................................................................. 13.220 ACCC v Jetstar Airways Pty Ltd [2015] FCA 1263 .......................................................... 3.185, 6.140 ACCC v Jewellery Group Pty Ltd (2012) ATPR ¶42-411 ................................................... 3.90, 6.155 ACCC v Jewellery Group Pty Ltd (No 2) (2013) ATPR ¶42-440 ................................................ 6.155 ACCC v Jones (No 5) [2011] FCA 49 ........................................................................................... 1.100 ACCC v Jutsen (No 3) (2011) 206 FCR 264 ...................................... 1.100, 2.40, 7.115, 7.120, 7.130 ACCC v Kokos International Pty Ltd (No 2) (2008) ATPR ¶42-212 ..................................................................................................................................... 13.145 ACCC v Korean Air Lines Co Ltd (2011) ATPR ¶42-382 .......................................................... 13.205 ACCC v Leahy Petroleum Pty Ltd (2007) 160 FCR 321 ........................................................... 15.225 ACCC v Link Solutions Pty Ltd (No 3) [2012] FCA 348 .......................................................... 13.145 ACCC v Lux Distributors Pty Ltd [2013] FCAFC 90 ..................................... 4.90, 4.95, 4.120, 4.195 ACCC v Lux Distributors Pty Ltd (No 2) [2015] FCA 903 ....................................................... 13.190 ACCC v Lyoness Pty Ltd [2015] FCA 1129 ...................................................................... 7.120, 7.195 ACCC v MSY Technology Pty Ltd [2012] FCAFC 56 ............................................................... 13.145 ACCC v MSY Technology Pty Ltd (No 2) [2011] FCA 382; (2011) 279 ALR 609 ...................................................................................... 13.175, 13.180, 13.195 ACCC v Maritime Union of Australia at (2001) 114 FCR 472 .................................................... 7.210 ACCC v Marksun Australia Pty Ltd (2011) ATPR ¶42-363 ................................................ 1.35, 6.165 ACCC v McCaskey (2000) 104 FCR 8; 183 ALR 159 ..................................................... 7.210, 7.215 ACCC v Metricon Homes Qld Pty Ltd [2012] FCA 797 ............................................... 13.180, 13.205 ACCC v Midland Brick Company Pty Ltd (2004) 207 ALR 329 .............................................. 13.145 ACCC v Murray (2002) 21 FCR 428 .................................................................. 6.290, 13.110, 13.115 ACCC v Nationwide News Pty Ltd (1996) ATPR ¶41-519 ...................................... 6.180, 7.10, 13.55 ACCC v Neighbourhood Energy Pty Ltd [2012] FCA 1357 ............................................. 10.45, 10.90 ACCC v Neighbourhood Energy Pty Ltd (2013) ATPR ¶42-449 .................................................. 10.90 ACCC v Nissan Motor Co (Aust) Pty Ltd (1998) ATPR ¶41-660 .................................................. 6.45 ACCC v Oceana Commercial Pty Ltd (2003) ATPR (Digest) ¶46-244 ....................................................................................................................................... 3.140 ACCC v Oceana Commercial Pty Ltd (2004) ATPR (Digest) ¶46-255 ....................................................................................................................................... 13.20 ACCC v On Clinic Australia Pty Ltd (1996) ATPR ¶41-517 ...................................................... 13.310 ACCC v Optell Pty Ltd (1998) ATPR ¶41-640 ................................................. 6.55, 6.90, 7.80, 7.100 ACCC v Origin Energy Electricity Ltd [2015] FCA 278 ..... 4.110, 4.120, 7.215, 10.45, 10.50, 10.90, 13.170

xii Table of Cases

ACCC v Origin Energy Ltd [2015] FCA 55 ....................................................... 6.145, 13.195, 13.200 ACCC v Original Mama’s Pizza & Ribs Pty Ltd [2008] FCA 370; (2008) ATPR ¶42-236 ...................................................................... 3.250, 3.285, 3.290, 6.180 ACCC v Panasonic Australia Pty Ltd (2010) 269 ALR 622 ......................................................... 3.190 ACCC v Pepe’s Ducks Ltd (2013) ATPR ¶42-441 ............................................... 6.50, 13.170, 13.190 ACCC v Pirovic Enterprises Pty Ltd (No 2) (2014) ATPR ¶42-483 .............................................................................................................................. 6.50, 6.275 ACCC v Prouds Jewellers Pty Ltd (2008) ATPR ¶42-217 ....................................... 3.85, 6.125, 6.155 ACCC v Prouds Jewellers Pty Ltd (2008) ATPR ¶42-268 ................................................. 6.125, 6.155 ACCC v Purple Harmony Plates Pty Ltd [2001] FCA 1062 ......................................................... 1.100 ACCC v RL Adams Pty Ltd (t/as Darling Downs Fresh Eggs) [2015] FCA 1016 .............................................................................................................. 6.50, 6.275 ACCC v Radio Rentals Ltd (2005) 146 FCR 292 .................................................................. 4.30, 4.60 ACCC v Real Estate Institute of Western Australia Inc (1999) 95 FCR 114 .............................................................................................................................. 13.280 ACCC v Reebok Australia Pty Ltd [2015] FCA 83; (2015) ATPR ¶42-501 .................................................... 1.35, 6.90, 6.275, 13.175, 13.190, 13.195, 13.395 ACCC v Safe Breast Imaging Pty Ltd (2014) ATPR ¶42-464 ........................................... 3.155, 6.100 ACCC v Safe Breast Imaging Pty Ltd (No 2) (2014) ATPR ¶42-481 ........................................................................................................... 13.195, 13.215, 13.325 ACCC v Safety Compliance Pty Ltd (in liq) (No 2) [2015] FCA 1469 ............................................................................................................................... 6.175, 13.325 ACCC v Sampson [2011] FCA 1165; (2011) ATPR ¶42-374 .......................................... 2.105, 13.145 ACCC v Samton Holdings Pty Ltd (2002) 117 FCR 301 ........................................... 4.15, 4.35, 4.100 ACCC v Santo Pennisi and Dojoo Pty Ltd (2007) ATPR ¶42-209 ....................................................................................................................................... 13.35 ACCC v Seal-A-Fridge Pty Ltd (No 2) [2010] FCA 681; (2010) 268 ALR 321 ................................................................................................................. 4.130, 13.300 ACCC v Sensaslim Australia Pty Ltd (in liq) (No 1) (2011) 196 FCR 566 ...................................................................................................................................... 1.100 ACCC v Seven Network Ltd (2007) 244 ALR 343 ....................................................................... 3.245 ACCC v Signature Security Group Pty Ltd (2003) ¶ATPR 41-908 ............................................................................................................................ 3.190, 13.310 ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253; ATPR ¶41-790 ......................................... 4.60, 4.105, 4.125, 4.145, 4.165, 4.175, 4.185 ACCC v Singtel Optus Pty Ltd [2010] FCA 1177 ........................ 3.185,3.190, 3.200, , 6.275, 13.160 ACCC v Singtel Optus Pty Ltd (No 3) [2010] FCA 1272; (2010) 276 ALR 102 ....................................................................................................... 3.70, 13.290 ACCC v Singtel Optus Pty Ltd (No 4) [2011] FCA 761; (2011) 282 ALR 246 ...................................................................................... 3.200, 13.160, 13.190, 13.195 ACCC v Skins Compression Garments Pty Ltd [2009] FCA 710 .............................................. 13.145 ACCC v Skippy Australia Proprietary Ltd [2006] FCA 1343 .......................................... 11.165, 13.20 ACCC v Sontax Australia (1988) Pty Ltd [2011] FCA 1202 ...................................................... 13.145 ACCC v South East Melbourne Cleaning Pty Ltd (in liq) (formerly known as Coverall Cleaning Concepts South East Melbourne Pty Ltd) [2015] FCA 25; (2015) ATPR ¶42-503 ................. 2.120, 3.135, 3.140, 6.290 ACCC v Spreets Pty Ltd [2015] FCA 382 ..................................................................................... 6.140 ACCC v StoresOnline International, Inc [2007] FCA 1597 ........................................................ 13.335 ACCC v TPG Internet Pty Ltd (2011) ATPR ¶42-383 ......................................................... 3.90, 3.190 ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 ............... 3.60, 3.70, 3.185, 3.190, 6.25, 13.160 ACCC v Target Australia Pty Ltd (2001) ATPR ¶41-840 ...................... 13.145, 3.170, 13.205, 13.310 ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 .. 3.60, 3.90, 3.170, 3.185, 3.190, 6.130, 7.10

Table of Cases xiii

ACCC v Telstra Corporation Ltd (2007) ATPR ¶42-203 .............................................. 3.10, 3.85, 6.25 ACCC v The Construction, Forestry, Mining and Energy Union (2007) ATPR ¶42-141 ............................................................................................................... 13.145 ACCC v Ticketek Pty Ltd [2011] FCA 1489 ............................................................................... 13.145 ACCC v Trading Post Australia Pty Ltd (2011) 197 FCR 498 ....................................................... 3.45 ACCC v Turi Foods Pty Ltd (No 2) [2012] FCA 12 ........................................ 13.145, 13.205, 13.210 ACCC v Turi Foods Pty Ltd (No 4) (2013) ATPR ¶42-448 ................................................ 6.50, 6.275 ACCC v Universal Music Australia Pty Ltd (No 2) (2002) 201 ALR 618 ........................................................................................................................ 13.65, 13.200 ACCC v Valve Corporation (No 3) [2016] FCA 196 ....................... 1.95, 6.180, 8.125, 8.140, 15.275 ACCC v Virgin Mobile Australia Pty Ltd (No 2) (2003) ATPR (Digest) ¶46-230 .......................................................................................................... 13.295, 13.310 ACCC v Wizard Mortgage Corp Ltd (2002) ATPR ¶41-903 ............................................... 6.90, 6.125 ACCC v Woolworths (South Australia) Pty Ltd (t/as Mac’s Liquor) (2003) 198 ALR 417 ................................................................................................... 13.205 ACCC v Woolworths Ltd [2016] FCA 44 ......................................................................... 6.105, 11.215 ACCC v Wordplay Services Pty Ltd (2004) 210 ALR 562 ......................... 7.115, 7.120, 7.125, 7.135 ACCC v Yellow Page Marketing BV (No 2) (2011) 195 FCR 1 ................................................ 13.395 ACCC v Z-Tek Computer Pty Ltd (1997) 78 FCR 197 ................................................. 13.265, 13.290 ACCC v Zanok Technologies Pty Ltd [2009] FCA 1124 .............................................................. 6.265 ACI Australia Ltd v Glamour Glaze Pty Ltd (1988) ATPR ¶40-868 ........................................................................................................................................ 6.115 ALDI Stores v EFTPOS Payments Australia Ltd (2011) ATPR ¶42-371 ....................................................................................................................................... 3.135 ASIC v Accounts Control Management Services Pty Ltd [2012] FCA 1164 .................................................................................................................................... 7.225 ASIC v Australian Property Custodian Holdings Ltd (R & Mgs apptd) (in liq) (Controllers apptd) [2014] FCA 1308 ............................................................. 13.325 ASIC v Fortescue Metals Group Ltd (2011) 190 FCR 364 ........................................................... 3.150 ASIC v Fortescue Metals Group Ltd [No 5] (2009) 264 ALR 201 ............................................................................................................................................... 3.150 ASIC v National Exchange Pty Ltd (2005) 148 FCR 132 .............................. 4.50, 4.65, 4.110, 4.195 ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1991) 27 FCR 460 .................................................................................................................... 8.125 Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd (2001) ATPR (Digest) 46-213 .................................................................................................... 3.115 Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd [2002] NSWCA 211 ................................................................................................................... 3.115 Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 ........................................................................... 1.05, 3.05, 3.145 Ackers v Austcorp International Ltd [2009] FCA 432 ................................................................... 2.115 Acquired Holdings Ltd v Turvey (2008) 8 NZBLC 102 ...................................................... 8.55, 15.80 Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd (1982) 150 CLR 169 .............................................................................. 2.55 Adams v ETA Foods Ltd (1987) ATPR ¶40-831 ............................................... 13.115, 13.120, 13.130 Adams v J & D’s Used Cars Ltd (1983) 26 Sask R 40 ................................................................ 15.70 Advanced Switching Services Pty Ltd v State Bank of New South Wales [2007] FCA 954 .................................................................................................... 3.125 Aevum Ltd v National Exchange Pty Ltd (2004) 142 FCR 316 ..................................................... 4.50 Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 ............................................... 13.145 Akai Pty Ltd v People’s Insurance Co Ltd (1996) 188 CLR 418 ............................................... 15.275

xiv Table of Cases

Alex Pordage t/as Pattisserie Fe Fi Fo v Chrystal & Co Pty Ltd t/as Caterlink [2014] NSWCATCD 72 ...................................................................................... 15.70 Aliotta v Broadmeadows Bus Service Pty Ltd (1988) ATPR ¶40-873 ............................................................................................................................ 2.120, 3.125 Alley v Quayside [2011] NSWCTTT 228 ...................................................................................... 8.340 Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd (2009) ATPR ¶42-294 ............................................................................................................................ 4.175, 4.185 Amadio Pty Ltd v Henderson (1998) 81 FCR 149 ........................................................................ 3.150 Andrews v Australian and New Zealand Banking Group Ltd (2011) 288 ALR 611 .................................................................................................................... 5.30 Annand and Thompson Pty Ltd v TPC (1979) ATPR ¶40-116 ....................................................... 6.60 Anthony v Vaclav [2009] VSC 357 .................................................................................................. 5.95 Apand Pty Ltd v The Kettle Chip Company Pty Ltd (1994) 52 FCR 474 ...................................................................................................................................... 3.225 Apco Service Stations Pty Ltd v ACCC (2005) ATPR ¶42-078 ................................................. 15.225 Apple Computer Inc v Computer Edge Pty Ltd (1984) 1 FCR 549 ................................................................................................................................... 6.115, 6.120 Arcardi v Colonial Mutual Life Assurance Society Ltd (1984) ATPR ¶40-473 .......................................................................................................................... 14.120 Argy v Blunts and Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 ...................................................................................................... 2.75, 2.100, 2.105, 2.120 Arturi v Zupps Motors Pty Ltd (1980) ATPR ¶40-189 .................................................................... 8.10 Ascot Four Pty Ltd v ACCC (2009) 176 FCR 106 .............................................................. 3.90, 6.155 Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441 .................................................. 8.385 Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106 ........................................................................... 3.10, 3.85, 3.90, 3.175, 6.25 Atkinson v Hastings Deering (Queensland) Pty Ltd (1985) 71 ALR 93 ....................................................................................................................................... 8.210 Attorney-General of NSW v World Best Holdings Ltd (2005) 63 NSWLR 557 ............................................................................................................. 4.50, 4.85, 4.195 Au.Domain Administration Ltd v Domain Names Australia (2004) 207 ALR 521 ........................................................................................................... 7.80, 7.85 Auckland Property Restoration Ltd v Blackford (Unreported ....................................................... 15.70 Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 ................................................................................................................................. 4.50 Australia and New Zealand Banking Group Ltd v Dzienciol [2001] WASC 305 ........................................................................................................................ 4.25 Australian Beauty Trade Suppliers Ltd v Conference & Exhibition Organisers Pty Ltd (1991) ATPR ¶41-107 ................................................................ 2.20 Australian Communications Network Pty Ltd v ACCC (2005) 146 FCR 413 ................................................................................................................... 7.115, 7.130 Australian Home Loans Ltd (t/as Aussie Home Loans) v Phillips (1998) ATPR ¶41-626 ................................................................................................................. 6.115 Australian Industrial Relations Commission, Re; Ex parte Australian Transport Officers Federation (1990) 171 CLR 216 ................................................................................................................................................. 2.55 Australian Ocean Line Pty Ltd v West Australian Newspapers Ltd (1983) 66 FLR 453; 47 ALR 497 ........................................................................... 3.235, 6.300 Australian Ocean Line Pty Ltd v West Australian Newspapers Ltd (1985) 58 ALR 549 ............................................................................................................. 3.235 Australian Softwood Forests Pty Ltd v Attorney General(NSW); Ex rel Corporate Affairs Commission (1981) 148 CLR 121 .................................................... 7.120

Table of Cases xv

Australian Woollen Mills Ltd v F S Walton & Co Ltd (1937) 58 CLR 641 ..................................................................................................................................... 3.225 Automasters Australia Pty Ltd v Bruness Pty Ltd [2002] WASC 286; (2003) ATPR (Digest) ¶46-229 ........................................................ 4.105, 4.145, 4.175, 4.185

B BBB Constructions Pty Ltd v Aldi Foods Pty Ltd [2010] NSWSC 1352 ............................................................................................................................. 3.125 BHP Coal Pty Ltd v O and K Orenstein and Koppel AG [2008] QSC 141 ................................................................................................................................... 14.130 BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2) [2008] FCA 1656 .................................................................................................... 14.145, 14.165 BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 3) [2009] FCA 1087 ................................................................................................................. 14.135 BMI Ltd v Federated Clerks Union of Australia (1983) 51 ALR 401 ............................................................................................................................................. 13.145 BMW Australia Ltd v ACCC (2004) 207 ALR 452 .................................................................... 13.265 Baltic Shipping Company v Dillon (1993) 176 CLR 344 .................................................. 5.190, 14.30 Baratta v TPA Pty Ltd [2012] VCAT 679 ...................................................................................... 8.305 Barbaro v The Queen (2014) 253 CLR 58 ................................................................................... 13.205 Barratta v TPA Pty Ltd [2012] VCAT 679 ..................................................................................... 8.250 Bartlett v Sydney Marcus Ltd [1965] 1 WLR 1013 ...................................................................... 8.210 Barton v Croner Trading Pty Ltd (1984) ATPR¶40-470 .................................................................. 6.45 Barton v Westpac Banking Corp (1983) 150 ALR 397 ................................................................... 7.50 Bateman v Slayter (1987) 71 ALR 553 .......................................................... 3.35, 3.140, 3.150, 3.155 Bauer v Power Pacific International Media Pty Ltd [2007] FCA 349 ................................................................................................................................................. 7.80 Begbie v State Bank of New South Wales (1994) ATPR ¶41-288 ................................................ 4.205 Benlist Pty Ltd v Olivetti Australia Pty Ltd (1990) ATPR ¶41-043 ............................................................................................................................ 3.160, 6.250 Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 ........ 2.115, 2.125, 3.35, 3.135, 3.140, 6.250, 14.95, 14.165 BestCare Foods Ltd v Origin Energy LPG Ltd (formerly Boral Gas (NSW) Pty Ltd) [2013] NSWSC 1287 ............................................................................ 14.105 Bevanere Pty Ltd v Lubidineuse (1984) 7 FCR 325 ..................................................................... 2.105 Bialous v Budget Vehicles Pty Ltd [2013] NSWCTTT 130 .......................................................... 8.305 Biba Ltd v Stratford Investments Ltd [1973] Ch 281 .................................................................. 13.335 Blomley v Ryan (1956) 99 CLR 362 ............................................................................. 4.20, 4.25, 5.95 Bodum v DKSH Australia Pty Ltd [2011] FCAFC 98 .................................................................. 3.220 Body Bronze International Pty Ltd v Fehcorp Pty Ltd [2011] VSCA 196; (2011) 34 VR 536; 282 ALR 571 ........................................... 3.145, 4.15, 4.50, 4.180 Bond v Barry (2007) 73 IPR 490 ................................................................................................... 3.235 Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215; 71 ALR 615 ................................................................................... 2.105, 8.125, 14.60 Bonomo v Tile Trends [2012] NSWCTTT 363 .............................................................................. 8.290 Bostik (Australia) Pty Ltd v Gorgevski (No 1) (1992) 36 FCR 20 ............................................................................................................................................... 14.100 Botany Bay City Council v Jazabas Pty Ltd [2001] NSWCA 94 ................................................. 3.135 Bowler v Hilda Pty Ltd (1998) 80 FCR 191; ATPR ¶41-625 ................................ 3.140, 3.160, 6.250 Bowler v Hilda Pty Ltd [2000] FCA 899 ..................................................................................... 14.180

xvi Table of Cases

Brandt v Flower Power and Stone Masonry Pty Ltd [2012] NSWCTTT 261 ............................................................................................................... 8.290, 15.05 Bray v Hoffman-La Roche Ltd (2002) 118 FCR 1 .......................................................................... 1.95 Bridge Stockbrokers Ltd v Bridges (1985) 57 ALR 401 ................................................................. 3.95 Bridgewater v Leahy (1998) 194 CLR 457 ...................................................................................... 4.25 Briginshaw v Briginshaw (1938) 60 CLR 336 ............................................................................. 12.120 Bristol-Meyers Squibb Australia Pty Ltd v Astra Pharmaceuticals Pty Ltd (1999) 45 IPR 144 ............................................................................... 3.20 British Airways Board v Taylor (1976) 1 WLR 13 ....................................................................... 6.180 Brockway v Pando (2000) 22 WAR 771 ........................................................................................ 2.120 Broken Hill South v Commissioner of Taxation (NSW) (1937) 56 CLR 337 ................................................................................................................................ 1.130 Brown v Riverstone Meat Company Pty Ltd (1985) 60 ALR 595 ............................................. 13.110 Brown v The Jam Factory Pty Ltd (1981) 53 FLR 340 .................................................................. 3.05 Bunnings Group Ltd v Laminex Group Ltd (2006) ATPR ¶42-115 ........................................................................................................................................ 8.100 Burdon v Outback Generators Pty Ltd [2013] NSWCTTT 270 .................................................... 8.305 Burg Design Pty Ltd v Wolki (1999) ATPR ¶41-689; 162 ALR 639 ................................................................................................................................... 3.120, 3.160 Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NWSCA 187 .................................................................................................................... 4.145, 4.175 Burswood Management Ltd v Attorney-General (Cth) (1990) 23 FCR 144 ........................................................................................................................................ 6.30 Burton v Chad One Pty Ltd [2013] NSWDC 301 .............................................................. 8.270, 8.300 Business and Professional Leasing Pty Ltd v Dannawi [2008] NSWSC 902 .................................................................................................................... 8.80, 15.225 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 ....... 3.10, 3.20, 3.40, 3.55, 3.60, 3.70, 3.75, 3.80, 3.85, 6.25, 14.130 Byers v Dorotea Pty Ltd (1987) ATPR ¶40-760 ............................................................................ 3.140

C C v FP Ltd & LVM Ltd [2009] NZDispT 34 ................................................................................ 6.205 CCP Australian Airships Ltd v Primus Telecommunications Pty Ltd [2004] VSCA 232 .................................................................................................................. 7.50 CH Real Estate Pty Ltd v Jainran Pty Ltd [2010] NSWCA 37 .................................................... 3.160 CIT Credit Pty Ltd v Keable [2006] NSWCA 130 .......................................................................... 4.85 CPA Australia Ltd v Dunn (2007) ATPR ¶42-205 ........................................................................... 6.90 CPI Group Ltd v Stora Enso Australia Pty Ltd (2007) ATPR ¶42-193 ............................................................................................................................ 3.125, 14.70 Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 159 FCR 397 .................................................................................................. 3.20, 3.210 Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 8) [2008] FCA 470 ......................................................................................................... 3.95 Caffwy v Leatt-Hayter (No 3) [2013] WASC 348 ......................................................................... 3.125 Cairnsmore Holdings Pty Ltd v Bearsden Holdings Pty Ltd [2007] FCA 1822 ........................................................................................................................ 1.100 Caltex Australia Petroleum Pty Ltd v Charbden Haulage Pty Ltd [2005] FCAFC 271 ..................................................................................................................... 14.60 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 ............................................................ 3.10, 3.20, 3.60, 3.75, 3.145, 3.160, 3.165, 14.75, 14.80 Campbell v Metway Leasing Ltd (1998) ATPR ¶41-630 .............................................................. 7.210

Table of Cases xvii

Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 ............................. 3.05, 3.10, 3.65, 3.70, 3.85, 3.90, 3.95, 3.165, 3.210, 6.25, 14.230 Canon Australia Pty Ltd v Patton (2007) ATPR ¶42-183; [2007] NSWCA 246 ...................................................................................................................... 4.85, 4.125 Cantarella Bros Pty Ltd v Valcorp Fine foods Pty Ltd (2002) ATPR ¶41-856 .............................................................................................................................. 3.65 Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd (2004) ATPR ¶42-014 ................................................................................................... 8.360, 12.45, 12.85, 12.120 Carpet Call Pty Ltd v Chan [1987] ASC 55-553; (1987) ATPR (Digest) ¶46-025 .................................................................................................... 8.75, 8.100, 8.355 Carroll v Pollock Wholesale Pty Ltd [2014] ACAT 14 ................................................................. 8.335 Cary Boyd v Agrison Pty Ltd [2014] VMC 23 ................................ 8.250, 8.280, 8.380, 8.385, 15.35 Cassidy v Medical Benefits Fund of Australia Ltd (2002) ATPR ¶41-892 .......................................................................................................................... 3.170, 13.310 Cassidy v NRMA Health Pty Ltd (2002) ATPR ¶41-891 ............................................................ 14.175 Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd (1986) 162 CLR 395 ........................................................................................................... 8.130 Cehave NV v Bremer Handelsgesellschaft mbH [1976] QB 44 ................................................... 8.260 Channel Seven Brisbane Pty Ltd v ACCC (2008) 173 FCR 91 ................................................... 3.245 Charben Haulage Pty Ltd v Environmental & Earth Sciences Pty Ltd (2004) ATPR (Digest) ¶46-252 .................................................................................. 6.30, 6.250 Cheryl Foster v Mahamudur Rahman t/as Smarty Web Solutions [2014] NSWCATCD 17 ............................................................................................................... 9.80 Chilcott v Homesec Finance Express Pty Ltd [2011] FCA 729 ...................................................... 4.75 Choice Constructions Pty Ltd v Janceski (No 3) [2011] WASC 358 ................................................................................................................................................. 4.25 Cicchini v Brabazon [2014] QCAT 671 ......................................................................................... 8.305 Cinema Centre Services Pty Ltd v Eastaway Air Conditioning Pty Ltd (1999) ASAL 55-034 .................................................................................................... 8.100 Claremont Petroleum NL v Cummings (1992) 110 ALR 239 ......................................................... 6.30 Clifford v Vegas Enterprises [2011] FCAFC 135 ........................................................................... 3.105 Coggin v Telstar Finance Company (Q) Pty Ltd (2006) ATPR ¶42-107 ....................................................................................................................................... 4.100 Colgate-Palmolive Pty Ltd v Rexona Pty Ltd (1981) ATPR ¶40-242 ..................................................................................................................... 1.35, 3.170, 6.45 Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) 72 ALR 601 ...................................................................................................................... 3.20 Comalco Aluminium Ltd v Mogal Freight Services Pty Ltd (1993) ATPR (Digest) ¶46-106 .................................................................................................... 9.30 Commerce Commission v Adair (1995) 5 NZBLC 99-361 ........................................................... 6.130 Commerce Commission v New Zealand Milk Corporation Ltd [1994] 2 NZLR 730 ................................................................................................................. 13.205 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 ......................................................................................................... 4.15, 4.20, 4.25, 4.30, 4.110 Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 ....................................................................................... 13.160, 13.205 Commonwealth v Verwayen (1990) 170 CLR 394 .......................................................................... 4.15 Commonwealth of Australia v Tasmania (1983) 46 ALR 625 ........................................................ 2.20 Con Agra Inc v McCain Foods (Aust Pty Ltd (1992) 33 FCR 302 ............................................................................................................................................... 3.210 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 ..................................................................... 2.75, 2.95, 2.105, 3.05, 3.210, 6.265, 13.290

xviii Table of Cases

Consumer Protection, Commissioner for v Armstrong [2012] WASC 206 ................................................................................................................................ 13.335 Contact Energy Ltd v Jones [2009] 2 NZLR 830 ...... 8.55, 8.205, 8.240, 8.260, 8.265, 15.70, 15.105 Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170; NZ DCR Lexis 19 ...................................................................................................... 8.255, 15.35, 15.60 Cooper v Cadwalader (1904) 5 TC 101 ........................................................................................... 1.95 Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 ............................................................................................................................... 4.145 Corrections Corporation of Australia Pty Ltd v Commonwealth (2000) 104 FCR 448 .................................................................................................................... 2.55 Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1998) 155 ALR 714 ........................................................................................................... 3.25, 3.30 Council of the Shire of Noosa v Farr [2001] QSC 060 ................................................................... 9.65 Country Road Clothing Pty Ltd v Najee Nominees Pty Ltd (1991) 20 IPR 419 ........................................................................................................................ 3.20 Crawford v Mayne Nickless Ltd (1992) ATPR (Digest) ¶46-091 ................................................... 8.75 Crocodile Marketing Ltd v Griffith Vintners Pty Ltd (1989) 28 NSWLR 539 .................................................................................................................... 6.45, 14.190 Crossan v Commons (1985) ATPR ¶40-542 ................................................................................... 6.290

D DPN Solutions Pty Ltd v Tridant Pty Ltd [2014] VSC 511 ............................................................ 4.85 Dai v Telstra (2000) 171 ALR 348 ................................................................................................... 4.60 Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR ¶42-079 ................................................. 3.40, 3.55 Darwin Bakery Pty Ltd v Sully (1981) ATPR ¶40-230 ................................................................... 6.25 Dataflow Computer Services Pty Ltd v Goodman (1999) 168 ALR 169 ....................................................................................................................................... 2.80 David Jones Ltd v Willis (1934) 52 CLR 110 ............................................................................... 8.215 Davidson v Watson (1953) 28 ALJ 63 ............................................................................................. 6.20 Dawson v LNG Holdings [2008] NSWSC 137 ............................................................................. 3.125 Dawson v Motor Tyre Service Pty Ltd (1981) ATPR ¶40-223 ..................................................... 6.175 Dawson v World Travel Headquarters Pty Ltd (1981) 53 FLR 455 ................................................................................................................................................. 7.50 De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) (2011) 200 FCR 253 ................................................................................................................... 14.45, 14.50 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 ....................................................... 3.100, 14.215 Dib Group Pty Ltd v Ventouris Enterprises Pty Ltd (2011) 284 ALR 601; [2011] NSWCA 300 ................................................................................................. 3.140 Digi-Tech (Australia) Ltd v Brand (2004) ATPR (Digest) ¶46-248; [2004] NSWCA 58 ............................................................................... 3.145, 14.45, 14.60 Dillon v Baltic Shipping Co (1989) 21 NSWLR 614 ...................................................................... 9.05 Dillon v Chin; Dillon Kingly Commodities (Qld) Pty Ltd (1988) ATPR ¶40-899 .............................................................................................................................. 6.90 Director, Fair Work Building Industry Inspectorate v CFMEU (2015) 229 FCR 331 ................................................................................................................ 13.205 Director of Consumer Affairs v Dimmeys Stores Pty Ltd (2013) 213 FCR 559 .............................................................................................................................. 1.150 Director of Consumer Affairs Victoria v AAPT Ltd [2006] VCAT 1493 ................................................................................................................................. 5.125 Director of Consumer Affairs Victoria v Craig Langley Pty Ltd (No 1 and No 2) [2008] VCAT 482 and [2008] VCAT 1332 .................................................. 5.125

Table of Cases xix

Director of Consumer Affairs Victoria v Scully (No 3) (2013) 303 ALR 168 ................................................................................................................................ 4.85 Director of Consumer Affairs Victoria v The Good Guys Discount Warehouses (Australia) Pty Ltd [2016] FCA 22 ............................................ 6.205, 6.210 Director of Consumer Affairs Victoria v Trainstation Health Clubs Pty Ltd [2008] VCAT 2092 ................................................................................. 5.125, 5.150 Director of Public Prosecutions (Cth) v Said Khodor El Karhani (1990) 21 NSWLR 370 .............................................................................................................. 13.60 Donoghue v Stevenson [1932] AC 562 ............................................................................. 11.20, 12.170 Doolan v Waltons Ltd (1981) ATPR ¶40-257 .............................................................................. 13.115 Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 .............................. 3.50, 3.75, 3.140 Dr Martens Australia Pty Ltd v Rivers (1999) 95 FCR 136 ......................................................... 3.220 Drew v Makita (Australia) Pty Ltd [2009] 2 Qd R 219 .............................................................. 12.170 Ducret v Chaudhary’s Oriental Carpet Palace Pty Ltd (1987) 76 ALR 182 ..................................................................................................................................... 13.45 Ducret v Nissan Motor Co (Australia) Pty Ltd (1979) ATPR ¶40-111 ........................................................................................................................................ 13.55 Duracell Australia Pty Ltd v Union Carbide Australia Ltd (1988) ATPR ¶40-918 ............................................................................................................................ 3.205

E “E” v Australian Red Cross Society (1991) 27 FCR 310 ........................................... 2.20, 2.105, 8.10 EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 ....................................... 3.110, 3.125 Easts Van Villages v Minister Administering the National Parks and Wildlife Act (2001) ATPR (Digest) ¶46-211 ........................................................................ 2.70 Effem Foods Ltd v Nicholls [2004] NSWCA 332 ............................................................ 8.305, 12.120 Elders Trustee and Executor Company Ltd v EG Reeves Pty Ltd (1987) ATPR (Digest) ¶46,030 .................................................................................................. 6.250 Energizer Australia Pty Ltd v Remington Products Australia Pty Ltd (2008) ATPR ¶42-219 ....................................................................................... 3.85, 6.25, 6.150 Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd (2008) 19 VR 358 .................................................................................................................... 14.120 Eva v Southern Motors Box Hill Pty Ltd (1977) ATPR ¶40-026 .......................................... 6.15, 6.45 Eveready Australia Pty Ltd v Gillette Australia Pty Ltd (2000) ATPR ¶41-751 ............................................................................................................................ 3.180

F F v SC Ltd NZDispt 94 ................................................................................................................... 6.205 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2010] NSWSC 726 ............................................................................................................................... 14.55 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 .................................................................................................................... 3.100, 3.105 Fadu Pty Ltd v ACN 008 112 196 Pty Ltd as Trustee of the “International Linen Service Unit Trust” (2007) ATPR ¶41-206 ....................................................................................................................................... 14.20 Fair Trading, Director-General of v First National Bank plc [2002] 1 AC 481 ......................................................................................................................... 5.120 Far Horizons Pty Ltd v McDonald’s Australia Ltd [2000] VSC 310 ............................................................................................................................................... 4.145 Fencott v Muller (1983) 152 CLR 570 ............................................................................................. 2.20

xx Table of Cases

Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 ........................................................................................ 5.50, 5.95, 5.130, 5.135, 5.190, 14.30 Finding v Commonwealth Bank of Australia [2001] 1 Qd R 168 ................................................ 3.125 Finucane v NSW Egg Corp (1988) 80 ALR 486 .................................................................. 3.20, 3.120 Firewatch Australia Pty Ltd v Country Fire Authority (1999) ATPR (Digest) ¶46-198 ................................................................................................................ 2.80 Forrest v ASIC (2012) 247 CLR 486 ............................................................... 3.85, 3.90, 3.150, 3.155 Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 .......................................................... 13.145 Foster v ACCC (2006) 149 FCR 135 .............................................................................. 13.250, 13.275 Four Square Stores (Queensland) Ltd v ABE Copiers Pty Ltd (1981) ATPR ¶40-232 ................................................................................................................. 8.100 Franich v Swannell (1993) 10 WAR 459 .............................................................................. 2.75, 2.100 Frank v Grosvenor Motor Auctions Pty Ltd [1960] VR 607 ........................................................ 8.365 Fraser v NRMA Holdings Ltd (1994) 52 FCR 1 ........................................................................... 6.130 Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 ....................................................................... 6.130 Free v Jetstar Airways Pty Ltd [2007] VCAT 1405 ....................................................................... 5.155 Freestone Auto Sales Pty Ltd v Musulin [2015] NSWCA 160 ..................................................... 8.305

G GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1 ........................................................................................................... 2.55 GPG (Australia Trading) Pty Ltd v GIO Australia Holdings Ltd (2001) 117 FCR 23 ..................................................................................................................... 3.285 Gammasonics Institute of Medical Research Pty Ltd v Comrad Medical Systems Pty Ltd [2010] NSWSC 267 ......................................................................... 8.135 Garcia v National Australia Bank Ltd (1998) 194 CLR 395 ............................................... 4.15, 4.110 Gardam v George Wills & Co Ltd (No 1) (1988) ATPR ¶40-884; 82 ALR 415 ............................................................................ 3.40, 6.15, 6.25, 6.35, 6.45, Gardam v George Willis & Co (No 2) (1988) ATPR ¶40-884 .................................................... 13.130 Gardiner v Suttons Motor (Homebush) Pty Ltd (1983) 48 ALR 142 ............................................................................................................................................... 3.140 Gardner Corporation Pty Ltd v Zed Bears Pty Ltd [2003] WASC 13 ................................................................................................................................... 14.65, 14.130 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 .............................................................................................................................. 14.85, 14.90 General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164 .............................. 3.25, 3.80, 3.105 Genocanna Nominees Pty Ltd v Thirsty Point Pty Ltd [2006] FCA 1268 .................................................................................................................... 14.175, 14.180 George Weston Foods Ltd v Goodman Fielder Ltd (2000) 49 IPR 553 ....................................................................................................................................... 3.190 Gharibian v Propix Pty Ltd t/as Jamberoo Recreational Park [2007] NSWCA 151 ..................................................................................................................... 9.65 Gillette Aust Pty Ltd v Energizer Australia Pty Ltd (2002) 56 IPR 13; 193 ALR 629 ........................................................................................... 3.20, 3.205, 6.150 Giorgianni v The Queen (1985) 156 CLR 473 ............................................................................ 14.175 Given v CV Holland (Holdings) Pty Ltd (1977) 29 FLR 212 ...................................... 6.15, 6.25, 6.45 Given v Snuffa Pty Ltd and Quinn (1978) ATPR ¶40-083 .............................................................. 6.45 Glendale Chemical Products Pty Ltd v ACCC (1999) ATPR ¶41-672; (1998) 90 FCR 40 ........................................................... 6.90, 6.105, 12.05, 12.10, 12.45 Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82; 55 ALR 25 ............................................................ 3.35, 3.145, 3.150, 3.155, 3.235, 6.300

Table of Cases xxi

Goldiwood Pty Ltd t/as Margaret Franklin & Associates v ADL (Aust) Pty Ltd t/as Adviser Logic [2014] QCAT 238 ........................................ 8.135, 15.30, 15.35 Goldsbro v Walker [1993] 1 NZLR 394 ............................................................................. 3.40, 15.105 Goodridge v Macquarie Bank Ltd [2010] FCA 67 ........................................................................ 4.205 Google Inc v ACCC (2013) 249 CLR 435 ........... 3.05, 3.10, 3.15, 3.20, 3.45, 3.60, 3.70, 3.85, 3.95, 13.125, 13.330, 14.245 Gould v Vaggelas (1983-1985) 157 CLR 215 .................................................................... 3.165, 14.85 Graham Barclay Oysters Pty Ltd v Ryan (2000) 177 ALR 18; ATPR (Digest) ¶46-207 .......................................................................... 8.360, 12.20, 12.35, 12.130 Grain Sorghum Marketing Board v Supastok Pty Ltd [1964] Qd R 98 ............................................................................................................................................. 13.20 Granitgard Pty Ltd v Termicide Pest Control Pty Ltd (No 5) [2010] FCA 313 ............................................................................................................................ 3.50 Granitigard Pty Ltd v Termicide Pest Control Pty Ltd (2011) 281 ALR 1 .................................................................................................................................... 3.50 Grant v Australian Knitting Mills Ltd (1935) 54 CLR 49; [1936] AC 85 ................................................................................................................. 8.365, 11.20, 12.170 Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095 ..................................................................................................................... 9.65 Green v The Queen (2011) 244 CLR 462 .................................................................................... 13.200 Gregg v Tasmanian Trustees Ltd (1997) 73 FCR 91 ..................................................................... 3.120 Gregory v Philip Morris Ltd (1988) 80 ALR 455 ....................................................................... 14.100 Griffiths v Conway Ltd [1939] 1 All ER 685 ..................................................................... 8.355, 8.365 Guglielman v Trescowthick [2004] FCA 326 ................................................................................. 3.255 Gurr v Hunter Volkswagen [2011] NSWCTTT 146 ....................................................................... 8.340

H HIH Insurance Ltd (in liq) v Adler [2007] NSWSC 633 ............................................... 14.180, 14.185 HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 ............................................................................ 14.90, 14.95, 14.110, 14.120 Hadgelias Holdings Pty Ltd v Seirlis [2014] QCA 177 ............................................................... 14.155 Hamilton v Whitehead (1989) ATPR ¶42-932 ................................................................................ 2.115 Hamond v State of New South Wales (2001) FCA 157 .................................................................. 2.70 Hampic Pty Ltd v Adams (2000) ATPR ¶41-737 ........................................................................... 6.105 Hanave Pty Ltd v LFOT Pty Ltd (1999) ATPR ¶41-687 ................................................... 14.50, 14.55 Hancock v East Coast Timber Products Pty Ltd [2011] NSWCA 11 ................................................................................................................................................... 6.75 Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association [1969] 2 AC 31 ...................................................................................................... 8.355 Hardy v Your Tabs Pty Ltd [2000] NSWCA 150 .......................................................................... 3.125 Haros v Linfox Australia Pty Ltd [2011] FCA 699 ....................................................................... 6.265 Haros v Linfox Australia Pty Ltd [2012] FCAFC 42 .................................................................... 14.55 Haros v Linfox Australia Pty Ltd [2012] FCAFC 699 .................................................................. 6.265 Hartnell v Sharp (1975) ATPR ¶40-003 ........................................................................................... 6.45 Harwood, Howard v Rich and Mor Diamonds Pty Ltd [2013] NSWCTTT 502 .......................................................................................................................... 8.230 Hatfield v Health Insurance Commission (1987) 15 FCR 487 ........................................................ 6.30 Havyn Pty Ltd v Webster (2005) 220 ALR 211 .......................................... 3.55, 3.140, 14.85, 14.105 Henderson v Bowden Ford Pty Ltd (1979) ATPR ¶40-129 ............................................................. 6.60 Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546; 79 ALR 83 ......................................... 3.25, 3.35, 3.125, 3.160, 14.70, 14.220

xxii Table of Cases

Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31 .......................................................................................................................................... 8.365 Henville v Walker (2001) 206 CLR 459 ... 14.35, 14.40, 14.55, 14.65, 14.85, 14.120, 14.130, 14.185 Heydon v NRMA Ltd (2000) 51 NSWLR 1 ........................................................................................... Hollis v ABE Copiers Pty Ltd (1979) 41 FLR 141; ATPR ¶40-115 .............................................................................................................................. 6.60, 6.180 Hollis v Clarke (1981) ATPR ¶40-245 ........................................................................................... 13.80 Holman v Johnson (1775) 1 Cowp 341; 98 ER 1120 .................................................................... 14.15 Hoover (Australia) Pty Ltd v Email Ltd (1991) ATPR ¶41-149; 104 ALR 369 ....................................................................................................................... 3.203.205 Hope v Bathurst City Council (1980) 144 CLR 1 .................................................................. 1.95, 5.75 Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 ....... 3.05, 3.70, 3.130, 3.165, 3.210, 3.215 Hosking v The Warehouse Ltd (Unreported ................................................................................... 15.70 Hospital Contribution Fund of Australia Ltd v Switzerland Australia Health Fund Pty Ltd (1987) 78 ALR 483 ............................................................... 13.280 Houghton v Arms (2006) 225 CLR 553 ............................................................................... 2.45, 2.100 Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd [2009] HCA Trans 325 .................................................................................................................................... 4.185 Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) (2008) ATPR ¶42-240 ............................................................................... 4.100, 4.135, 4.145, 4.175, 4.185 Hughes v Western Australian Cricket Association (Inc) (1986) 19 FCR 10 .................................................................................................................................... 2.20 Hungier v Grace (1972) 127 CLR 210 ............................................................................................. 2.55 Hurley v McDonald’s Australia Ltd (2000) ATPR ¶41-741 ................................................. 4.50, 4.105

I I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 ................................................................................ 14.35, 14.40, 14.50, 14.65 ICI Australia Operations Pty Ltd v TPC (1982) 38 FCR 248 ............ 13.250, 13.270, 13.275, 14.230, 14.240 IDP Education Ltd v Lejburg Pty Ltd [2015] VSC 650 .................................. 3.10, 3.150, 3.170, 6.80 IOOF Australia Trustees (NSW) Ltd v Tantipech (1998) 156 ALR 470 ..................................................................................................................................... 3.160 Ibrahim v Phan [2007] NSWCA 215 .............................................................................................. 3.125 Immigration & Multicultural Affairs, Minister for v Mohammad (2000) 101 FCR 434 .................................................................................................................... 6.30 Ingot Capital Investment & Ors v Macquarie Equity Capital Markets & Ors [No 6] [2007] NSWSC 125 ............................................................................. 14.70 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2008] NSWCA 206; (2008) 73 NSWLR 653 ......................................... 14.45, 14.95 Inland Revenue, Commissioners of v Lysaght [1928] AC 234 ....................................................... 1.95

J J McPhee & Son (Aust) Pty Ltd v ACCC (2000) 172 ALR 532 ................................................ 13.175 JS McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 ................................................ 2.55, 5.75 Jacazlow Pty Ltd v Amberley Autos Pty Ltd (1992) ATPR ¶41-177 ......................................................................................................................................... 7.95 Jackson v McClintock (1997) 8 TCLR 161 ..................................................................................... 9.40 Jacques v Cut Price Deli Pty Ltd (1993) ATPR (Digest) ¶46-102 .................................................. 3.20

Table of Cases xxiii

Jainran Pty Ltd v Boyana [2008] NSWSC 468 ................................................................ 14.80, 14.130 James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 .............................................................................................. 3.35, 3.150, 3.155, 14.120 James Spittles v Michael’s Appliance Services Pty Ltd [2008] NSWCA 76 ...................................................................................................................... 12.10, 12.20 Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526; ATPR ¶41-186 ................................................................................................................... 1.35, 14.45 Janssen Pharmaceutical Pty Ltd v Pfizer Pty Ltd (1986) ATPR ¶40-654 ........................................................................................................................ 13.280, 13.310 Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372 .................................................................................................................... 8.80 Jekos Holdings Pty Ltd v Australian Horticultural Finance Pty Ltd (1994) 2 Qd R 515 ............................................................................................................ 14.120 Jelin Pty Ltd v Murdoch Pty Ltd (1985) ATPR ¶40-562 ............................................................... 3.140 Jetstar Airways Pty Ltd v Free [2008] VSC 539 ................................................................ 5.120, 5.155 Jewellery Group Pty Ltd v ACCC [2013] FCAFC 144 ....................................................... 3.90, 6.155 Jillawarra Grazing Company v John Shearer Ltd (1984) ATPR ¶40-441 ....................................................................................................................................... 8.100 John Bevins Pty Ltd v Cassidy (2003) 135 FCR 1 ..................................................................... 14.180 John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR ¶41-249 .............................................................................. 3.20, 3.40, 3.55, 3.140 Johnson Tiles Pty Ltd v Esso Australia Ltd (2001) ATPR ¶41-794 ....................................................................................................................................... 3.165 Johnson Tiles Pty Ltd & Ors v Esso Australia Ltd (1999) ATPR ¶41-696 ..................................................................................................................... 3.25, 3.30, 3.120 Jones v ACCC [2010] FCA 481 ..................................................................................................... 1.100 Jones v Glen Houn Holdings Pty Ltd (1985) ATPR ¶40-604 ....................................................... 6.290 Jones v West Star Motors Pty Ltd (1995) ATPR ¶41-447 .................................................... 8.75, 8.210 Juniper Property Holdings No 15 Pty Ltd v Caltabiano [2016] QSC 5 ......................................................................................................................................... 14.50

K Kabwand v National Australia Bank (1989) ATPR ¶40-950 ......................................................... 3.125 Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 ................................................................. 4.35 Karawi Constructions Pty Ltd v Bonefind Pty Ltd (1993) ATPR ¶41-265 ....................................................................................................................................... 14.70 Karedis Enterprises Pty Ltd v Antoniou (1995) 59 FCR 35 ........................................................ 14.120 Keays v J P Morgan Administrative Services Australia Ltd [2011] FCA 358 ............................................................................................................... 6.265, 14.75 Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1988) ATPR ¶40-853 .......................................................................... 6.250, 14.120 Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1989) ATPR (Digest) ¶46-048 ......................................................................... 14.75 Keller v LED Technologies Pty Ltd (2010) 185 FCR 449 ................................. 3.195, 14.180, 14.190 Kennan v Monahan [1991] Qd R 401 ............................................................................................ 7.100 Kenny & Good Pty Ltd v MGICA (1992) Ltd (1997) ATPR ¶41-576 ....................................................................................................................................... 14.85 Ketchell v Master Of Education Services Pty Ltd (2007) 226 FLR 169 ...................................................................................................................................... 14.15 Kettle Chip Co Pty Ltd, The v Apand Pty Ltd (1993) 46 FCR 152 ............................................................................................................................................... 3.225

xxiv Table of Cases

Khoury v Sidhu [2011] FCAFC 71 ............................................................................................... 14.135 Khoury v Sidhu (No 2) [2010] FCA 1320 ................................................................................... 14.135 Kiley v Lysfar Pty Ltd (1985) ATPR ¶40-614 ................................................................................. 6.55 Kiley v MCI Technologies Pty Ltd [2006] VCAT 2543 .............................................................. 15.275 Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest) ¶46-054 ........................................................................................................................... 3.25 Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 ................................... 14.65, 14.85, 14.90 Knight v R (1992) 175 CLR 495 .................................................................................................... 13.45 Koninklijke Philips Electronics NV v Remington Products Australia Pty Ltd (2000) 100 FCR 257 ..................................................................................... 3.220 Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2011] FCAFC 119 ......................................................................................................... 3.80 Kovacevic v Holland Park Holdings Pty Ltd [2010] QDC 279 ...................................................... 9.65 Kowalczuk v Accom Finance Pty Ltd (2008) 229 FLR 4 ............................................................. 5.130 Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 .................................. 3.20, 3.110, 13.220 Ku-ring-gai Co-operative Building Society (No 12) Ltd, Re (1978) 36 FLR 134 .................................................................................................. 2.25, 2.75, 2.105 Kucharski v Air Pacific Ltd [2011] NSWCTTT 555 ..................................................................... 5.155

L LG Thorne & Co Pty Ltd v Thomas Borthwick & Sons (Australasia) Ltd (1956) 56 SR (NSW) 81 ............................................................................... 8.390 Lam v Ausintel Investments Australia Pty Ltd (1990) ATPR ¶40-990 .............................................................................................................................. 3.80, 3.105 Laminex (Aust) Pty Ltd v Coe Manufacturing Co [1999] NSWCA 370; (1998) ATPR ¶41-610 ....................................................................................... 15.275 Larmer v Power Machinery Pty Ltd (1977) ATPR ¶40-021 ............................................................ 6.90 Latrobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Ltd (2011) 273 ALR 774 ..................................................................................... 14.110 Law v MCI Technologies Pty Ltd [2006] VCAT 415 .................................................................. 15.275 Laws v GWS Machinery Pty Ltd [2007] NSWSC 316; (2007) 209 FLR 53 ........................................................................................................ 8.110, 12.60, 12.170 Leading Edge Events Australia Pty Ltd v Te Kanawa [2007] NSWSC 228 ................................................................................................................................. 4.50 Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601 ..................... 3.20, 3.80, 3.105, 14.75 Leeks v FXC Corporation [2002] FCA 72 ..................................................................................... 12.10 Legione v Hateley (1983) 152 CLR 406 .......................................................................................... 4.15 Lego Australia Pty Ltd v Paul’s (Merchants) Pty Ltd (1982) 42 ALR 344 ..................................................................................................................................... 3.215 Levene v Commissioners of Inland Revenue [1928] AC 217 ......................................................... 1.95 Leveraged Equities Ltd v Goodridge [2011] FCAFC 3; (2011) 274 ALR 655 ..................................................................................................................... 4.205, 5.60 Lewarne v Momentum Productions Pty Ltd [2007] FCA 1136 ..................................................... 1.100 Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535 ....................................................................................................................................... 3.20, 3.55 Lisciandro v Official Trustee in Bankruptcy (1995) ATPR ¶41-436 ........................................................................................................................................ 2.115 Louth v Diprose (1992) 175 CLR 621 ........................................................................... 4.15, 4.20, 4.25 Lovick & Son Developments Pty Ltd v Doppstadt Australia Pty Ltd [2012] NSWSC 529 ........................................................................................................... 14.160 Luxton v Vines (1952) 85 CLR 352 ............................................................................................... 13.45

Table of Cases xxv

Lymquartz v 2 Elizabeth Bay Road [2007] NSWSC 457 .............................................................. 3.180 Lyons v Kern Konstructions (Townsville) Pty Ltd (1983) 47 ALR 114 ..................................................................................................................................... 3.140

M MK Hutchence (Trading as “INXS”) v South Sea Bubble Co (1986) ATPR ¶40-667 ................................................................................................................. 3.175 MacCormick v Nowland (1988) ATPR ¶40-852 ............................................................................ 2.130 Mackman v Stengold Pty Ltd (1991) ATPR ¶41-105 ..................................................... 14.180, 14.185 Macquarie Bank Ltd v Seagle [2008] FCA 1417 ........................................................................... 1.100 Madden v Seafolly Pty Ltd [2012] FCA 1346 ............................................................................... 1.100 Makita (Aust) Pty Ltd v Black & Decker (A’asia) Pty Ltd (1990) 18 IPR 270 ........................................................................................................................ 3.20 Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305 .......................................................... 6.75 Malam v Graysonline, Rumbles Removals and Storage (General) [2012] NSWCTTT 197 .............................................................................................. 8.170 March v Stramare (E & MH) Pty Ltd (1991) 171 CLR 506 ........................................... 14.40, 14.130 Mark Bain Constructions Pty Ltd v Avis [2012] QCA 100 ........................................................... 14.95 Mark Foys Pty Ltd v TVSN (Pacific) Ltd (2001) ATPR ¶41-795 ....................................... 6.90, 6.115 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; 158 ALR 333 ............................................................................................... 14.45, 14.85, 14.105, 14.220 Martin v Tasmania Development and Resources (1999) ATPR (Digest) ¶46-193 ......................................................................................................................... 6.265 Marwood v Agrison Pty Ltd [2013] VCAT 1549 ............................................................... 8.245, 15.40 Masterclass Enterprises Pty Ltd v Bedshed Franchisors (WA) Pty Ltd [2008] WASC 67 ........................................................................................................... 4.175 Maxwell v Murphy (1957) 96 CLR 261 .......................................................................................... 8.60 Mayes v Australian Cedar Pty Ltd (2006) ATPR ¶42-119 ............................................... 12.10, 12.145 Mayne Nickless v Crawford (1992) 59 SASR 490l [1992] ASC 56-188 .................................................................................................................................. 9.05, 9.85 McCarthy v Australian Rough Riders Association Inc (1988) ATPR ¶40-836 .............................................................................................................................. 2.20 McCarty v Mc Intyre [1999] FCA 784 ........................................................................................... 14.40 McDonald’s System of Australia Pty Ltd v McWilliam’s Wines Pty Ltd (1979) ATPR ¶40-140 ................................................................................................... 6.115 McGrath v Australian Naturalcare Products Pty Ltd (2008) 165 FCR 230 ...................................................................................................................................... 3.135 McQuillan v Thomas [2012] NSWCTTT 107 ................................................................................ 8.335 McWilliam’s Wines Pty Ltd v McDonald’s System of Australia Pty Ltd (1980) 49 FLR 455 .............................................................................................. 3.95, 3.165 Medibank Private Ltd v Cassidy (2002) 124 FCR 40 ................................................................. 13.395 Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 ........................ 3.170, 3.185, 3.190, 3.195, 13.145, 13.290, 13.310, 14.180, 14.185, 14.190 Medtel Pty Ltd v Courtney (2003) 126 FCR 219 .......................................................................... 8.215 Medtel Pty Ltd v Courtney [2003] FCAFC 151; (2003) 130 FCR 182 .................................................................................................. 8.215, 8.250, 8.305, 12.170 Mehta v Commonwealth Bank of Australia (1990) ATPR ¶41-026 ..................................................................................................................................... 14.120 Merck Sharpe & Dohme (Aust) Pty Ltd v Peterson (2011) 196 FCR 145; [2011] FCAFC 128 ............................................................................. 8.305, 8.360, 14.40

xxvi Table of Cases

Mercland Investment Group Pty Ltd v Duncalm Pty Ltd [2012] FCA 183 ...................................................................................................................................... 3.125 Metal Corp Recyclers Pty Ltd v Metal Manufacturers Ltd (2004) ATPR (Digest) ¶46-243 ....................................................................................... 3.115, 3.120 Microbeads AG v Vinhurst Road Markings Ltd [1975] 1 WLR 218 ............................................................................................................................................... 8.190 Mill v The Queen (1988) 166 CLR 59 ............................................................................. 13.70, 13.195 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 ......... 3.05, 3.35, 3.65, 3.100, 3.105, 3.110, 3.130 Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) [2015] FCA 825 .................................... 4.145, 4.185 Mister Figgins Pty Ltd v Centepoint Freeholds Pty Ltd (1981) 36 ALR 23 ................................................................................................................................ 14.215 Monroe Topple v The Institute of Chartered Accountants (2002) 122 FCR 110; (2001) ATPR (Digest) ¶46-212 .................................................................. 5.65, 6.30 Mould v Commissioner of State Revenue [2015] VSCA 285 ......................................................... 5.75 Mullens v Miller (1882) 22 Ch D 194 ........................................................................................... 2.120 Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274; (1989) ATPR ¶40-926 ........................................................................................ 14.35, 14.65, 14.220 Murphy v Overton Investments Pty Ltd (2004) 21 CLR 388 ............................... 3.20, 14.110, 14.120

N NMFM Property Pty Ltd v Citibank Ltd (2000) 107 FCR 270 .................................................... 2.115 NT Power Generation Pty Ltd v Power and Water Authority (2002) 122 FCR 399 .................................................................................................................... 2.55 NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 ............................................................................................................. 2.55, 2.60 NW Frozen Foods Pty Ltd v ACCC (1996) 71 FCR 285 ..................... 13.65, 13.175, 13.200, 13.205 National Australia Bank Ltd v Meeke (2007) ATPR (Digest) ¶46-272 ....................................................................................................................................... 4.100 National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000 ................. 3.10, 3.90, 3.130, 3.190, 3.285 Nationwide News Pty Ltd v ACCC (1996) 71 FCR 215 ....................................................... 7.10, 7.15 Nella v Kingia Pty Ltd (1989) ATPR (Digest) ¶46-046 ................................................................ 14.65 Nesbit v Porter [2000] 2 NZLR 465 ................................................................................... 8.260, 15.60 Nescor Industries Group Pty Ltd v Miba Pty Ltd (1998) ATPR ¶41-609 ....................................................................................................................................... 3.140 Netcomm (Australia) Pty Ltd v Dataplex Pty Ltd (1988) ATPR ¶40-883 ....................................................................................................................................... 6.165 New South Wales v McCloy Hutcherson Pty Ltd (1993) 116 ALR 363 ................................................................................................................................... 14.120 New South Wales v RT & YE Falls Investments Pty Ltd (2003) ATPR (Digest) ¶46-233 ................................................................................................................ 2.55 Niblett v Confectioners’ Materials Co Ltd [1921] 3 KB 387 ........................................................ 8.185 Nike International Ltd v Campomar Sociedad Limitada (1996) ATPR ¶41-518 .............................................................................................................................. 3.70 Nixon v Slater & Gordon (2000) ATPR ¶41-765 ........................................................................... 8.125 Noor Al Houda Islamic College Pty Ltd v Bankstown Airport Ltd (2005) 215 ALR 625 ......................................................................................... 3.25, 3.35, 3.115 Norcast SarL v Bradken Ltd (No 2) (2013) 219 FCR 14 .................................................... 1.95, 3.115 North East Equity Pty Ltd v Proud Nominees Pty Ltd (2010) 269 ALR 262 ................................................................................................................... 14.40, 14.95

Table of Cases xxvii

North East Solution Pty Ltd v Masters Home Improvement Australia Pty Ltd [2016] VSC 1 .............................................................................................. 14.105 Norton v Hervey Motors Ltd [1996] DCR 427; 5 NZBLC 99-387 ......................................................................................................................................... 8.255

O O’Bryen v Coles Myer Ltd (1993) ATPR ¶41-209 .......................................................................... 6.45 O’Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455 ............................................................................................................. 3.135, 6.265, 14.100 Ocean Dynamics Charter Pty Ltd v Hamilton Island Enterprises Ltd [2015] FCA 460 ................................................................................................................. 14.235 Office Cleaning Services Ltd v Westminster Window and General Cleaners Ltd (1946) 63 RPC 39 .................................................................................. 3.215 Office of Fair Trading v Abbey National plc [2009] UKSC 6; [2010] 1 AC 696 ........................................................................................................................... 5.35 Ogden, Contech Technical Services Pty Ltd v Unmanned Systems Asia Pacific (General) [2013] NSWCTTT 378 ............................................................ 8.80 Orix Australia Corporation Ltd v Moody Kidell & Partners Pty Ltd [2006] NSWCA 257 .............................................................................................................. 3.45 Osgaig Pty Ltd v Ajisen (Melbourne)Pty Ltd (2004) ATPR ¶42-036 ......................................................................................................................................... 6.90 Our Town FM Pty Ltd v Australian Broadcasting Tribunal (1987) 16 FCR 465 ...................................................................................................................... 6.30 Overlook Management BV v Foxtel Management Pty Ltd (2002) ATPR (Digest) ¶46-219 .................................................................................................. 4.185 Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193 ..................................................................................... 3.25, 3.30, 3.100, 3.110, 3.165 Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd [2011] WASCA 76 ................................................................................................................................. 14.40

P PSAL Ltd v Kellas-Sharpe [2012] QSC 31 .......................................... 4.75, 4.195, 4.210, 5.30, 5.130 PT Ltd v Spuds Surf Chatswood Pty Ltd [2013] NSWCA 446 ...................................................... 4.90 Pacific National (ACT) Ltd v Queensland Rail (2006) ATPR (Digest) ¶46-268 ......................................................................................................................... 4.165 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 .................... 4.45, 4.65, 4.80, 4.90, 4.95, 4.100, 4.185, 4.190, 4.195, 4.210, 5.10, 5.15 Paciocco v Australia and New Zealand Banking Group [2015] HCATrans 229 ............................................................................................................................ 4.195 Paramedical Services Pty Ltd v Ambulance Service of NSW [1999] FCA 548 .................................................................................................................. 2.65, 2.70 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 ...................................... 1.40, 3.05, 3.20, 3.60, 3.65, 3.70, 3.95, 3.165, 3.210, 3.220 Parkview (Keppell) Pty Ltd v Mytarc Pty Ltd (1984) 3 FCR 186 ................................................. 3.65 Paul Madsen v Agrison Pty Ltd [2014] NSWCATCD 79 .................................................. 8.230, 8.245 Pavich Pty Ltd v Bobra Nominees (1988) ATPR (Digest) ¶46-039 ....................................................................................................................................... 14.65 Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211 ..................................................................................................................... 3.30 Pereira v Director of Public Prosecutions (1988) 82 ALR 217 ........................................ 3.195, 14.190

xxviii

Table of Cases

Permanent Mortgages Pty Ltd v Vandenbergh (2010) 41 WAR 353 ................................................................................................................................................. 4.25 Perpetual Trustee Company Ltd v Milanex Pty Ltd (in liq) [2011] NSWCA 367 ........................................................................................... 1.50, 14.130, 14.140 Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd (2010) 184 FCR 1 ................................................................................................................. 3.120, 8.360, 12.170 Phillip & Anton Homes Pty Ltd v Commonwealth (1988) ATPR ¶40-838 ....................................................................................................................................... 6.250 Playcorp Group of Companies Pty Ltd v Peter Bodum A/S [2010] FCA 23 ............................................................................................................................ 3.220 Plimer v Roberts (1997) 80 FCR 303 ................................................................................... 2.95, 2.105 Pojzak v Congeo Nominees Pty Ltd [2013] VCAT 2175 .............................................................. 15.75 Pont Data Australia Pty Ltd v ASX Operations Pty Ltd (1990) 21 FCR 385 ....................................................................................................................... 8.125, 9.10 Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 .............................................. 3.80, 3.105 Potts v Miller (1940) 64 CLR 282 ...................................................................................... 14.85, 14.90 Poulet Frais Pty Ltd v The Silver Fox Co Pty Ltd (2005) 220 ALR 211 ............................................................................................................................ 3.20, 14.75 Prestia v Aknar (1996) 40 NSWLR 65 ................................................................................. 2.85, 2.105 Pretorius v Venture Stores (Retailers) Pty Ltd (1992) ATPR ¶41-166 ..................................................................................................................................... 13.130

Q Quickenden v O’Connor, Commissioner of Australian Industrial Relations Commission (2001) 109 FCR 243 .............................................................................. 2.20 Quinlivanc v ACCC (2004) 160 FCR 1 ....................................................................................... 14.180

R R v Federal Court of Australia; Ex parte WA National Football League (1979) 143 CLR 190 ....................................................................................................... 2.20 R v Judges of Federal Court of Australia; Ex parte Pilkington ACI (Operations) Pty Ltd (1978) 142 CLR 113 ..................................................................... 14.230 R v Kirby (1956) 94 CLR 254 ..................................................................................................... 13.375 R v McInerney (1986) 42 SASR 111 ........................................................................................... 13.185 R & C Products Pty Ltd v SC Johnson & Sons Pty Ltd (1993) FCR 188 ........................................................................................................................................ 3.20 RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd (1993) 41 FCR 164 .................................................................................................................. 13.145 RT & YE Falls Investments Pty Ltd v New South Wales [2001] NSWSC 1027 ...................................................................................................................... 1.95, 5.75 Rafferty v Time 2000 West Pty Ltd (No 4) [2010] FCA 725 ..................................................... 14.185 Raffety v Madgwicks (2012) 203 FCR 1 ........................................................................ 14.185, 14.190 Rasell v Cavalier Marketing (Australia) Pty Ltd [1991] 2 Qd R 323 ................................................................................................................................... 8.210, 8.360 Razdan v Westpac Banking Corporation [2014] NSWCA 126 ..................................................... 14.50 Read v Nerey Nominees Pty Ltd [1979] VR 47 .............................................................................. 9.65 Reardon v Morley Ford Pty Ltd (1980) 49 FLR 401 ...................................................................... 7.35 Reardon v Nolan (1983) ATPR ¶40-405 ......................................................................................... 13.80 Red Bull Australia Pty Ltd v Sydneywide Distributors Pty Ltd (2001) 53 IPR 481 ...................................................................................................................... 3.225

Table of Cases xxix

Regent’s Pty Ltd v Subaru (Aust) Pty Ltd (1996) ATPR ¶41-463 .............................................. 14.235 Reinhold v Ford Motor Company [2014] QCAT 671 .................................................................... 8.340 Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 ................................................................................................................. 14.160 Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 ........................................................................................... 3.25, 3.30, 3.100 Rich v ASIC (2004) 220 CLR 129 ............................................................................................... 13.325 Rizzo v Fitzgerald (1988) 19 FCR 175 ................................................................................. 7.80, 7.100 Robin Pty Ltd v Canberra International Airport Pty Ltd (1999) ATPR ¶41-710 ............................................................................................................................ 2.105 Rogers v Whitaker (1992) 175 CLR 479 ......................................................................................... 9.65 Roses Only & Lush Pty Ltd v Mark Lyons Pty Ltd (1999) ATPR ¶41-706 ............................................................................................................................ 3.215 Rural Press Ltd v ACCC (2003) 216 CLR 53 ................................................................ 13.145, 14.180 Ryan v Great Lakes Council [1999] FCA 177; (1999) ATPR (Digest) ¶46-191 ............................................................................................................ 12.20, 12.130 Ryan v The Queen [2001] HCA 21; (2001) 206 CLR 267 ......................................................... 13.185 Ryan Connor v Teela Enterprises Pty Ltd and Robyn May Stevenson t/as Sureflo Exhaust [2014] NSWCATCD 93 ......................................................... 8.130

S S & I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd (1998) 88 FCR 354 ........................................................................................................... 3.70, 3.215 SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50 ............................................... 3.135 SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516 ................................................ 14.20 SWB Family Credit Union Ltd v Parramatta Tourist Services Pty Ltd (1980) ATPR ¶40-180 ................................................................................................... 8.125 Sabre Corporation Pty Ltd v Laboratories Pharm-a-Care (1995) ATPR ¶41-396 .......................................................................................................................... 14.235 St Albans City and District Council v International Computers Ltd [1996] 4 All ER 481 ............................................................................................................ 8.135 St George Bank Ltd v Wright [2009] QSC 337 ........................................................ 1.105, 3.250, 9.20 Saints Gallery Pty Ltd, The v Plummer (1988) 80 ALR 525 .......................................................... 3.55 Samsung Electronics Australia Pty Ltd v LG Electronics Pty Ltd [2015] FCA 227 .......................................................................................................................... 3.205 Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd (No 2) [2015] FCA 477 ..................................................... 14.25, 14.230, 14.240 Samsung Electronics Company Ltd v Apple Inc (2011) 217 FCR 238 ............................................................................................................................................. 14.235 Samuels v Davis (1943) 1 KB 526 ................................................................................................. 9.100 Schneider Electric (Australia) Pty Ltd v ACCC (2003) 127 FCR 170 ................................................................................................................................. 13.65, 13.200 Seafolly Pty Ltd v Madden [2012] FCA 1346; (2012) ATPR ¶42-424 ......................................................................................................................................... 2.40 Selig v Wealthsure Pty Ltd (2015) 89 ALJR 572 ........................................................................ 14.150 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 ............................ 3.20, 14.40, 14.105, 14.110 Serini v Surf Toyota [2013] NSWCTTT 531 ................................................................................. 8.305 Serrata Investments Pty Ltd v Rajane Pty Ltd (1991) 6 WAR 419 ............................................................................................................................................... 2.120 Seven Network Ltd v News Ltd [2007] FCA 1062 ....................................................................... 3.125 Sgargetta v National Australia Bank Ltd [2014] VSCA 159 ........................................................... 4.85

xxx Table of Cases

Shahid v Australian College of Dermatologists (2008) 168 FCR 46 ....................................................................................................... 2.20, 2.75, 2.85, 6.275, 14.110 Shoshana Pty Ltd v 10th Cantanae Pty Ltd (1988) 18 FCR 285; ATPR ¶40-833 ................................................................................................................. 6.115, 6.120 Siddons Pty Ltd v Stanley Works Pty Ltd (1990) ATPR ¶41-044 .................................................. 6.45 Sigma Constructions (Vic) Pty Ltd v Maryvell Investments Pty Ltd (2005) ATPR ¶42-048 .......................................................................................................... 2.105 Singtel Optus Pty Ltd v ACCC [2012] FCAFC 20; (2012) 287 ALR 249 .............................................. 1.35, 3.200, 6.275, 13.160, 13.175, 13.185, 13.190, 13.210 Singtel Optus Pty Ltd v Telstra Corp Ltd [2004] FCA 859 .......................................................... 3.170 Sirway Asia Pacific Pty Ltd v Commonwealth (2002) ATPR (Digest) ¶46-226 ........................................................................................................................... 2.55 Skerbic v McCormack [2007] ACTSC 93 ............................................................. 11.220, 12.45, 12.90 Smith v Anderson (1880) 15 Ch D 247 ........................................................................................... 5.75 Smith v Capewell (1979) 142 CLR 509 ................................................................................. 2.55, 5.75 Smith v Chadwick (1884) 9 App Cas 187 ..................................................................................... 14.50 Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254 ............................................................................................. 14.95 Smolonogov v O’Brien (1982) ATPR ¶40-312 ................................................................................ 1.90 Smolonogov v O’Brien (1983) ATPR ¶40-418 ................................................................................ 1.90 Smythe v Thomas (2007) 71 NSWLR 537 .................................................................................... 8.170 Specsavers Pty Ltd v The Optical Superstore Pty Ltd (No 2) [2010] FCA 566 .......................................................................................................................... 3.205 Spriggs v Federal Commissioner of Taxation (2009) 239 CLR 1 ................................................... 5.75 Stack v Coast Securities No 9 Pty Ltd (1983) 46 ALR 451 ......................................................... 3.140 State Government Insurance Corporation v Government Insurance Office of NSW (1991) ATPR ¶41-110 ........................................................................ 2.20 Stegenga v J Corp Pty Ltd (1999) ATPR ¶41-695 ....................................................................... 12.100 Steiner v Magic Carpet Tours Pty Ltd (1984) ATPR ¶40-490 ..................................................... 14.110 Stephens v Chevron Motor Court Ltd [1996] DCR 1; NZ DCR Lexis 29 ................................................................................................................ 8.255, 15.25, 15.30 Stern v Mc Arthur (1988) 165 CLR 489 .......................................................................................... 4.15 Sternberg v The Queen (1953) 8 CLR 646 ...................................................................................... 6.20 Stuart Alexander & Co (Interstate) Pty Ltd v Blenders Pty Ltd (1981) 53 FLR 307; 37 ALR 161 ......................................................................... 3.20, 3.180, 3.205 Sun Earth Homes Pty Ltd v Australian Broadcasting Commission (1991) ATPR ¶41-067 ............................................................................................. 2.20 Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 2) (2012) 266 FLR 243 .................................................................................... 1.95, 1.100, 2.75 Sutton v A J Thompson Pty Ltd (in liq) (1987) ATPR ¶40-789 ......................... 3.165, 14.180, 14.185 Swan v Downes (1978) 34 FLR 36 .................................................................................................. 7.50 Sydney Harbour Casino Properties Pty imited v Coluzzi (2003) ATPR (Digest) ¶46-238 .............................................................................................................. 3.145 Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 354 ............................................................................................................ 3.20, 3.225 Sykes v Reserve Bank of Australia (1998) 88 FCR 511 ......................................... 2.105, 3.135, 3.145

T TCN Channel Nine Pty Ltd v Ilvariy Pty Ltd (2008) 71 NSWLR 323; [2008] NSWCA 9 ...................................................................................... 2.45, 3.235

Table of Cases xxxi

TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147 ......................................................... 9.90, 9.105, 9.115 TPC v Allied Mills Industries Pty Ltd (No 5) (1981) 60 FLR 38 .............................................. 13.205 TPC v Axive Pty Ltd (1994) ATPR ¶41-368 ............................................................................... 13.205 TPC v Bata Shoe Co Pty Ltd (1980) ATPR ¶40-161 .................................................................. 13.210 TPC v CC (New South Wales) Pty Ltd (1994) ATPR ¶41-363 ................................................... 13.205 TPC v CSR Ltd (1991) ATPR ¶41-076 ........................................................................................ 13.175 TPC v Calderton Corporation Pty Ltd (1994) ATPR ¶ 41-306 ....................................................... 7.10 TPC v Cue Design Pty Ltd (1996) ATPR ¶41-475 ............................................................. 6.125, 6.155 TPC v Farrow (1990) ATPR ¶41-018 ............................................................................................. 6.290 TPC v Golden Australia Paper Manufacturers Pty Ltd (1995) ATPR ¶41-370 ................................................................................................................... 6.45, 6.275 TPC v Hymix Industries Pty Ltd (1995) ATPR ¶41-369 ............................................................. 13.205 TPC v J & R Enterprises Pty Ltd (1991) 99 ALR 325 ................................................................. 6.275 TPC v Legion Cabs (Trading) Co-op Society Ltd (1978) ATPR ¶40-092 ......................................................................................................................................... 2.20 TPC v Mobil Oil Australia Ltd (1984) 3 FCR 168 ......................................................................... 7.35 TPC v Optus Communications Pty Ltd (1996) 64 FCR 326 ......................................................... 6.130 TPC v Pacific Dunlop Ltd (1994 ATPR ¶41-307 ............................................................................. 6.45 TPC v Parkfield Operations Pty Ltd (1985) 7 FCR 534 ............................................................. 13.220 TPC v QDSV Holdings Pty Ltd (trading as Bush Friends Australia) (1995) ATPR ¶41-371 ............................................................................................... 6.165 TPC v Queensland Aggregates Pty Ltd (1982) 61 FLR 52 ................................................ 2.115, 8.125 TPC v Santos Ltd (1993) ATPR 41-221 ....................................................................................... 13.145 TPC v Simpson Pope Ltd (1980) 30 ALR 544 ............................................................................ 13.210 TPC v TNT Australia Pty Ltd (1995) ATPR ¶41-375 .................................................................. 13.205 TPC v Tubemakers of Australia Ltd (1983) 76 FLR 455 ..................................... 2.115, 2.120, 13.220 TPC v Vales Wines Co Pty Ltd (1996) ATPR ¶41-480 ................................................................... 6.45 TPG Internet Pty Ltd v ACCC (2012) 210 FCR 277 .................................................................... 3.190 TPS Developments Pty Ltd v Chef’s Hat Australia Pty Ltd [2013] VCAT 731 ....................................................................................................................... 15.85 Tabet v Gett (2010) 240 CLR 537 .................................................................................................. 14.40 Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 ................................................................................................................... 3.05, 3.90, 3.95, 3.165 Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 .................................................. 4.15, 5.05 Taylor v Crossman (No 2) [2012] FCAFC 11 ............................................................................... 14.40 Taylor v Johnson (1983) 151 CLR 422 ............................................................................................ 4.15 Tec & Thomas (Australia) Pty Ltd v Matsumiya Computers Co Pty Ltd (1984) 1 FCR 28 ......................................................................................................... 13.290 Telstra Corp Ltd v Cable & Wireless Optus Ltd [2001] FCA 1478 ............................................................................................................................................... 3.65 Telstra Corporation Ltd v Optus Communications Pty Ltd (1996) 36 IPR 515 .......................................................................................................... 3.20, 13.290 Telstra Corporation Ltd v Singtel Optus Pty Ltd (2007) ATPR ¶42-159 ....................................................................................................................................... 6.150 Telstra Corporation Ltd v Singtel Optus Pty Ltd [2014] VSC 35 ................................................. 3.205 Tenji v Henneberry & Associates Pty Ltd (2000) ATPR (Digest) ¶46-204 ........................................................................................................................ 14.200, 14.220 Tenth Vandy Pty Ltd v Natwest Markets Australia Pty Ltd [2012] VSCA 103 ......................................................................................................................... 4.15 Tesco Supermarkets Ltd v Nattrass [1972] AC 153 ....................................................................... 2.110

xxxii

Table of Cases

Thompson v Ice Creameries of Australia Pty Ltd (1998) ATPR ¶41-611 ................................................................................................................... 3.20, 3.150, 3.155 Thompson v Mastertouch TV Services Pty Ltd (No 2) (1977) 29 FLR 270 ...................................................................................................................................... 3.140 Thompson v Mastertouch TV Services (1977) ATPR ¶40-027 ..................................................... 6.180 Thomson Australia Holdings Pty Ltd v TPC (1981) 148 CLR 151 ............................................................................................................................................. 13.250 Thorpe v CA Imports Pty Ltd (1990) ATPR ¶40-996 .................................................................... 6.165 Ting v Blanche (1993) 118 ALR 543 ............................................................................................. 3.145 Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1 ........................................................................... 2.80 Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 ........................................................ 13.145 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 ............................................................................................................................................... 6.265 Tomasetti v Brailey [2012] NSWCA 399 ..................................................................................... 14.170 Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 ................................................................................................................................................. 4.50 Townsend v Roussety & Co (WA) Pty Ltd (2007) 33 WAR 321 ................................................. 3.125 Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 ................................................................................................. 3.75, 3.100, 3.105, 3.125 Transmarket Trading Pty Ltd v Sydney Futures Exchange Ltd (2010) 188 FCR 1 ...................................................................................... 1.105, 3.250, 4.195, 9.20 Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 200 CLR 591 ................................................................ 13.250 Twentieth Century Fox Film Corporation v The South Australian Brewery Co Ltd (1996) 66 FCR 451 ........................................................................................ 3.225 Tycoon Holdings Ltd v Trencor Jetco Inc (1992) 34 FCR 31 ........................................................ 5.75 Tytel Pty Ltd v Telecom (1986) 67 ALR 433 .............................................................................. 14.235

U UK Housing Alliance (North West) Ltd v Francis [2010] EWCA Civ 117 .......................................................................................................................................... 5.95 Ueda v Ecruising Pty Ltd and Southern Cross Safaris Australia Pty Ltd [2014] NSWCATCD 30 ................................................................................................ 9.105 Unilan Holdings Pty Ltd v Kerrin (1992) ATPR ¶41-169 ............................................................. 2.105 Union Steamship Company of Australia Pty Ltd v King (1988) 166 CLR 1 .................................................................................................................................. 1.130 Universal Telecasters (Qld) Ltd v Ainsworth Consolidated Industries Ltd (1983) ATPR ¶40-384 ......................................................................................... 3.235 Universal Telecasters (Qld) Ltd v Guthrie (1978) 32 FLR 360 .................................................... 3.235

V Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 ............................................................................................................................... 3.140 Vero Lenders v Taylor Byrne Pty Ltd [2006] FCA 1430 ............................................................ 14.135 Village Building Company Ltd v Canberra International Airport Pty Ltd (2004) 139 FCR 330 ....................................................................................................... 2.95 Voli v Inglewood Shire Council (1963) 110 CLR 74 ...................................................................... 9.65

Table of Cases xxxiii

Volunteer Eco Students Abroad Pty Ltd v Reach Out Volunteers Pty Ltd [2013] FCA 731 .............................................................................................................. 6.80

W Walker, Commissioner for Fair Trading v Rugs a Million Pty Ltd [2006] WASC 127 .................................................................................................... 6.125, 6.155 Wallace v Brodribb (1985) 5 FCR 315 ............................................................................................ 7.35 Wallace v Walplan Pty Ltd (1985) 8 FCR 14 .................................................................................. 7.35 Wallis v Downard-Pickford (1994) 179 CLR 388 ........................................................................... 9.30 Walplan v Wallace (1985) 8 FCR 27 .............................................................................................. 2.115 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 ....................................................... 4.15 Wardley Australia Ltd v Western Australia (1991) ATPR ¶41-131 ..................................................................................................................................... 14.120 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 ............. 14.35, 14.40, 14.50, 14.120 Warner v Elders Rural Finance Ltd (1993) 41 FCR 399; 113 ALR 517 ............................................................................................................................ 3.25, 3.125 Warnock v Australian and New Zealand Banking Group Ltd (1989) ATPR ¶40-928 ................................................................................................................... 9.95 Warwick Entertainment Centre Pty Ltd v Alpine Holdings Pty Ltd (2005) ALR 134 ................................................................................................................... 3.160 Waterside Workers’ Federation of Australia v JW Alexander Ltd (1915) 20 CLR 54 .................................................................................................................... 13.375 Weininger v The Queen (2003) 212 CLR 629 ............................................................................. 13.185 Weitmann v Katies Ltd (1977) 29 FLR 336; ATPR ¶40-041 ............................................... 3.65, 6.115 Wells v John R Lewis (International) Pty Ltd (1975) 25 FLR 194 ..................................................................................................................................... 1.100, 7.80 Westpac Banking Corporation v Northern Meals Pty Ltd (1989) ATPR ¶40-953 ............................................................................................................................ 6.275 Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189; ATPR ¶40-940 ...................................................... 2.115, 3.35, 3.140, 3.150, 3.155, 14.180, 14.185 Whitaker v Paxad Pty Ltd [2009] WASC 47 ................................................................................. 3.110 Wilde v Menville Pty Ltd (1981) ATPR ¶40-195 .................................................... 6.265, 6.290, 13.80 Wildsmith v Dainford Ltd (1983) 51 ALR 24 ............................................................................... 3.120 Williams v Pisano [2015] NSWCA 177; (2015) 299 FLR 172 ...... 2.75, 2.100, 2.135, 14.90, 14.145, 14.150, 14.155 Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) [2012] FCA 1028 .................................................................................... 3.255, 3.285, 3.290 Winterton Constructions Pty Ltd v Hambros Australia Ltd (1993) ATPR ¶41-205 ................................................................................................................. 3.125 Wordplay Services Pty Ltd v ACCC (2005) 143 FCR 345 ................................................ 7.115, 7.135 World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181 ........................................................ 14.230 Wright v Wheeler Grace & Pierucci Pty Ltd (1988) ATPR ¶40-865 ................................................................................................................... 3.35, 3.150, 3.155 Wyong Shire Council v Shirt (1980) 146 CLR 40 ........................................................... 11.20, 12.170

Y Yates v Whitlam (1999) ATPR ¶41-722 ......................................................................................... 8.125 Yorke v Lucas (1985) 158 CLR 661 ...................................................................... 3.40, 14.175, 14.195

xxxiv

Table of Cases

Z Zalai v Col Crawford (Retail) Pty Ltd (1980) ATPR ¶40-177 ........................................................ 8.10 Zhang v United Auctions [2013] NSWCTTT 6 .................................................................. 8.130, 8.235 Zhu v Treasurer (NSW) (2004) 218 CLR 530 ................................................................................. 1.90 Zipside Pty Ltd v Anscor Pty Ltd [2000] QCA 395 ......................................................... 14.85, 14.105

Table of Statutes Commonwealth A New Tax System (Goods and Services Tax) Act 1999: 9.125 Acts Interpretation Act 1901: 1.30, 5.65 s s s s

2C(1): 8.70 4: 1.55 15AA: 1.40 15AC: 14.35

Administrative Decisions (Judicial Review) Act 1977: 11.60 Agricultural and Veterinary Chemicals Act 1994: 11.250 Australian Securities and Investments Commission Act 1989 s 12DG: 7.45 s 12DK(5): 7.145 s 12DK(6): 7.145

Australian Securities and Investments Commission Act 2001: 1.55, 3.250, 9.20 s 12BF: 5.205, 5.215, 5.245 s 12BF(1): 5.195 s 12BF(2): 5.195 s 12BF(3): 5.200 ss 12BF to 12BM: 5.45 s 12BG: 5.225 s 12BG(1): 5.220, 5.230 s 12BG(2): 5.220, 5.230 s 12BG(2)(b): 5.235 s 12BG(2)(c): 5.240 s 12BG(3): 5.220, 5.235 s 12BG(4): 5.225 s 12BH(1): 5.220, 5.245 s 12BH(2): 5.245 s 12BI: 1.110, 5.215 s 12BI(2): 5.215 s 12BI(3): 5.215 s 12BL: 5.210 s 12CA: 4.05, 4.195 s 12CB: 4.05, 4.85, 4.90, 4.95, 4.100, 4.185, 4.190, 4.195, 4.205, 4.210 s 12CB(4)(b): 4.65 s 12CC: 4.05, 4.50, 4.90, 4.95, 4.195, 4.210 s 12CC(1): 4.195, 4.200, 4.205, 4.210, 4.215 s 12CC(1)(l): 4.185 s 12CC(2): 4.195 s 12CC(2)(a): 4.200 s 12CC(2)(b): 4.205 s 12CC(2)(e): 4.210

s 12CC(2)(l): 4.185, 4.215 s 12CD(4): 4.05 s 12DA: 1.110, 3.260, 3.285, 6.245 s 12DA(1A): 3.285 s 12DA(1): 3.10, 3.285, 7.225 s 12DB: 3.285, 6.220, 6.225 s 12DB(1): 3.260 s 12DB(1)(g): 3.285 s 12DB(1)(h): 6.245 s 12DB(1)(i): 6.230, 6.245 s 12DB(1)(j): 6.230 s 12DC: 3.260, 6.260 s 12DD: 3.260 s 12DE: 3.260, 7.30 s 12DF: 3.260, 6.285 s 12DG: 3.260, 7.45 s 12DH: 3.260, 7.205 s 12DI: 3.260, 7.60 s 12DJ: 3.260, 7.225 s 12DJ(1): 7.225 s 12DK: 3.260, 7.145 s 12DL: 3.260, 7.75 s 12DM: 3.260, 7.85 s 12DN: 6.305 s 12ED: 1.60, 1.105, 3.250, 9.20, 15.225 s 12ED(3): 1.110 s 12BAA: 3.265 s 12BAA(1): 3.270, 3.285 s 12BAA(4): 3.270 s 12BAA(5): 3.285 s 12BAA(7): 3.270 s 12BAA(7)(d): 9.35 s 12BAA(7)(k): 3.270, 3.285, 8.95 s 12BAA(8): 3.270 s 12BAB: 3.265, 8.95 s 12BAB(1): 3.265 s 12BAB(5): 3.275 s 12BAB(6): 3.275 s 12BAB(7): 3.280 s 12BAB(8): 3.280 s 12DMA: 7.95 s 12DMB: 7.110 s 12DMB(1): 7.100 s 12DMB(2): 7.100 s 12GXA: 6.225, 7.30 s 102(2)(e): 3.290 Pt II, Div 2: 3.250

xxxvi

Table of Statutes

Australian Securities and Investments Commission Regulations 2001 reg 2B: 3.270, 3.285 reg 2B(3): 8.95 reg 2B(3)(b)(iv): 3.285

Carriage of Goods by Sea Act 1991 s 7(1): 5.45

Commonwealth of Australia Constitution Act 1901 Ch III: 13.375 s 51(xxxix): 1.90 s 51(i): 1.90 s 51(xx): 1.90, 2.05, 2.10, 2.25 s 61: 1.90 s 75: 1.150 s 122: 1.90, 1.120

Competition Policy Reform Act 1995: 1.40 Competition and Consumer Act 2010: 1.10, 1.55 s s s s s s s s s s s s s s s s s s s s s s s s s s s s s s s s s s s s s s s

2A(1: 2.05 2: 1.40, 11.45 2A: 2.50, 5.75 2A(1): 2.50 2A(2): 2.50 2C: 2.60, 2.70 2C(1)(b): 2.60 2C(1)(c): 2.60 2C(1)(d): 2.60 2C(3): 2.60 4: 8.120 4(1): 1.100, 2.10, 2.25, 2.30, 2.110 4A(5): 2.35 4F(1)(b): 5.65 4L: 14.20 5: 1.100, 2.40, 2.50 5(1): 1.95, 1.130 5(1)(g): 1.95 6: 1.50, 1.90, 1.100, 2.40, 2.50, 14.150 6(2): 1.90 6(2)(a): 1.100 6(2)(a)(i): 1.95 6(3): 1.95, 1.100, 2.40, 5.175 6(3)(a): 1.100, 2.40 6(3)(b): 1.100 6(3A): 1.100, 2.40 6AA: 13.20 48: 13.210 51AE: 4.140 51ACA: 4.155 51ACA(1): 4.140, 4.155 51ACA(2): 4.155 54(3): 12.35 75B: 14.180 76: 13.155 76(3): 13.210 79A: 13.80 79B: 13.85 82: 14.35, 14.40

s 84(2): 2.110, 2.120, 2.125 s 84(4): 2.100 ss 86A(1) to (3): 1.160 ss 86A(4) to (6): 1.160 s 86C: 13.300 s 86C(2)(a): 13.295 s 87: 14.165 s 87B: 6.140, 6.170, 13.160, 13.335 s 87B(4): 13.335 s 87D: 15.70 s 87E: 12.170 s 87E(1): 14.250, 15.70, 15.135 s 87M: 14.255 s 87S: 14.265 s 87T: 14.270 s 87U: 14.260 s 87W: 14.280 s 87X: 14.280 s 87CB: 14.150 s 87CB(1): 14.145, 14.150, 14.165 s 87CB(2): 14.145 s 87CB(3): 14.145, 14.155 s 87CB(5): 14.155 s 87CC(1): 14.145 s 87CD(1)(a): 14.160 s 87CE: 14.145 s 87CG: 14.145 s 87CI: 14.145, 14.155 s 87ZB: 14.275 s 87ZC: 14.285 s 96(3): 7.35 s 96(4): 7.35 s 130: 1.90, 2.10 s 131: 1.120, 2.40, 2.50, 5.175, 6.230, 9.20 s 131(1): 1.50, 1.90, 1.100, 2.05, 2.50, 4.05, 5.50 s 131(2): 1.50, 1.90 s 131A: 1.110, 3.250, 5.45, 6.230, 6.245, 9.20, 9.35 s 131A(1): 1.105, 8.95, 15.220 s 131C(3): 1.135 s 131C(4): 1.115, 8.15 s 132(1): 11.200 s 132A: 11.210 s 132A(1): 11.60 s 132J: 11.60, 11.200 s 134(1): 13.375 s 134(2)(a): 13.375 s 134(2)(b): 13.375 s 134(2)(c): 13.375 s 134A: 10.125, 11.205, 13.375 s 134A(2): 13.375 s 134C: 13.380 s 134D(3): 13.380 s 134E: 13.380 s 137: 14.125 s 137A: 14.290

Table of Statutes xxxvii Competition and Consumer Act 2010 — cont s 137B: 1.50, 14.55, 14.70, 14.125, 14.130, 14.135, 14.140, 14.165 s 137C: 6.105, 14.250 s 137C(1): 14.125 s 137C(2): 14.125 s 137D: 14.200, 14.205, 14.225 s 137E: 14.250 s 137E(1): 14.210 s 137F: 13.285 s 137G: 13.80 s 137H: 14.10 s 137H(2): 13.390, 14.200 s 138: 1.150 s 138A: 1.150 s 138B: 1.150, 1.155 s 138C(1): 1.160 s 138C(2): 1.160 s 138D: 1.160 s 139A: 1.50, 5.40, 15.280, 15.285 s 139A(1): 15.285 s 139A(2): 15.285 s 139A(4): 15.285 s 139A(5): 15.285 s 139B: 2.110, 2.120, 13.220 s 139B(1): 3.25 s 139B(2): 2.110, 2.115, 2.120, 2.130, 2.135, 14.145 s 139B(2)(a): 2.120, 2.125 s 139B(2)(b): 2.125 s 139C(2): 2.130, 2.135 s 139D: 13.80 s 139D(1)(a): 13.80 s 139D(1)(b): 13.80 s 139D(3): 13.80 s 139D(4): 13.80 s 139D(5): 13.80 s 139D(6): 13.80 s 139G: 1.50, 1.55, 1.140 s 139G(4)(a): 1.140 s 139G(4)(b): 1.140 s 139G(4)(c): 1.140 s 140: 1.50 s 140B: 1.50 s 140C: 1.150 s 140H: 1.125 s 140J(1): 1.135 s 140J(2): 1.135 s 155: 13.345 s 155(1)(a): 13.345 s 163(2): 13.40 s 163(4)(a): 13.20 s 290A: 5.10 Pt IV: 1.120 Pt IV, Div 1: 15.225 Pt IV, Div 2: 15.225 Pt VI: 6.05 Pt VIA: 1.50, 14.125, 14.145, 14.155, 14.165

Pt VIB: 12.170, 14.250, 15.70, 15.135 Pt VIB, Div 2: 14.125, 14.210, 14.250 Pt VIB, Div 7: 14.125, 14.250 Pt VIII, s 96(3): 13.210 Pt XI: 1.50, 1.90, 1.95, 1.100, 1.140, 1.160, 2.40 Pt XI, Div 5: 13.375 Pt XI, Div V: 13.375 Pt XIAA: 1.50, 1.120 Sch 1: 1.120 Sch 2, Australian Consumer Law: 1.051.10, 1.50, 1.55, 1.60, 1.65, 1.75, 1.85, 1.90, 1.120, 1.140, 2.05, 2.40, 2.50, 3.250, 4.05, 10.05, 10.15, 10.55, 10.80, 10.90, 10.95, 11.10, 11.35, 13.335, 14.175 Sch 2, s 2: 1.145, 2.55, 2.75, 2.85, 2.90, 3.100, 3.265, 4.155, 5.75, 6.40, 6.125, 6.250, 7.35, 7.175, 8.75, 8.85, 8.110, 8.120, 8.125, 8.135, 8.140, 8.145, 8.150, 8.165, 8.170, 8.400, 9.15, 9.40, 9.45, 11.25, 11.30, 11.40, 11.45, 11.215, 12.125, 12.140, 13.395, 13.405, 14.175, 14.180, 14.195, 14.205, 14.225, 15.220, 15.235 Sch 2, s 2(1): 1.100, 7.80, 8.70, 8.130, 8.135, 8.160, 12.20, 15.15, 15.30, 15.115 Sch 2, s 2(2): 3.15, 3.20, 3.25, 3.35 Sch 2, s 2(2)(a): 3.145 Sch 2, s 2(2)(b): 3.145 Sch 2, s 2(2)(b)(i): 9.40 Sch 2, s 2(2)(c): 3.25 Sch 2, s 3: 1.65, 5.65, 6.205, 6.250, 6.265, 6.275, 6.290, 7.05, 7.10, 7.35, 7.50, 7.65, 7.80, 7.135, 7.155, 7.195, 8.15, 8.70, 8.75, 8.80, 8.115, 8.160, 10.20, 10.105, 11.25, 15.15, 15.115 Sch 2, s 3(1): 8.70 Sch 2, s 3(1)(a): 8.75 Sch 2, s 3(1)(c): 8.105 Sch 2, s 3(2): 8.70, 8.110, 9.10 Sch 2, s 3(4): 8.70, 8.75 Sch 2, ss 3(4) to (9): 8.75 Sch 2, s 3(5): 8.75, 8.85, 8.110, 8.145, 8.165 Sch 2, s 3(6): 8.90 Sch 2, s 3(7): 8.90 Sch 2, s 3(8): 8.90 Sch 2, s 3(9): 8.95 Sch 2, s 3(10): 8.100, 8.115 Sch 2, s 3(11): 8.85 Sch 2, s 4: 1.65, 3.15, 3.135, 3.145, 4.05, 6.290 Sch 2, s 4(1): 3.60, 3.135, 6.290 Sch 2, s 4(2): 3.135, 3.145, 3.150, 3.155, 6.290 Sch 2, s 5: 1.65, 1.90, 8.160, 12.20 Sch 2, s 6: 1.90, 2.35 Sch 2, s 6(3A): 1.65 Sch 2, s 7: 1.65, 8.395, 12.10 Sch 2, s 7(1)(a): 12.10 Sch 2, s 7(1)(c): 12.10 Sch 2, s 7(1)(e): 12.10

xxxviii

Table of Statutes

Competition and Consumer Act 2010 — cont Sch 2, s 8: 8.145, 8.165, 9.40 Sch 2, s 9: 8.245, 12.35, 12.170 Sch 2, s 9(1): 8.245, 12.35 Sch 2, s 9(2): 8.245, 12.35, 12.60 Sch 2, s 9(2)(a): 12.40 Sch 2, ss 9(2)(b) to (d): 12.45 Sch 2, s 9(2)(e): 12.50 Sch 2, s 9(2)(f): 12.55 Sch 2, s 9(3): 12.35, 12.65 Sch 2, s 9(4): 12.35, 12.70 Sch 2, s 10: 7.85, 7.100 Sch 2, s 12BG(2)(a): 5.220 Sch 2, s 12BG(2)(b): 5.220 Sch 2, s 12ED: 15.245 Sch 2, s 12BAA(7)(k): 5.200 Sch 2, s 13: 9.70 Sch 2, s 15: 5.170, 12.170, 14.225, 15.250 Sch 2, s 15(a): 5.175 Sch 2, s 16: 14.20 Sch 2, s 16A(2): 13.60 Sch 2, s 18: 1.05, 1.30, 1.50, 1.100, 2.40, 2.55, 2.75, 2.100, 2.135, 3.05, 3.10, 3.15, 3.25, 3.35, 3.65, 3.70, 3.75, 3.80, 3.95, 3.100, 3.135, 3.140, 3.145, 3.155, 3.160, 3.170, 3.180, 3.185, 3.195, 3.205, 3.210, 3.215, 3.220, 3.225, 3.260, 3.285, 6.05, 6.15, 6.25, 6.50, 6.80, 6.90, 6.105, 6.110, 6.140, 6.145, 6.165, 6.170, 6.180, 6.210, 6.250, 6.265, 6.275, 6.290, 7.05, 7.15, 7.225, 8.15, 9.45, 9.105, 12.170, 13.165, 13.185, 13.280, 13.330, 13.345, 13.350, 13.375, 13.405, 13.410, 13.415, 13.420, 13.425, 13.430, 14.125, 14.130, 14.135, 14.145, 14.150, 14.155, 14.165, 14.240, 14.245, 15.250 Sch 2, s 18(1): 3.05, 3.20, 3.60, 3.95, 6.10, 6.25, 6.180, 6.265, 13.185 Sch 2, s 19: 1.65, 3.235 Sch 2, s 19(1): 3.10, 3.230, 3.235, 3.245, 14.245 Sch 2, s 19(2): 3.240 Sch 2, s 19(2)(3): 3.235, 14.245 Sch 2, s 19(2)(4): 3.235, 14.245 Sch 2, s 19(3): 1.65, 3.245 Sch 2, s 19(4): 1.65, 3.245 Sch 2, s 19(5): 3.235, 13.105 Sch 2, s 19(6): 3.235, 13.105 Sch 2, s 20: 4.05, 4.10 Sch 2, s 20(2): 4.10 Sch 2, s 21: 1.05, 1.30, 1.65, 3.100, 4.05, 4.10, 4.45, 4.65, 4.75, 4.85, 4.90, 4.95, 4.100, 4.105, 4.110, 4.120, 4.125, 4.155, 4.170, 4.175, 4.180, 4.185, 4.190, 4.195, 5.95, 10.90, 13.185 Sch 2, s 21(1): 4.40, 4.45, 4.60, 4.120 Sch 2, s 21(1)(f): 4.175 Sch 2, s 21(4): 1.05, 4.05, 4.45, 4.55 Sch 2, s 22: 4.05, 4.90, 4.95, 4.175, 13.185 Sch 2, s 22(1): 4.60, 4.95, 4.100

Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch

2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2,

Sch Sch Sch Sch Sch Sch Sch Sch Sch

2, 2, 2, 2, 2, 2, 2, 2, 2,

Sch Sch Sch Sch Sch Sch Sch Sch

2, 2, 2, 2, 2, 2, 2, 2,

s 22(1)(a): 4.100, 5.95 s 22(1)(b): 4.105, 5.130 s 22(1)(c): 4.110 s 22(1)(d): 4.115 s 22(1)(e): 4.130 s 22(1)(f): 4.135 s 22(1)(g): 4.140 s 22(1)(h): 4.155 s 22(1)(i)(i): 4.160 s 22(1)(i)(ii): 4.160 s 22(1)(j)(i): 4.165, 5.95 s 22(1)(j)(ii): 4.170 s 22(1)(j)(iv): 4.180 s 22(1)(j)(iii): 4.175 s 22(1)(l): 4.185 s 22(2): 4.45, 4.95 s 22(2)(a): 4.100 s 22(2)(b): 4.95, 4.105, 5.130 s 22(2)(c): 4.110 s 22(2)(d): 4.95, 4.115 s 22(2)(e): 4.130 s 22(2)(f): 4.95, 4.135 s 22(2)(g): 4.140 s 22(2)(h): 4.155 s 22(2)(i): 4.95 s 22(2)(i)(i): 4.160 s 22(2)(i)(ii): 4.160 s 22(2)(j): 1.65 s 22(2)(j)(i): 4.100, 4.165 s 22(2)(j)(ii): 4.170 s 22(2)(j)(iv): 4.180 s 22(2)(j)(iii): 4.175 s 22(2)(l): 4.175, 4.185 s 22(3): 4.45 s 22(3)(j): 1.65 s 22A: 4.05 s 23: 5.20, 5.60, 5.70, 5.75, 5.170 s 23(1): 5.25, 5.35, 5.50, 5.75, 5.90, 5.130, 5.175, 14.30, 14.225 s 23(1)(b): 5.95 s 23(2): 5.50, 14.30 s 23(3): 5.60, 5.65 s 23(4): 5.70 s 23(4)(b): 5.75, 5.80 s 23(5): 5.80 ss 23 to 28: 1.65 s 24: 5.110, 5.135, 5.160 s 24(1): 1.05, 5.105, 5.110, 5.120, 5.130, 5.135, 5.140 s 24(1)(a): 5.120 s 24(2): 5.105, 5.120, 5.140 s 24(2)(a): 5.105, 5.145 s 24(2)(b): 5.105, 5.155 s 24(3): 5.145 s 24(4): 5.130 s 25: 5.35, 5.105, 5.160 s 25(1)(f): 5.35

Table of Statutes xxxix Competition and Consumer Act 2010 — cont Sch 2, s 25(2): 5.165 Sch 2, s 25(l): 5.65 Sch 2, s 26: 5.20, 14.30 Sch 2, s 26(1): 5.25, 5.90 Sch 2, s 26(1)(b): 5.35 Sch 2, s 26(2): 5.85 Sch 2, s 27(1): 5.100 Sch 2, s 27(2): 5.90, 5.95 Sch 2, s 27(2)(a): 5.95 Sch 2, s 27(2)(b): 5.95 Sch 2, s 27(2)(c): 5.95 Sch 2, s 27(2)(e): 5.95 Sch 2, s 28: 5.45 Sch 2, s 28(2): 5.45 Sch 2, s 28(3): 5.45 Sch 2, s 29: 1.65, 2.75, 3.15, 6.20, 6.30, 6.40, 6.215, 6.220, 6.250, 6.265, 6.300, 10.90, 13.185, 13.280, 13.345, 13.410, 13.415, 13.420, 13.425, 13.430, 14.135 Sch 2, s 29(1): 6.10, 6.20, 6.25, 14.130 Sch 2, s 29(1)(a): 1.100, 3.155, 6.35, 6.45, 6.50, 6.105, 6.165, 6.275, 13.405 Sch 2, s 29(1)(b): 3.205, 6.35, 6.55 Sch 2, s 29(1)(c): 6.60 Sch 2, s 29(1)(d): 6.65 Sch 2, s 29(1)(e): 6.10, 6.70, 6.80 Sch 2, s 29(1)(f): 6.10, 6.70, 6.80 Sch 2, s 29(1)(g): 3.155, 3.205, 6.90, 6.95, 6.100, 6.105, 6.110, 6.145, 6.275, 8.15, 12.170, 13.195 Sch 2, s 29(1)(h): 6.115 Sch 2, s 29(1)(i): 3.185, 6.125, 6.130, 6.140, 6.145, 13.195 Sch 2, s 29(1)(j): 6.160 Sch 2, s 29(1)(k): 6.165, 6.170, 13.405 Sch 2, s 29(1)(l): 6.175, 6.210 Sch 2, s 29(1)(m): 1.100, 2.40, 6.180, 6.185, 6.210, 7.10, 8.15, 9.105, 12.165 Sch 2, s 29(1)(n): 6.190, 6.205, 8.15 Sch 2, s 29(2): 6.70, 6.80 Sch 2, s 29(m): 7.15, 15.250 Sch 2, s 29(n): 15.250 Sch 2, s 30: 1.65, 2.75, 3.15, 6.25, 6.40, 6.250, 6.255, 6.260, 6.300, 14.155 Sch 2, s 30(1): 6.250, 9.45, 14.130 Sch 2, s 30(1)(c): 6.250 Sch 2, s 30(1)(e): 6.250 Sch 2, s 30(1)(f): 6.250 Sch 2, s 30(1)(g): 6.250 Sch 2, s 30(2): 6.250 Sch 2, s 31: 1.65, 3.15, 6.25, 6.40, 6.265, 6.270, 6.290, 14.130 Sch 2, s 32: 1.65, 6.125, 7.05, 7.10, 7.25, 7.30 Sch 2, s 32(1): 7.10, 7.15 Sch 2, s 32(1)(c): 6.250 Sch 2, s 32(1)(d): 6.250 Sch 2, s 32(2): 7.10

Sch 2, s 32(3): 1.65, 7.20 Sch 2, s 32(4): 7.20 Sch 2, s 33: 1.100, 3.15, 6.25, 6.40, 6.50, 6.90, 6.105, 6.275, 6.280, 6.285, 6.300, 13.185, 14.130 Sch 2, s 34: 3.15, 6.25, 6.40, 6.275, 6.280, 6.300, 9.105 Sch 2, s 35: 6.125, 7.05, 7.35, 7.40, 7.45 Sch 2, s 35(1): 7.35 Sch 2, s 35(2): 7.35 Sch 2, s 36: 1.65, 7.05, 7.50, 7.55, 7.60 Sch 2, s 36(1): 7.50 Sch 2, s 36(2): 7.50 Sch 2, s 36(3): 7.50 Sch 2, s 36(4): 1.65, 2.40, 7.50 Sch 2, s 36(4)(b): 7.50 Sch 2, s 36(7): 7.50 Sch 2, s 37: 3.15, 6.25, 6.40, 6.290, 6.295, 6.300, 14.130 Sch 2, s 37(1): 6.290 Sch 2, s 37(2): 6.290 Sch 2, s 38: 1.65, 6.300 Sch 2, s 38(2): 6.300 Sch 2, s 38(3): 1.65, 6.300 Sch 2, s 38(4): 1.65, 6.300 Sch 2, s 39: 7.05, 7.65, 7.70, 7.75 Sch 2, s 39(5): 7.65 Sch 2, s 39(6): 7.65 Sch 2, s 40: 1.65, 7.05, 7.80, 7.85, 7.90, 7.95 Sch 2, s 40(3): 7.85 Sch 2, s 41: 7.05, 7.95 Sch 2, s 42: 1.65, 7.95 Sch 2, s 43: 1.65, 7.100, 7.105, 7.110 Sch 2, s 43(1): 7.100 Sch 2, s 43(2): 7.85, 7.100 Sch 2, s 43(3): 7.100 Sch 2, s 43(3)(a): 7.100 Sch 2, s 43(3)(d): 7.100 Sch 2, s 43(6): 7.100 Sch 2, s 44: 7.05, 7.115, 7.120, 7.135, 7.145 Sch 2, s 44(1): 7.115, 7.140 Sch 2, s 44(2): 7.115, 7.140 Sch 2, s 45: 7.115, 7.120, 7.130, 7.135, 7.145, 7.195 Sch 2, s 45(1)(a): 7.120 Sch 2, s 45(1)(b): 7.120, 7.130 Sch 2, s 46: 1.65, 7.115, 7.130, 7.135 Sch 2, s 46(1)(a): 7.130 Sch 2, s 46(1)(b): 7.130 Sch 2, s 47: 1.65, 6.125, 7.150, 7.155 Sch 2, s 47(1): 7.150, 7.155, 7.160 Sch 2, s 47(2): 7.150 Sch 2, s 47(4): 7.150 Sch 2, s 47(5): 7.155 Sch 2, s 48: 6.125, 6.140, 7.165, 7.170, 7.190 Sch 2, s 48(1): 7.165, 7.175, 7.180, 7.185 Sch 2, s 48(2): 7.165

xl

Table of Statutes

Competition and Consumer Act 2010 — cont Sch 2, s 48(3): 7.165 Sch 2, s 48(4): 7.165 Sch 2, s 48(5): 7.185 Sch 2, s 48(7): 7.165 Sch 2, s 48(7)(a): 7.180 Sch 2, s 49: 7.195, 7.200, 7.205 Sch 2, s 50: 1.65, 7.210, 7.220, 7.225 Sch 2, s 50(1): 7.215 Sch 2, s 51: 8.155, 8.170, 8.180, 8.185, 15.10, 15.260 Sch 2, s 51(2): 8.185 Sch 2, s 51(3): 8.185 Sch 2, ss 51 to 59: 1.65, 2.75 Sch 2, s 52: 8.155, 8.170, 8.180, 15.10, 15.260 Sch 2, s 52(1): 3.05, 8.190 Sch 2, s 52(2): 8.190 Sch 2, s 52(3): 8.190 Sch 2, s 52(4): 8.190 Sch 2, s 53: 1.65, 8.155, 8.170, 8.180, 15.10, 15.260 Sch 2, s 53(1): 8.195 Sch 2, s 53(2): 8.195 Sch 2, s 53(3): 8.195 Sch 2, s 53(4): 8.195 Sch 2, s 53(a): 13.115 Sch 2, s 53(e): 13.45 Sch 2, s 53(g): 7.10 Sch 2, s 53C: 7.165 Sch 2, s 54: 3.285, 6.180, 8.05, 8.155, 8.160, 8.180, 8.205, 8.230, 8.245, 8.250, 8.305, 8.350, 8.385, 8.390, 12.170, 15.10, 15.30, 15.40, 15.70, 15.140 Sch 2, s 54(1): 8.205, 8.220 Sch 2, s 54(1)(b): 8.170 Sch 2, s 54(2): 8.205, 8.220, 8.225, 8.255, 8.270 Sch 2, s 54(2)(a): 8.230 Sch 2, s 54(2)(b): 8.235 Sch 2, s 54(2)(c): 8.240, 8.335 Sch 2, s 54(2)(d): 8.245, 8.335, 15.40 Sch 2, s 54(2)(e): 8.250, 8.335 Sch 2, s 54(3): 8.205, 8.220, 8.225, 8.235, 8.245, 8.250, 8.255, 8.270, 8.300, 15.30 Sch 2, s 54(3)(a): 8.275 Sch 2, s 54(3)(b): 8.160, 8.280 Sch 2, s 54(3)(c): 8.55, 8.240, 8.285 Sch 2, s 54(3)(d): 8.55, 8.290 Sch 2, s 54(3)(e): 8.300 Sch 2, s 54(4): 8.55, 8.310, 8.320 Sch 2, s 54(4)(5): 8.55 Sch 2, s 54(4)(6): 8.55 Sch 2, s 54(4)(7): 8.55 Sch 2, s 54(5): 8.55, 8.310, 8.325 Sch 2, s 54(6): 8.55, 8.310, 8.330 Sch 2, s 54(7): 8.55, 8.310, 8.335 Sch 2, s 55: 8.155, 8.180, 8.350, 8.355, 8.365, 12.170, 15.10, 15.35, 15.70, 15.110, 15.140 Sch 2, s 55(1): 8.370, 8.375, 8.380, 12.170

Sch 2, s 55(1)(b): 8.170 Sch 2, s 55(2)(a): 8.380 Sch 2, s 56: 8.155, 8.180, 8.385, 15.10, 15.120, 15.140 Sch 2, s 56(1): 8.385 Sch 2, s 56(1)(b): 8.170 Sch 2, s 56(2): 8.385 Sch 2, s 57: 8.155, 8.180, 8.390, 15.10, 15.35 Sch 2, s 57(1)(b): 8.170 Sch 2, s 57(1)(e): 8.390 Sch 2, s 58: 8.155, 8.180, 8.395 Sch 2, s 58(1): 8.395 Sch 2, s 58(1)(b): 8.170 Sch 2, s 58(2): 8.395 Sch 2, s 59: 6.290, 8.50, 8.155, 8.400, 8.405 Sch 2, s 59(1): 8.180, 8.400 Sch 2, s 59(1)(b): 8.170 Sch 2, s 59(2): 8.180, 8.400, 13.115, 15.10 Sch 2, s 60: 1.65, 7.225, 8.10, 8.155, 9.05, 9.25, 9.40, 9.60, 9.70, 9.75, 9.110, 15.145, 15.185, 15.190, 15.195 Sch 2, ss 60 to 63: 1.65 Sch 2, s 61: 8.155, 9.40, 9.45, 9.95, 9.110, 15.190 Sch 2, s 61(1): 9.05, 9.60, 9.95, 9.105, 15.145 Sch 2, s 61(2): 9.05, 9.60, 9.95, 9.110, 15.145 Sch 2, s 61(3): 9.95 Sch 2, s 61(4): 1.65, 9.25, 9.95 Sch 2, s 62: 8.155, 9.25, 9.40, 9.60, 9.115, 15.145, 15.190 Sch 2, s 63: 1.110, 9.05, 9.30, 9.35 Sch 2, s 64: 6.180, 8.380, 8.405, 15.255, 15.260, 15.265, 15.280 Sch 2, s 64(1): 15.255 Sch 2, s 64A: 15.260, 15.265, 15.270 Sch 2, s 64A(3): 15.260 Sch 2, s 64A(4): 15.260 Sch 2, s 65: 1.65, 9.50 Sch 2, s 65A: 6.300 Sch 2, s 65A(1)(b): 3.240 Sch 2, s 66: 1.65, 9.120 Sch 2, s 66(2): 13.165 Sch 2, s 67: 15.275 Sch 2, s 67(1): 15.275 Sch 2, s 67(a): 15.275 Sch 2, s 67(b): 15.275 Sch 2, s 68: 8.175 Sch 2, ss 69 to 95: 1.65 Sch 2, s 69(1): 10.10 Sch 2, s 69(1)(b): 10.10 Sch 2, s 69(1)(c): 10.10 Sch 2, s 69(1)(d): 10.10 Sch 2, s 69(1A): 10.10 Sch 2, s 69(2): 10.10 Sch 2, s 69(4): 10.15 Sch 2, s 70: 10.10 Sch 2, s 71: 10.10 Sch 2, s 72: 10.10

Table of Statutes xli Competition and Consumer Act 2010 — cont Sch 2, s 73: 10.45, 10.85 Sch 2, s 74: 10.05, 10.45, 10.90 Sch 2, s 74(2): 9.100 Sch 2, s 74(a): 10.45, 10.90, 13.185 Sch 2, s 74(b): 10.45, 10.90, 13.185 Sch 2, s 74(c): 10.45, 10.90 Sch 2, s 75: 10.05 Sch 2, s 75(1): 10.45, 10.90 Sch 2, s 75(1)(a): 13.185 Sch 2, s 75(2): 10.45, 10.90 Sch 2, s 76: 10.50, 10.90 Sch 2, s 77: 10.45, 10.90 Sch 2, s 78(1): 10.50 Sch 2, s 78(2): 10.50 Sch 2, s 79: 10.50, 13.45 Sch 2, s 79(b)(ii): 10.50 Sch 2, s 79(b)(iii): 10.50 Sch 2, s 79(c)(ii): 10.50 Sch 2, s 80: 10.50 Sch 2, s 81: 10.50 Sch 2, s 82: 10.65, 10.70 Sch 2, s 82(1): 10.60 Sch 2, s 82(3)(a): 10.60 Sch 2, s 82(3)(b): 10.60 Sch 2, s 82(3)(c): 10.65 Sch 2, s 82(3)(d): 10.65 Sch 2, s 83: 10.70 Sch 2, s 83(1): 10.70 Sch 2, s 83(2): 10.70 Sch 2, s 84: 10.90 Sch 2, s 85(2): 10.75 Sch 2, s 86: 10.50, 10.85 Sch 2, s 86(1): 10.80 Sch 2, s 86C: 13.300 Sch 2, s 87: 10.75, 10.80 Sch 2, s 87CB: 14.150 Sch 2, s 88: 10.80 Sch 2, s 89: 10.95 Sch 2, s 89(1): 10.80 Sch 2, s 89(2): 10.80 Sch 2, s 94: 10.85 Sch 2, s 94(b): 10.85 Sch 2, s 96(1): 10.105 Sch 2, s 96(2): 10.105 Sch 2, s 96(3): 10.105 Sch 2, ss 96 to 99: 1.65, 10.125 Sch 2, s 97(1): 6.185, 10.110 Sch 2, s 97(2): 10.110 Sch 2, s 97(3): 10.110 Sch 2, s 98: 10.115 Sch 2, s 99(1): 10.120 Sch 2, s 100: 1.65 Sch 2, s 100(1): 9.125, 9.130 Sch 2, s 100(3): 9.130 Sch 2, s 100(4): 9.125 Sch 2, s 101: 1.65, 9.135 Sch 2, s 101(1): 9.135

Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch

2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2,

s 101(2): 9.135 s 101(3): 9.135 s 101(4): 9.135 s 102: 1.65, 8.405 s 102(1): 8.405 s 102(2): 8.405 s 102(3): 8.405 s 103: 1.65 s 104(1): 11.150 s 104(2): 11.150, 11.155 s 104(3): 11.155 s 104(3): 11.150 ss 104 to 137: 1.65 s 106(1): 11.165 s 106(3): 11.165 s 108: 11.160, 11.165 s 109: 11.190 s 109(1): 11.190 s 109(2): 11.190 s 111(1): 11.190 s 111(2): 11.190 s 111(4): 11.190 s 114: 11.185 s 114(1): 11.195 s 114(2): 11.195 s 115: 11.195 s 116: 11.195 s 117: 11.195 s 118: 11.205 s 118(1): 11.205 s 118(2): 11.205 s 119: 11.205 s 119(1): 11.205 s 119(2): 11.205 s 122: 11.50 s 122(1): 11.50 s 122(1)(b): 11.50, 11.55 s 122(1)(c): 11.55, 11.50 s 123(1): 11.75 s 123(1)(b): 11.75 s 123(1)(c): 11.75 s 123(4): 11.75 s 124: 11.75 s 125(1): 11.80 s 125(4): 11.80 s 126: 11.70 s 127(2): 11.85 s 128: 11.90, 11.95 s 128(2): 11.90, 11.100, 11.115, 11.135 s 128(3): 11.105 s 128(4): 11.90, 11.125 s 128(6): 11.125, 11.135 s 128(7): 11.90, 11.105 s 129(1): 11.210 s 129(2): 11.210 s 130(1): 11.210

xlii Table of Statutes Competition and Consumer Act 2010 — cont Sch 2, s 131: 6.105, 11.215, 11.225, 11.230, 11.250, 11.255, 13.165 Sch 2, s 131(1): 11.235 Sch 2, s 131(2)(c): 11.250 Sch 2, s 131(4): 11.230 Sch 2, s 131(5): 11.215, 11.240 Sch 2, s 131(6): 11.240 Sch 2, s 131G(2): 13.110 Sch 2, s 132: 11.210, 11.220, 11.225, 11.230, 11.250, 11.255 Sch 2, s 132(1): 11.235 Sch 2, s 132(2)(c): 11.250 Sch 2, s 132(2)(d): 11.245 Sch 2, s 132(2)(e): 11.245 Sch 2, s 132(5): 11.240 Sch 2, s 132A(1): 11.245 Sch 2, s 132A(2): 11.245 Sch 2, s 132A(2)(b): 11.245 Sch 2, s 134(1): 11.170 Sch 2, s 134(2): 11.175 Sch 2, s 134A: 9.130 Sch 2, s 135: 11.175 Sch 2, s 136: 11.180 Sch 2, s 136: 11.175 Sch 2, s 136(1): 11.175 Sch 2, s 136(2): 11.175 Sch 2, s 136(3): 11.175 Sch 2, s 137: 11.175, 11.180 Sch 2, s 137A: 12.145 Sch 2, s 137B: 14.130, 14.135 Sch 2, s 137E(2): 14.210 Sch 2, s 138: 12.05, 12.10, 12.45, 12.75 Sch 2, ss 138 to 141: 12.170 Sch 2, ss 138 to 150: 1.65 Sch 2, s 139: 12.05, 12.95 Sch 2, s 139(1): 12.95 Sch 2, s 139(1)(d): 14.35 Sch 2, s 139(2): 12.95 Sch 2, s 140: 12.05, 12.105 Sch 2, s 140(1): 12.105 Sch 2, s 141: 12.05 Sch 2, s 141(1): 12.110 Sch 2, s 142: 12.85, 12.115 Sch 2, s 142(a): 12.120 Sch 2, s 142(b): 12.125 Sch 2, s 142(c): 12.15, 12.130, 12.170 Sch 2, s 142(d): 12.140 Sch 2, s 142C: 12.170 Sch 2, s 143: 12.15 Sch 2, s 144: 12.150, 12.155 Sch 2, s 147: 12.15 Sch 2, s 147(1): 12.15 Sch 2, s 148: 12.125 Sch 2, s 148(1): 12.125 Sch 2, s 148(2): 12.125 Sch 2, s 148(3): 12.125 Sch 2, s 149: 12.160

Sch 2, s 150: 12.165 Sch 2, s 151: 6.215, 6.300, 13.105, 13.410, 13.415, 13.420, 13.425, 13.430 Sch 2, s 151(1)(a): 6.165, 13.405 Sch 2, s 151(1)(k): 6.165, 13.405 Sch 2, s 151(1)(n): 6.190, 6.205 Sch 2, s 151(m): 12.165 Sch 2, s 152: 6.255, 6.300, 13.105 Sch 2, s 153: 6.270 Sch 2, s 154: 7.25 Sch 2, s 155: 1.100, 6.280, 6.300, 13.105 Sch 2, s 156: 6.280, 6.300, 13.105 Sch 2, s 157: 7.40 Sch 2, s 158: 7.55 Sch 2, s 159: 6.295, 6.300, 13.105 Sch 2, s 160: 6.300 Sch 2, s 160(1): 13.105 Sch 2, s 160(2): 13.105 Sch 2, s 160(3): 13.105 Sch 2, s 160(4): 13.105 Sch 2, s 161: 7.70 Sch 2, s 162: 7.90, 7.100 Sch 2, s 163: 7.105 Sch 2, s 164: 7.140 Sch 2, s 165: 7.160 Sch 2, s 166: 7.190 Sch 2, s 167: 7.200 Sch 2, s 168: 7.220 Sch 2, s 169: 9.120 Sch 2, s 170: 10.95 Sch 2, s 172: 10.95 Sch 2, s 174: 10.95 Sch 2, s 175: 10.95 Sch 2, s 176: 10.95 Sch 2, s 177: 10.95 Sch 2, s 178: 10.95 Sch 2, s 179: 10.95 Sch 2, s 180: 10.95 Sch 2, s 181: 10.95 Sch 2, s 182: 10.95 Sch 2, s 183: 10.95 Sch 2, s 184: 10.95 Sch 2, s 188: 10.130 Sch 2, s 189: 10.130 Sch 2, s 190: 10.130 Sch 2, s 191: 10.130 Sch 2, s 192(1): 8.405 Sch 2, s 194: 11.165, 13.130 Sch 2, s 195: 13.130 Sch 2, s 195(1): 11.165 Sch 2, s 196(1): 11.165 Sch 2, s 197(1): 11.205 Sch 2, s 197(5): 11.205 Sch 2, s 197(6): 11.205 Sch 2, s 198(1): 11.205 Sch 2, s 199(1): 11.85 Sch 2, s 199(2): 11.85

Table of Statutes xliii Competition and Consumer Act 2010 — cont Sch 2, s 200(1): 11.85 Sch 2, s 201(1): 11.135 Sch 2, s 201(2): 11.135 Sch 2, s 202: 11.255 Sch 2, s 203: 11.180, 13.130 Sch 2, s 204: 11.180, 13.130 Sch 2, s 205: 13.365 Sch 2, s 206: 13.365 Sch 2, s 207: 13.110, 13.115 Sch 2, s 208: 13.110, 13.120 Sch 2, s 209: 13.110, 13.125 Sch 2, s 210: 13.110, 13.130 Sch 2, s 212: 13.50 Sch 2, s 213: 13.85 Sch 2, s 214: 13.90 Sch 2, s 215: 13.95 Sch 2, s 216: 13.135 Sch 2, s 218: 9.130, 10.125, 13.15, 13.335, 13.360 Sch 2, s 218(1): 13.335 Sch 2, s 218(4): 13.335 Sch 2, s 219: 9.130, 10.125, 11.205, 13.350 Sch 2, s 219(2)(a): 13.350 Sch 2, s 219(2)(c): 13.350 Sch 2, s 219(4): 13.355 Sch 2, s 221: 13.165 Sch 2, s 222: 13.165 Sch 2, s 222(1): 13.365 Sch 2, s 223: 9.130, 10.125, 11.205, 13.370 Sch 2, s 224: 1.35, 10.90, 10.125, 13.155, 13.165, 13.170, 13.205, 13.220, 13.235, 13.240, 13.360, 13.375 Sch 2, s 224(1)(a)(viii): 11.85, 11.135, 11.165, 11.205 Sch 2, s 224(1)(a)(ix): 11.180 Sch 2, s 224(1)(a): 11.255, 13.155, 13.220, 13.240 Sch 2, s 224(1)(b): 13.215, 13.240 Sch 2, s 224(1)(c): 13.215 Sch 2, s 224(1)(d): 13.215 Sch 2, s 224(1)(e): 13.215, 13.220 Sch 2, s 224(1)(f): 13.215 Sch 2, s 224(2): 13.170, 13.190 Sch 2, s 224(4): 13.210 Sch 2, s 224(b): 13.220 Sch 2, s 224(d): 13.220 Sch 2, ss 224 to 231: 1.65 Sch 2, s 225(1): 13.235 Sch 2, s 225(2): 13.235 Sch 2, s 226: 13.165, 13.240 Sch 2, s 227: 13.400 Sch 2, s 228: 14.10 Sch 2, s 228(1): 13.165 Sch 2, s 228(2): 13.165 Sch 2, s 229: 13.165, 13.245 Sch 2, s 230: 13.245 Sch 2, s 232: 1.155, 3.85, 5.185, 5.190, 9.130, 10.125, 13.135, 13.250, 13.315, 14.10, 14.200, 14.230

Sch Sch Sch Sch Sch Sch Sch Sch

2, 2, 2, 2, 2, 2, 2, 2,

Sch 2, Sch 2, Sch 2,

Sch 2, Sch Sch Sch Sch Sch Sch Sch

2, 2, 2, 2, 2, 2, 2,

Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch

2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2,

Sch Sch Sch Sch Sch

2, 2, 2, 2, 2,

Sch Sch Sch Sch Sch Sch Sch Sch

2, 2, 2, 2, 2, 2, 2, 2,

s 232(1): 13.280 s 232(2): 1.150 s 232(3): 13.150, 14.30 s 232(4): 13.260, 14.240 ss 232 to 235: 1.65 s 233: 13.255 s 234: 14.235 s 236: 1.50, 1.65, 3.160, 3.165, 5.175, 5.190, 6.105, 8.05, 9.130, 10.125, 12.170, 14.05, 14.30, 14.35, 14.40, 14.85, 14.90, 14.105, 14.115, 14.125, 14.130, 14.135, 14.140, 14.145, 14.165, 14.175, 14.185, 14.200, 14.215, 14.225, 14.250, 15.70, 15.250 s 236(1): 14.10, 14.120 s 236(2): 14.120 s 237: 1.65, 5.185, 5.190, 9.130, 10.125, 13.400, 14.20, 14.30, 14.115, 14.135, 14.150, 14.165, 14.175, 14.200, 14.210, 14.215, 14.225, 14.250, 15.70, 15.250 s 237(1): 13.150, 13.390, 14.10, 14.200, 14.205, 14.210, 14.220, 14.225 s 237(1)(a)(ii): 5.175, 5.190, 14.225 s 237(1)(b): 13.150, 13.390 s 237(2): 13.395 s 237(3): 5.190, 14.200, 14.225, 14.250 s 238: 1.65, 13.400, 14.200, 14.205, 14.250 s 238(1): 14.200, 14.205, 14.210, 14.220 s 239: 5.185, 9.130, 13.175, 13.390, 13.395, 13.400 s 239(1): 5.185, 13.150, 13.395, 14.10 s 239(2(a): 14.205 s 239(4): 13.395 s 239L: 10.125 s 240(1): 13.395 s 240(2): 13.395 s 240(3): 13.395 s 241: 13.395 s 242: 13.150 s 242(1): 13.150, 13.395, 14.200 s 242(2): 13.150, 13.390 s 243: 5.185, 13.390, 13.395, 14.30, 14.200, 14.205, 14.215, 14.220 s 243(a): 14.15, 14.220, 14.225 s 243(d): 13.395, 14.30, 14.225 s 243(e): 13.390, 13.395 s 244: 14.200 s 246: 9.130, 10.125, 13.135, 13.280, 13.290, 13.295, 13.315, 14.10, 14.200 s 246(2)(a): 13.295 s 246(2)(b): 13.300 s 246(2)(b)(i): 13.290 s 246(2)(b)(ii): 13.290 s 246(2)(b)(iii): 13.290 s 246(2)(c): 13.305, 13.315 s 246(2)(d): 13.310, 13.315 s 246(a): 11.215

xliv Table of Statutes Competition and Consumer Act 2010 — cont Sch 2, s 246(c): 11.215 Sch 2, s 247: 9.130, 10.125, 13.135, 13.315, 14.10, 14.200 Sch 2, s 247(2)(a): 13.315 Sch 2, s 247(2)(b): 13.315 Sch 2, s 248: 9.130, 10.125, 13.135, 13.215, 13.320, 13.325, 14.10, 14.200 Sch 2, s 248(1)(a): 13.325 Sch 2, s 249: 1.65, 13.325 Sch 2, s 250: 5.175, 5.185, 5.190, 13.150, 14.30, 14.200, 14.205, 14.225 Sch 2, s 250(1): 5.185 Sch 2, s 251: 3.45, 3.235, 3.240, 6.300, 13.125, 13.330, 14.245 Sch 2, ss 254 to 258: 1.65 Sch 2, s 255: 6.165, 13.405, 13.410, 13.415, 13.420, 13.425, 13.430 Sch 2, s 255(3): 13.410 Sch 2, s 255(7): 13.430 Sch 2, s 255(8): 13.430 Sch 2, s 255(9): 13.430 Sch 2, s 256: 13.410, 13.420 Sch 2, s 258: 13.405 Sch 2, s 259: 3.285, 15.10, 15.15 Sch 2, s 259(2): 15.25, 15.30, 15.80, 15.100 Sch 2, s 259(2)(a): 8.05, 15.80 Sch 2, s 259(2)(b): 8.05 Sch 2, s 259(2)(b)(i): 15.80 Sch 2, s 259(3): 6.180, 15.25, 15.30, 15.45, 15.50, 15.55, 15.100 Sch 2, s 259(3)(a): 8.05, 8.250 Sch 2, s 259(3)(b): 8.05, 15.65 Sch 2, s 259(4): 15.70, 15.75, 15.100, 15.105, 15.140, 15.265 Sch 2, s 259(5): 15.70 Sch 2, s 259(6): 8.05, 15.100 Sch 2, ss 259 to 266: 1.65 Sch 2, s 260: 15.20, 15.30, 15.35, 15.40 Sch 2, s 260(a): 15.20, 15.30 Sch 2, s 261: 15.85, 15.100 Sch 2, s 261(c): 15.90 Sch 2, s 262(1): 15.55 Sch 2, s 262(2): 15.60 Sch 2, s 263: 15.50 Sch 2, s 263(2): 15.50 Sch 2, s 263(4): 6.180, 15.50 Sch 2, s 263(5): 15.50 Sch 2, s 263(6): 15.50 Sch 2, s 264: 15.50, 15.90 Sch 2, s 266: 8.160, 15.15, 15.115 Sch 2, s 267: 15.145, 15.285 Sch 2, s 267(1): 15.200 Sch 2, s 267(1)(c): 15.190, 15.195 Sch 2, s 267(1)(c)(i): 15.200 Sch 2, s 267(2): 15.180 Sch 2, s 267(3): 15.185 Sch 2, s 267(4): 15.70, 15.210, 15.265, 15.285

Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch Sch

2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2,

Sch 2, Sch 2,

Sch Sch Sch Sch

2, 2, 2, 2,

ss 267 to 270: 1.65 s 268: 15.150 s 268(a): 15.155 s 268(b): 15.160 s 268(c): 15.165 s 268(d): 15.170 s 268(e): 15.175 s 269(2)(a): 15.180 s 269(2)(b): 15.180 s 271: 15.110, 15.115, 15.135, 15.140 s 271(1): 8.05, 12.170, 15.110, 15.270 s 271(2): 8.05, 15.120 s 271(3): 15.110 s 271(4): 15.120 s 271(5): 8.400, 8.405, 15.110 s 271(6): 8.05, 8.405, 15.05, 15.125 ss 271 to 273: 1.65 s 272: 15.135 s 272(1): 8.405 s 272(1)(a): 8.05, 12.170, 15.125 s 272(1)(b): 8.05, 15.130, 15.270 s 274: 1.65, 8.55, 15.140, 15.270 s 274(1): 15.140 s 274(2): 15.140 s 274(3): 8.05 s 275: 15.290 s 276: 15.270 s 276A(1): 15.270 s 276A(2): 15.270 s 277: 15.295 s 277(2): 15.295 s 278: 15.235, 15.245 s 278(1): 15.220, 15.225 s 278(2): 15.220 ss 278 to 287: 1.65 s 279: 15.230 s 280: 15.235 s 280(1): 15.235 s 280(2): 15.235 s 280(3): 15.235 s 280(4): 15.235 s 281: 15.240 s 284: 15.240 s 285: 15.245 Ch 2: 1.05, 2.75, 3.15, 8.05, 13.05, 13.150, 13.250, 13.270, 13.390, 14.05, 14.10, 14.15, 14.30, 14.35, 14.85, 14.120, 14.200, 14.230, 14.235, 15.250 Ch 2, Pt 2-3: 1.65 Ch 3: 1.05, 2.75, 3.15, 6.05, 8.05, 13.05, 13.20, 13.250, 13.270, 13.315, 13.390, 14.05, 14.10, 14.15, 14.30, 14.35, 14.85, 14.120, 14.200, 14.230, 14.235 Ch 3, Pt 3-1: 1.65 Ch 3, Pt 3-2: 1.60, 10.95 Ch 3, Pt 3-2, Div 1: 1.65, 8.05 Ch 3, Pt 3-2, Div 3: 1.65

Table of Statutes xlv Competition and Consumer Act 2010 — cont Sch 2, Ch 3, Pt 3-3: 1.65, 11.15 Sch 2, Ch 3, Pt 3-4: 1.65 Sch 2, Ch 4: 1.160, 6.05, 7.05, 13.05, 13.20, 13.25, 13.35, 13.80, 13.110, 13.135, 13.170, 13.250, 13.315, 13.375, 13.380, 13.390, 14.05, 14.10, 14.15, 14.200, 14.230, 14.235 Sch 2, Ch 5, Pt 5-3: 6.165, 13.405 Sch 2, Pt 2: 2.40, 3.250 Sch 2, Pt 2-1: 1.100, 6.250, 14.125, 14.250 Sch 2, Pt 2-2: 1.100, 13.165, 13.315, 14.200, 14.205 Sch 2, Pt 2-3: 1.100, 5.05, 5.20 Sch 2, Pt 3-1: 1.100, 6.05, 6.250, 13.165, 14.125, 14.250 Sch 2, Pt 3-1, Div 3: 1.160, 10.100 Sch 2, Pt 3-2: 6.180, 8.05, 8.75, 10.90, 13.165, 15.280 Sch 2, Pt 3-2, Div 1: 3.285, 6.10, 6.180, 6.190, 6.205, 6.230, 8.10, 8.105, 8.120, 8.255, 9.50, 15.20, 15.25, 15.235 Sch 2, Pt 3-2, Div 1, subdiv A: 8.180, 8.350, 9.60 Sch 2, Pt 3-2, Div 1, subdiv B: 9.05, 9.60 Sch 2, Pt 3-2, Div 2: 10.05 Sch 2, Pt 3-3: 1.25, 1.100, 11.05, 11.10, 13.165 Sch 2, Pt 3-3 Div 1: 11.05, 11.145 Sch 2, Pt 3-3 Div 2: 11.05, 11.15, 11.145 Sch 2, Pt 3-3 Div 4: 11.05 Sch 2, Pt 3-3, Div 4: 11.210 Sch 2, Pt 3-3 Div 5: 11.05 Sch 2, Pt 3-4: 1.25, 1.100, 11.10, 13.165 Sch 2, Pt 3-5: 1.25, 1.160, 12.05, 12.165, 12.170 Sch 2, Pt 3-5, Div 1: 6.105, 8.245, 12.05 Sch 2, Pt 3-5, Div 2: 12.170, 14.290 Sch 2, Pt 4-1: 1.100, 13.55 Sch 2, Pt 4-3: 1.100 Sch 2, Pt 4-4: 1.100 Sch 2, Pt 4-5: 13.365 Sch 2, Pt 4-6: 6.215, 6.255, 6.270, 6.280, 6.295, 7.25, 7.40, 7.55, 7.70, 7.90, 7.105, 7.140, 7.160, 7.190, 7.200, 7.220, 10.95, 10.135, 13.110 Sch 2, Pt 5-2: 11.175, 13.380, 14.05 Sch 2, Pt 5-2, Div 4: 14.20 Sch 2, Pt 5-3: 1.95, 1.100, 6.165 Sch 2, Pt 5-4: 14.05, 15.30 Sch 2, Pt 5-4, Div, subdiv A: 15.10 Sch 2, Pt 5-4, Div 2: 15.70, 15.135 Sch 2, Pt 5-5: 9.20, 15.215, 15.220 Sch 2, Pt 5G: 5.180 Sch 2, Pt 305: 12.05, 12.10 Sch 2, Pt V-2: 13.375 Sch 2, Pt V, Div 2: 15.275 Sch2 , Pt II, Div 2, subdiv C: 4.195

Competition and Consumer (Industry Codes – Food and Grocery) Regulation 2015: 4.150

Competition and Consumer (Industry Codes – Franchising) Regulation 2014: 4.145 cl 6: 4.145 cl 6(3): 4.145 cl 6(4): 4.145 cl 6(5): 4.145 cl 6(6): 4.145 Sch 1: 4.145

Competition and Consumer Legislation Amendment Act 2011: 1.65, 4.05, 4.195 Competition and Consumer Legislation Amendment Bill 2010: 4.65 Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004: 14.145 Sch 3: 14.130

Corporations Act 2001: 1.105, 2.120, 3.250, 3.255, 6.240, 9.20, 13.325 s 9: 5.45 ss 12 to 129: 2.120 s 206C: 13.325 s 206E: 13.325 s 763A: 6.240 s 763C: 6.240 s 763E: 6.235, 6.240 s 763E(1): 6.235 s 764A(1)(d): 6.240 s 766A: 3.265 s 1041H: 1.105, 3.130, 14.150 s 1041L: 14.150 s 1466: 14.130 Pt 2D.6: 13.320

Corporations Law s 995(2): 3.285

Crimes Act 1914 s s s s s

5: 14.175 15A: 13.80 16A(2): 13.55 16A(2)(j): 13.60 19B: 13.55

Criminal Code Act 1995: 6.05, 13.20 s 9.2: 13.110 ss 11.2(1) to (6): 13.30 s 11.5(1): 13.35 ss 11.5(2) to (7A): 13.35 s 12.2: 13.20 s 12.3(1): 13.20 s 12.3(2): 13.20 s 12.3(2)(b): 13.20 Ch 2: 13.20

Customs Act 1901 s 234(d): 6.20

Do Not Call Register Act 2006: 10.45 Evidence Act 1995 s 140: 13.155 s 144(1): 2.40

xlvi Table of Statutes Evidence Act 1995 — cont s 191: 13.145

Fair Work Act 2009 s 384: 5.80 s 384(2): 5.80

Federal Court of Australia Act 1976 s s s s

21: 22: 23: 43:

13.145, 14.25 13.250 13.250, 13.335 13.100

Financial Sector Reform (Consequential Amendments) Act 1998 Pt II, Div 2: 3.250

Income Tax Assessment Act 1997: 4.05 Insurance Contracts Act 1984: 5.45, 5.210 s s s s

13: 1.110 14: 1.110 15: 1.110, 5.45 15(1): 1.110

Intergovernmental Agreement for the Australian Consumer Law: 1.140 cl cl cl cl cl

8: 1.140 12: 1.140 19: 1.140 20: 1.145 21: 1.145

Mutual Recognition Act 1992: 1.45 National Consumer Credit Protection Code: 1.105, 3.250 National Credit Code s 135: 1.65

National Health Security Act 2007: 11.250 Passenger Movement Charge Act 1978: 7.170 Therapeutic Goods Act 1989: 11.250 Trade Practices Act 1974: 11.15, 12.05 s 2A: 2.55 s 2B: 2.55 s 4(2): 3.15, 3.30 s 4B: 1.65, 8.70, 8.75, 8.80 s 4F(b)(ii): 5.65 s 5(1): 5.75 s 6(2): 13.115 s 6(3): 1.65, 1.100 s 12: 7.55 s 18: 3.165 ss 29(1)(a) to (h): 6.10 s 35: 7.35 s 45: 13.220 s 47(1): 14.20 s 47B(1)(d): 8.360 s 47B(1)(e): 8.360 s 48: 4.125 s 51A: 1.65, 3.135, 3.140 s 51A(1): 3.135 s 51A(2): 3.135 s 51AA: 4.05, 4.10, 4.15, 4.30, 4.35

s 51AB: 1.65, 4.05, 4.30, 4.45, 4.50, 4.85, 4.120, 4.190 s 51AC: 1.65, 4.05, 4.45, 4.50, 4.85, 4.100, 4.110, 4.125, 4.145, 4.175, 4.180, 4.185, 4.190, 4.210, 6.30, 8.80 s 51AC(3): 4.95 s 51AC(3)(d): 4.125 s 51AC(9): 8.80 s 51AD: 14.185 s 52: 1.05, 1.35, 1.100, 2.45, 2.55, 2.80, 2.120, 2.130, 3.05, 3.10, 3.20, 3.25, 3.30, 3.40, 3.45, 3.65, 3.70, 3.90, 3.95, 3.110, 3.115, 3.140, 3.150, 3.165, 3.175, 3.185, 3.200, 3.210, 3.215, 3.220, 3.225, 3.235, 3.245, 3.255, 3.285, 6.45, 6.50, 6.60, 6.70, 6.85, 6.95, 6.105, 6.120, 6.165, 6.275, 6.290, 13.275, 14.45, 14.50, 14.85, 14.180 s 52(1): 3.05, 3.10, 6.265, 14.105 s 53: 1.65, 2.45, 6.10, 6.20, 14.180 s 53(a): 1.100, 3.185, 6.20, 6.35, 6.45, 6.50, 6.70 s 53(b): 6.20, 6.45, 6.60, 6.65 s 53(c): 1.100, 3.155, 3.225, 6.45, 6.70, 6.90, 6.95, 6.100, 6.105, 6.115, 6.120 s 53(d): 3.225, 6.115, 6.120 s 53(e): 1.100, 6.125, 6.155, 7.10 s 53(f): 6.175 s 53(g): 3.185, 6.180, 6.185, 7.10 s 53A: 1.65, 6.250 s 53A(1): 6.30 s 53A(1)(b): 2.120, 6.250 s 53A(1)(c): 6.250 s 53A(2): 1.65 s 53B: 1.65, 6.265 s 53C: 7.165, 13.385 s 53(aa): 6.55 s 53(ea): 6.20, 6.160 s 53(eb): 6.165 s 54: 1.65, 7.10 s 54(3): 8.10 s 55: 6.45, 6.50, 6.120, 6.275 s 55A: 6.275 s 56: 7.35 s 56(2): 7.35 s 57: 7.195 s 58: 1.65, 7.50 s 58(a): 7.50 s 58(b): 7.50, 7.55 s 59: 6.180, 6.290 s 59(2): 6.290 s 60: 1.65, 7.210, 7.215, 13.325 s 63A: 7.65 s 64: 1.65, 7.80, 7.100 s 64(3): 7.100 s 64(4): 7.100 s 64(5): 7.80 s 64(5)(e): 7.85 s 64(7): 7.80

Table of Statutes xlvii Trade Practices Act 1974 — cont s 65: 7.95 s 65(2): 7.95 s 65A: 1.65, 3.235, 3.240, 3.245, 6.300 s 65A(1): 3.235 s 65A(1)(a): 3.245, 6.300 s 65A(1)(a)(vi): 3.245 s 65A(1)(b): 6.300 s 65B: 1.65, 11.15 s 65C: 1.65, 6.35, 11.15, 11.165, 11.185 s 65C(1)(c): 11.205 s 65D: 1.65, 11.15 s 65E: 1.65, 11.15 s 65F: 1.65, 11.15, 11.50 s 65G: 1.65, 11.15 s 65H: 1.65, 11.15 s 65R: 1.65, 11.15, 11.90 s 65T: 1.65, 11.15 s 65AAC: 7.115 s 65AAC(1): 7.115, 7.135 s 65AAC(2): 7.115 s 65AAD: 7.115, 7.120 s 65AAE: 1.65, 7.115 s 66(2): 8.205, 8.210, 8.215, 8.230 s 66AAD: 7.120, 7.125 s 68: 15.255 s 68A: 8.75, 15.260 s 68B(1): 15.280 s 68B(2): 15.280 s 69(1)(a): 8.185 s 69(1)(b): 8.190 s 70: 8.385 s 71(1): 8.50, 8.75, 8.205, 8.210, 8.215 s 71(2): 8.75, 8.355, 8.360 s 72: 8.390 s 73: 1.65, 15.215 s 74: 1.65, 8.75, 9.05, 9.30, 9.65, 9.85, 15.280 s 74(1): 8.10, 9.05, 9.65, 9.75, 9.85 s 74(2): 9.95, 9.100 s 74(3)(a): 9.30 s 74A: 1.65, 12.10, 12.60 s 74A(1): 1.65 s 74A(2)(a): 8.100 s 74A(3): 1.65 s 74B: 8.10, 8.360, 14.40 s 74B(1): 8.355 s 74B(1)(a): 8.360 s 74B(1)(b): 8.360 s 74B(1)(c): 8.360 s 74B(2): 8.355 s 74B(2)(b): 8.360 s 74D: 8.10, 8.250, 8.305, 8.360, 14.40 s 74D(3): 8.210, 8.215, 12.35 s 74F: 8.395 s 74H: 1.65 s 74AD: 12.10 s 75A: 8.30, 15.10

s 75B: 2.45, 7.135, 13.165, 13.215, 14.175, 14.180, 14.205 s 75B(1): 14.185 s 75B(1)(a): 14.175, 14.185 s 75B(1)(c): 14.185 s 75AA: 12.10 s 75AB: 12.10 s 75AC: 12.35, 12.45, 12.145, 12.170 s 75AC(2): 8.10, 12.35 s 75AC(3): 12.35 s 75AC(4): 12.35 s 75AD: 12.10, 12.60, 12.100, 12.120, 12.130, 12.170 s 75AE: 12.95, 12.100 s 75AF: 12.105 s 75AJ: 12.15 s 75AK(1)(c): 12.130, 12.170 s 75AN: 12.145 s 75AZC: 6.215 s 75AZC(1)(g): 13.20, 13.45 s 75AZD: 6.255 s 75AZE: 6.270 s 75AZG: 7.25 s 75AZH: 6.280 s 75AZI: 6.280 s 75AZJ: 7.40 s 75AZK: 7.200 s 75AZL: 7.55, 13.60 s 75AZL(3): 7.55, 13.60 s 75AZM: 6.295 s 75AZN: 7.220 s 75AZO: 7.140 s 75AZP: 7.70 s 75AZQ: 7.90, 7.105 s 75AZS: 11.165 s 75AZS(1): 11.165, 13.20 s 76: 13.170 s 76(1): 13.220 s 76(1)(b): 13.220 s 76E: 1.65, 13.170 s 79: 6.05, 6.55, 13.35 s 80: 1.65, 13.250, 13.310, 13.320, 14.230 s 82: 1.35, 1.65, 2.45, 6.105, 8.355, 14.35, 14.40, 14.45, 14.50, 14.85, 14.95, 14.110, 14.115, 14.120, 14.130, 14.175, 14.180 s 82(1): 14.35, 14.120 s 82(1B): 1.50, 14.130 s 82(1AAA): 14.250 s 82(1AAB): 14.250 s 82(2): 14.120 s 83: 14.10 s 84(2): 2.115, 13.220 s 84(4): 2.130 s 85: 13.110 s 85(1): 13.115 s 85(1)(a): 13.110, 13.115 s 85(1)(b): 13.115

xlviii

Table of Statutes

Trade Practices Act 1974 — cont s 85(1)(c): 13.110, 13.120 s 85(3): 3.240, 13.110, 13.125, 13.330, 14.245 s 85(4): 13.110, 13.130 s 85(6): 13.240 s 86C: 13.290 s 86D: 13.315 s 86E: 13.325 s 87: 1.65, 4.175, 13.395, 14.85, 14.115, 14.135, 14.200, 14.220 s 87(1): 14.215 s 87(2): 14.215 s 87A: 13.285 s 87ZE: 13.375 s 87AAA: 13.395 s 163: 6.55 ss 251 to 253: 1.65 s 1041H: 3.150 Pt V: 1.40, 1.75, 6.05, 14.120 Pt V, Div 1: 1.90, 3.235, 6.05 Pt V, Div 1A: 11.155, 13.130 Pt V, Div 1AA: 6.165 Pt V, Div 2: 1.65, 1.75, 8.05, 8.10, 8.20, 8.30, 8.50, 8.60, 8.75, 8.210, 8.355, 9.05, 15.10, 15.275 Pt V, Div 2A: 1.65, 8.05, 8.10, 8.30, 8.50, 8.60, 8.210, 8.355, 12.05 Pt V Div 2A: 12.05 Pt VA: 8.10, 11.220, 12.05, 12.10, 12.20, 12.100, 12.145 Pt VC: 6.05, 13.35 Pt VC, Div 2: 6.05 Pt XI: 1.65 Sch 3: 14.130 Trade Practices Amendment Act 1992: 12.05

Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010: 1.05, 1.55, 5.60

Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010: 1.05, 1.55, 15.25 Pt VIC: 13.375

Trade Practices (Australian Consumer Law) Amendment Regulations 2010 (No 1): 1.05, 1.55, 9.50, 10.15, 10.20 reg reg reg reg reg reg reg reg reg reg reg reg

77: 7.85 78: 7.85 79: 7.100 80: 7.100 81: 10.15, 10.20, 10.25 81(1): 10.20 81(2): 10.20, 10.25, 10.30, 10.35, 10.40 82: 10.45 83: 10.50 84: 10.50 85: 10.50 86: 10.50

reg 87: 10.50 reg 88: 10.85 reg 89: 10.85 reg 90: 8.405 reg 90(1): 8.405 reg 90(2): 8.405 reg 92: 11.250 Sch 1: 1.55 Sch 2: 1.55 Sch 3: 1.55

Trade Practices (Consumer Product Safety Standard) (Baby Walkers) Regulations 2002: 11.165

Trade Practices (Industry Codes – Franchising) Regulations 1998: 4.145 s 4(1): 4.100 cl 22: 4.145

Trademarks Act 1995 Pt XI: 6.115

Trans-Tasman Mutual Recognition Act 1997: 1.45

Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015: 5.10, 5.70 Uniform Consumer Credit Code: 1.105, 3.250

Australian Capital Territory Administrative Decision (Judicial Review) Act 1989: 11.65 Civil Law (Wrongs) Act 2002 s 107B: 1.50, 14.170

Coroners Act 1997: 11.250 Door-to-Door Trading Act 1991: 10.05 Fair Trading Act 1992 s s s s

14: 15: 16: 18:

2.65 2.65 2.65 2.65

Fair Trading (Australian Consumer Law) Act 1992: 1.50, 1.55, 1.60, 1.120, 1.135, 1.150, 1.155, 2.05, 2.40, 2.65, 2.135, 3.05, 3.35, 3.255, 5.50, 5.60, 5.175, 14.140 s s s s s

6: 1.50, 1.120 7: 1.50, 1.120 11: 1.130 20: 1.135 236: 1.50, 14.130, 14.140

Fair Trading (Consumer Affairs) Act 1973 s 37(1): 11.100

Law Reform (Miscellaneous Provisions) Act 1955 s 15: 1.50, 14.130, 14.140

Lay-by Sales Agreement Act 1953: 10.100 Public Health Act 1997: 11.250

Table of Statutes xlix

Road Transport (Safety and Traffic Management) Act 1999: 11.250 Sale of Goods Act 1954: 8.10 Sale of Goods (Vienna Convention) Act 1987: 8.175

Supreme Court Act 1933: 11.65

New South Wales Australian Consumer Law s 18: 14.150 s 54: 15.05

Civil Liability Act 2002 s 34(1)(b): 1.50, 14.170 s 34(2): 14.150, 14.170 s 35(1): 14.150, 14.170 Pt 4: 14.170

Civil and Administrative Tribunal Act 2013 s 38(2): 8.340 s 38(4): 8.340

Contracts Review Act 1980: 5.130 Coroners Act 2009: 11.250 Fair Trading Act 1987: 1.50, 1.55, 1.60, 1.120, 1.135, 1.150, 1.155, 2.05, 2.40, 2.55, 2.65, 2.85, 2.135, 3.05, 3.35, 3.255, 5.50, 5.60, 5.175, 5.180, 14.140 s 3: 1.120 s 4(1): 11.20 s 24: 14.140 s 27: 1.50, 1.120 s 28: 1.50, 1.120 s 28(1): 1.120 s 29: 1.140 s 32: 1.130 s 35: 2.65 s 36: 2.65 s 36D(1): 11.100 s 37: 2.65 s 39: 2.65 s 40: 1.65, 7.150 s 41: 1.135 s 42: 3.285, 14.140, 14.170 s 42(1): 11.20, 14.55 s 58: 1.65 s 65(2): 1.65 s 68: 13.20 s 68(1): 14.55 s 236: 1.50, 14.130, 14.140 Pt 4, Div 3: 10.05 Pt 5B: 10.100

Fair Trading Amendment (Unfair Contract Terms) Act 2010: 1.55, 5.180 s 60AD: 5.155 s 60ZE(3): 5.155

Fair Trading (Australian Consumer Law) Amendment Act 2010: 1.120

s 28: 1.140

Interpretation Act 1987 s 21: 1.120, 2.45

Law Reform (Miscellaneous Provisions) Act 1965 s 8: 1.50, 14.130, 14.140 s 9: 1.50, 14.130, 14.140

Motor Dealers Act 1974: 8.300 Public Health Act 1991: 11.250 Retail Leases Act 1994: 4.50 Road Transport (Safety and Traffic Management) Act 1999: 11.250 Sale of Goods Act 1923: 8.10, 8.135, 15.05 s 17(1): 8.185 s 17(2): 8.190 s 19(2): 8.205 s 20: 8.390 s 21: 8.185 ss 21 to 25: 8.185 s 22(1): 8.185 s 38(1): 15.55

Sale of Goods (Vienna Convention) Act 1986: 8.175

Supreme Court Act 1970: 11.65

Northern Territory Consumer Affairs and Fair Trading Act: 1.50, 1.55, 1.60, 1.120, 1.135, 1.150, 1.155, 2.05, 2.40, 2.65, 2.135, 3.05, 3.35, 3.255, 5.50, 5.60, 5.175, 8.10, 14.140 s 26: 1.50, 1.120 s 27: 1.50, 1.120 s 31: 1.130 s 34: 2.65 s 35: 2.65 s 36: 2.65 s 36(2): 11.100 s 38: 2.65 s 40: 1.135 s 236: 1.50, 14.130, 14.140 Pt III: 10.05 Coroners Act: 11.250

Fair Trading (Australian Consumer Law) Act Interpretation Act s 17: 1.120, 2.45

Law Reform (Miscellaneous Provisions) Act s 16(1): 1.50, 14.130, 14.140

Notifiable Diseases Act: 11.250 Power and Water Authority Act s 17(1): 2.55

Proportionate Liability Act s 4(2)(b): 1.50, 14.170

Sale of Goods Act: 8.10 Sale of Goods (Vienna Convention) Act: 8.175

l

Table of Statutes

Supreme Court Act: 11.65 Traffic Act: 11.250

Queensland Acts Interpretation Act 1954 s 32D: 1.120, 2.45

Australian Consumer Law Ch 4: 13.20

Civil Liability Act 2003 s 28(1)(b): 1.50, 14.170

Coroners Act 2003: 11.250 Criminal Code of Queensland: 13.20 s 23(2): 13.20

Fair Trading Act 1989: 1.50, 1.55, 1.60, 1.120, 1.135, 1.150, 1.155, 2.05, 2.40, 2.65, 2.135, 3.05, 3.35, 3.255, 5.50, 5.60, 5.175, 14.140 s 3: 1.40 s 5A: 3.35 s 15: 1.50, 1.120 s 16: 1.50, 1.120 s 17: 1.140 s 20: 1.130 s 23: 2.65 s 24: 2.65 s 25: 2.65 s 27: 2.65 s 29: 1.135 s 38: 1.120 s 50: 1.155 s 51: 1.155, 14.225 s 53: 13.20 s 59: 13.85 s 95: 2.135 s 99: 1.120 s 107: 1.50 s 236: 1.50, 14.130, 14.140 Pt 3, Div 4: 10.05 Pt 3, Div 5: 1.65 Judicial Review Act 1991: 11.65

Law Reform Act 1995 s 10: 1.50, 14.130, 14.140

Motor Accident Insurance Act 1994: 11.250 Public Health Act 2005: 11.250 Sale of Goods Act 1896: 8.10 Sale of Goods (Vienna Convention) Act 1986: 8.175

Supreme Court of Queensland Act 1991: 11.65 Transport Operations (Road Use Management – Road Rules) Regulation 2009: 11.250

South Australia Civil Liability Act 1936 s 50: 1.50, 14.130, 14.140

Consumer Transactions Act 1972-1983: 8.10 Coroners Act 2003: 11.250 Criminal Law (Sentencing) Act 1988 s 54(3)(e): 8.300 s 57: 8.390

Fair Trading Act 1987: 1.50, 1.55, 1.60, 1.120, 1.135, 1.150, 1.155, 2.05, 2.40, 2.65, 2.135, 3.05, 3.35, 3.255, 5.50, 5.60, 5.175, 14.140 s 13: 1.50, 1.120 s 14: 1.50, 1.120 s 15: 1.140 s 18: 1.130 s 21: 2.65 s 22: 2.65 s 23: 2.65 s 25: 2.65 s 27: 1.135 s 236: 1.50, 14.130, 14.140 Pt III: 10.05

Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 s 8: 1.50, 14.170

Public and Environmental Health Act 1987: 11.250

Road Traffic Act 1961: 11.250 Sale of Goods Act 1895: 8.10 Sale of Goods (Vienna Convention) Act 1986: 8.175

Supreme Court Act 1935: 11.65 Trade Standards Act 1979 s 27C: 11.100

Tasmania Australian Consumer Law (Tasmania) Act 2010: 1.50, 1.55, 1.60, 1.120, 1.135, 1.150, 1.155, 2.05, 2.40, 2.65, 2.135, 3.05, 3.35, 3.255, 5.50, 5.60, 5.175, 14.140 s s s s s s s s s s

5: 1.50, 1.120 6: 1.50, 1.120 8: 1.140 10: 1.130 13: 2.65 14: 2.65 15: 2.65 17: 2.65 19: 1.135 236: 1.50, 14.130, 14.140

Civil Liability Act 2002 s 43A: 1.50, 14.170

Coroners Act 1995: 11.250 Fair Trading Act 1990: 10.05 Judicial Review Act 2000: 11.65 Public Health Act 1997: 11.250 Sale of Goods Act 1896: 8.10

Table of Statutes li

Sale of Goods (Vienna Convention) Act 1987: 8.175

Supreme Court Act 1856: 11.65 Tortfeasors and Contributory Negligence Act 1954 s 4(1): 1.50, 14.130, 14.140

Traffic Act 1925: 11.250

Victoria Australian Consumer Law and Fair Trading Act 2012: 1.50, 1.55, 1.60, 1.120, 1.135, 1.150, 1.155, 2.05, 2.40, 2.65, 2.135, 3.05, 3.35, 3.255, 5.50, 5.60, 5.175, 14.140 s 6: 2.65 s 7: 1.50, 1.120 s 8: 1.50, 1.120 s 8(1): 1.120, 1.155 s 9: 1.120, 1.140 s 12: 1.130 s 15: 2.65 s 16: 2.65 s 17: 2.65 s 18: 2.65 s 18(1): 2.70 s 18(1)(b): 2.70 s 18(1)(c): 2.70 s 18(1)(d): 2.70 s 18(3): 2.70 s 19: 2.65 s 19(1): 2.65 s 19(2): 2.65 s 20: 2.65 s 22: 1.135, 15.290 s 22(1): 1.50 s 22(4): 15.285 s 64: 1.50 s 196: 2.135 s 217: 14.35 s 233: 5.15 s 236: 1.50, 14.130, 14.140 Ch 7: 1.155 Ch 8: 1.155 Pt 8.5: 1.155 Coroners Act 2008: 11.250

Electricity Industry Act 2000 s 35: 9.50 s 36: 9.50 s 39: 9.50

Fair Trading Act 1999: 4.85, 5.15 s s s s s s

9: 2.45 12: 2.45 14: 1.65, 6.10 16: 1.65 16(6): 1.65 19: 1.65, 7.50

s 26: 1.65 s 32W: 5.15, 5.120, 5.125, 5.150, 5.155 s 32X: 5.15, 5.120, 5.155 s 32Y: 5.15 s 49(1): 11.100 s 159(1): 14.35 s 161A: 1.65, 9.125 Pt 2B: 5.05, 5.15 Pt 4, Div 2: 10.05 Pt 5: 10.100

Fair Trading Amendment (Unfair Contract Terms) Act 2010: 1.55, 5.15, 5.180 Gas Industry Act 2001 s 42: 9.50 s 43: 9.50 s 46: 9.50

Goods Act 1958: 8.10 Pt IV: 8.10

Goods (Sales and Leases) Act 1981: 8.10 Interpretation of Legislation Act 1984 s 38: 1.120, 2.45

Public Health and Wellbeing Act 2008: 11.250 Road Safety Act 1986: 11.250 Sale of Goods (Vienna Convention) Act 1987: 8.175

Supreme Court Act 1986: 11.65 Wrongs Act 1958 s 24AF(1)(b): 1.50, 14.170 s 26(1): 1.50, 14.130, 14.140

Western Australia Australian Consumer Law s 218: 13.335 s 218(4): 13.335

Civil Liability Act 2002 s 5AI(1)(b): 1.50, 14.170

Consumer Affairs Act 1971 s 54(10): 11.100

Coroners Act 1996: 11.250 Door to Door Trading Act 1987: 10.05 Fair Trading Act 1987: 8.10 s 10: 2.85

Fair Trading Act 2010: 1.50, 1.55, 1.60, 1.120, 1.135, 1.150, 1.155, 2.05, 2.40, 2.65, 2.135, 3.05, 3.35, 3.255, 5.50, 5.60, 5.175, 14.140 s s s s s s s s s

3: 1.40 7: 1.140 11: 1.130 18: 1.50, 1.120 19: 1.50, 1.120 19(1): 1.120 19(2): 1.120 20: 1.120 27: 2.65

lii

Table of Statutes

Fair Trading Act 2010 — cont s 28: 2.65 s 29: 2.65 s 30: 2.65 s 31: 1.135 s 236: 1.50, 14.130, 14.140 Food Regulations 2009: 11.250 Health Act 1911: 11.250

Hospitals and Health Services Act 1927: 2.55 Interpretation Act 1984 s 5: 1.120, 2.45

Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 s 4(1): 1.50, 14.130, 14.140 Road Traffic Act 1974: 11.250 Sale of Goods Act 1895: 8.10

Sale of Goods (Vienna Convention) Act 1986: 8.175

s 13(g): 6.130

United Kingdom Consumer Rights Act 2015 s 34: 8.140 s 35: 8.140 s 36: 8.140 Ch 3: 8.140

Sale of Goods Act 1893: 8.355, 8.365 Sale of Goods Act 1896 s 17(1): 8.355

Sale of Goods Act 1979: 8.190 Supply of Goods (Implied Terms) Act 1973: 8.100, 8.210 Supply of Goods and Services Act 1982 s 13: 9.70

Supreme Court Act 1935: 11.65

New Zealand Consumer Guarantees Act 1993: 1.65, 8.10, 8.45, 8.50, 8.150, 8.170, 8.255, 15.20, 15.25, 15.60 s s s s s s s s s s s s s s s s

Fair Trading Act 1986: 15.105

2: 9.40 7(1): 8.205, 8.220, 8.240, 8.260 7(2): 8.320 7(3): 8.325 7(4): 8.330 18(2): 15.80 18(3): 15.25 18(4): 15.70, 15.80, 15.105 19: 15.25 20: 15.60 20(2): 15.60 21: 15.20, 15.25 23(1): 15.50 26: 15.120 28: 9.70 33(b): 15.205

Unfair Term in Consumer Contracts Regulations 1994: 5.115 reg 5(1): 5.115

Unfair Terms in Consumer Contracts Regulations 1999 reg 6(2): 5.35 reg 6(2)(b): 5.35

United States Federal Trade Commission Act s 5(a): 6.110

Treaties and Conventions Australian Treaty Series: 8.175 Intergovernmental Agreement for the Australian Consumer Law cl 39 to 42: 11.50, 11.65

United Nations Convention on Contracts for the International Sale of Goods 1980: 8.175

GLOSSARY OF TERMS ACCC — Australian Competition and Consumer Commission ACL — Australian Consumer Law ACMA — Australian Communication and Media Authority ASIC — Australian Securities and Investments Commission ASIC Act — Australian Securities and Investments Commission Act 2001 CAANZ — Consumer Affairs Australia and New Zealand CCA — Competition and Consumer Act 2010 CCAAC — Commonwealth Consumer Affairs Advisory Council COAG — Council of Australian Governments First Commonwealth Act — Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth) First Explanatory Memorandum — Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill 2009 IGA — Intergovernmental Agreement for the Australian Consumer Law MCCA — Ministerial Council on Consumer Affairs MINCO — Ministerial Council for Corporations NEIAT — National Education and Information Advisory Taskforce NPA — COAG National Partnership Agreement to Deliver a Seamless National Economy NZ CGA — Consumer Guarantees Act 1993 (NZ) PC — Productivity Commission SCOCA — Standing Committee of Officials of Consumer Affairs Second Commonwealth Act — Trade Practices Amendment Act (Australian Consumer Law) Act (No 2) 2010 (Cth) Second Explanatory Memorandum — Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 TPA — Trade Practices Act 1974

1

Consumer Protection Policy and Overview of the ACL [1.05] SCOPE OF THE WORK ......................................................................................................... 2 [1.10] PART I – CONSUMER PROTECTION POLICY ................................................................ 3

[1.15] Market failure and consumer detriment ............................................................ 6 [1.20] Behavioural economics and consumer detriment ............................................. 7 [1.25] Sale of unsafe products and consumer detriment ............................................ 9 [1.30] Protection against business detriment ................................................................ 9 [1.35] Misleading conduct and business detriment ................................................... 10 [1.40] Policy objects included in the IGA .................................................................... 12 [1.45] Managing consumer policy and reform ........................................................... 13 [1.50] Overview of the ACL ........................................................................................... 14 [1.55] Commencement dates .......................................................................................... 16 [1.60] Transitional measures ........................................................................................... 18 [1.65] Substantive changes introduced by the ACL .................................................. 19 [1.70] PART II: HISTORY OF THE ACL ....................................................................................... 25

[1.75] Comparison of generic consumer protection legislation ............................... 26 [1.90] PART III: ACL AS A LAW OF THE COMMONWEALTH ............................................ 28

[1.95] Extended application of ACL (Cth) to conduct outside Australia .............. 29 [1.100] Application of ACL (Cth) to conduct of natural persons ........................... 31 [1.105] Financial services ................................................................................................ 34 [1.110] Insurance ............................................................................................................... 35 [1.115] ACL (Cth) not intended to cover the field ..................................................... 36 [1.120] PART IV: THE ACL AS STATE OR TERRITORY LAW ................................................ 36

[1.125] ACL (Application Acts) not intended to cover the field ............................. 39 [1.130] Extraterritorial application of ACL (Application Acts) ................................ 39 [1.135] No doubling-up of liabilities ............................................................................ 40 [1.140] Future modifications to the ACL ..................................................................... 41 [1.145] PART V: ENFORCEMENT ................................................................................................. 42

[1.145] ACL regulators .................................................................................................... 42 [1.150] Jurisdiction of the Federal Court ..................................................................... 43 [1.155] Jurisdiction of the courts of the States and Territories ................................ 44 [1.160] Transfer of proceedings ..................................................................................... 45

2

The Australian Consumer Law

[1.05]

SCOPE OF THE WORK [1.05] On 24 June 2010, the last sitting day of Parliament before the winter recess, both Houses of the Australian Parliament passed the second stage of the Australian Consumer Law (ACL) reforms, the Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth). The first stage of the ACL reforms, the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth), had been passed on 17 March 2010. The third stage of the ACL reforms, the Trade Practices (Australian Consumer Law) Amendment Regulations 2010 (No 1), were made on 16 November 2010.1 These three pieces of primary and subordinate legislation comprise the Australian Consumer Law at the Commonwealth level. The passage of the ACL implements one of the Commonwealth’s major commitments in COAG’s National Partnership Agreement to Deliver a Seamless National Economy (NPA). The ACL is a single, national law concerning consumer protection and fair trading, which applies in the same way nationally and in each State and Territory. For the first time, consumers have the same protections and expectations about business conduct wherever they live in Australia. Similarly, businesses have the same obligations and responsibilities wherever they operate in Australia. Excluding the introductory section, this work is concerned with four main topics, each of which is the subject of a separate Part. The first topic is the general consumer protections in Ch 2 of the ACL, which are considered in Part II of the book. The second topic is the specific consumer protections, including unfair practices, consumer guarantees, unsolicited consumer agreements, lay-by agreements, contained in Ch 3 of the ACL which are considered in Part III of the book. The third topic is the product liability and safety regulation provisions of the ACL which are considered in Part IV of the book. The fourth topic covers the public enforcement and private remedies available under the ACL which are considered in Part V of the book. There are a number of possible legislative approaches to the regulation of consumer protection. One approach is to prohibit specific types of conduct which are defined (rule-based regulation). This approach has the advantage of clarity and certainty, but it also allows unscrupulous traders to take advantage of consumers by devising trading practices that fall outside the definition of the banned practice. Another approach is to adopt a general prohibition expressed in terms of a standard of behaviour that is prohibited, such as “misleading conduct”, “unconscionable conduct”, or “unfair terms”, sometimes referred to as safety-net regulation.2 Some jurisdictions adopt both general and specific approaches. The approach adopted in the ACL is to provide for three general protections which are supplemented by specific prohibitions in relation to trading practices that are highly unfair, such as pyramid selling, or aggressive selling techniques such as door-to-door or unsolicited sales, and undue harassment or coercion. 1 Explanatory Statement, Select Legislative Instrument 2010, No 280. 2 See Paterson and Brody, “Safety Net Consumer Protection: Using Prohibitions on Unfair and Unconscionable Conduct to Respond to Predatory Business Models” (2015) 38 Journal of Consumer Policy 331 at 332-3.

[1.10]

1 Consumer Protection Policy and Overview of the ACL

3

A significant feature of the three general protections is that they adopt a principles-based approach to drafting.3 They set out general principles to allow for their flexible application, rather than attempting to define all forms of conduct prohibited with a great deal of specificity. The open-ended nature of the general protections leaves it to the courts to set a legal standard and to decide whether the particular conduct at issue is deserving of intervention. In effect, the court must consider the conduct at issue in the light of its own circumstances and surrounding facts and make a public policy judgment as to whether that conduct is “misleading” or “unconscionable,” or whether a particular term of a standard form contract is “unfair” in the light of all the surrounding circumstances. Such an approach places great faith in the judiciary. It also means that it takes time to develop sufficient case law to enable businesses to be able to predict with certainty what conduct is prohibited. Uncertainty increases risk. It also increases compliance costs, including the costs arising from delay. The first general protection, the prohibition of misleading conduct in s 18 of the ACL, is a broad provision. It does not define “misleading conduct”. It is based on s 52 of the Trade Practices Act 1974 (Cth) (TPA) which imposed a “norm of conduct”,4 and the role of the courts has been to apply it to a wide range of circumstances involving not just business-toconsumer conduct, but business-to-business conduct as well. The second general protection, s 21 of the ACL (statutory unconscionable conduct), is also a broad provision. Section 21 does not define “unconscionable conduct”, although since 1 January 2012 it now contains three interpretative principles in s 21(4) which give some indication as to Parliament’s intention regarding its scope. While these interpretative principles provide useful guidance, they are unlikely to deter judicial creativity or eliminate judicial discretion. The third general protection relates to unfair terms in standard form consumer contracts. In order to satisfy the definition of “unfair term” in s 24(1) of the ACL it is necessary to prove that the term at issue would cause “a significant imbalance” in the parties’ rights and obligations arising under the contract and that “it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term”. This leaves considerable scope for judicial discretion in deciding what constitutes a “significant” imbalance; what constitutes a “legitimate interest”; and whether the term at issue is “reasonably” necessary to protect the respondent’s “legitimate” interest. Before examining the scope of these general and specific protections it is necessary to have some understanding of the economic foundation for consumer protection laws.

PART I – CONSUMER PROTECTION POLICY [1.10] Consumer detriment refers to the loss in economic welfare consumers incur “if they are misled into making purchases of goods and services which they would not otherwise have made or if they pay more for purchases than they would 3 See, eg, Second Explanatory Memorandum at [9.5], where, in relation to the lay-by sales provisions it is stated: “The ACL provisions draw on the ACT, NSW and Victorian approaches, but are expressed in principles-based form, in keeping with the remainder of the ACL”. 4 Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 505.

4

The Australian Consumer Law

[1.10]

if they had been better informed.”5 Consumer detriment may be subdivided into structural detriment and personal detriment.6 Structural detriment is the principal concern of competition policy. It focuses on the supply side. It includes market failure arising from sub-optimal market structures, such as monopoly and oligopoly, which limit choice and create inefficiencies resulting in increased prices above those that would prevail under competitive conditions. Personal detriment is the principal concern of consumer policy. It focuses on the demand side. It includes market failures arising from transaction costs or an inequality of information, bargaining power or litigious power as between suppliers and consumers. It focuses on the individual experiences of consumers when goods or services do not meet their expectations and includes loss of money, time and stress arising from: (i) scams and fraud; (ii) misleading advertising; (iii) unfair marketing practices; (iv) unfair contract terms; (v) sales of unsafe products; and (vi) inadequate redress in response to complaints.7 In Australia, both policy objects (limiting consumer detriment arising from structural detriment and limiting consumer detriment arising from personal detriment), are pursued in the same Act. The Competition and Consumer Act 2010 (Cth) (CCA), and related State and Territory legislation, gives effect to the Competition Code in Sch 1 and the ACL in Sch 2 of the CCA as laws of their respective jurisdictions. The Productivity Commission (PC) in its Report considered at some length the role of consumers in promoting effective competition:8 The role of consumers in facilitating competition, and promoting well-functioning markets, has long been recognised. In seeking the “best” value (the good or service and price/quality combination most appropriate for them) consumers not only advance their own self-interest, but also provide signals to suppliers on the product characteristics they require. Competition between suppliers, who respond to these signals, can variously lead to lower costs, improved product quality, greater innovation and higher productivity. However, poorly informed consumers send weak and confused signals to the market, limiting the benefits they receive from transactions and reducing gains from competition more generally. As pointed out by Vickers, informed choice has two dimensions – knowing the alternatives on offer and having the ability to judge their price and quality differences. 5 OECD, Consumer Policy Toolkit (OECD, Paris, 2010), p 52. 6 Europe Economics, An Analysis of the Issue of Consumer Detriment and the Most Appropriate Methodologies to Estimate It (Final Report for DG SANCO, Europe Economics, London, July 2007), available at http://www.ec.europa.eu/consumers/strategy/docs/study_consumer_detriment.pdf. 7 OECD, Consumer Policy Toolkit (OECD, Paris, 2010), p 53. 8 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), vol 2, ch 3.

[1.10]

1 Consumer Protection Policy and Overview of the ACL

5

In addition to having access to relevant information, consumers need to be sufficiently confident to act on it. Confident consumers have the skills needed to deal effectively with suppliers, and obtain what they expect from a transaction, or, if not, to access effective redress mechanisms. Of course, it is not necessary for all consumers to be well informed and confident to encourage effective competition between firms. Competition will still be robust if there is a sufficient proportion of informed, “marginal” consumers who are willing to switch suppliers to secure a better deal. That said, as a general rule, competition works best when the bulk of consumers are reasonably well-informed and willing to act on that information. To this end, a key goal of consumer policy is to overcome significant information failures that can hinder effective competition. However, it is important to emphasise that competition is a means to achieving an improvement in consumer wellbeing rather than an end in itself. In addition, it is only one means. Where competition is limited (or absent), consumer policy can still achieve improvements in consumer wellbeing through other policy responses such as business or product regulation, improved access to redress mechanisms, and support measures (such as legal aid and financial counselling).9

As regards the policy object of the ACL, the PC also recommended that Australian governments should adopt the common overarching object and six operational objects that have since been incorporated into the Intergovernmental Agreement for the Australian Consumer Law (IGA).10 The principal focus of the ACL is to deliver better outcomes for consumers and to minimise consumer detriment. The aims are to minimise costs and unintended side-effects of interventions, and to have special regard for the needs of vulnerable and disadvantaged consumers. The importance of integrating supply and demand polices is widely accepted.11 The position is summarised by the OECD: Competition involves the interaction of supply and demand. Competition policy is concerned mainly with the supply-side structure of markets, ensuring that there are no unnecessary barriers to entry, that market concentration does not lead to economic loss or unreasonable transfers from consumers to producers, and that there are effective legal sanctions against fraud, misleading conduct, and collusion among suppliers. Various policy instruments in member countries are used to achieve structural soundness in markets. 9 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), vol 2, p 28. 10 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), vol 2, pp 41-2, recommendation 3.1. 11 See OECD, Consumer Policy Toolkit (OECD, Paris, 2010), Ch 2 which sets out an overview of the way in which consumer protection complements competition policy, at http://www.oecd.org/sti/ consumer-policy/toolkit. See also OECD, Roundtable on Demand-side Economics for Consumer Policy, Summary Report (OECD, Paris, 20 April 2006), available at http://www.oecd.org. For commentary on this issue in an Australian context, see Consumer Policy in Australia: A Companion to the OECD, Consumer Policy Toolkit (Commonwealth of Australia, March 2011); Sylvan, “Activating Competition: The Consumer–Competition Interface” (2004) 12 Competition & Consumer Law Journal 191; Griggs, “Intervention or Empowerment – Choosing the Consumer Law Weapon!” (2007) 15 Competition & Consumer Law Journal 111; Hally-Burton, Shirodkar, Winckler and Writer, “Harnessing the Demand Side: Australian Consumer Policy” (2008) 4 Economic Roundup 91; King and Smith, “The Shaky Economic Foundations of Consumer Protection Policy and Law” (2010) 18 Competition & Consumer Law Journal 71.

6

The Australian Consumer Law

[1.15]

Even when markets are structurally sound on the supply-side, however, there can still be adverse consequences for consumers and therefore a misallocation of resources. Problems in gaining access to information and certain patterns of consumer behaviour can result in some potentially beneficial transactions not occurring (“deadweight loss”), an excessive burden of transaction costs (the costs of searching for and switching to alternative suppliers), and some stickiness in prices, all to the detriment of consumers. In short, the potential benefits of competition are not fully realised. It is the behaviour of consumers that activates competition, and that behaviour can be shaped in part by public policy. Public policy, therefore, is concerned with the demand-side as well as the supply-side of markets, to ensure as a basic condition that consumers are well-informed. Provision of information however, while being necessary to activate competition, may not be in itself sufficient. Even well-informed consumers exhibit consistent patterns of behaviour that can lead them away from making decisions that satisfy their preferences. The Committee examined the core question of the extent to which these distortions should be addressed by public policy.12

Market failure and consumer detriment [1.15] A principal source of consumer detriment on the demand side is market failure arising from transactions costs and information asymmetry. Transaction costs are costs of searching for and switching to alternative suppliers. If search costs are high, decisions will be based on incomplete information. Consumers’ “bounded rationality” refers to purchasing decisions being based on less than perfect information; consumers will only undertake a limited or “bounded” range of research prior to purchase. The theory of “bounded rationality” suggests that decision makers truncate their search at the point when the costs of searching start to outweigh the benefits resulting from that search. The OECD explains the situation of “bounded rationality” as one where “the rational decision-maker weighs up the sum of search and switching costs against the expected benefits of continuing to search for a lower priced or more satisfactory product”.13 In some markets consumers are well-informed because it is in the interests of suppliers to provide information about the quality of their products so that prospective purchasers can make comparisons about the price and quality of the goods or services on offer. In many cases prospective purchasers can inspect the goods before purchase and there are many repeat purchases. But in some markets information is not optimised; it is suppressed.14 Transactions involving asymmetric information, where one party to the transaction knows more than the other party, can also produce significant inefficiencies.15 In relation to most consumer goods or services, the ACL does not provide for 12 OECD, Roundtable on Demand-side Economics for Consumer Policy, Summary Report (OECD, Paris, 20 April 2006), at [8]. 13 OECD, Roundtable on Demand-side Economics for Consumer Policy, Summary Report (OECD, Paris, 20 April 2006), at [10]. 14 Akerlof, “The Market for “Lemons”: Quality, Uncertainty and the Market Mechanism” (1970) 84(3) Quarterly Journal of Economics 488. 15 Hadfield, Howse, and Trebilcock, “Information-Based Principles for Rethinking Consumer Protection Policy” (1998) 21 Journal of Consumer Policy 131 at 150.

[1.20]

1 Consumer Protection Policy and Overview of the ACL

7

mandatory disclosure.16 It is assumed that market forces will put pressure on suppliers to make sufficient information available to consumers to allow them to make an informed decision as to which goods or services will maximise their utility. Provided this information is accurate, and provided consumers are able to evaluate it properly, consumers can use this information to select products and services which meet their requirements. In some situations there is a greater likelihood that the decision-making process will be constrained and that this will result in poor consumer choices. According to the Secondary Explanatory Memorandum: Information standards are an example of regulatory intervention to address the market failure associated with information asymmetry. Lack of information on which to base purchasing decisions can lead consumers to make decisions which are not in their best interests. This can apply to services as well as goods. The service sector accounts for a significant share of economic activity in Australia and covers a wide variety of categories including financial services, property and business services, telecommunications, health services, travel and tourism, cultural and recreational services and personal services. Some services are subject to industry-specific regulation whereas others are subject only to the general fair trading laws. The misleading and deceptive conduct laws in Australia set a minimum acceptable standard of commercial behaviour. They are reactive, providing for sanctions (for example prosecution and injunctions) and remedies (for example compensation orders) to protect the public when misled or deceived. Information standards, on the other hand, are proactive, requiring a positive standard of information disclosure that the market, on its own, has not provided.17

For example, selling products in complex bundles may make it difficult for consumers to calculate the price of each item in the bundle and make comparisons with the prices of competitors. This is a feature of pricing in the telecommunications sector where, for example, fixed line, mobile and internet services are advertised as a bundle of telecommunication services at a single price.

Behavioural economics and consumer detriment [1.20] “Classical” economic theory rests on assumptions of rational consumer behaviour. It is assumed that consumers are well-informed and that they will act in ways that fulfil their preferences.18 Preferences are determined on the basis of self-interest. The rationale behind the classical model is to aggregate consumer decision-making so that analysis and predictions can be made at the market level rather than at the level of an individual or group of consumers. “Behavioural economics” is an empirical discipline that: 16 Safety warning notices are required in relation to some hazardous products where there is a risk of physical injury. Mandatory information standards are required in relation to matters such as fibre content labelling of textile products, care labelling for clothing and textile products, and ingredient labelling for cosmetics and toiletries. 17 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [23.180]-[23.181]. 18 For a description see King and Smith, “The Shaky Economic Foundations of Consumer Protection Policy and Law” (2010) 18 Competition & Consumer Law Journal 71 at 74.

8

The Australian Consumer Law

[1.20]

extends the knowledge base of economics with insights from empirical studies of consumer behaviour. Relying largely on psychological studies, in laboratory simulations and actual markets, behavioural economics delves into the ways in which people make decisions. These patterns of behaviour, or biases, indicate ways in which consumers make decisions that are inconsistent with their welfare. This extension of knowledge can provide an important contribution to policy, both by identifying market failures missed by traditional theory and by contributing to the effectiveness and efficiency of remedies.19

On 8 and 9 August 2007, the PC convened a roundtable on the topic “Behavioural Economics and Public Policy” in Melbourne. Behavioural economics applies insights from psychology to economic issues and analysis. Participants at the Roundtable discussed the contribution that behavioural economics can make to a broader understanding of people’s motivation and behaviour in markets and the implications for policy and regulatory approaches. The PC acknowledged that behavioural economics has particular relevance to consumer policy, and that the insights gained through the Roundtable made a useful contribution to the Commission’s inquiry on Australia’s consumer policy framework.20 Several important insights for consumer protection emerge from behavioural economics. One is that consumers do not always behave rationally and are in need of assistance in making purchasing decisions. Some consumers behave emotionally and are vulnerable to exploitation, for example, through the acquisition of weight loss products that do not entail diet or exercise, or get rich quick schemes that do not entail risk.21 Mulholland observes that cooling off regulations in unsolicited consumer agreements provide another example of laws that incorporate behavioural economics insights: In particular, these rules are premised on the view that consumers at times make purchases in emotionally or biologically “hot” states that, in a cooler or more rational state, they would not make. Mandating a cooling-off period allows consumers to reframe their choices and to give them an opportunity for rational re-consideration to overcome the influence of impulsive choice.22

Some high pressure sales techniques play on human weaknesses and the tendency of consumers to behave irrationally. For example, “limited time” sales put pressure on consumers to make up their minds quickly in the belief that the goods or 19 OECD, Roundtable on Demand-side Economics for Consumer Policy, Summary Report (OECD, Paris, 20 April 2006), at [13]. For seminal works on behavioural economics, see Sunstein, Behavioural Law and Economics (Cambridge University Press, 2000) and Korobkin and Ulen, “Law and Behavioural Science: Removing the Rationality Assumption from Law and Economics” (2000) 88(4) California Law Review 1051. 20 See especially the papers by Mulholland, “Behavioural Economics and the Federal Trade Commission”; Shafir, “A Behavioural Background for Economic Policy”, and Field, “Having One’s Cake and Eating it too – an Analysis of Behavioural Economics from a Consumer Policy Perspective”. The conference proceedings can be found at http://www.pc.gov.au/research/ supporting/behavioural-economics. 21 Mulholland, “Behavioural Economics and the Federal Trade Commission”, p 12. 22 Mulholland, “Behavioural Economics and the Federal Trade Commission”, pp 17-8.

[1.30]

1 Consumer Protection Policy and Overview of the ACL

9

services are scarce. They can result in consumer detriment because the decision to purchase is made under time pressure without the benefit of shopping around and making comparisons. “Reference pricing” or “two-price” advertising provides another example of a sales technique that may be used to exploit consumer irrationality. It refers to the practice of advertising the seller’s current price for goods or services by reference to its previous price. The “was” price acts as a reference or anchor to what the goods or services are “worth” and can result in consumer detriment if goods or services were not, in fact, previously sold at that price: see [6.155]. Finally, sellers may try to make the purchases less “painful” by allowing consumers to spread the payment into the future through lay-by schemes and thereby avoid the emotionally unpleasant experience of having to pay in full at the time of purchase. Consumers may suffer detriment if they are thereby induced to acquire goods or services they cannot afford. Suppliers can seek to exploit natural human weakness through unfair sales techniques including: • misleading conduct generally, or specific misleading representations or lack of disclosure of material information in relation to the supply of goods or services; • unfair marketing practices including harassment and coercion by sales people; • unconscionable conduct in relation to vulnerable consumer groups, including the elderly, consumers with poor understanding of English and the disadvantaged; and • using strong bargaining power to insert unfair terms in standard form consumer contracts. In order to eradicate these high-pressure sales techniques, an effective consumer regulatory regime requires that consumers have access to remedies should problems occur. Traders must have a clear understanding of their obligations and the enforcement powers of the regulator and the penalties imposed for failure to comply must act as a real deterrent for failure to comply.

Sale of unsafe products and consumer detriment [1.25] A further source of personal consumer detriment arises from the sale of defective or unsafe products. The detriment will be easy to detect where the products result in physical injury or, for example, illness (that is, from ingesting tainted food). The ACL contains a number of product liability regimes. It seeks to limit consumer detriment arising from the sale of defective or unsafe products in Pt 3-3 (“Safety of consumer goods and product relate services”), Pt 3-4 (“Information standards”) and Pt 3-5 (“Liability of manufacturers for goods with safety defects”). Protection against business detriment [1.30] Despite its title, some general and specific protections in the ACL are available to businesses as well as consumers. Section 18, the general prohibition of misleading conduct, is not confined to consumer transactions, and much litigation has arisen as a result of businesses seeking to protect their commercial interests

10

The Australian Consumer Law

[1.35]

rather than as a result of consumers seeking remedies from businesses. Section 21, the general prohibition of unconscionable conduct, in trade or commerce, in relation to: the supply or possible supply of goods or services to a person (other than a listed public company), or the acquisition or possible acquisition of goods or services from a person (other than a listed public company). Thus, in the context of a business’s dealings with other businesses, s 21 is intended to protect “business consumers” and “business suppliers” as well as individual consumers. A more restrictive approach was initially taken in relation to the general protection for unfair terms. Until 2015, the unfair terms law only applied where the supply of goods or services or the sale of an interest in land was to an individual. The term “individual” is defined in the Acts Interpretation Act 1901 (Cth) to mean a natural person. In 2015, the general protection in relation to unfair terms was extended to small businesses, although the more egregious unfair terms in business-to-business transactions may be caught by the prohibition of unconscionable conduct in s 21 of the ACL.23

Misleading conduct and business detriment [1.35] It had long been recognised that the “consumer protection” provisions of the TPA were, before their repeal, concerned with the supply side as well as the demand side of markets and with market efficiency considerations. This is because misleading advertising increases demand for an inferior product at the expense of a superior product. It harms competition and is a cause of business detriment on the supply side. For example, Lockhart J in Colgate-Palmolive Pty Ltd v Rexona Pty Ltd,24 granted an interlocutory injunction to prevent misleading claims by Rexona concerning the effectiveness of Aim toothpaste for the following reasons: It is the plain purpose of the Act to require truthful conduct in the market place and that competition be free and fair. In this case, claims are made by Rexona which consumers themselves cannot verify. They rely on the technical expertise of Rexona to assure the validity of the claims. As I have found that a prima facie case has been established, the public interest is a matter to be taken into account, weighing heavily in favour of the granting of interlocutory injunctions …. There is evidence that Rexona’s advertising campaign may erode the market share enjoyed by the smaller manufacturers of toothpastes. Indeed, Mr Johns, the General Sales Manager of Rexona, said in cross-examination that the introduction of Aim toothpaste would, in his view, cause the small brands to suffer substantially, …

Rexona contended that these matters are irrelevant as the small manufacturers are neither parties to the proceedings nor consumers. In my opinion the possible detriment to the small manufacturers is a relevant consideration. The Act is concerned with the maintenance of free and healthy competition. If a corporation is engaging in misleading or deceptive advertising which assists it in gaining a

23 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 (Gordon J). See Corones, “Regulating Supermarket Misconduct as Customer/Acquirer of Goods and Services” (2015) 43(6) Australian Business Law Review 400 at 406-10. 24 Colgate-Palmolive Pty Ltd v Rexona Pty Ltd (1981) ATPR ¶40-242.

[1.35]

1 Consumer Protection Policy and Overview of the ACL

11

substantial share of a market at the expense of small manufacturers, the interests of those manufacturers must be a relevant consideration when considering the balance of convenience.25 The same principle has been recognised in other cases. In Janssen-Cilag Pty Ltd v Pfizer Pty Ltd,26 Pfizer argued that only a person who relied on the misleading representation which constituted the contravention of s 52 could recover damages under s 82 of the TPA. Lockhart J rejected this argument and refused to give s 82 a restrictive interpretation. His Honour held that the wording of s 82 did not impose some general requirement that damage can be recovered only where the applicant relies upon the conduct of the respondent constituting the contravention, and that s 82 can be relied upon by a rival trader who suffers a business detriment as a result of the contravening conduct.27 Misleading conduct in relation to premium (or credence) claims can also harm competition on the supply side.28 Where products are genuinely superior, premium claims assist consumers to make informed decisions and enhance consumer welfare. Where premium claims are false they are a source not only of consumer detriment, but also result in lost sales to the suppliers of genuine products. On the supply side, premium claims are the result of innovation and can promote competitive rivalry. False premium claims can deter suppliers from engaging in innovation, because consumers will be cynical in future about the accuracy of such claims. In assessing the level of pecuniary penalties to be imposed under s 224 of the ACL, the court is required to take into account the amount of the loss or damage caused by the conduct to consumers on the demand side and competitors on the supply side. For example, in ACCC v Reebok Australia Pty Ltd, McKerracher J took into account the loss or damage suffered by competitors: The damage to fair and open competition in the footwear market in Australia cannot be quantified, but it is likely that the conduct had a significant effect because some consumers were misled into purchasing the EasyTone shoes on the basis of credence attributes which they could not readily verify, and where they would not otherwise have made such a purchase had they known the shoes did not have such attributes.29

Drip pricing can be a source of consumer detriment on the demand side and business detriment on the supply side. It is a feature of online selling. Drip pricing refers to the practice of using a headline price to attract potential buyers which is misleading because it is not the final total price. This is only ascertained after working through several pages on the site which disclosure fees and surcharges incrementally. The buyer may decide to purchase because of the investment of time and effort involved in searching for the final price even though they would not have purchased if they had been advised of the total price at the outset. Consumer detriment arises because drip pricing leads consumers into making purchases of 25 Colgate-Palmolive Pty Ltd v Rexona Pty Ltd (1981) ATPR ¶40-242 at 43,194-5. See also Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) ATPR ¶41-186 (Lockhart J). 26 Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526. 27 Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526 at [16]. 28 ACCC v Marksun Australia Pty Ltd (2011) ATPR ¶42-363 at [107]. 29 ACCC v Reebok Australia Pty Ltd (2015) ATPR ¶42-501 at [143] citing the Full Federal Court in Singtel Optus Pty Ltd v ACCC (2012) 287 ALR 249 at [69].

12

The Australian Consumer Law

[1.40]

goods and services which they would not otherwise have made, or paying more for goods and services than they would have paid if they had been better informed. Competition is harmed on the supply side because of the erosion of market share by suppliers with less expensive products whose goods and services would have been purchased but for the drip pricing. Because of this demand and supply side interaction it was thought appropriate to include the ACL in the CCA.

Policy objects included in the IGA [1.40] The modern approach or “purposive” approach to statutory interpretation favours a construction of legislation which gives effect to its legislative purpose. Section 15AA of the Acts Interpretation Act 1901 (Cth) requires the courts when interpreting a statute to adopt a meaning that would “promote the purpose or object underlying the Act” rather than one that would not do so. Objects provisions can play a significant role as an aid to judicial interpretation and can influence judicial outcomes. The overarching national consumer policy objective favoured by the PC,30 agreed to by MCCA on 15 August 2008, and included in the IGA signed by COAG on 2 July 2009, is: To improve consumer well-being through consumer empowerment and protection fostering effective competition and enabling confident participation of consumers in markets in which both consumers and suppliers trade fairly.31

Some of the States and Territories have amended their Application Acts to include this objective.32 This overarching objective is supported by six operational objectives: (a) to ensure that consumers are sufficiently well-informed to benefit from and stimulate effective competition; (b) to ensure that goods and services are safe and fit for the purposes for which they were sold; (c) to prevent practices that are unfair; (d) to meet the needs of those consumers who are most vulnerable or are at the greatest disadvantage; (e) to provide accessible and timely redress where consumer detriment has occurred; and (f) to promote proportionate, risk-based enforcement.33 Other objectives of the ACL can be gleaned from the extrinsic materials, especially the Productivity Commission Report, the CCAAC Report and the MCCA. They are: (a) to clarify the law relating to consumer protection in Australia (clarity); 30 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008)), recommendation 3.1, vol 2, pp 41-2. 31 Intergovernmental Agreement for the Australian Consumer Law (signed by COAG on 2 July 2009), Recital C. 32 See Fair Trading Act 1989 (Qld), s 3; Fair Trading Act 2010 (WA), s 3. 33 Intergovernmental Agreement for the Australian Consumer Law (signed by COAG on 2 July 2009), Recital D.

[1.45]

1 Consumer Protection Policy and Overview of the ACL

13

(b) to make the law relating to consumer protection in Australia consistent across all jurisdictions and sectors of the economy (consistency); (c) to make the law relating to consumer protection in Australia more readily enforceable from the consumer’s point of view (accessibility); (d) to raise awareness of consumers and suppliers of their rights and responsibilities under the law relating to consumer protection in Australia (awareness); and (e) to promote compliance by business with the law relating to consumer protection in Australia (compliance). The Competition Policy Reform Act 1995 (Cth) inserted a new objects provision into the CCA. It provides: The object of this Act is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection.

Well before s 2 was inserted, the consumer protection provisions of Pt V of the TPA were consistently recognised as having important public policy objectives. For example, in Parkdale Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd,34 Mason J (as his Honour then was) observed that the two policy objectives of promoting competition and protecting consumers could be reconciled: The object of Pt V is to protect the consumer by eliminating unfair trade practices, just as the object of Pt IV is to promote competition by eliminating restrictive trade practices. Knowledge of the history of the legislative proposals, of the legislation and of the controversy which has surrounded it might suggest that the dominant object of the Act is the promotion of freedom of competition. But examination and analysis of its provisions yields no acceptable foundation for this conclusion. The two Parts are independent and there is no direction that one Part is to be read subject to the other. Although they have to be read together as parts of the same statute, they might in other circumstances have been enacted as separate statutes with not very much difference in legal effect.35

Managing consumer policy and reform [1.45] In 2011, COAG reformed its organisation and processes. The former Ministerial Council on Consumer Affairs (MCCA) was replaced by the COAG Legislative and Governance Forum of Consumer Affairs (CAF) which consists of the Australian and New Zealand Ministers responsible for consumer affairs. CAF’s role and objectives are set out in the Charter 2013-2015 (dated 1 July 2013).36 CAF is responsible for the administration of the ACL and other issues under the Inter-Governmental Agreements.37 Consumer Affairs Australia and New Zealand (CAANZ) comprises: the Australian Treasury (the Commonwealth Department responsible for administering the CCA) and Federal agencies (ACCC and ASIC); the New Zealand Ministry of Business, Innovation and Employment and the NZ 34 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191. 35 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 202-5. 36 COAG Legislative and Governance Forum of Consumer Affairs and Consumer Affairs Australia and New Zealand, Charter 2013-2015 (1 July 2013), at http://consumerlaw.gov.au/files/2015/09/CAF_ charter_20130515.pdf 37 Intergovernmental Agreement for the Australian Consumer Law (signed by COAG on 2 July 2009), the Trans-Tasman Mutual Recognition Act 1997, the Mutual Recognition Act 1992, the “Travel Agents Participation Agreement” and other matters delegated by COAG.

14

The Australian Consumer Law

[1.50]

Commerce Commission; and the eight State and Territory regulators set out at [1.145]. CAANZ provides primary support to CAF in achieving its strategic objectives. CAANZ has established a number of advisory and consultative committees for each of its four main functions: • education and information (Education &Information Committee); • compliance and dispute resolution (Compliance & Dispute Resolution Advisory Committee); • product safety (Product Safety Consultative Committee); and • policy and research (Policy & Research Advisory Committee). The Australian Consumer Law Review Issues Paper was released in March 2016 and is available at the consumerlaw.gov.au website. It will be overseen by CAANZ and will formally commence in 2016, incorporating an extensive public consultation process and with a final report to Ministers in early 2017.

Overview of the ACL [1.50] Part XI of the CCA provides for the application of the Australian Consumer Law as a law of the Commonwealth. The text of the ACL consists of: • Schedule 2 of the CCA; • the remaining provisions of the that relate to Sch 2 of the CCA; and • regulations under the CCA that relate to the ACL. The ACL applies as a law of the Commonwealth under the CCA. Part XIAA of the CCA regulates the application of the Australian Consumer Law as a law of a State or Territory. The “applied Australian Consumer Law” is defined in s 140 of the CCA to mean the text described in s 140B. Section 140B of the CCA states: The applied Australian Consumer Law consists of: (g) Schedule 2; and (h) The regulations made under section 139G of this Act.

The ACL applies as a law of each State and Territory by separate State and Territory application legislation referred to collectively in this work as the ACL (Application Acts). They are considered in Part IV of this chapter. When the States and Territories implemented the ACL (Application Acts) they adopted the “Australian Consumer Law text”.38 The Australian Consumer Law text consists of: (f) Schedule 2 to the Competition and Consumer Act 2010 of the Commonwealth, and (g) the regulations made under s 139G of that Act.

Thus, there are nine ACLs in force in Australia. The ACL (Cth), applies principally to corporations. In addition, there are six State and two Territory ACLs that apply 38 The Principal State and Territory Application Acts are: Fair Trading Act 1987 (NSW) (FTA 1987 (NSW)), ss 27 and 28; Australian Consumer Law and Fair Trading Act 2012 (Vic) (ACLFTA 2012 (Vic)), ss 7 and 8; Fair Trading Act 1989 (Qld) (FTA 1989 (Qld)), ss 15 and 16; Fair Trading Act 2010 (WA) (FTA 2010 (WA)), ss 18 and 19; Fair Trading Act 1987 (SA) (FTA 1987 (SA)), ss 13 and 14; Australian Consumer Law (Tasmania) Act 2010 (Tas) (ACLA 2010 (Tas)), ss 5 and 6; Consumer Affairs and Fair Trading Act (NT) (CAFTA (NT)), ss 26 and 27; and Fair Trading (Australian Consumer Law) Act 1992 (ACT) (FT(ACL)A 1992 (ACT)), ss 6 and 7.

[1.50]

1 Consumer Protection Policy and Overview of the ACL

15

to persons generally. However, while the States and Territories adopted the text as defined which includes the regulations made under s 139G of the CCA, they did not adopt the other provisions in the CCA. This means that the nine ACLs are not entirely uniform, because there are a number of important provisions in the CCA that are not in the ACL (Cth) itself, and have not been enacted in the ACL (Application Acts) or other State and Territory legislation. Some important differences that should be noted are: • Section 131(1) of the CCA provides that the ACL (Cth) applies to the conduct of corporations, and only to a limited extent to the conduct of individuals, although ss 6 and 131(2) of the CCA extend the operation of the ACL (Cth) to natural persons in certain circumstances where the Commonwealth has constitutional power to do so. The ACL (Application Acts) apply to the conduct of persons (corporations and individuals). • A contributory fault defence is provided by s 137B of the CCA in relation to claims for damages under s 236 of the ACL (Cth) which re-enacts s 82(1B) of the TPA.39 State legislation40 allows a court to reduce an award of damages for contributory negligence only for claims arising out of the tort of negligence and contributory negligence is available at common law; or the claim is for loss arising from a breach of contractual duty that is concurrent with a duty of care in tort. The legislative provisions have not been amended to extend contributory negligence to a statutory claim for damages under s 236 of the ACL (Application Acts). This presents a procedural advantage for claimants seeking damages under the ACL (Application Acts), who will be able to avoid a reduction of their damages award for contributory fault. • Section 139A of the CCA expressly allows for a term that limits or excludes liability for a failure to comply with the consumer guarantees by suppliers of recreational services under the ACL (Cth). Some States and Territories adopt similar provisions.41 • Part VIA of the CCA (Proportionate liability) only applies to a claim for damages made under s 236 of the ACL (Cth) for economic loss or damage to property caused by conduct that was done in contravention of s 18 of the ACL (Cth).

39 In relation to New South Wales, see the decision of the New South Wales Court of Appeal in Perpetual Trustee Company Ltd v Milanex Pty Ltd (In liq) [2011] NSWCA 367. Seddon and Fridman, “Misleading Conduct and Contributory Fault: Inconsistency under the Uniform Australian Consumer Law” (2012) 20 Australian Journal of Competition and Consumer Law 87. 40 See Law Reform (Miscellaneous Provisions) Act 1965 (NSW), ss 8 and 9; Law Reform Act 1995 (Qld), s 10; Civil Liability Act 1936 (SA), s 50; Tortfeasors and Contributory Negligence Act 1954 (Tas), s 4(1); Wrongs Act 1958 (Vic), s 26(1); Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 (WA), s 4(1); Law Reform (Miscellaneous Provisions) Act 1955 (ACT), s 15; Law Reform (Miscellaneous Provisions) Act (NT), s 16(1). 41 For example, s 22(1) of the ACLFTA 2012 (Vic) provides that a term of a contract which operates to limit liability in relation to the supply of recreational services in the ways described is not void by virtue of s 64 of the ACLFTA 2012 (Vic). On the other hand, s 107 of the FTA 1989 (Qld) prohibits all forms of contracting out of the ACL (Qld).

16

The Australian Consumer Law

[1.55]

Similar provisions have been introduced into State and Territory legislation and apply in relation to claims for negligence and misleading conduct.42 Before commencing proceedings prospective litigants will need to consider which ACL applies. There may be procedural advantages in framing the cause of action as one based on the ACL (Application Acts) rather than the ACL (Cth).

Commencement dates [1.55] The ACL (Cth), Sch 2 was implemented in two stages. The first stage of the reforms contained in the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth) (First Commonwealth Act) was passed by the Parliament on 17 March 2010. The First Commonwealth Act comprised: (a) national unfair contract terms provisions, and (b) new civil pecuniary penalties, enforcement powers and consumer redress options for breaches of the TPA or the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). These provisions came into operation on 1 July 2010. The second stage of the reforms contained in the Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth) (Second Commonwealth Act) was passed on 24 June 2010. The Second Commonwealth Act comprised: (i) changes drawing on best practice in the States and Territories,43 (ii) the consumer guarantees reforms, and (iii) a new standard consumer product safety law for consumer goods and product related services. This Act introduced the ACL and provided that the new law would commence on 1 January 2011. Section 139G of the CCA provides that the Governor-General may make regulations prescribing matters required or permitted by the ACL to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the ACL. Item 12 of Sch 7 to the Second Commonwealth Act provides that the GovernorGeneral may make regulations prescribing matters of a transitional, application or saving nature in relation to the amendments and repeals made by the Schedules to the Second Commonwealth Act. 42 Civil Liability Act 2002 (NSW), s 34(1)(b); Civil Liability Act 2003 (Qld), s 28(1)(b) (but note the exclusion for claims by consumers); Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA), s 8; Civil Liability Act 2002 (Tas), s 43A; Wrongs Act 1958 (Vic), s 24AF(1)(b); Civil Liability Act 2002 (WA), s 5AI(1)(b); Civil Law (Wrongs) Act 2002 (ACT), s 107B; Proportionate Liability Act (NT), s 4(2)(b). 43 The Ministerial Council on Consumer Affairs (MCCA) held in Perth on 4 December 2009, considered and agreed on 14 specific proposals to enhance the effectiveness of the Australian Consumer Law. These include unsolicited sales practices, and other forms of direct selling which do not take place in a retail context, lay-by sales transactions, demanding payment for unsolicited advertising, and clarifications to the provisions on pyramid selling.

[1.55]

1 Consumer Protection Policy and Overview of the ACL

17

On 16 November 2010, the Trade Practices (Australian Consumer Law) Amendment Regulations 2010 (No 1)44 (ACL Amendment Regulations) were published. Since the Second Commonwealth Act was scheduled to commence on 1 January 2011, these regulations were made pursuant to s 4 of the Acts Interpretation Act 1901 (Cth) which provides that the regulation-making powers in the ACL (Cth) can be exercised as if the Act had come into force. The ACL Amendment Regulations provide for three transition periods for the implementation of the ACL, to allay the fears expressed by the business community that they would be unable to comply with the 1 January 2011 commencement date. Schedule 1 to the ACL Amendment Regulations relates to the following provisions in the ACL: (a) prescribed requirements for asserting a right to payment, (b) agreements that are not unsolicited consumer agreements and (c) reporting requirements for goods or product-related services associated with death, serious injury or serious illness. These provisions commenced on 1 January 2011. Schedule 2 to the ACL Amendment Regulations relates to repair notices provisions of the ACL, which commenced on 1 July 2011. Schedule 3 to the ACL Amendment Regulations relates to warranties against defects provisions of the ACL, which commenced on 1 January 2012. The TPA was amended and partially renumbered with effect from 1 January 2011 by the Second Commonwealth Act. At the same time, the TPA was renamed by item 2 of Sch 5 to the Second Commonwealth Act to become the Competition and Consumer Act 2010 (Cth). By reason of item 7(1) of Sch 7 to the Second Commonwealth Act the TPA as in force immediately before 1 January 2011 continues to apply to acts or omissions that occurred before that date. This means that in relation to conduct that occurred before 1 January 2011, and continued after that date, it will be necessary to seek relief under the relevant provisions of the TPA and the CCA. At the State and Territory level the ACL was also implemented in stages. Two States implemented the unfair terms provisions of the ACL as a law of their States by incorporating them into their Fair Trading Acts. The Fair Trading Amendment (Unfair Contract Terms) Act 2010 (Vic) was passed by the Parliament of Victoria on 1 June 2010 and came into operation as a law of the State of Victoria on 1 July 2010.45 The Fair Trading Amendment (Unfair Contract Terms) Act 2010 (NSW) was passed by the Parliament of New South Wales on 23 June 2010 and came into operation as a law of the State of New South Wales on 1 July 2010.46 From 1 January 44 Registered on the Federal Register of Legislative Instruments, at http://www.comlaw.gov.au. 45 Available at http://www.parliament.vic.gov.au/static/www.legislation.vic.gov.au-bills.html. See Government Gazette (24 June 2010) http://www.gazette.vic.gov.au/gazette/Gazettes2010/ GG2010G025.pdf. 46 See Government Gazette (1 July 2010) http://www.legislation.nsw.gov.au/sessionalview/sessional/ sr/2010-321.pdf.

18

The Australian Consumer Law

[1.60]

2011, the FTA unfair terms provisions in these States were repealed and the unfair terms provisions of the CCA, Sch 2 now apply. The ACL (Application Acts) which enacted the ACL as a law of their respective jurisdictions commenced on 1 January 2011.

Transitional measures [1.60] Transitional measures are contained in Sch 7 of the Second Commonwealth Act. Items 2–5 make the following provisions in relation to existing product declaration, bans and standards: 2 Declarations of goods to be unsafe goods A notice under subsection 65C(5) of the Trade Practices Act 1974 that was in force immediately before the commencement of this item continues in force after that commencement as if: (a) it were an interim ban imposed under section 109 of the Australian Consumer Law by the Commonwealth Minister; and (b) it starts on the day of that commencement. 3 Permanent bans A notice under subsection 65C(7) of the Trade Practices Act 1974 that was in force immediately before the commencement of this item continues in force after that commencement as if it were a permanent ban imposed under section 114 of the Australian Consumer Law. 4 Prescribed consumer product safety standards A prescribed consumer product safety standard under section 65C of the Trade Practices Act 1974 that was in force immediately before the commencement of this item continues in force after that commencement as if it were a safety standard made under section 104 of the Australian Consumer Law. 5 Prescribed consumer product information standards A prescribed consumer product information standard under section 65D of the Trade Practices Act 1974 that was in force immediately before the commencement of this item continues in force after that commencement as if it were an information standard made under section 134 of the Australian Consumer Law.

Implementation of the new consumer guarantees regime is dealt with in item 6 of Sch 7 of the Second Commonwealth Act. It provides that Ch 3, Pt 3-2 (Consumer transactions) applies to all relevant conduct occurring in trade or commerce on or after 1 January 2011. Conduct occurring prior to 1 January 2011 will remain subject to the repealed (and saved, for those purposes) provisions of the TPA or the relevant FTA of a State or Territory .47 Goods and services acquired before 1 January 2011 will be covered by TPA and FTA regimes . Eligible goods and services acquired on or after 1 January 2011 will be

47 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.144].

[1.65]

1 Consumer Protection Policy and Overview of the ACL

19

subject to the guarantees. Warranties for financial services provided by the ASIC Act48 will continue to apply and be administered by ASIC. Item 7 of Sch 7 of the Second Commonwealth Act provides that the TOA, as in force immediately before the commencement of the CCA, Sch 2, continues to apply to or in relation to any proceedings which were commenced, but not concluded, before the commencement of the ACL.

Substantive changes introduced by the ACL [1.65] The principal substantive changes introduced by the ACL are the national law on unfair contract terms (Ch 2, Pt 2-3) and the national consumer guarantees law, which replaces the statutory implied conditions and warranties (Ch 3, Pt 3-2, Div 1). However, many of the ACL provisions are not substantively different from their equivalent former TPA provisions. According to the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, when transferring the provisions of the TPA into the ACL, the opportunity was taken to express the law in a clearer style. It stated: much of the TPA has been in place for over 30 years, so a number of ACL provisions have been redrafted to comply with plain English drafting.49

The drafting changes are not intended to alter the legal effect of those TPA provisions. Thus, the extensive jurisprudence that developed around those TPA provisions will apply equally to the new ACL provisions that re-enact them. The Australian Treasury, the Commonwealth Department responsible for the administration of the CCA, has published two guides to explain the context of the ACL reforms: • The Australian Consumer Law: An Introduction;50 and • The Australian Consumer Law: A Guide to Provisions.51 In The Australian Consumer Law: An Introduction, Treasury identifies the following changes as the principal ones being implemented by the ACL: • a single set of definitions and interpretive provisions, some of which differ from those currently used in the (Ch 1); • a new, national law on unfair contract terms (Ch 2, Pt 2-3); • a single set of provisions about unfair practices and fair trading, including amendments and additions which reflect existing provisions in State and Territory consumer laws (Ch 3, Pt 3-1); • new national consumer guarantees provisions, which will replace statutory implied conditions and warranties (Ch 3, Pt 3-2, Div 1); • a new national regime for unsolicited consumer agreements, which will replace existing State and Territory laws on door-to-door sales and other direct marketing (Ch 3, Pt 3-2, Div 2); 48 ASIC Act, s 12ED. 49 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.8]. 50 The Australian Consumer Law: An Introduction (July 2010). 51 The Australian Consumer Law: A Guide to Provisions (July 2010).

20

The Australian Consumer Law

[1.65]

• simple national rules for lay-by agreements (Ch 3, Pt 3-2, Div 3); • a new, national product safety legislative regime (Ch 3, Pt 3-3); and • new national provisions on information standards which apply to services as well as goods (Ch 3, Pt 3-4).52 The following table, originally prepared by the Australian Treasury, summarises the principal differences between the ACL and the TPA consumer protection provisions.53 It was prepared before the Second ACL Bill was amended in the Senate. It has been amended to reflect those and other changes that have occurred since 1 January 2011. Table 1.1 Australian Consumer Law – Table of provisions that have substantially changed compared to the TPA Description Chapter 1 Meaning of consumer

ACL

TPA or other source

Comments

s3

TPA, s 4B

$40,000 threshold retained contrary to the version of the Bill first introduced into Parliament. Amended to clarify that burden of proof is evidentiary only in nature; no legal burden on defendant; and not a defence to otherwise misleading or deceptive conduct. Proposed changes agreed by MCCA on 4 December 2009. New provision – based on NZ Consumer Guarantees Act 1993 (CG Act). Only applies to contracts for or relating to the use of postal, telegraphic or telephonic services; or contracts for or relating to radio or television broadcasts. Draws on the definition of “manufactured” in s 74A(1) and deemed “manufacturer” in s 74A(3) of the of the TPA.

Misleading representa- s 4 tions with respect to future matters

TPA, s 51A

When donations are treated as supplies

s5

-

Postal, telegraphic or telephonic services or contracts for or in relation to a radio or television broadcast Meaning of manufacturer

s 6(3A)

TPA, s 6(3)

s7

TPA, s 74A

Part 2-1: Misleading or deceptive conduct Application of this s 19 TPA, s 65A Part to information providers

Subsections 19(3) and 19(4) reflect the High Court’s interpretation of 65A of the in ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305.

Part 2-2: Unconscionable conduct

52 The Australian Consumer Law: An Introduction, p 3. 53 The Table in its original form appears as an Appendix to the submission by the Treasury to the Senate Economics Legislation Committee. It is reproduced with the kind permission of Office of the Senior Clerk of Committees Department of the Senate.

[1.65] Description Unconscionable conduct in consumer and business transactions

1 Consumer Protection Policy and Overview of the ACL ACL s 21

TPA or other source TPA, ss 51AB and 51AC

21

Comments Amended to give effect to Government response to the 2009 Senate Economics Committee report on unconscionable conduct. Section 22(2)(j) and 22(3)(j) inserted to allow the court to have regard to the progress of a contract in considering unconscionability. Amended by the Competition and Consumer Legislation Amendment Act 2011 (Cth) which implemented the Expert Panel’s recommendations to include a list of interpretive principles and unify the consumer and business related provisions prohibiting unconscionable conduct.

Part 2-3 Unfair Terms Unfair terms in ss 23 – 28 Adds prohibition of unfair terms in standard form standard form consumer contracts consumer contracts Part 3-1 Unfair practices, Division 1: False or misleading representations etc. False or misleading s 29 TPA, s 53 Section 53 of the TPA expanded to: representations about • clarify that discharging an goods or services evidentiary burden does not amount to a defence; • prohibit both false or misleading representations (whereas s 53 prohibited only false representations in some instances); and • include additional prohibitions relating to: – representations that are testimonials and representations about testimonials (based on s 14 FTA 1999); and

– representations concerning consumer guarantees.

False or misleading representations about sale etc of land

ss 30 & 31

TPA, s 53A & 53B

These changes were agreed by MCCA on 4 December 2009. Prohibition on offering gifts and prizes in connection with the sale of land moved to s 32 of the ACL.

22

The Australian Consumer Law

[1.65]

Description Offering rebates, gifts, prizes etc

ACL s 32

TPA or other source TPA, s 54; FTA (Vic), s 16(6)

Comments Combines s 54 of TPA and s 16 of FTA 1999. Defence: s 32(3) added to no providing rebate, gift prize or other free item within time specified (or reasonable time) if: • act or omission of another person or cause beyond person’s control; and • took reasonable precautions to ensure rebate, gift, prize or other free item would be provided within time specified (or reasonable time).

Wrongly accepting payment

s 36

TPA, s 58

Provision now includes requirement to provide goods or services for which payment has been accepted within a specified time, or if no time is specified, within a reasonable time (s 36(4)). Based on s 19 of FTA 1999. Defence: s 36(4) added to accepting payment for goods or services without supply within specified period if: • failure due to act or omission of another person or cause beyond person’s control; and • person took reasonable precautions and exercised due diligence to avoid failure.

Applications of provision of this Division to information providers

s 38

TPA, s 65A

Subsections 38(3) and 38(4) reflect the High Court’s interpretation of s 65A of the in ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305.

Part 3-1, Division 2: Unsolicited supplies Assertion of right to s 40 TPA, s 64 payment for unsolicited goods or services

Adds requirement for a warning statement to be set out in the regulations. Based on s 58 FTA 1987. Agreed by Ministerial Council on Consumer Affairs on 4 December 2009. Based on s 26 of the FTA 1999.

Liability of recipient s 42 – for unsolicited services s 43 TPA, s 64 Adds prohibition on asserting a Assertion of right to right to payment for unauthorised payment for unauthoradvertisements. Expansion to ised entries or advertisements advertisements Part 3-1, Divisions 3 to 5: Pyramid schemes, multiple pricing and other unfair practices Marketing schemes as s 46 TPA, s 65AAE Amended such that a court “must” pyramid schemes have regard to certain matters, instead of “may”. Ministerial Council on Consumer Affairs agreed to clarification of pyramid selling provisions on 4 December 2009.

[1.65]

1 Consumer Protection Policy and Overview of the ACL

Description Multiple pricing

ACL s 47

TPA or other source –

Harassment and coercion

s 50

TPA, ss 60 & 53A(2)

Part 3-2, Division 1: Consumer guarantees Guarantees relating to ss 51 – 59 NZ CGA the supply of goods Guarantees relating to the supply of services

ss 60 – 63

s 65 Application of Division to supplies of gas, electricity and telecommunications Display notices Sch 2, s 66

NZ CGA

–

–

Part 3-2, Division 2: Unsolicited consumer agreements All provisions ss 69 – 95 – Part 3-2, Division 3: Lay-by agreements All provisions ss 96 – 99 –

Part 3-2, Division 4 : Miscellaneous Supplier must provide s 100 proof of transaction

Similar to s 161A, FTA 1999.

Customer may request itemised bill

s 101

Similar to s 161A, FTA 1999 (Vic).

Prescribed requirements for warranties against defects

s 102

Similar to FTA 1989 (Qld), Pt 3, Div 5

23

Comments Similar to s 40 of the FTA 1987. The inclusion of this provision in the ACL was agreed by Ministerial Council on Consumer Affairs on 4 December 2009. Combines harassment and coercion in connection with supply of goods and services (s 60) with the same in relation to interests in land (s 53A(2)). Guarantees correspond to implied conditions and warranties in Pt V, Div 2 of the TPA. Guarantees correspond to existing conditions and warranties in Pt V, Div 2 of the TPA. A new guarantee, based on a NZ provision, relates to supply of services within a reasonable time. An exemption for architects and engineers in s 74 of the TPA has been carried over in s 61(4) of the ACL. New provision – regulation-making power to allow for exclusion of guarantees for these supplies. New provision based on Commonwealth Consumer Affairs Advisory Council recommendation. The inclusion of this provision in the ACL was agreed by the Ministerial Council on Consumer Affairs on 4 December 2009. New law – based on existing arrangements in all States and Territories. New law – high level principles, as agreed at Ministerial Council on Consumer Affairs on 4 December 2009. The inclusion of this provision in the ACL was agreed by the Ministerial Council on Consumer Affairs on 4 December 2009. The inclusion of this provision in the ACL was agreed by the Ministerial Council on Consumer Affairs on 4 December 2009. Allows regulation to be made to prescribe requirements contact details, etc to be provided when warranty provided by supplier.

24

The Australian Consumer Law

Description ACL Repairers must comply s 103 with prescribed requirements

[1.65] TPA or other source –

Parts 3-3 and 3-4, Product Safety and Information Standards Safety standards ss 104 – 137 TPA, ss 65B, 65C, 65D, 65E, 65F, 65G, 65H, 65R, 65T

Part 3-5, Manufacturer’s liability for safety defects Manufacturer’s s 138 – 150 TPA, Pt V, Div 2A liability Chapter 4, Offences Offences replicate Chapter 3 provisions Parts 5-1 and 5-2: Enforcement and Remedies Pecuniary penalties ss 224 – 231 TPA, s 76E Injunctions

ss 232 – 235 TPA, s 80

Actions for damages

s 236

TPA, s 82

Compensation orders for injured persons

ss 237, 238

TPA, s 87

Privilege against s 249 exposure to a penalty Defences for certain ss 251 – 253 civil prosecutions Part 5-3, Country of origin representations Country or origin ss 254 – 258 representations

Comments New provision – allows regulations to be made requiring repairers of goods to provide information to consumers about, for example, the potential for data to be erased from electronic storage media when goods are repaired, as agreed at the Ministerial Council on Consumer Affairs on 4 December 2009. The Ministerial Council on Consumer Affairs agreed to a new approach to product safety at its meeting on 23 May 2008. On 4 December 2009 the MCCA agreed to the detailed operation of this approach. It is based on existing arrangements for safety standards, interim bans, permanent bans, mutual recognition, compulsory recalls, voluntary recalls, safety warning notices and information standards under the TPA and recommendations by the Productivity Commission. A new reporting requirement for incidents occasioning death or serious injury has been included in the ACL. The Productivity Commission recommended a mandatory reporting requirement along these lines. No policy change between TPA and ACL.

Penalties apply to new provisions in Chapter 3 based on best practice from States and Territories. Addition of an injunction restraining a person from carrying on a business. Based on s 65(2) of the FTA 1987. Provisions dealing with damages for personal injury moved to Pt XI of the TPA, to apply only as Commonwealth law. Provisions dealing with damages for personal injury moved to Pt XI of the TPA, to apply only as Commonwealth law. New law New law

New defence to misleading or deceptive conduct for goods “grown in” a particular country.

[1.70]

1 Consumer Protection Policy and Overview of the ACL

Description ACL TPA or other source Part 5-4, Remedies relating to consumer guarantees Actions against ss 259 – 266 Based on NZ CGA suppliers of goods Actions against ss 267 – 270 Based on NZ CGA suppliers of services Actions for damages ss 271 – 273 Based on NZ CGA against manufacturers of goods Indemnification of s 274 TPA, s 74H suppliers by manufacturers

Part 5-5, Liability of linked credit providers Linked credit contracts ss 278 – 287 TPA, s 73

25

Comments

Indemnity expanded to cover not only situations where a manufacturer would be required to pay damages, but to circumstances in which a supplier incurs costs because goods are not of acceptable quality, fit for purpose or fail to match their description. Based on s 73 of the TPA and s 135 of the National Credit Code, to ensure that amounts can be recovered in State and Territory tribunals in respect of linked credit contracts. The NCC is otherwise only enforceable in courts (but not tribunals).

The remainder of this chapter is divided into four parts.

• Part II – explains the history of the ACL; • Part III – considers the adoption and scope of the ACL (Cth); • Part IV – considers the adoption and scope of the ACL (Application Acts); and, • Part V – considers the implementation and enforcement of the ACL by the ACL regulators. PART II: HISTORY OF THE ACL [1.70] The catalyst for the ACL reforms was the two studies completed by the Productivity Commission (PC): the 2006 report, Review of the Australian Consumer Product Safety System,54 and the 2008 report, Review of Australia’s Consumer Policy Framework.55 As part of its terms of reference for the 2008 report the PC was to consider “ways to improve the consumer policy framework so as to assist and empower consumers to meet current and future challenges”. The PC was also required to report on “any barriers to, and ways to improve, the harmonisation and coordination of consumer 54 Productivity Commission, Review of the Australian Consumer Product Safety System: Research Report (7 February 2006), at http://www.pc.gov.au/inquiries/completed/product-safety/report. 55 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008). The PC’s report is available at http://www.pc.gov.au/inquiries/completed/consumer-policy/ report.

26

The Australian Consumer Law

[1.75]

policy and its development and administration across jurisdictions in Australia, including ways to institutionalise arrangements and to avoid duplications of effort”.56

Comparison of generic consumer protection legislation [1.75] As part of its 2008 Inquiry, the PC commissioned a report to ascertain the nature and extent of any differences between the existing Commonwealth, State and Territory legislation governing consumer protection (Consultancy Report).57 The Consultancy Report considered first the Commonwealth consumer protection regime contained in Pt V of the former TPA and other Commonwealth legislation, principally the ASIC Act. Having considered the material differences between the Commonwealth legislation, the Report compared the TPA (the template legislation) with the equivalent provisions of the State and Territory Fair Trading legislation (eight separate pieces of State and Territory legislation), including the enforcement powers of the State and Territory regulators. The Report also considered the material differences between the statutory implied terms regime in Pt V Div 2 of the TPA, and the State and Territory Sale of Goods Acts (another eight separate pieces of legislation). Finally, the Report considered other State legislation dealing with unfair or unjust terms (a further two separate pieces of legislation). The overall conclusion of the Report was that a myriad of Commonwealth, State and Territory consumer laws had developed over time with many small variations, even in regard to the definition of “consumer”, and that rather than moving towards uniformity and simplicity, they were moving towards greater complexity and disharmony. The national consumer protection laws contained in the TPA, overlapped with separate but discontinuous State and Territory fair trading provisions, leading to uncertainty and unjustified compliance costs for businesses, and confusion for consumers as to their rights and remedies. The PC recommended that a single national generic consumer law (to be called “The Australian Consumer Law”) be implemented and that the existing consumer protection provisions of the TPA should form the basis for the new law. The Australian Consumer Law would constitute a single, national law for fair trading and consumer protection, which would apply equally in all Australian jurisdictions. Commonwealth Consumer Affairs Advisory Council Report

[1.80] The PC, in its review of Australia’s Consumer Policy Framework, noted that it had not “undertaken the detailed analysis necessary to reach a judgment on the adequacy or otherwise of the existing regulation in this area, or the merits of alternative models such as those adopted in countries such as New Zealand”.58 56 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), vol 1, p vii. 57 Professors Corones and Christensen, Comparison of Generic Consumer Protection Legislation (Consultancy Report prepared for Productivity Commission, Faculty of Law, Queensland University of Technology, September, 2007), available at http://www.pc.gov.au/inquiries/completed/ consumer-policy/consumerprotectionlegislation. 58 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), p 176.

[1.85]

1 Consumer Protection Policy and Overview of the ACL

27

Accordingly, it recommended that: “The adequacy of existing legislation related to implied warranties and conditions should be examined as part of the development of the new national generic consumer law”.59 On 12 March 2009, the Australian government announced that a review of the Australian law of implied terms would be undertaken by the Commonwealth Consumer Affairs Advisory Council (CCAAC).60 On 26 July 2009, the Minister for Competition Policy and Consumer Affairs, the Hon Dr Craig Emerson MP released an Issues Paper on behalf of CCAAC. The Issues Paper examined the adequacy of the existing laws on implied terms and the need, if any, for amendments.61 A parallel consultation process was conducted with the States and Territory consumer agencies. Based on the 33 written submissions received by CCAAC in response to the Issues Paper, there were interviews in Canberra and Melbourne with interested parties and additional teleconferences in September 2009. CCAAC also had discussions with the New Zealand Ministry of Consumer Affairs, ASIC and the ACCC on the adequacy and effectiveness of the existing implied terms regime. On 30 October 2009, CCAAC presented its report, Consumer Rights: Reforming Statutory Implied Conditions and Warranties to Minister Emerson.62 NEIAT Report

[1.85] While CCAAC was conducting its review, the National Education and Information Advisory Taskforce (NEIAT)63 commissioned Latitude Research, together with On Track Research, to conduct a baseline study to generate robust data from consumers and traders in relation to statutory warranties and refunds in three markets, whitegoods, electronic goods and mobile phones (the target goods).64 The baseline research was conducted during July and August 2009.

59 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), recommendation 8.1. 60 The function of CCAAC is to “consider reports and papers referred to CCAAC by the Minister and report to the Minister on their likely consumer impacts; identify emerging issues impacting on consumers and draw those to the attention of the Minister; and investigate and report to the Minister on consumer issues referred to CCAAC by the Minister”. 61 The reports are available on the Australian Government, the Treasury’s website, CCAAC Review of Statutory Implied Conditions and Warranties (2009) at http://www.ccaac.gov.au. The Report was compiled by a sub-group of CCAAC led by Professor Stephen Corones and assisted by Ms Deborah Healey, Mr Ray Steinwall and Ms Carolyn Bond. 62 The report is available on the Australian Government, Treasury’s website, Consumer Rights – CCAAC Report on Statutory Implied Conditions and Warranties (2009) at http://www.ccaac.gov.au. 63 NEIAT was established in 2007 by the Standing Committee of Officials of Consumer Affairs (SCOCA), composed of the senior officers of consumer policy and enforcement bodies in Australia and New Zealand, to help identify, develop and implement strategies to empower consumers to make informed and timely market place decisions. 64 NEIAT, National Baseline Study for Statutory Warranties and Refunds, Research Paper No 2 October 2009 (NEIAT Baseline Study), http://www.archive.treasury.gov.au/documents/1666/PDF/ National_Baseline_Study_Warranties_and_Refunds.pdf.

28

The Australian Consumer Law

[1.90]

On 4 December 2009, the Ministerial Council on Consumer Affairs (MCCA) met in Perth.65 In relation to consumer guarantees, the MCCA noted: the comprehensive studies of the law on consumer rights and the effectiveness of existing laws undertaken by the Commonwealth Consumer Affairs Advisory Council (CCAAC) in its Report Consumer rights: Reforming statutory implied conditions and warranties and the SCOCA’s National Education and Information Taskforce (NEIAT) in its Baseline Study for Statutory Warranties and Refunds. Ministers thanked CCAAC and NEIAT for their impressive contributions to the understanding of these laws and the needs of consumers and businesses, and further noted the publication of these reports. Ministers noted the findings of the NEIAT study to the effect that many consumers and businesses have little, if any, awareness of consumer rights and that a significant contributor to this is the current legal framework. Informed by the NEIAT study, CCAAC has recommended that the existing system of statutory implied conditions and warranties in consumer contracts be replaced with a system of statutory consumer guarantees. Ministers share CCAAC’s view that such a system will be a significant enhancement of the law and will be more readily understood by consumers and businesses. MCCA agreed, as part of the development of the Australian Consumer Law, to improve the legal framework for consumer rights that apply to the acquisition of goods and services. This will be a single national law guaranteeing consumer rights in relation to their acquisition of goods and services. They will be based on existing implied conditions and warranties, which will be simplified and streamlined. This new system of consumer guarantees, supported by effective redress, will foster a greater ability to inform and educate all Australian consumers and businesses about their rights and obligations, and will reduce the compliance burden for businesses, particularly those that operate in more than one state or territory.66

On 15 August 2008, the MCCA adopted the recommendation of the PC that there should be a new ACL based on the consumer protection provisions of the former TPA, together with amendments reflecting best practice in the State and Territory consumer protection legislation. While the Joint Communiqué recognised that the Australian Consumer Law would be “a significant enhancement of the law”, the consumer guarantees regime would be “based on existing implied conditions and warranties, which will be simplified and streamlined”.

PART III: ACL AS A LAW OF THE COMMONWEALTH [1.90] In the case of the Commonwealth, the application law is contained in Pt XI of the CCA. Section 130 of the defines the term “Australian Consumer Law” to mean Sch 2 as applied under Pt XI of the CCA. As an application law, the ACL in Sch 2 of the CCA is drafted to reflect that it will be a law of the Commonwealth and of each State and Territory. Consequently, all of the provisions are drafted to apply to the conduct of “persons” rather than “corporations”, as was the case in the consumer protection provisions of the former TPA. 65 MCCA comprises Commonwealth, State, Territory and New Zealand Ministers responsible for fair trading, consumer protection laws, trade measurement and credit laws. More information can be obtained from its official site at: Consumer.gov.au “Official Site of the Ministerial Council on Consumer Affairs” at http://www.consumer.gov.au/. 66 The MCCA Joint Communique (2009), at http://www.consumerlaw.gov.au/files/2015/09/Meeting_ 22_4_Dec_09.pdf.

[1.95]

1 Consumer Protection Policy and Overview of the ACL

29

Section 131(1) of the CCA provides: Schedule 2 applies as a law of the Commonwealth to the conduct of corporations, and in relation to contraventions of Chapter 2, 3 or 4 of Schedule 2 by corporations.

Because of constitutional limitations on the legislative power of the Commonwealth Parliament, the does not apply universally to all transactions or activities. The Commonwealth does not have constitutional power to make consumer protection laws generally but may make laws with respect to the conduct of corporations under the corporations power in s 51(xx) of the Constitution. Sections 6 and 131(2) of the CCA extend the operation of the CCA, Sch 2 to natural persons where the Commonwealth has constitutional power to do so. By virtue of s 6(2) of the CCA, reliance is placed on other heads of constitutional power, namely: (a) the overseas trade and commerce power;67 (b) the interstate trade and commerce power;68 (c) the Territories power;69 (d) the executive power of the Commonwealth;70 and (e) the incidental power.71 These powers were used to ensure that the CCA applies directly to the greatest extent possible under the Commonwealth Parliament’s legislative power.72 A number of the phrases used in the Constitution, such as “trading or financial corporations” and “trade and commerce among the States” are also incorporated into the CCA. In the early years of the TPA’s operation, the extension provisions in ss 5 and 6 were very important because, in relation to conduct occurring in the States, they provided the only means of subjecting natural persons to liability under the TPA. In Smolonogov v O’Brien,73 for example, it was the respondent’s use of the telephone to make the representations complained of that brought this conduct within the purview of the Act. However, the enactment during the 1980s of the Fair Trading Acts in each State and Territory which mirrored most of the provisions in Pt V, Div 1 of the TPA meant that reliance on ss 5 and 6 of the was no longer necessary.

Extended application of ACL (Cth) to conduct outside Australia [1.95] The operation of the ACL (Cth) is extended to conduct occurring outside Australia by ss 5(1), 6(2)(a)(i) and 6(3) of the CCA. Section 6(2)(a)(i) extends the territorial operation of the ACL (Cth) to conduct between Australia and places 67 Australian Constitution, s 51(i). 68 Australian Constitution, s 51(i). 69 Australian Constitution, s 122. 70 Australian Constitution, s 61. 71 Australian Constitution, s 51(xxxix). 72 Zhu v Treasurer (NSW) (2004) 218 CLR 530 at [96] (Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ). 73 Smolonogov v O’Brien (1982) ATPR ¶40-312. On appeal Smolonogov v O’Brien (1983) ATPR ¶40-418.

30

The Australian Consumer Law

[1.95]

outside Australia. Section 6(3) of the CCA extends to representations using the telegraphic or telephonic services. Sections 6(2)(a)(i) and 6(3) are considered at [1.100]. Section 5(1) of the CCA applies Pt XI of the CCA and the ACL, other than Pt 5-3, to: the engaging in conduct outside Australia by: (g) bodies corporate incorporated or carrying on business within Australia; or (h) Australian citizens; or (i) persons ordinarily resident within Australia …

Section 5(1) focuses on the body corporate or person engaging in the conduct. In the case of a body corporate, the necessary connection with Australia exists if it is incorporated or carries on business within Australia. The first test, incorporation, requires no explanation. The second test, “carrying on business”, will be established by trading in Australia. In Hope v Bathurst City Council,74 Mason J (with whom by Gibbs, Stephen and Aickin JJ concurred) said that the word “business” denotes “activities undertaken as a commercial enterprise in the nature of a going concern, that is, activities engaged in for the purpose of profit on a continuous and repetitive basis”.75 This definition was adopted by Merkel J for the purposes of s 5(1) in Bray v Hoffman-La Roche Ltd.76 Merkel J also stated: I see no reason, however, for importing the additional requirement that to carry on business in the jurisdiction the foreign company must also have a place of business in the jurisdiction. A place of business is not a requirement of comity.77

This approach has been adopted in subsequent cases.78 In the case of natural persons, the necessary connection with Australia is citizenship or ordinary residence within Australia. The first test, citizenship, requires no explanation.79 The second test, ordinary residence, is a question of fact and degree. In each case it will be necessary to isolate the factors that give rise to some connection with Australia, such as the frequency, duration and purpose of visits to Australia; family or business ties; and the ownership and use of property in Australia. The fact that a person is a resident of another country does not preclude a finding of ordinary residence within Australia.80 Section 5(1)(g) of the CCA applies Pt XI of the CCA and the ACL, other than Pt 5-3, to the “engaging in conduct outside Australia by … bodies corporate incorporated 74 Hope v Bathurst City Council (1980) 144 CLR 1. 75 Hope v Bathurst City Council (1980) 144 CLR 1 at 8-9. 76 Bray v Hoffman-La Roche Ltd (2002) 118 FCR 1 at [63]. See also Norcast SarL v Bradken Ltd (No 2) (2013) 219 FCR 14 at [255] (Gordon J). 77 Bray v Hoffman-La Roche Ltd (2002) 118 FCR 1 at [63]. 78 Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 2) (2012) 266 FLR 243 at 437-9 [380]-[384] (Croft J) and RT & YE Falls Investments Pty Ltd v New South Wales [2001] NSWSC 1027 at [78] (Palmer J). 79 Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 2) (2012) 266 FLR 243 at 445 [401] (Croft J). 80 Levene v Commissioners of Inland Revenue [1928] AC 217; Commissioners of Inland Revenue v Lysaght [1928] AC 234; Cooper v Cadwalader (1904) 5 TC 101.

[1.100]

1 Consumer Protection Policy and Overview of the ACL

31

or carrying on business within Australia”. There is no definition of the phrase “carrying on business within Australia”.81 In ACCC v Valve Corporation (No 3),82 Valve Corporation did not have a physical presence or place of business in Australia. It supplied computer games to Australian consumers via the internet and granted licences of its computer games to Australian consumers. Even if Valve did not engage in conduct in Australia, Edelman J held that Valve Corporation was carrying on business in Australia, because: • it had many customers in Australia and earned significant revenue from them; • it had content servers in Australia to ensure that consumers could download content as soon as possible; • it had significant personal property and servers located in Australia and paid invoices to Australian companies for equipment involving servers; • it paid for rack space and power to its servers in Australia; • it relied on relationships with third party content delivery providers in Australia; and • it entered into contracts with third party service providers outside Australia who provided content around the world, including Australia.83

Application of ACL (Cth) to conduct of natural persons [1.100]

Section 6(2)(a) of the CCA extends the application of the ACL (other than ss 33 or 155 of the ACL) to natural persons who are engaged in trade or commerce between Australia and places outside Australia, or within Australia but among the States or Territories of Australia. Section 4(1) of the CCA and s 2(1) of the ACL (Cth) both define “trade or commerce” to mean “trade or commerce within Australia or between Australia and places outside Australia”.

Misleading conduct engaged in by Australian firms in an overseas location in respect of their purely overseas transactions will not be actionable under s 18 of the ACL as that conduct was not “in trade or commerce” as so defined. On the other hand, if the conduct in question occurred in the course of trade to or from Australia, the protection given by the Act will extend to overseas consumers and not just those in Australia. For example, in Wells v John R Lewis (International) Pty Ltd,84 liability arose in respect of prohibited conduct originating in Australia but directed towards consumers resident overseas. By virtue of s 6(3)(a) of the CCA, Pts 2-1 (misleading or deceptive conduct), 2-2 (unconscionable conduct), 3-1 (unfair practices other than Div 3, pyramid schemes), 3-3, 3-4, 4-1 (other than Div 3), 4-3, 4-4 and 5-3, apply to natural persons where the conduct in question involved the use of postal, telegraphic or telephonic services, or took place in a radio or television broadcast. The process of achieving this outcome is as follows: the relevant provisions of the ACL refer to “persons”; the effect of s 131(1) of the CCA is that as a law of the Commonwealth these provisions 81 See Bray v Hoffman-La Roche Ltd (2002) 118 FCR 1 at [59]-[60]. 82 ACCC v Valve Corporation (No 3) [2016] FCA 196. 83 ACCC v Valve Corporation (No 3) [2016] FCA 196 at [199]-[205]. 84 Wells v John R Lewis (International) Pty Ltd (1975) 25 FLR 194. See Clarke, “The Extraterritorial Reach of the CCA – A Primer” (2012) 27(10) Competition and Consumer Law News 308.

32

The Australian Consumer Law

[1.100]

are restricted “to the conduct of corporations”. Section 6(3)(b) then reverses this by providing that a reference in the provisions of Pt XI to a corporation include a reference to a person not being a corporation where the conduct involves the use of postal, telegraphic or telephonic services, or takes place in a radio or television broadcast. Section 6(3)(a) of the CCA is of particular significance in the context of the internet, email and e-commerce. In ACCC v Jutsen (No 3),85 Nicholas J held that the expression “telegraphic … services” in s 6(3) of the CCA extends to conduct involving the use of the internet. The statutory provisions of the ACL relating to pyramid selling schemes were held to be applicable to natural persons by reason of the internet-based nature of the scheme. In ACCC v Chopra,86 the court ordered a natural person, the sole operator of an online electronics store based in Australia, Electronic Bazaar (EB), to pay penalties of $100,000 for contraventions of ss 18 and 29(1)(m) of the ACL. Mr Chopra represented that consumers who purchased goods through the EB website were not entitled to a refund, replacement or repair in relation to those goods. Where a natural person engages in infringing conduct by means of a website located outside Australia, it may be necessary to have recourse to both s 5 and s 6(3) of the CCA to bring the conduct within the ACL (Cth). In ACCC v Hughes,87 Mr Hughes, a natural person living within Australia, contravened the TPA, ss 52, 53(e), misleading representation with respect to price, and 53(c), misleading representation with respect of performance characteristics, uses or benefits, by making false or misleading representations through an internet-based website with a United States domain name. The goods offered for sale were prescription pharmaceutical products, namely a range of oral contraceptives. The court made a number of declarations and restrained Hughes from continuing to supply pharmaceutical products unlawfully. Hughes was later imprisoned for contempt for disregarding those orders. Allsop J concluded: Thus, Mr Hughes places on a computer site overseas misleading or deceptive material with the intention that consumers in Australia, the United States and elsewhere will use telephonic services to access that information and rely upon it. Thus, relief is available under the TPA by reason of s 5 and s 6 of the Act, notwithstanding the lack of a presence of a corporation.88

85 ACCC v Jutsen (No 3) (2011) 206 FCR 264 at [100]. See also ACCC v Sensaslim Australia Pty Ltd (in liq) (No 1) (2011) 196 FCR 566 at [17], [25] and [38] (Yates J); ACCC v Jones (No 5) [2011] FCA 49 at [5] and [10] (Logan J); Jones v ACCC [2010] FCA 481 at [30] (Collier J); Macquarie Bank Ltd v Seagle [2008] FCA 1417 at [17] and [19] (Jagot J); Cairnsmore Holdings Pty Ltd v Bearsden Holdings Pty Ltd [2007] FCA 1822 at [130]-[131] (Jacobson J); Lewarne v Momentum Productions Pty Ltd [2007] FCA 1136 (Stone J) at [164]; ACCC v Chen (2003) 132 FCR 309 at [20] and [32]; ACCC v Hughes (2002) ATPR ¶41-863 at [77]-[79] (Allsop J). 86 ACCC v Chopra [2015] FCA 539 at [6] (Middleton J). 87 ACCC v Hughes (2002) ATPR ¶41-863 at [77]. See also ACCC v Purple Harmony Plates Pty Ltd [2001] FCA 1062 at [35] (Goldberg J); and ACCC v Chen (2003) 132 FCR 309 at [32] (Sackville J). 88 ACCC v Hughes (2002) ATPR ¶41-863 at [78]-[79].

[1.100]

1 Consumer Protection Policy and Overview of the ACL

33

It is unclear whether the references to ss 5 and 6 mean that it is necessary to have recourse to both sections to apply s 18 of the ACL (Cth) to the conduct of natural persons where the website is based outside Australia, rather than s 5 of the CCA alone.89 These provisions are important to ensure that the ACL protections are available in cases of internet shopping where goods are acquired for personal use directly from overseas suppliers online. In addition, online services such as eBay allow people not only to acquire a wide variety of products from around the world, but also to become sellers in an online global marketplace. By searching more effectively online, consumers are presented with a wider range of choice and a greater opportunity to make savings. However, e-commerce is inherently different from traditional methods of acquiring goods and services. It provides additional risks for the exploitation of consumers, and can make it more difficult for consumers to obtain redress. Online consumers should be able to access rights under the ACL that are as extensive as those provided to consumers participating in face-to-face consumer transactions. As Bromberg J observed in ACCC v Apple Pty Ltd: Multi-national corporations who (through their subsidiaries or otherwise) operate in and profit from the Australian market, must respect that market and the laws which serve to regulate it and protect its participants. Those who design global campaigns, and those in Australia who adopt them, need to be attuned to the understandings and perceptions of Australian consumers and ensure that representations made by such campaigns will not serve to mislead. The penalty imposed in this case [$2.25 million], needs to make that message clear.90

In Dataflow Computer Services Pty Ltd v Goodman, s 6(3) of the TPA was held to apply to messages communicated by email. Similarly, in Madden v Seafolly Pty Ltd,91 the appellant, Ms Madden, whose label was “White Sands”, and the respondent were competitors in the ladies swimwear fashion industry. The appellant asserted on her personal Facebook page, her business Facebook page (“White Sands”) and in emails to media outlets that the respondent had copied eight of her swimwear designs. The primary judge found that the assertions were false and misleading contrary to ss 52 and 53(a) of the TPA, now ACL, ss 18 and 29(1)(a) respectively. The TPA applied to Madden (an individual) because each of the publications made use of the internet. An appeal to the Full Federal Court was dismissed. Section 6(3A) of the CCA extends Pt 2-3, the general protection for unfair terms in consumer contracts for, or relating to the use of postal, telegraphic or telephonic services; or contracts for or relating to radio or television broadcasts. Section 6(3A) states: the provisions of Part 2-3 of the Australian Consumer Law have, by force of this subsection, the effect they would have if: (a) those provisions were, by express provision, confined in their operation to contracts for or relating to: (i) the use of the postal, telegraphic or telephonic services or 89 See Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 2) (2012) 266 FLR 243 at 445 [401] (Croft J). 90 ACCC v Apple Pty Ltd (2012) ATPR ¶42-404 at [32]. 91 Madden v Seafolly Pty Ltd [2012] FCA 1346.

34

The Australian Consumer Law

[1.105]

(ii) radio or television broadcasts; and (b) a reference in those provisions of Part XI to a corporation included a reference to a person not being a corporation.

It should be noted that s 6(3A) of the CCA differs from s 6(3) of the CCA. Section 6(3) of the CCA extends the misleading conduct and unconscionable conduct provisions to catch conduct involving “the use of postal, telegraphic or telephonic services or which occurs in a radio or television broadcast”. However, s 6(3A) of the CCA is narrower in its ambit: it only applies to unfair terms in consumer contracts for or relating to the use of postal, telegraphic or telephonic services; or consumer contracts for or relating to radio or television broadcasts. For example, it would apply to unfair terms imposed by the supplier of mobile telephony services in relation to the terms of a mobile phone contract.

Financial services [1.105]

The Commonwealth may also make consumer protection laws in respect of financial services, through a referral of legislative competence from the States set out in the Corporations Agreement 2002. In 2009, the States also referred their specific powers concerning consumer credit. The Intergovernmental Agreement for the Australian Consumer Law (IGA), signed by COAG on 2 July 2009 required the Commonwealth to enact changes to the investor protection provisions of the ASIC Act, and to the extent necessary, the Corporations Act 2001 (Cth), to ensure that they were consistent with the ACL (Cth).92 Relevant amendments to the ASIC Act are included in Sch 3 of the Second Commonwealth Act. The IGA reflects that financial services will be carved out of the scope of the ACL (Cth), and separate legislative arrangements would be made for the regulation of financial services under the Corporations Agreement 2002. Section 131A(1) of the CCA provides: Despite section 131, this Division does not apply (other than in relation to the application of Part 5-5 of Schedule 2 as a law of the Commonwealth) to the supply, or possible supply, of services that are financial services, or of financial products.

This carve-out for financial services means that the ACL (Cth) does not apply to financial services, which are regulated at the Commonwealth level by the Corporations Act 2001 (Cth) and the ASIC Act. The ASIC Act continues to apply, separately, to financial services, with the Australian Securities and Investments Commission (ASIC) as the national regulator. This reflects the current subject matter referral by the States and Territories set out in the Corporations Agreement 2002 and administered by the Ministerial Council for Corporations (MINCO). Clause 301(1) of the Corporations Agreement 2002 states that “the Commission [ASIC] will have sole responsibility for the general administration of the national law [which includes the Corporations Act 2001 (Cth) and the Australian Investments and Securities Commission Act 2001]”. The consumer protection provisions of the ASIC Act have been amended to maintain consistency with the ACL. However, the consumer guarantees regime in 92 Intergovernmental Agreement for the Australian Consumer Law (signed by COAG on 2 July 2009), subclause 3.1.3.

[1.110]

1 Consumer Protection Policy and Overview of the ACL

35

the ACL does not apply to financial services (with the exception of linked credit services).93 This position is at odds with the policy objectives of consistency and uniformity which the ACL was intended to achieve. Section 12ED of the ASIC Act only implies warranties of due care and skill and fitness for purpose into contracts for the supply of financial services to a consumer in the course of a business.94 Consumer credit regulation was referred to the Commonwealth by the States and Territories in 2009. The Uniform Consumer Credit Code was replaced by the National Consumer Credit Protection Code (the National Credit Code) from 1 July 2010. The National Credit Code applies to credit that is provided to individual debtors or strata corporations wholly or predominantly (a) for personal, domestic or household purposes; or (b) to purchase, renovate or improve residential property for investment purposes or to refinance such credit. In relation to misleading conduct or unconscionable conduct involving the supply financial services, great care will need to be taken in framing the cause of action. The conduct may fall within s 1041H of the Corporations Act 2001 (Cth), or the ASIC Act, but not the ACL (Cth).

Insurance [1.110]

While the PC in its Review of Australia’s Consumer Policy Framework, recommended that a new generic national consumer law should apply to all sectors of the economy,95 insurance has been excluded from the ACL regime and the ASIC Act regime. The reason for that is to be found ss 13, 14 and 15 of the Insurance Contracts Act 1984 (Cth) (IC Act). Section 13 of the IC Act provides: A contract of insurance is a contract based on the utmost good faith and there is implied in such a contract a provision requiring each party to it to act towards the other party, in respect of any matter arising under or in relation to it, with the utmost good faith.

Section 14 of the IC Act provides that parties are not to rely on provisions in a contract of insurance except in the utmost good faith. Insurance is a financial product and the supply of insurance is the supply of a financial service. The supply of financial services is regulated by the ASIC Act. For example, misleading statements about flood cover during pre-contractual negotiations for the supply of home and contents insurance would be subject to s 12DA of the ASIC Act. However, it seems that the unfair terms provisions of the ASIC Act do not cover insurance contracts. This is because s 15(1) of the IC Act provides: A contract of insurance is not capable of being made the subject of relief under: • Any other [Commonwealth] Act; • A State Act; or 93 See [9.20]. 94 There have been few cases which have sought to rely on a breach of these implied warranties. See, eg, St George Bank Ltd v Wright [2009] QSC 337 at [54]-[59] (McMurdo J); and Transmarket Trading Pty Ltd v Sydney Futures Exchange Ltd (2010) 188 FCR 1 at [113]-[116] (Perram J). 95 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), recommendation 4.2. The PC’s report is available at http://www.pc.gov.au/inquiries/ completed/consumer-policy/report.

36

The Australian Consumer Law

[1.115]

• An Act or Ordinance of a Territory.

While conduct leading up to the making of an insurance contract is covered by the provisions of the ASIC Act, the terms themselves are regulated by the ICA.96 Even if insurance contracts are covered by the unfair terms provisions of the ASIC Act, those core terms that govern matters such as the risk covered and the premium payable will be excluded by s 12BI of the ASIC Act. The relevant provisions excluding consumer protection applying to insurance are: • s 131A of the CCA excludes financial services from the ACL (Cth); • s 63 of the ACL excludes insurance services (that are not included in the definition of financial services) from Subdiv B of Pt 3-2 (guarantees relating to the supply of services); • s 12ED(3) of the ASIC Act excludes the implied warranties in relation to a contract of insurance; • s 15 of the IC Act operates to prevent some or all of the unfair terms provisions of the ASIC Act in respect of financial services applying to terms in insurance contracts.

ACL (Cth) not intended to cover the field [1.115]

Section 131C(4) of the CCA states:

Except as expressly provided by this Part or the Australian Consumer Law, nothing in this Part or the Australian Consumer Law is taken to limit, restrict or otherwise affect any right or remedy a person would have had if this Part and the Australian Consumer Law had not been enacted.

The purpose of this provision is to ensure that it is not held that the ACL (Cth) is intended to “cover the field” of consumer protection regulation, so as to render invalid State or Territory legislation dealing with that topic. Consequently, the ACL (Cth) will exist side-by-side with other legislation regulating transactions with consumers.

PART IV: THE ACL AS STATE OR TERRITORY LAW [1.120]

In the case of the ACL (Application Acts), the States and Territories have separately legislated to make the ACL a law of their respective jurisdictions, although the approach adopted has not been entirely uniform. Part XIAA of the CCA facilitates the application of the ACL by the States and Territories. The States have a general power to make laws in respect of consumer protection matters, as do the Territories within the scope of the territories power in s 122 of the Australian Constitution. The ACL as State or Territory law applies to the conduct of anyone who is a “person”. The word “person” is not defined in the Application Acts. However, interpretation legislation in most jurisdictions provides that a “person” includes a body politic or corporate as well as a natural person.97

96 See Corporations and Financial Services Division, Unfair Terms in Insurance Contracts – Options Paper (The Treasury, Langton Crescent, Parkes, ACT, 2600). 97 See Interpretation Act 1987 (NSW), s 21; Interpretation of Legislation Act 1984 (Vic), s 38; Acts Interpretation Act 1954 (Qld), s 32D; Interpretation Act 1984 (WA), s 5; Interpretation Act (NT), s 17.

[1.120]

1 Consumer Protection Policy and Overview of the ACL

37

Consequently, as used in the ACL as a law of each State or Territory, the word “person” is likely to be given its ordinary meaning and to cover natural and artificial persons and the Crown. The ACL gives effect to COAG’s National Partnership Agreement to Deliver a Seamless National Economy (NPA).98 It adopts the application model used previously in relation to competition provisions in Pt IV of the CCA and the Competition Code set out in Sch 1 of the CCA, with the Australian Government as the lead legislator. The Principal State and Territory Acts are: • New South Wales: Fair Trading Act 1987 (FTA 1987 (NSW)), ss 27 and 28 • Victoria: Australian Consumer Law and Fair Trading Act 2012 (ACLFTA 2012 (Vic)), ss 7 and 8 • Queensland: Fair Trading Act 1989 (FTA 1989 (Qld)), ss 15 and 16 • Western Australia: Fair Trading Act 2010 (FTA 2010 (WA)), ss 18 and 19 • South Australia: Fair Trading Act 1987 (FTA 1987 (SA)), ss 13 and 14 • Tasmania: Australian Consumer Law (Tasmania) Act 2010 (ACLA 2010 (Tas)), ss 5 and 6 • Northern Territory: Consumer Affairs and Fair Trading Act (CAFTA (NT)), ss 26 and 27 • Australian Capital Territory: Fair Trading (Australian Consumer Law) Act 1992 (FT(ACL)A 1992 (ACT)), ss 6 and 7. By way of example, the Fair Trading (Australian Consumer Law) Amendment Act 2010 (NSW) added “The Australian Consumer Law” as Pt 3 of the FTA 1987 (NSW). Section 27 of the FTA 1987 (NSW) defines the Australian Consumer Law text as: (a) Schedule 2 to the Competition and Consumer Act 2010 of the Commonwealth; and (b) the regulations under s 139G of that Act.

Section 28(1) of the FTA 1987 (NSW) states that: [t]he Australian Consumer Law text, as in force from time to time – (a) applies as a law of New South Wales; and (b) as so applying may be referred to as the Australian Consumer Law (NSW); and (c) as so applying is a part of the Fair Trading Act 1987.

In a similar way, s 7 of the ACLFTA 2012 (Vic) defines the Australian Consumer Law text as: (c) Schedule 2 to the Competition and Consumer Act 2010 of the Commonwealth; and (d) the regulations under s 139G of that Act.

Section 8(1) of the ACLFTA 2012 (Vic) states that: The Australian Consumer Law text, as in force from time to time: (a) applies as a law of this jurisdiction; and (b) as so applying may be referred to as the Australian Consumer Law (Victoria); and 98 The NPA provides for the States and Territories to receive partnership payments from the Commonwealth, consisting of facilitation payments to compensate for set-up costs, and reward payments if they achieve key milestones.

38

The Australian Consumer Law

[1.120]

(c) as so applying is a part of this Act.

In Western Australia a slightly different approach was adopted. Section 19(1) of the FTA 2010 (WA) states: For the purposes of this section, the Australian Consumer Law text consists of – 1. Schedule 2 to the Competition and Consumer Act 2010 (Commonwealth), as in force on the commencement of this section… 2. The regulations made under section 139G of that Act, as those regulations are in force from time to time.

Section 19(2) of the FTA 2010 (WA) states: The Australian Consumer Law text – a) applies as a law of this jurisdiction; and b) as so applying, may be referred to as the Australian Consumer Law (WA); c) in so far as it constitutes Schedule 2 to the Competition and Consumer Act 2010 (Commonwealth), is part of this Act; and d) in so far as it constitutes regulations made under section 139G of the Competition and Consumer Act 2010 (Commonwealth), is subsidiary legislation for the purposes of this Act.

Section 19(1) of the FTA 2010 (WA) makes clear that it is only the text of the ACL as in force on 1 January 2011 that applies as a law of Western Australia. The omission of the words “as in force from time to time” from s 19(2) of the FTA 2010 (WA) means that any future amendment to the text of the ACL in Sch 2 of the CCA will not automatically apply in Western Australia. Section 20 of the FTA 2010 (WA) provides: “the Australian Consumer Law (WA) (as described in s 19(1)(a)) may be amended by bill”. Thus, future changes to the ACL (WA) will be enacted by the Western Australian Parliament, and will not automatically apply as in other States and Territories. As regards the position in Queensland, a significant amendment has been the removal of the limitation placed upon the cause of action for damages for contravening s 38 of the FTA 1989 (Qld), the general prohibition of misleading conduct. The cause of action in damages for misleading conduct in s 99 of the FTA 1989 (Qld) was previously confined to consumers. Since the adoption of the ACL, this limitation has been removed. The alternative model for the adoption of the ACL considered by the PC was a referral of powers by the States and Territories to the Commonwealth, making the ACCC solely responsible for enforcing the ACL (the one regulator model).99 This was rejected for the following reasons: But while the States and Territories remain responsible for enforcing a large body of specific consumer regulation, the loss of regulatory synergies and the costs of creating a parallel regional office network are powerful arguments against implementation of the one regulator model. More pragmatically, in the face of considerable jurisdictional opposition to the one regulator model, packaging it with the implementation of a new 99 The one regulator model applies in relation to the enforcement of the competition provisions of the CCA. The ACCC is the only regulator with the power to bring proceedings for contraventions of Pt IV of the CCA. The Australian Energy Regulator (AER) has responsible for compliance with the Australian Electricity Law and the Australian Gas Law. See Corones, Competition Law in Australia (6th ed, Lawbook Co, Sydney, 2014) ch 3.

[1.130]

1 Consumer Protection Policy and Overview of the ACL

39

national generic law, could put the latter at risk. As indicated above, implementation of this new law is a critical first step in creating a more nationally coherent consumer policy framework that could deliver more efficient and effective outcomes for consumers and the wider community. The Commission has therefore concluded that, for the time being – and with the important exception of the product safety provisions – the new national generic law should be jointly enforced by the Australian Government and the States and Territories.100

Table 1.2 Adoption of the ACL CCA (Cth)

FTA 1987 FTA 1989 ACLFTA (NSW) (Qld) 2012 (Vic)

FTA 1987 FTA 2010 ACLA (SA) (WA) 2010 (Tas)

s 131

ss 27, 28

ss 13, 14

ss 15, 16

ss 8, 9

ss 18, 19

ss 5, 6

FT(ACL)A 1992 (ACT) ss 6, 7

CAFTA (NT) ss 26, 27

ACL (Application Acts) not intended to cover the field [1.125]

Section 140H of the CCA expressly provides that the application of the ACL as a law of a State or Territory is not intended to exclude or limit the concurrent operation of any law, whether written or unwritten, of a State or a Territory. Consequently, the ACL of a State or Territory will exist side by side with other legislation regulating transactions with consumers.

Extraterritorial application of ACL (Application Acts) [1.130]

The State and Territory application laws make it clear that the ACL as a law of their respective jurisdictions is not to be construed as merely applying in the territorial area of that State or Territory, and that the extraterritorial power of the State or Territory Legislature is being used. The power of a State legislature to make laws of extraterritorial application was considered by the High Court in Broken Hill South v Commissioner of Taxation (NSW),101 and Union Steamship Company of Australia Pty Ltd v King.102 The High Court held that there must be some connection with the jurisdiction which may consist in “presence within the territory, residence, domicile, carrying on business there, or even remoter connections”.103 Section 12 of the ACLFTA 2012 (Vic) mirrors s 5(1) of the CCA. It provides: (1) The Australian Consumer Law (Victoria) applies to and in relation to– (a) persons carrying on business within this jurisdiction; or (b) bodies corporate incorporated or registered under the law of this jurisdiction; or (c) persons ordinarily resident in this jurisdiction; or (d) persons otherwise connected with this jurisdiction. (2) Subject to subsection (1), the Australian Consumer Law (Victoria) extends to conduct, and other acts, matters and things, occurring or existing outside or partly outside this jurisdiction (whether within or outside Australia). 100 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008) vol 1, p 22. 101 Broken Hill South v Commissioner of Taxation (NSW) (1937) 56 CLR 337. 102 Union Steamship Company of Australia Pty Ltd v King (1988) 166 CLR 1. 103 Union Steamship Company of Australia Pty Ltd v King (1988) 166 CLR 1 at 13.

40

The Australian Consumer Law

[1.135]

There are similar provisions in the State and Territory Acts that apply the ACL as a law of their jurisdiction. Table 1.3 Extraterritorial application of ACL (Application Acts) FTA 1987 (NSW)

FTA 1989 (Qld)

ACLFTA 2012 (Vic)

FTA 1987 (SA)

FTA 2010 (WA)

ACLA 2010 (Tas)

s 32

s 20

s 12

s 18

s 11

s 10

FT(ACL)A 1992 (ACT) s 11

CAFTA (NT) s 31

The definition of “carrying on a business” for the purposes of the ACL (Application Acts) is the same as the definition of “carrying on a business” in the CCA, considered at [2.55] and [2.70].

No doubling-up of liabilities [1.135] Because the same conduct may be actionable under the and also under the ACL (Application Acts), and because the same conduct may be the subject of a pecuniary penalty for a consumer protection breach as well as criminal action, the CCA contains a number of provisions designed to prevent the doubling-up of liabilities. As regards the application of the ACL (Cth), s 131C(3) of the CCA provides if an act or omission is an offence under that Act and also under the application law of a State or Territory and the offender has been punished for the offence under the Commonwealth law, the offender is not liable to punishment for the offence under the State or Territory laws. As regards the application of the ACL (Application Acts), s 140J(1) of the CCA provides that if an act or omission is an offence under the CCA and also under the application law of a State or Territory and the offender has been punished for the offence under the latter, the offender is not liable to punishment for the offence under the CCA. In respect of pecuniary penalties, s 140J(2) of the CCA likewise provides that there is to be no double imposition. The ACL (Application Acts) contain similar protections against double The Explanatory Memorandum to the Queensland Fair Trading (Australian Law) Amendment Bill 2010 provides an example of how the Queensland may be bound by the action of another jurisdiction where an offender punished for the same offence in that jurisdiction:

jeopardy. Consumer regulator has been

if a false representation (the act or omission is made by a business in a newspaper that is published in New South Wales, and the newspaper is read in both Queensland and New South Wales, it would be an offence in both States. If the business in New South Wales is prosecuted and punished in that State, then Queensland cannot seek to punish the business and vice versa. If the punishment is sought and obtained in New South Wales, then the Queensland regulator will not be able to pursue another form of punishment even if it believes the punishment in New South Wales was too lenient, not appropriate or more importantly did not adequately provide redress or compensation for Queensland residents affected by the false representation.104

These provisions recognise the importance of uniformity and that consistency is necessary under a single national law, however this may come at the expense of the 104 Explanatory Memorandum, Fair Trading (Australian Consumer Law) Amendment Bill 2010, p 16.

[1.140]

1 Consumer Protection Policy and Overview of the ACL

41

right of the regulators to act unilaterally. Table 1.4 Protection against doubling-up of liabilities CCA

FTA 1987 FTA 1989 ACLFTA (NSW) (Qld) 2012 (Vic)

ss 131C(3), s 41 140J(1) and (2)

s 29

s 22

FTA 1987 FTA 2010 ACLA (SA) (WA) 2010 (Tas) s 27

s 31

s 19

FT(ACL)A 1992 (ACT) s 20

CAFTA (NT) s 40

Future modifications to the ACL [1.140]

The Intergovernmental Agreement for the Australian Consumer Law (IGA) signed by COAG on 2 July 2009, regulates the way in which future amendments can be made to the template ACL to avoid slipping back into disharmony. By signing the IGA, participating jurisdictions have agreed to abide by the processes for co-operative negotiation of amendments to the ACL. Any party may submit to the Commonwealth a valid proposal to amend the ACL.105 After a period of consultation provided for in cl 12 of the IGA, the Commonwealth Minister will call a vote on the proposed amendment. Clause 19 of the IGA provides that the Commonwealth will not amend the ACL unless the proposed amendment is supported by the Commonwealth plus four jurisdictions, three of which must be States. Part XI of the CCA provides for a system to deal with future modifications of the ACL text by Commonwealth legislation. Section 139G of the CCA provides that the Governor-General may make regulations prescribing matters required or permitted by Sch 2 to be prescribed or necessary or convenient to be prescribed for carrying out or giving effect of the Schedule.

Section 139G provides that a regulation may exempt from Sch 2: • conduct engaged in by a specified organisation or body that performs functions in relation to the marketing of primary products;106 • a specified contract pursuant to or for the purposes of a specified agreement arrangement or understanding between the Government of Australia and the Government of a foreign country;107 • a specified contract or prescribed conduct engaged in, in the course of a business carried on by the Commonwealth or by a prescribed authority of the Commonwealth.108 The States and Territories have reserved the right to exclude any future modification to the ACL as at 1 January 2011 for the ACL in their respective jurisdictions. For example, s 9 of the ACLFTA 2012 (Vic) provides: (1) A modification made by a Commonwealth law to the Australian Consumer Law text after the commencement of this section does not apply under s 8, if the modification is 105 Intergovernmental Agreement for the Australian Consumer Law, cl 8. 106 CCA, s 139G(4)(a). 107 CCA, s 139G(4)(b). 108 CCA, s 139G(4)(c).

42

The Australian Consumer Law

[1.145]

declared by Order of the Governor in Council published in the Government Gazette to be excluded from the operation of the section. (2) An Order under subsection (1) has effect only if published before the end of 2 months after the date of the modification. (3) Subsection (1) ceases to apply to the modification if a further Order so provides. (4) For the purposes of this section, the date of the modification is the date on which the Commonwealth Act effecting the modification receives Royal Assent or the regulation effecting the modification is registered under the Legislative Instruments Act 2003 of the Commonwealth.

Table 1.5 Future modifications to the ACL FTA 1987 (NSW)

FTA 1989 (Qld)

ACLFTA 2012(Vic)

FTA 1987 (SA)

FTA 2010 (WA)

ACLA 2010 (Tas)

s 29

s 17

s9

s 15

n/a

s7

FT(ACL)A 1992 (ACT) s8

CAFTA (NT) s 28

PART V: ENFORCEMENT ACL regulators [1.145]

Enforcement and administration of the ACL will be shared between the ACCC, ASIC and State and Territory administrative agencies pursuant to agreed Memoranda of Understanding.109 Commonwealth, State and Territory consumer agencies will jointly administer and enforce the ACL. The relevant ACL regulators are: • Australian Competition and Consumer Commission;110

• Australian Securities and Investments Commission;111 • ACT Office of Regulatory Services;112 • NSW Fair Trading;113 • Northern Territory Consumer Affairs;114 • Queensland Office of Fair Trading;115 • South Australia Office of Consumer & Business Affairs;116 • Tasmania Consumer Affairs and Fair Trading;117 • Consumer Affairs Victoria;118 109 Intergovernmental Agreement for the Australian Consumer Law, cll 20 and 21. 110 Available at http://www.accc.gov.au. 111 Available at http://www.asic.gov.au. 112 Available at http://www.accesscanberra.act.gov.au. 113 Available at http://www.fairtrading.nsw.gov.au. 114 Available at http://www.consumeraffairs.nt.gov.au. 115 Available at http://www.qld.gov.au/law/fair-trading/. 116 Available at http://www.cbs.sa.gov.au. 117 Available at http://www.consumer.tas.gov.au. 118 Available at http://www.consumer.vic.gov.au.

[1.150]

1 Consumer Protection Policy and Overview of the ACL

43

• Western Australia Department of Commerce.119 The term “regulator” is used to refer to the relevant regulator responsible for enforcing the ACL in the particular jurisdiction concerned. The term “regulator” is defined in s 2 of the ACL as follows: (a) for the purposes of the application of this Schedule as a law of the Commonwealth – means the Commission; or (b) for the purposes of the application of this Schedule as a law of a State or a Territory – has the meaning given by the application law of the State or Territory.

Jurisdiction of the Federal Court [1.150]

Section 138 of the CCA confers jurisdiction over any civil matter in relation to the ACL (Cth) on the Federal Court. The jurisdiction is exclusive, except that jurisdiction is also conferred by s 138A on the Federal Circuit Court in relation to civil matters where the loss or damage does not exceed $750,000 or an amount specified in the regulations, on the courts of the States and Territories under s 138B, and the High Court of Australia, under s 75 of the Constitution. Section 138 provides: (1) Jurisdiction is conferred on the Federal Court in relation to any matter arising under this Part or the Australian Consumer Law in respect of which a civil proceeding has been instituted under this Part or the Australian Consumer Law. (2) The jurisdiction conferred by subsection (1) on the Federal Court is exclusive of the jurisdiction of any other court other than: (a) the jurisdiction of the Federal Magistrates Court under section 138A; and (b) the jurisdiction of the several courts of the States and Territories under section 138B; and (c) the jurisdiction of the High Court under section 75 of the Constitution.

The State and Territory courts have concurrent jurisdiction with the Federal Court over civil matters arising under the ACL (Cth). Section 138B of the CCA provides: (1) Jurisdiction is conferred on the several courts of the States and Territories in relation to any matter arising under this Part or the Australian Consumer Law in respect of which a civil proceeding is instituted by a person other than the Commonwealth Minister or the Commission. (2) However, subsection (1) does not apply in relation to a matter arising under: (a) Division 3 of Part 3-1 of the Australian Consumer Law; or (b) Part 3-5 of the Australian Consumer Law. (3) The jurisdiction conferred by subsection (1) on the several courts of the States is conferred within the limits of their several jurisdictions, whether those limits are as to locality, subject matter or otherwise. (4) The jurisdiction conferred by subsection (1) on the several courts of the Territories is conferred to the extent that the Constitution permits. (5) This section is not to be taken to enable an inferior court of a State or a Territory to grant a remedy other than a remedy of a kind that the court is able to grant under the law of that State or Territory. 119 Available at http://www.commerce.wa.gov.au.

44

The Australian Consumer Law

[1.155]

Section 140C of the provides that the Federal Court may exercise jurisdiction (whether original or appellate) conferred on that Court by an application law of a Territory with respect to matters arising under the ACL (Application Acts). In Director of Consumer Affairs v Dimmeys Stores Pty Ltd,120 the applicant sought injunctive relief against the defendants for alleged breaches of both the ACL (Vic) and its equivalent provisions in the ACL (Cth). The respondents raised a preliminary question as to whether the applicant, being a public official representing a State, had the authority to issue a proceeding in Federal Court relying on Commonwealth legislation. Section 232(2) of the ACL provided relevantly that the court could grant an injunction on application by the regulator or “any other person”. Marshall J observed that the IGA was designed to effect a national approach to consumer protection laws. The IGA also provided for shared enforcement functions between federal, State and Territory regulators. His Honour held “[i]t is consistent with such a shared scheme for the Director to be considered to be ‘another person’ for the purposes of the ACL”.121 Accordingly, the court rejected the respondents’ submission.

Jurisdiction of the courts of the States and Territories [1.155]

The CCA and a State or Territory’s Application Act specifies that the ACL is a law of the relevant jurisdiction.122 The CCA vests Federal jurisdiction on the courts of the States and Territories in civil proceedings instituted under the ACL (Cth) other than proceedings by the ACCC or the Commonwealth Minister, except in relation to manufacturers’ liability and pyramid schemes.123 The CCA and the State and Territory Application Acts : • govern the way in which consumers can access national, State and Territory courts and tribunals; and • make provision for enforcement, administrative and judicial review procedures in respect of the actions of regulators under the ACL.124 The State and Territory Application Acts provide that proceedings under their respective ACLs must be referred to a court of competent jurisdiction. For example, under the ACL (Qld), jurisdiction to hear and determine proceedings under that law is conferred on: (a) (b) (c) (d)

the Supreme Court; the District Court; the Magistrates Court; and the Queensland Civil and Administrative Tribunal (QCAT).125

120 Director of Consumer Affairs v Dimmeys Stores Pty Ltd (2013) 213 FCR 559. 121 Director of Consumer Affairs v Dimmeys Stores Pty Ltd (2013) 213 FCR 559 at [14]. 122 In relation to the Australian Consumer Law (Vic) see s 8(1) of the ACLFTA 2012 (Vic). 123 CCA, s 138B. 124 See ACLFTA 2012 (Vic), Chs 7 and 8. 125 FTA 1989 (Qld), ss 50 and 51.

[1.160]

1 Consumer Protection Policy and Overview of the ACL

45

The tribunal or court having jurisdiction for the proceeding, must have regard to: 1 for the tribunal – whether the subject of the proceeding would be a minor civil dispute within the meaning of the QCAT Act; or 2 for a court – any civil jurisdictional limit, including any monetary limit, applying to the court. In relation to the grant of an injunction under s 232 of the ACL, s 51 of the FTA 1989 (Qld) provides that if the injunction is sought in connection with, or in the course of another proceeding under the ACL (Qld), whether for an offence or otherwise, the matter is to be heard before the District Court, and the District Court has jurisdiction, otherwise the Supreme Court has jurisdiction. Other States and Territories make similar provision for the conferral of jurisdiction on their tribunals and courts to hear and determine matters arising under their respective ACLs.126

Transfer of proceedings [1.160]

The Federal Court may transfer civil proceedings, other than proceedings instituted by the ACCC or the Minister, to State and Territory courts.127 Section 138C(2) provides that, in deciding whether to transfer proceedings, the Federal Court must take into account whether the other court has the power to grant the remedies sought before the Federal Court, whether the matter “arises out of or is related to” the proceeding pending in the other court, and whether it is in the interests of justice that the matter be determined by the other court.128 Section 138D of the CCA provides that a State or Territory court (other than the Supreme Court) hearing a matter under Pt XI of the CCA or the ACL other than under Div 3 of Pt 3-1 of the ACL; or Pt 3-5 of the ACL; or Ch 4 of the ACL must transfer the matter to the Federal Court, if the Federal Court directs it to do so.129

126 See ACLFTA 2012 (Vic), Pt 8.5 – Enforcement of Australian Consumer Law (Victoria). 127 CCA, s 138C(1). 128 These provisions reflect CCA, s 86A(1) – (3). 129 These provisions reflect CCA, s 86A(4) – (6).

2

Definitions and Key Concepts [2.05] INTRODUCTION .................................................................................................................. 48 [2.10] PART I: LIABILITY OF CORPORATIONS ....................................................................... 48

[2.10] Introduction ........................................................................................................... 48 [2.15] Foreign corporation .............................................................................................. 49 [2.20] Trading corporation .............................................................................................. 49 [2.25] Financial corporation ............................................................................................ 50 [2.30] Corporation incorporated in a Territory ........................................................... 51 [2.35] Related bodies corporate ..................................................................................... 51 [2.40] PART II: LIABILITY OF NATURAL PERSONS ............................................................... 51

[2.40] Direct liability under the ACL (Cth) ................................................................. 51 [2.45] Direct liability ACL (Application Acts) ............................................................. 53 [2.50] PART III: LIABILITY OF THE CROWN ........................................................................... 54

[2.50] Commonwealth Crown ........................................................................................ 54 [2.55] Commonwealth Crown carrying on a business .............................................. 54 [2.60] Exceptions to Commonwealth Crown carrying on a business .................... 57 [2.65] State and Territory Crowns ................................................................................. 59 [2.70] State or Territory Crown: exceptions to carrying on a business .................. 61 [2.75] PART IV: “IN TRADE OR COMMERCE” REQUIREMENT ......................................... 63

[2.75] Introduction ........................................................................................................... 63 [2.80] Examples ................................................................................................................ 65 [2.85] Extended definition: any professional activity ................................................ 66 [2.90] Non-profit activities .............................................................................................. 67 [2.95] “In” trade or commerce ....................................................................................... 67 [2.100] Trade or commerce of another ......................................................................... 68 [2.105] Summary .............................................................................................................. 69 [2.110] PART V: LIABILITY OF CORPORATE AND NON-CORPORATE PRINCIPALS ... 69

[2.110] Introduction .......................................................................................................... 69 [2.115] On behalf of ......................................................................................................... 70 [2.120] “Actual or apparent authority” ........................................................................ 72 [2.125] “At the direction of” or “with the consent of” ............................................. 74 [2.130] Direct liability of non-corporate principals for conduct of employees or agents .................................................................................................................... 74 [2.135] Direct liability: summary ................................................................................... 75

48

The Australian Consumer Law

[2.05]

INTRODUCTION [2.05] This chapter considers a number of definitions and key concepts that are common to the general and specific protections contained in the ACL. As explained in Chapter 1Australian Consumer Law (ACL) has been designed to operate uniformly across Australia. There are nine ACLs – the ACL (Cth), and eight ACL (Application Acts) – all of which apply Sch 2 of the Competition and Consumer Act 2010 (Cth) as a law of their respective jurisdictions. However, the ACL does not apply to all types of transactions; it is restricted in a number of ways. First, although the ACL is drafted so as to apply to the conduct of a “person” the effect of s 131(1) of the CCA is to apply the ACL “as a law of the Commonwealth to the conduct of corporations…”. The ACL also applies to natural persons in circumstances where the Commonwealth Parliament has been able to rely on a head of power in the Constitution other than the corporations power created by s 51(xx) of the Australian Constitution. Where an applicant seeks relief from an individual, the applicant will have to frame the cause of action as a breach of a State or Territory ACL (primary liability), or rely on the accessorial liability provisions of the ACL. Secondly, the ACL (Cth) applies to the Crown in right of the Commonwealth,1 and the ACL (Application Acts) apply to the Crown in right of the States and Territories, but only in so far as the Crown carries on a business. Thirdly, many of the key provisions in the CCA, the ACL (Cth) and the ACL (Application Acts), apply only to conduct that occurs “in trade or commerce”. Finally, many of the provisions of the ACL are restricted by reference to some concept of a consumer. This chapter will focus on the key concepts which limit the scope of the ACL and is divided into five parts.

• Part I – considers the meaning of “corporation” for the purposes of the ACL. • Part II – examines the liability of natural persons under the ACL and the ACL (Application Acts). • Part III – examines the liability of the Crown under the ACL and the ACL (Application Acts). • Part IV – analyses the “in trade or commerce” requirement under the ACL and the ACL (Application Acts). • Part V – discusses the liability of corporate and non-corporate principals for conduct of directors, employees or agents. PART I: LIABILITY OF CORPORATIONS Introduction [2.10] Section 130 of the CCA provides that the word “corporation” for the purposes of the ACL (Cth), Sch 2 has the same meaning as in s 4(1) of the CCA. 1 CCA, s 2A(1).

[2.20]

2 Definitions and Key Concepts

49

Section 4(1) of the CCA provides: “corporation” means a body corporate that – a) is a foreign corporation; b) is a trading corporation formed within the limits of Australia or is a financial corporation so formed; c) is incorporated in a Territory; or d) is the holding company of a body corporate of a kind referred to in paragraph (a), (b) or (c).

“Foreign”, “trading” and “financial” corporations are also defined in s 4(1) by reference to the meaning to be given to them by s 51(xx) of the Constitution. These definitions, which are not mutually exclusive, have, generally speaking, been interpreted broadly by the courts with the result that few corporations fall outside the ambit of the Act.

Foreign corporation [2.15] A “foreign corporation” is one incorporated outside continental Australia; that is, in another country or in an external territory.

Trading corporation [2.20] A “trading corporation” is one which engages in trading (which in this context means the activity of acquiring, or supplying, goods or services in a commercial or business context) as a substantial and not merely a peripheral activity. The “substantial current activities test” was summarised in Hughes v Western Australian Cricket Association by Toohey J: Views as to the necessary extent of trading activity have varied. It must be a substantial corporate activity (Barwick CJ in Adamson [R v Federal Court of Australia; Ex parte WA National Football League] (1979) 143 CLR 190 at 208]; the trading activities must form a sufficiently significant proportion of the corporation’s overall activities (Mason J in Adamson at 233, with Jacobs J concurring at 237); the trading activities should not be insubstantial (Adamson at 239); the corporation must carry on trading activities on a significant scale (Mason, Murphy and Deane JJ in State Superannuation Board (57 ALJR at 96); Deane J in Commonwealth v Tasmania (1983) 46 ALR 625 at 833)).2

The following corporations have been held to be “trading corporations” on the basis of this “substantial current activities” test: • a football club and a football league;3 • a rodeo organiser;4 • the Royal Prince Alfred Hospital;5 • the Australian Red Cross Society;6 2 Hughes v Western Australian Cricket Association (Inc) (1986) 19 FCR 10 at 20. 3 R v Federal Court of Australia; Ex parte WA National Football League (1979) 143 CLR 190. 4 McCarthy v Australian Rough Riders Association Inc (1988) ATPR ¶40-836. 5 “E″ v Australian Red Cross Society (1991) 27 FCR 310. 6 “E″ v Australian Red Cross Society (1991) 27 FCR 310.

50

The Australian Consumer Law

[2.25]

• a co-operative society;7 • the Hydro-Electric Commission of Tasmania;8 • the organiser of an annual trade exhibition for members of the corporation;9 • the Australian Broadcasting Commission;10 • the Australian College of Dermatologists;11 • the University of Western Australia;12 and • the New South Wales Government Insurance Office.13 While the substantial current activities test focuses on what the corporation actually does, the purpose for which it was formed, as indicated by its constitution, is not irrelevant. As Toohey J held in Hughes case, a corporation’s constitution will be especially important where the corporation has not yet started to trade. Thus, for example, as Fencott v Muller14 shows, a shelf company which has remained dormant since its incorporation can still be a trading corporation for the purposes of the CCA if its constitution authorises it to engage in trading activity.

Financial corporation [2.25] “Financial corporation” is defined in s 4(1) of the CCA to mean: a financial corporation within the meaning of paragraph 51(xx) of the Constitution and includes a body corporate that carries on its sole or principal business the business of banking (other than State banking not extending beyond the limits of the State concerned) or insurance (other than State insurance not extending beyond the limits of the State concerned).

It was held in Re Ku-ring-gai Co-operative Building Society (No 12) Ltd,15 that the essence of a financial corporation is that it deals in finance to an appreciable degree – that is – in transactions whose subject matter is finance, such as lending or borrowing money, as distinct from transactions which merely involve the use of money. The test of whether a corporation is a “financial corporation,” is the same as that used in respect of trading corporations, namely the substantial current activities test. Consequently, it is not essential for a corporation’s financial activities to be its principal activities so long as they form a significant part of its operations. 7 TPC v Legion Cabs (Trading) Co-op Society Ltd (1978) ATPR ¶40-092. 8 Commonwealth of Australia v Tasmania (1983) 46 ALR 625. 9 Australian Beauty Trade Suppliers Ltd v Conference & Exhibition Organisers Pty Ltd (1991) ATPR ¶41-107. 10 Sun Earth Homes Pty Ltd v Australian Broadcasting Commission (1991) ATPR ¶41-067. 11 Shahid v Australian College of Dermatologists (2008) 168 FCR 46. 12 Quickenden v O’Connor, Commissioner of Australian Industrial Relations Commission (2001) 109 FCR 243. The University engaged in trading activities such as selling publications, parking services, student accommodation services and making investments. 13 State Government Insurance Corporation v Government Insurance Office of NSW (1991) ATPR ¶41-110. 14 Fencott v Muller (1983) 152 CLR 570. 15 Re Ku-ring-gai Co-operative Building Society (No 12) Ltd (1978) 36 FLR 134.

[2.40]

2 Definitions and Key Concepts

51

Corporation incorporated in a Territory [2.30] A “corporation incorporated in a Territory” is one formed in an internal Australian Territory. As the definition of “corporation” in s 4(1) extends to all corporations of this nature, the ACL has a somewhat wider operation in the Australian Capital Territory and Northern Territory than it does in the States where it applies only to those corporations described at [2.15]-[2.25]. Related bodies corporate [2.35] The Second Explanatory Memorandum states: It is recognised that, for the purposes of the ACL, there are many potential applications of the Law that could be: • avoided or frustrated unless the activities of all corporations forming part of a corporate group are treated in the same way and taken together; or • may apply inconsistently or inappropriately if the activities of a corporate group are not recognised and treated accordingly.16

Section 6 of the ACL provides that a body corporate is taken to be related to another body corporate if the bodies corporate would, under s 4A(5) of the CCA, be deemed to be related to each other. Section 4A(5) of the deems a body corporate to be related to another body corporate if the first-mentioned body corporate is: • the holding company of another body corporate; • a subsidiary of another body corporate; or • a subsidiary of the holding company of another body corporate.

PART II: LIABILITY OF NATURAL PERSONS Direct liability under the ACL (Cth) [2.40] Sections 5 and 6 of the CCA extend the operation of, inter alia, Pt 2 of the ACL to natural persons in a miscellaneous set of situations in which the Commonwealth Parliament has the legislative power to bind them. The prohibitions in Sch 2 of the CCA are directed at “a person”. As a result of s 131 of the CCA, the provisions of the ACL apply as a law of the Commonwealth only to “the conduct of corporations”. However, extension provisions are included in s 6 of the CCA which apply the ACL to natural persons in a number of situations in which the Commonwealth Parliament has the legislative power to do so. The most significant of these are s 6(3) and 6(3A) of the CCA. Section 6(3) and (3A) provide: (3) In addition to the effect that this Act, other than Parts IIIA, VIIA and X, has as provided by another subsection of this section, the provisions of Parts 2-1, 2-2, 3-1 (other than Division 3), 3-3, 3-4, 4-1 (other than Division 3), 4-3, 4-4 and 5-3 of the Australian Consumer Law have, by force of this subsection, the effect they would have if: (a) those provisions (other than sections 33 and 155 of the Australian Consumer Law) were, by express provision, confined in their operation to engaging in conduct to 16 Second Explanatory Memorandum, [2.30].

52

The Australian Consumer Law

[2.40]

the extent to which the conduct involves the use of postal, telegraphic or telephonic services or takes place in a radio or television broadcast; and (b) a reference in the provisions of Part XI to a corporation included a reference to a person not being a corporation. (3A) In addition to the effect that this Act, other than Parts IIIA, VIIA and X, has as provided by subsection (2), the provisions of Part 2-3 of the Australian Consumer Law have, by force of this subsection, the effect they would have if: (a) those provisions were, by express provision, confined in their operation to contracts for or relating to: (i) the use of postal, telegraphic or telephonic services; or (ii) radio or television broadcasts; and (b) a reference in the provisions of Part XI to a corporation included a reference to a person not being a corporation.

The relevant provisions of the ACL in Sch 2 of the CCA refer to “persons”. The effect of s 131 of the CCA is that the ACL as a law of the Commonwealth is restricted “to the conduct of corporations”. Section 6(3) then reverses this, in the instances listed, by providing that the references to “a corporation” in Pt XI of the Act (which contains s 131) should be read as including natural persons. The extensive use that is being made of the internet, access to which involves the use of telephonic services, allows the private parties and the regulators to have recourse to the ACL as a law of the Commonwealth to catch the conduct of natural persons. For example, in Seafolly Pty Ltd v Madden,17 it was held that the TPA applied to an individual (Madden) because each of the publications of which the applicant complained (Facebook postings and sending an email) made use of the internet. In ACCC v Jutsen (No 3),18 Nicholas J held that the expression “telegraphic …services” in s 6(3) of the CCA extends to conduct involving the use of the internet. His Honour stated that “the internet is a ‘telegraphic’ apparatus or system used to transmit and receive electronic communications”.19 Similarly, in ACCC v Chopra,20 Middleton J held that the promotion of and sale of electronic goods to consumers by Mr Chopra through the website, www.elcetronicbazaar.com.au, contravened ss 18, 29(1)(m) and 36(4) of the ACL by the operation of s 6(3)(a) of the CCA.21 Section 6(3A) applies a similar approach to s 6(3) but is narrower in its ambit. It extends the reach of the ACL as a law of the Commonwealth to the conduct of natural persons in relation to unfair terms in consumer contracts for, or relating to, the use of postal, telegraphic, or telephonic services, or radio or television broadcasts. Where a natural person engages in conduct in contravention of one of the provisions of the ACL, applicants in all States and Territories are able to take proceedings by invoking their respective ACL (Application Acts). 17 Seafolly Pty Ltd v Madden [2012] FCA 1346; (2012) ATPR ¶42-424. 18 ACCC v Jutsen (No 3) (2011) 206 FCR 264. 19 ACCC v Jutsen (No 3) (2011) 206 FCR 264 at [100] citing s 144(1) of the Evidence Act 1995 (Cth). 20 ACCC v Chopra [2015] FCA 539. 21 ACCC v Chopra [2015] FCA 539 at [6].

[2.45]

2 Definitions and Key Concepts

53

In summary, the forms of conduct on the part of a natural person which may come within the scope of the ACL (Cth) because of the operation of these sections can be summarised as follows: • conduct occurring overseas where the person involved was an Australian citizen or resident; • conduct occurring in overseas, or interstate trade or commerce; • conduct occurring in trade or commerce within a Territory, between a State and a Territory, or between two Territories; • conduct occurring in the course of supplying goods or services to the Commonwealth; • conduct involving the use of postal, telegraphic or telephonic services; and • contracts for or in relation to the use of postal, telegraphic or telephonic services or contracts for or in relation to a radio or television broadcast.

Direct liability ACL (Application Acts) [2.45] As noted in Chapter 1, each State and Territory has applied the ACL as a law of its jurisdiction. In doing so, they have retained the generality of the ACL’s proscriptions with the result that, subject to certain constitutional limitations, they apply to anyone who is a “person”. Whilst these acts do not define “person”, in most jurisdictions interpretation legislation provides that a “person” includes a body politic or corporate as well as an individual.22 Consequently, as used in the ACL as a law of each State or Territory, the word is likely to be given its ordinary meaning and will cover natural and artificial persons and the Crown. Furthermore, “a person” has not been restricted to someone acting as a principal. Consequently, an individual who acts on behalf of a corporation in a transaction occurring in trade or commerce can be held personally liable, independent of the corporation, if the conduct they undertook on its behalf contravenes a provision of one of those Acts. In Houghton v Arms,23 Mr Arms entered into a contract with WSA Online Ltd to advise on website design, construction and administration. An employee of WSA Online Ltd, Mr Student, who was described as “WSA online project manager”, and a fellow employee, Mr Houghton, who was described as the “guru of interactive web design and development” gave incorrect information to Mr Arms. Mr Arms sued WSA under s 82 for a contravention of ss 52 and 53 of the TPA. Houghton and Student were also sued under s 75B as accessories and for contraventions of ss 9 and 12 of the FTA 1999 (Vic). Ryan J found that WSA was liable, but WSA was in liquidation. Ryan J dismissed the claims against Houghton and Student based on the FTA since it only applied to persons who were acting “in trade or commerce in their own right and not on behalf of another”. The Court held that the employees were directly liable for giving incorrect advice or information in the course of their employment, even though they were not acting for themselves in trade or commerce. The High Court 22 See Interpretation Act 1987 (NSW), s 21; Interpretation of Legislation Act 1984 (Vic), s 38; Acts Interpretation Act 1954 (Qld), s 32D; Interpretation Act 1984 (WA), s 5; Interpretation Act (NT), s 17. 23 Houghton v Arms (2006) 225 CLR 553 (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ).

54

The Australian Consumer Law

[2.50]

held that s 52 did not refer to the trade or commerce of any particular person, and that a representation can be made in trade or commerce even though it is not the trade or commerce of the person making the representation.24 Thus, an employee will be directly liable for misleading conduct under a State or Territory ACL if the employer is engaged in trade or commerce and the conduct occurred in the course of the employer’s trade or commerce, or the trade or commerce of the person to whom that representation is made. It is not the trade or commerce of the employee, but the trade or commerce of the employer in which the conduct takes place.25 Houghton v Arms indicates the superiority of proceeding against a natural person directly under a State or Territory ACL, rather than indirectly as an accessory to a contravention by a corporation under the ACL (Cth). It avoids the problems of proof associated with the requirement of actual knowledge established by the High Court in Yorke v Lucas.

PART III: LIABILITY OF THE CROWN Commonwealth Crown [2.50] Section 2A(1) of the CCA provides: “this Act binds the Crown in right of the Commonwealth in so far as the Crown in right of the Commonwealth carries on a business, either directly or by an authority of the Commonwealth”. Section 131(1) of the CCA provides that Sch 2 applies as a law of the Commonwealth to the conduct of corporations and refers to conduct of corporations as extended by ss 5 and 6 of the CCA, but there is no reference to s 2A or the fact the ACL binds the Crown. However, because s 2A refers to the “Act” and an Act includes any Schedules, this includes the ACL despite the fact that in the application provision (s 131) there is no mention of the application of the ACL to the Crown in right of the Commonwealth. Section 2A(2) of the CCA provides that for this purpose the Crown, in right of the Commonwealth and its authorities, are to be treated as if they were corporations. Thus, if the Crown in right of the Commonwealth engages in conduct proscribed by the ACL (Cth) whilst carrying on a business its conduct will be actionable.

Commonwealth Crown carrying on a business [2.55] The definition of the word “business” in s 2 of the ACL includes a not-for-profit business, but does not elaborate any further. It is necessary to ask: does the activity constitute carrying on a business in the ordinary sense? The word “business” is a “wide and general” word.26 It takes its meaning from its context.27 It 24 Houghton v Arms (2006) 225 CLR 553 at [32]-[35]. See also TCN Channel Nine Pty Ltd v Ilvariy Pty Ltd [2008] NSWCA 9 (Spigelman CJ, Beazley and Hodgson JJA). 25 Houghton v Arms (2006) 225 CLR 553 at [35]. 26 Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd (1982) 150 CLR 169 at 184 (Gibbs CJ). 27 Re Australian Industrial Relations Commission; Ex parte Australian Transport Officers Federation (1990) 171 CLR 216 at 226 (Mason CJ, Gaudron and McHugh JJ).

[2.55]

2 Definitions and Key Concepts

55

was held in J S McMillan Pty Ltd v Commonwealth,28 that the phrase “carries on a business” has a different meaning to that of engaging in “trade or commerce” as used in 18 of the ACL, but the terms are not mutually exclusive. In particular, it “signifies that the Commonwealth is to be bound only where the conduct complained of is engaged in, in the course of carrying on a business”.29 In that case the Australian Government Publishing Service (AGPS) was a unit within the Department of Administrative Services. It was not a separate authority of the Commonwealth. The AGPS was systematically and regularly providing general printing services, dispatch and distribution services, graphic design services and editorial services to other Commonwealth departments. Emmett J expressed the view that in providing these services the Commonwealth was carrying on a business with the meaning of s 2A of the TPA.30 However, the fact that the AGPS carried on a business by providing these services did not mean that the Commonwealth, in conducting a sale of the AGPS, was carrying on that business. The Commonwealth was not in the business of selling capital assets.31 Emmett J drew a distinction between carrying on the day-to-day operations of the AGPS which was carrying on a business, and issuing a Request for Tender for the sale of the assets of the business which was not conduct in the carrying on of a business.32 His Honour adopted the view of Gibbs J in Smith v Capewell33 that: “The expression ‘carries on a business’ in its ordinary meaning, signifies a course of conduct involving the performance of a succession of acts and not simply the effecting of one solitary transaction.” Emmett J elaborated:34 However, mere repetitiveness is not sufficient to constitute carrying on of a business. System and regularity are involved in the carrying on of the business but it does not necessarily follow that one who has transactions of the same kind systematically or regularly is carrying on a business in those transactions. The example of regular deposits to a bank account is sufficient to explain that proposition. Absence of a system and regularity might deny that a business is being carried on but the presence does not necessarily establish that it is.

Thus, the Commonwealth was able to escape liability for its misleading conduct when it invited tenders for aspects of the AGPS’s business. Its conduct in so doing did not amount to carrying on that business. One factor that the courts consider is whether the activities being undertaken are in the nature of government activities, in the sense of public or regulatory, as opposed to private or commercial. An examination of the entity’s governing statute will be a 28 J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337. 29 J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 at 356. 30 J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 at 355. 31 J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 at 356-357. 32 J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 at 356. 33 Smith v Capewell (1979) 142 CLR 509 at 517. 34 J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 at 354 citing Barwick CJ in Hungier v Grace (1972) 127 CLR 210 at 217.

56

The Australian Consumer Law

[2.55]

useful reference point.35 In NT Power Generation Pty Ltd v Power and Water Authority,36 s 17(1) of the Power and Water Authority Act (NT) stated that PAWA’s duty was to “act in a commercial manner”. In ACCC v Australian Medical Association (WA),37 the Hospitals and Health Services Act 1927 (WA) did not suggest that the Minister for Health, when providing medical services in public hospitals, was carrying on a business and Carr J concluded that the activities of the state in this regard were properly characterised as fulfilling a governmental or welfare function. They did not have the requisite “commercial flavour” to amount to carrying on a business.38 Another useful reference point is the language used in the entity’s annual reports and other internal records. This self-description was crucial in the NT Power case where PAWA’s documents indicated that its officers perceived it to be carrying on a business for the purposes of the equivalent “carries on a business” requirement in s 2B of the TPA.39 The High Court referred to PAWA’s Report to the Legislative Assembly in which it stated that it was undergoing “commercialisation” and that: “Like all business, [PAWA] needs to generate a return in the very significant amount of capital invested.” The High Court referred to these admissions being made pursuant to statutory duties as being matters of the “utmost solemnity”.40 Another factor that the courts consider is whether the activities are undertaken with repetition, system and regularity. If so, this tends to indicate that the entity is carrying on a business. An isolated transaction will tend to indicate that the entity is not carrying on a business. The High Court in NT Power approved the result in McMillan since “the officers engaged in the sale had nothing to do with the day-to-day operations of enterprise; the Commonwealth did not conduct any business of selling assets”.41 Another matter of some importance that emerges from the court’s decision in McMillan is that if the government is engaged in the procurement of goods or services for its own use in the conduct of governmental activities it is not carrying on a business. In McMillan, Emmett J held that the AGPS was carrying on a business as a provider of services but that the other government departments that were users of these services were not carrying on a business; rather, they were engaged in purely governmental activities. His Honour stated:42 Insofar as the Commonwealth, in the guise of the Department of the Senate, the Department of the House of Representatives and other departments, utilises the services provided or procured by AGPS, it does so in the carrying out of governmental functions. 35 NT Power Generation Pty Ltd v Power and Water Authority (2002) 122 FCR 399 at [129] (Finkelstein J); and ACCC v Australian Medical Association (WA) (2003) 199 ALR 423 at [390] (Carr J). 36 NT Power Generation Pty Ltd v Power and Water Authority (2002) 122 FCR 399. 37 ACCC v Australian Medical Association (WA) (2003) 199 ALR 423. 38 ACCC v Australian Medical Association (WA) (2003) 199 ALR 423 at [393]. 39 NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 at 110-111 [52]-[54] (McHugh A-CJ, Gummow, Callinan and Heydon JJ). 40 NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 at 110-111 [53]-[55]. 41 NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 at 119 [74]. 42 J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 at 355.

[2.60]

2 Definitions and Key Concepts

57

It could not be said that the Commonwealth in those guises is carrying on a business. It is acquiring the services systematically and regularly, but only for the purposes of governing.

This interpretation has been followed in other cases43 but has been the subject of judicial criticism. Finn J in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd44 observed: Government contracting (in procurement and otherwise) is of major significance in the economic life of this country, as it is in most countries … It is somewhat surprising, that when the State enters the market place to acquire goods or services, it should exempt itself from those norms of conduct considered appropriate to the conduct of trade and commerce that it has imposed upon the private sector as of course – the more so given the “business-like” manner in which the Executive government commonly professes it conducts its affairs both internally and in its dealings with the community.

In State of New South Wales v RT & YE Falls Investments Pty Ltd,45 representations made by the NSW Department of Agriculture in connection with a disease eradication program it was administering were found by the New South Wales Court of Appeal not to fall within the ambit of the Fair Trading Act 1987 (NSW) which provided that the Crown was bound only to the extent that it carried on a business. Although compensation was paid to the owners of cattle destroyed and although the Department received payments from the abattoirs, its activities were best characterised as “purely governmental in the interests of the community, rather than constituting the carrying on of a business”.46

Exceptions to Commonwealth Crown carrying on a business [2.60] If a Commonwealth entity represents the Crown and the challenged conduct occurs in the course of carrying on a business it is necessary to consider whether a s 2C exception applies. Section 2C of the CCA identifies certain activities that do not amount to carrying on a business. It provides: (1) For the purposes of sections 2A, 2B and 2BA, the following do not amount to carrying on a business: 43 See Corrections Corporation of Australia Pty Ltd v Commonwealth (2000) 104 FCR 448 where the Department of Immigration and Multicultural Affairs (“DIMA”) maintained a number of centres for the detention of “non-citizens” entering Australia unlawfully. In 1997, the government decided to privatise the provision of these centres. It requested a number of organisations, including the applicant, to tender for this work. The requests for tender set out certain criteria and other requirements with which tenders had to comply. The applicant submitted a tender but was unsuccessful. It alleged that DIMA had engaged in misleading conduct contrary to s 52 by representing that it would evaluate the tenders it received in accordance with the terms of the request. Finkelstein J held that the process of selecting a person to provide services to the Commonwealth was quite distinct from any business and struck out the applicant’s s 52 claim. In Sirway Asia Pacific Pty Ltd v Commonwealth (2002) ATPR (Digest) ¶46-226, the Department of Defence was held not to be carrying on a business when it purchased chinaware in “industrial quantities”. Sundberg J held that in doing so it was fulfilling its government related responsibilities, not engaging in a commercial exercise. 44 GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1 at [1375]. 45 State of New South Wales v RT & YE Falls Investments Pty Ltd (2003) ATPR (Digest) ¶46-233. 46 State of New South Wales v RT & YE Falls Investments Pty Ltd (2003) ATPR (Digest) ¶46-233 at 53,719 (Hodgson JA).

58

The Australian Consumer Law

[2.60]

(a) imposing or collecting: (i) taxes; or (ii) levies; or (iii) fees for licences; (b) granting, refusing to grant, revoking, suspending or varying licences (whether or not they are subject to conditions); (c) a transaction involving: (i) only persons who are all acting for the Crown in the same right (and none of whom is an authority of the Commonwealth or an authority of a State or Territory); or (ii) only persons who are all acting for the same authority of the Commonwealth; or (iii) only persons who are all acting for the same authority of a State or Territory; or (iv) only the Crown in right of the Commonwealth and one or more noncommercial authorities of the Commonwealth; or (v) only the Crown in right of a State or Territory and one or more non-commercial authorities of that State or Territory; or (vi) only non-commercial authorities of the Commonwealth; or (vii) only non-commercial authorities of the same State or Territory; or (viii) only persons who are all acting for the same local government body (within the meaning of section 2BA) or for the same incorporated company in which such a body has a controlling interest; (d) the acquisition of primary products by a government body under legislation, unless the acquisition occurs because: (i) the body chooses to acquire the products; or (ii) the body has not exercised a discretion that it has under the legislation that would allow it not to acquire the products. (2) Subsection (1) does not limit the things that do not amount to carrying on a business for the purposes of sections 2A, 2B and 2BA.

In the NT Power case,47 the High Court stated that the “licence” referred to in s 2C(1)(b) is of the kind that prevents what would otherwise be an illegality or wrong against the Crown. According to the High Court:48 [The illegality] is found in conduct without a licence, contrary to an enactment–carrying on some profession (like medicine or law), or some trade or business (like selling liquor or drugs, or erecting buildings, or dealing in second-hand goods), or some pastime (like shooting, fishing, owning a pet or, in former times, watching television), or some common activity (like driving).

Thus, the granting of taxi licences to operators who meet certain minimum criteria in return for an appropriate licence fee would be covered by the exemption. So too would the grant of licences to operate private hospitals that meet specified standards, or the grant of a licence to an approved service operator. Section 2C(1)(b) would not exempt the grant or sale of permits to acquire goods or services; it only exempts licences that allow the licensee to supply goods or services. Similarly, a licence in the nature of a right to occupy land or premises owned by the Crown, or 47 NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 at 128 [101]. 48 NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 at 128 [101].

[2.65]

2 Definitions and Key Concepts

59

a licence to use certain material owned by the Crown would not constitute a licence for the purposes of s 2C(3) since it does not allow the licensee to supply “goods or services”. Section 2C(1)(c) provides that carrying on a business is not constituted by merely carrying out an intra-governmental transaction. It is important to note the limited nature of this exemption. An intra-governmental transaction will only be exempt if it involves persons, all of whom are acting for the Crown in the same right, and none of whom is an authority of the Commonwealth or an authority of a State or Territory. Section 2C(1)(d) provides that carrying on a business is not constituted by the compulsory acquisition of primary products by a Crown body. If a State marketing authority does not represent the Crown, the exemption will not apply and it will carry on a business.

State and Territory Crowns [2.65] The ACL (Cth) does not apply to the State and Territory Crowns. However, the State and Territory application legislation of each jurisdiction provides that the ACL of their jurisdiction will bind the Crown in right of each of the States, and of the Northern Territory and the Australian Capital Territory, to the full extent of its constitutional capacity to do so. This expressly rebuts the common law presumption that the Crown is not bound by legislation. For example, the relevant Part of the Australian Consumer Law and Fair Trading Act 2012 (Vic) (ACLFTA 2012 (Vic)) is Pt 2.4, “Application of the Australian Consumer Law to the Crown”. It contains the following definitions that are relevant to the issue of Crown liability: • The term “jurisdiction” is defined in s 6 of the ACLFTA 2012 (Vic) to mean “a State or the Commonwealth”. • The term “this jurisdiction” is defined in s 6 of the ACLFTA 2012 (Vic) to mean “Victoria”. • The term “participating jurisdiction” is defined in s 6 of the ACLFTA 2012 (Vic) to mean “a jurisdiction that is a party to the Intergovernmental Agreement and applies the Australian Consumer Law as a law of the jurisdiction, either with or without modifications”. • The term “State” is defined in s 6 of the ACLFTA 2012 (Vic) to include a Territory. • Section 15 of the ACLFTA 2012 (Vic) qualifies s 4 and provides: “In this Part, participating jurisdiction or other jurisdiction does not include the Commonwealth”. Section 16 of the ACLFTA 2012 (Vic) provides: The application law of this jurisdiction binds (so far as the legislative power of Parliament permits) the Crown in right of this jurisdiction and of each other jurisdiction, so far as the Crown carries on a business, either directly or by an authority of the jurisdiction concerned.

Section 17 of the ACLFTA 2012 (Vic) provides: (1) The application law of each participating jurisdiction other than this jurisdiction binds the Crown in right of this jurisdiction, so far the Crown carries on a business, either directly or by an authority of this jurisdiction.

60

The Australian Consumer Law

[2.65]

(2) If because of this Chapter, a provision of the law of another participating jurisdiction binds the Crown in right of this jurisdiction, the Crown in that right is subject to that provision despite any prerogative right or privilege. However, s 19 of the ACLFTA 2012 (Vic) provides: (1) Nothing in the application law of this jurisdiction makes the Crown in any capacity liable to a pecuniary penalty or to be prosecuted for an offence. (2) Without limiting subsection (1), nothing in the application law of a participating jurisdiction makes the Crown in right of this jurisdiction liable to a pecuniary penalty or to be prosecuted for an offence. (3) The protection in subsection (1) or (2) does not apply to an authority of any jurisdiction. In summary, the complementary coverage of the ACL (Application Acts) means that each State and Territory Crown is bound by its own ACL, and by each the ACLs of the other States and Territories. However, each application law provides that a State or Territory Crown is only bound by the ACL to the extent that it carries on a business, either directly or by an authority of its jurisdiction. Each State and Territory application law excludes the Commonwealth Crown from its coverage. Thus, the Commonwealth Crown is bound by the ACL (Cth). State and Territory Crowns that contravene the ACL are not liable to a pecuniary penalty or prosecution for an offence. Consider a situation where the Crown in right of New South Wales carried on a business of providing first aid training for reward49 and made a false representation in a newspaper published in both New South Wales and Victoria. Section 16 of the ACLFTA 2012 (Vic) provides that the ACL (Vic) binds the Crown in right of the State of New South Wales so far as it carries on a business. Section 36 of the FTA 1987 (NSW) provides that the ACL (NSW) binds the Crown in right of New South Wales. Thus, the conduct of the Crown in right of New South Wales could be challenged under either the ACL (Vic) or the ACL (NSW), but the Crown in right of New South Wales would not be liable for a pecuniary penalty or prosecution for an offence under either the ACL (Vic) or the ACL (NSW). Table 2.1 Application of State and Territory ACLs to the Crown

Crown bound by application laws of its own jurisdiction

FTA 1987 FTA 1989 ACLFTA (NSW) (Qld) 2012 (Vic) s 36 s 24 s 16

FTA 1987 FTA 2010 ACLA (SA) (WA) 2010 (Tas) s 22 s 28 s 14

49 Paramedical Services Pty Ltd v Ambulance Service of NSW [1999] FCA 548.

FTA 1992 CAFTA (ACT) (NT) s 15

s 35

[2.70]

2 Definitions and Key Concepts FTA 1987 FTA 1989 ACLFTA (NSW) (Qld) 2012 (Vic) s 37 s 25 s 18

Crown bound by application law of other jurisdictions Crown s 39 not liable for pecuniary penalty or prosecution Applica- s 35 tion of the ACL to the Crown does not include the Commonwealth

FTA 1987 FTA 2010 ACLA (SA) (WA) 2010 (Tas) s 23 s 29 s 15

s 16

s 36

61

FTA 1992 CAFTA (ACT) (NT)

s 27

s 20

s 25

s 30

s 17

s 18

s 38

s 23

s 16

s 21

s 27

s 13

s 14

s 34

State or Territory Crown: exceptions to carrying on a business [2.70] If a State or Territory authority represents the Crown and the challenged conduct occurs in the course of carrying on a business, it is necessary to consider whether an exception applies. For example, s 18(1) of the ACLFTA 2012 (Vic) provides: For the purposes of sections 16 and 17, the following do not amount to carrying on a business– (a) imposing or collecting– (i) taxes; or (ii) levies; or (iii) fees for authorisations; (b) granting, refusing to grant, revoking, suspending or varying authorisations (whether or not they are subject to conditions); (c) a transaction involving– (i) only persons who are all acting for the Crown in the same right (and none of whom is an authority of a State); or (ii) only persons who are all acting for the same authority of a State; or (iii) only the Crown in right of a State and one or more non-commercial authorities of that State; or (iv) only non-commercial authorities of the same State; (d) the acquisition of primary products by a government body under legislation, unless the acquisition occurs because– (i) the body chooses to acquire the products; or (ii) the body has not exercised a discretion that it has under the legislation that would allow it not to acquire the products.

62

The Australian Consumer Law

[2.70]

(e) Subjection (1) does not limit the things that do not amount to carrying on a business for the purposes of sections 16 and 17.

These exceptions raise the same issues as those discussed at [2.60] in relation to s 2C of the CCA. Section 18(1)(a) provides that carrying on a business is not constituted by Crown bodies which merely impose or collect fees, taxes and levies. This is self-explanatory. Section 18(1)(b) of the ACLFTA 2012 (Vic) provides that carrying on a business is not constituted by Crown bodies which merely grant, refuse, revoke, suspend or vary authorisations in relation to the supply of goods or services. The definition of “authorisation” in s 18(3) requires that it “allows the holder of the authorisation to supply goods or services”. Thus, the granting of authorisations to taxi operators who meet certain minimum criteria in return for an appropriate fee would be covered by the exemption. So too would the grant of authorisations to operate private hospitals that meet specified standards, or the grant of a licence to an approved service operator. Section 18(1)(b) would not exempt the grant or sale of permits to acquire goods or services; it only exempts licences that allow the licensee to supply goods or services. Section 18(1)(c) of the ACLFTA 2012 (Vic) provides that carrying on a business is not constituted by merely carrying out an intra-governmental transaction. It is important to note the limited nature of this exemption. An intra-governmental transaction will only be exempt if it involves persons, all of whom are acting for the Crown in the same right, and none of whom is an authority of the Commonwealth or an authority of another State or Territory. For example, an intra-governmental transaction between a State Department of Health and a State Department of Administrative Services, both of which are part of the same legal entity (the Crown in right of the State) would be exempt. On the other hand, where a Departmental “business unit” supplies goods or services to a commercial authority of that State, the transaction will not be exempt. Section 18(1)(d) of the ACLFTA 2012 (Vic) provides that carrying on a business is not constituted by the compulsory acquisition of primary products by a Crown body. If a State marketing authority does not represent the Crown, the exemption will not apply and it will carry on a business. Other participating jurisdictions contain similar provisions. In determining whether the ACL of a State or Territory applies to a particular authority, the starting point is to determine its status, and whether it is a manifestation of the Crown. If is not the Crown, the State or Territory ACL will apply and it is unnecessary to enquire further. If the authority is the Crown in right of the particular State or Territory, it is then necessary to consider whether it “carries on a business”. If it is not carrying on a business, it is unnecessary to enquire further. If the authority is carrying on a business, it is necessary to enquire whether the particular business being carried on falls within one of the exceptions. The following State activities have been held to constitute the carrying on of a business:

[2.75]

2 Definitions and Key Concepts

63

• providing ambulance services at sporting events and first aid training for reward.50 The following State activities have been held not to constitute the carrying on of a business: • managing a national park;51 • operating a public hospital through an outsourced contractor and providing hospital services to public patients; and,52 • providing police and corrective services.53

PART IV: “IN TRADE OR COMMERCE” REQUIREMENT Introduction [2.75] The general protections against misleading conduct and unconscionable conduct in Ch 2 of the ACL, and some of the specific protections in Ch 3 of the ACL only apply if the conduct at issue occurs “in trade or commerce.” For example, s 29 provides that a person must not, in trade or commerce, in connection with the supply of goods or services make false or misleading representations concerning various matters, and s 30 provides that a person must not, in trade or commerce, in connection with the sale of an interest in land make false or misleading representations concerning various matters. These provisions were not intended to apply to all conduct regardless of its nature. In particular, they are not intended to apply to conduct of a purely private or personal nature. For example, a person who sells their home would not be engaged in trade or commerce, and this would be so even if they had renovated the home with a view to making a profit on the sale, engaged an agent to assist them with the sale, and prepared brochures and other advertisements.54 The sale by the vendor of his or her home is not an act done as part of a trading or commercial business. In Williams v Pisano,55 the joint vendors of a property retained a real estate agent to market the property on their behalf. The vendors had renovated the property with a view to resale at a profit. They lived in the property from before 2005 until 2010 as their home and the renovations were carried out over a two year period. As soon as the renovations were completed they sold the property. The advertising brochure prepared by the agent made false representations about the standard of the renovations that had been made to the property. The case was decided on the basis that the sale did not occur in trade or commerce because it was a private residence, so there was no contravention of ss 18 or 30 of the ACL.56 Emmett JA observed: 50 Paramedical Services Pty Ltd v Ambulance Service of NSW [1999] FCA 548. 51 Easts Van Villages v Minister Administering the National Parks and Wildlife Act (2001) ATPR (Digest) ¶46-211. 52 ACCC v Australian Medical Association (WA) (2003) 199 ALR 423. 53 Hamond v State of New South Wales (2001) FCA 157. 54 Argy v Blunts and Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 at 129-130. 55 Williams v Pisano (2015) 299 FLR 172. 56 Williams v Pisano (2015) 299 FLR 172.

64

The Australian Consumer Law

[2.75]

the element of acting in trade or commerce will not be attributed to owners selling their home merely by reason of their engagement of an estate agent to find a buyer … The business character of the acts done by an agent cannot be imputed to the acts of the principals.57

The consumer guarantees provided for in ACL, Ch 3, Pt 3-2, Div 1, subdiv A, ss 51 – 59 only apply if the supply occurs “in trade or commerce”. In relation to the supply of goods the guarantees would not apply to a private sale of a motor vehicle, or a “garage sale” of personal effects. These are not activities of a trading or commercial nature. In each case it is necessary to consider the character of the conduct at issue from the perspective of the person engaging in the conduct. The term “trade or commerce” is defined in s 2 of the ACL to mean: (a) trade or commerce within Australia; or (b) trade or commerce between Australia and places outside Australia; and includes any business or professional activity (whether or not carried on for profit). The ACL applies to conduct engaged in outside Australia, provided that at least some aspect of the trading relationship between two or more parties has taken place in Australia. In Concrete Constructions (NSW) Pty Ltd v Nelson, the majority described the terms “trade or commerce” as “terms of common knowledge of the widest import”.58 In Re Ku-ring-gai Co-operative Building Society (No 12) Ltd,59 Deane J said: the terms “trade” and “commerce” are not terms of art. … [They] are clearly of the widest import … [and] are not restricted to dealings or communications which can properly be described as being at arm’s length in the sense that they are within open markets or between strangers or have a dominant objective of profit making. They are apt to include commercial or business dealings in finance between a company and its members…which, while being commercial in character, are marked by a degree of altruism which is not compatible with a dominant objective of profit-making.

In order to satisfy the definition of the term “trade or commerce” in s 2 of the ACL it is also necessary to establish that it constitutes trading or commercial activity within Australia or between Australia and places outside Australia. In Sunland v Prudentia Investments,60 it was argued that misleading conduct which took place in Dubai in relation to the acquisition of a block of land in Dubai, occurred in trade or commerce between Australia and places outside Australia on the basis that one of the parties to the negotiations for the acquisition of the block of land, Sunland

57 Williams v Pisano (2015) 299 FLR 172 at [40] citing Franich v Swannell (1993) 10 WAR 459 at 481-483. 58 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 602-604 (majority judgment of Mason CJ, Deane, Dawson and Gaudron JJ). 59 Re Ku-ring-gai Co-operative Building Society (No 2) Ltd (1978) 36 FLR 134 at 167, cited with approval by Branson and Stone JJ in Shahid v Australian College of Dermatologists (2008) 168 FCR 46 at [25]. 60 Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 2) (2012) 266 FLR 243.

[2.80]

2 Definitions and Key Concepts

65

Group Ltd, was incorporated in Queensland. Croft J, in the Supreme Court of Victoria, held that the conduct at issue was not conduct in trade or commerce between Australia and Dubai.61

Examples [2.80] In Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc,62 an advertisement published by the Tobacco Institute suggested that there was little evidence proving that cigarette smoke caused disease in non-smokers. The Federation of Consumer Organisations sought an injunction restraining the Institute from publishing these advertisements. It succeeded at first instance and the Institute appealed to the Full Court. The Full Court held that the Institute was formed to promote the interests of a particular industry whose activities were “in trade or commerce”. When conveying representations about that industry’s product and down-playing the risks of passive smoking this was likely to promote sales of tobacco-based products. Accordingly, the Institute was acting in trade or commerce.63 On the other hand, in Dataflow Computer Services Pty Ltd v Goodman,64 Goodman, a former employee of Dataflow, sent an email to Harvey Norman, one of its important customers, suggesting that Dataflow was going to alter its distribution arrangements to the detriment of the Harvey Norman chain of stores. This was not correct. Dataflow took these proceedings against Goodman on the ground that his action in sending the email contravened s 52 of the TPA. Dataflow submitted that the e-mail had a “trading or commercial character” as it was intended to influence the recipients not to deal with Dataflow any longer because of the falsely suggested misbehaviour by Dataflow. Hely J did not agree with this characterisation of the conduct at issue and concluded: Trade or commerce does not exist in the abstract. For present purposes the trade or commerce with which one is concerned can probably be described as the business or commercial dealings between Dataflow and Harvey Norman and other retailers of Dataflow products. In my view the sending of the e-mail was not conduct on the part of the respondent which was engaged in as part of those business or commercial dealings, as opposed to being in connection with or in relation to those dealings.65

Goodman’s conduct was more appropriately characterised as that of a bystander commenting on the trade or commerce in which others were engaged.66

61 Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 2) (2012) 266 FLR 243 at 447 [406] and [407]. 62 Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1. 63 Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1 at 16 (Sheppard J), at 25 (Foster J) and 44 (Hill J). 64 Dataflow Computer Services Pty Ltd v Goodman (1999) 168 ALR 169 (Hely J). 65 Dataflow Computer Services Pty Ltd v Goodman (1999) 168 ALR 169 at [22]. 66 Dataflow Computer Services Pty Ltd v Goodman (1999) 168 ALR 169 at [23].

66

The Australian Consumer Law

[2.85]

It is difficult to reconcile Dataflow with the decision of in Firewatch Australia Pty Ltd v Country Fire Authority.67 Goldberg J held that an internal Fire Authority bulletin which strongly recommended that brigades not become involved in the distribution or recommendation of the applicant’s “Firewatch extinguisher” had a trading or commercial character. His Honour stated: Although an internal CFA communication will ordinarily not have a trading or commercial character there was added to the bulletin a recommendation to brigades that as part of their trading or commercial activity they not be involved in the distribution or recommendation of the Firewatch extinguisher. In that context the primary distribution of the bulletin was conduct “in trade or commerce”. More particularly was this so where the bulletin was distributed further to persons outside the CFA organisation and reached consumers and potential consumers.

Although the bulletin was an internal document it had “a trading or commercial character” in the sense that it was intended to influence servicing brigades not to be involved in the distribution or recommendation of the Firewatch extinguisher. Putting the matter another way, the bulletin had more than “an internal character”; it was intended to have a consequence or impact on trading and commercial activities. It was intended that in dealings or potential dealings with consumers’ fire equipment maintenance servicing brigades would be influenced not to become involved in the distribution or recommendation of the product.68 Goldberg J’s focus on the purpose or intention of those responsible for the bulletin suggests a subjective inquiry rather than an objective inquiry as to whether the conduct at issue is an aspect or element of a trading or commercial nature.69

Extended definition: any professional activity [2.85] The phrase “trade or commerce” is expressly defined in s 2 of the ACL to include “any business or professional activity”. The effect of this inclusion is to expose accountants, lawyers, medical practitioners and the members of other professions to liability under the ACL should they mislead their clients in the course of carrying out professional work for them. It also exposes them to liability under the consumer guarantees law if they fail to comply with the standards imposed by those provisions that have an “in trade or commerce” requirement.70 In Shahid v Australian College of Dermatologists,71 Branson and Stone JJ held that the extended definition of “trade or commerce” in s 10 of the FTA 1987 (WA), which included “any business or professional activity,” was not confined to professional activities that have a trading or commercial character. Included within the concept “professional activity” were the activities and transactions done by the College for the purposes of a training program. This included representations in the College’s 67 Firewatch Australia Pty Ltd v Country Fire Authority (1999) ATPR (Digest) ¶46-198. 68 Firewatch Australia Pty Ltd v Country Fire Authority (1999) ATPR (Digest) ¶46-198 at [63]-[64]. 69 See McCabe, “Section 52 and the Regulation of Non-commercial Speech” (2010) 18 Trade Practices Law Journal 21 at 24-5. 70 See Chapter 9. 71 Shahid v Australian College of Dermatologists (2008) 168 FCR 46.

[2.95]

2 Definitions and Key Concepts

67

Handbook which contained information relating to the selection process, the adequacy of the College’s record keeping and an appeals process for unsuccessful applicants. Branson and Stone JJ held that the College published its Handbooks “in trade or commerce”, and that the College had a commercial relationship with practitioners who applied for a position as a trainee registrar. It charged them significant examination fees and gained further revenue from conducting training and seminars that trainee registrars were required to attend.72 In so finding, their Honours rejected the analysis of Santow J in Prestia v Aknar,73 who adopted a narrow interpretation of “any professional activity” confining it to professional activities that have a trading or commercial character.

Non-profit activities [2.90] The definition of “trade or commerce” in s 2 of the ACL expressly includes non-profit activities. This part of the definition differs from that found in the TPA. For example, it would apply to advice given by a lawyer to a client on a pro bono basis, and, it seems it would also apply to the activities of charities such as supplying goods or services free of charge. This may have implications for charities under the consumer guarantees law of the ACL.74 “In” trade or commerce [2.95] Conduct must occur “in” trade or commerce. The High Court, in Concrete Constructions (NSW) Ply Ltd v Nelson,75 held that the conduct at issue must itself be trading or commercial in nature, and that it is not sufficient for it to be merely connected with, or incidental, to trade or commerce. In other words, the trade or commerce requirement is not satisfied merely because the conduct occurred as part of some overall commercial or trading activity. The majority concluded that the conduct at issue, which consisted of an internal communication by one employee (the foreman) to another (Mr Nelson) in the course of their activities constructing a building, was not “in trade or commerce”.76 The question whether representations made by a business or professional firm to its employees about the terms of their employment are “in” trade or commerce remains unresolved. The position was summarised in the following extract from the Full Federal Court in Village Building Company Ltd v Canberra International Airport Pty Ltd:77 72 Shahid v Australian College of Dermatologists (2008) 168 FCR 46 at [26]. 73 Prestia v Aknar (1996) 40 NSWLR 165. Prestia was concerned with the FTA 1987 (NSW) which was the first of the Fair Trading Acts to contain an extension of the definition of “trade or commerce” to include “professional activity”. 74 See Chapters 8 and 9. 75 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 603-4; Plimer v Roberts (1997) 80 FCR 303 at 326-9 (Lindgren J). 76 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 604-5. 77 Village Building Company Ltd v Canberra International Airport Pty Ltd (2004) 139 FCR 330 at [46]-[52].

68

The Australian Consumer Law

[2.100]

The difficulty that can arise in applying the principles in Concrete Constructions is illustrated by the different views expressed in this Court as to whether representations made by a corporation to an employee in connection with the employee’s terms of employment constitute conduct in trade or commerce. In Barto v GPR Management, in the context of a strike out application, Wilcox J held negotiations with a prospective or present employee in respect of that person’s employment contact is conduct capable of falling within s 52 of the TPA. In Martin v Tasmania Development and Resources, Heerey J disagreed, holding that a communication to an employee asserting that termination of his employment was required on operational grounds was not a dealing of a trading or commercial nature. In Stoelwinder v Southern Health Care Network, Finkelstein J preferred Barto to Martin. In Hearn v O’Rourke, a case involving a different fact situation, Kiefel J at first instance expressed a preference for the reasoning in Martin. The Full Court allowed an appeal (Finn and Jacobson JJ; Dowsett J dissenting), but did not find it necessary to resolve the conflict. (citations omitted)

Trade or commerce of another [2.100]

Where vendors of private property have retained an agent in connection with the sale of the property, and the conduct of the agent is conduct in trade or commerce, the “trade or commerce” of the agent is not to be attributed to the principal, where the principal was not engaged in trade or commerce.78 Section 84(4) of the CCA provides that conduct engaged in on behalf of a person (the principal) by an agent within the scope of the actual or apparent authority of the agent is deemed to have been engaged in by the principal. However, s 84(4) does not impute to the principal the trade or commerce of the agent.79 However, an employee who engages in misleading conduct in the course of his or her employment engages in that conduct in trade or commerce if the employer is engaged in trade or commerce. The conduct takes place in the trade or commerce of the employer. In Houghton v Arms,80 the High Court held that while in most cases the focus would be on the nature of the business of the person making the representations, statements made by employees, who are not themselves engaged in trade or commerce, may be held to be in “trade or commerce” where they are made for the purposes of the employer’s business. In such circumstances, the employee will be personally liable if their conduct constitutes a contravention of s 18 of the ACL. In Williams v Pisano,81 Emmett JA observed: it does not follow from the propositions just formulated that an employer (or principal) is deemed to engage in conduct in trade or commerce merely because the employee, or agent, engages in his own trade or commerce in the course of that employment or agency. Such a result would in effect work backwards the principle stated in Houghton v Arms.82 78 Argy v Blunts and Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 at 127-9. See also Williams v Pisano (2015) 299 FLR 172 at [39] (Emmett JA). 79 Franich v Swannell (1993) 10 WAR 459 at 481-3. 80 Houghton v Arms (2006) 225 CLR 553 at 565 [32]-[35] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ). 81 Williams v Pisano (2015) 299 FLR 172 (Bathurst CJ, McColl and Emmett JJA). 82 Williams v Pisano (2015) 299 FLR 172 at [43].

[2.110]

2 Definitions and Key Concepts

69

Summary [2.105] Davies J in Plimer v Roberts, observed: “the precise limits of what is or is not trade or commerce, or what act is in or is not in trade or commerce cannot be definitely stated…”.83 In summary, the following conduct will occur in trade of commerce: • external transactions or communications by businesses to further their commercial interests;84 and • external transactions or communications by professionals in the course of a retainer for which they are remunerated.85 The following conduct will not occur in trade of commerce: • internal communications by one employee to another in the course of their ordinary activities;86 • government announcements and policy statements;87 and • making representations in the course of lectures on a subject of historical, religious and/or scientific interest for which the lecturer is not remunerated.88

PART V: LIABILITY OF CORPORATE AND NON-CORPORATE PRINCIPALS Introduction [2.110]

The liability of corporate principals for the conduct of others who contravene the consumer protection provisions of the ACL (Cth) does not arise as a result of the common law of vicarious liability. The right of a claimant to sue a corporate principal for the infringing conduct of others, including directors, servants or agents, relies on proof of the matters in s 139B of the CCA. A distinction is made in the relevant authorities between direct liability (as it applies to corporations) and the principle of vicarious liability.

83 Plimer v Roberts (1997) 80 FCR 303 at 305. 84 See, eg, Re Ku-ring-gai Co-operative Building Society (No 12) Ltd (1978) 36 FLR 134; Bevanere Pty Ltd v Lubidineuse (1984) 7 FCR 325; “E” v Australian Red Cross Society (1991) 27 FCR 310; Sykes v Reserve Bank of Australia (1998) 88 FCR 511; and Sigma Constructions (Vic) Pty Ltd v Maryvell Investments Pty Ltd (2005) ATPR ¶42-048. 85 See, eg, Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 71 ALR 615; Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 at 127 where it was conceded that a firm of solicitors acting for the vendor of a residential property was engaged in trade or commerce. In ACCC v Sampson (2011) ATPR ¶42-374 Tracey J declared that Ms Sampson, a lawyer, carried on business as a partner and principal of the law firm, Goddard Elliott. Her actions on behalf of her clients in sending debt collection letters and notices seeking to recover debts which contained misleading information were held to have occurred in trade or commerce. Cf Prestia v Aknar (1996) 40 NSWLR 65 where remarks made during the course of settlement negotiations by a solicitor were held not to be in trade or commerce because he was not retained or remunerated by the parties to the settlement. 86 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594. 87 Unilan Holdings Pty Ltd v Kerrin (1992) ATPR ¶41-169 at 40,324-40,344 (Hill J); Robin Pty Ltd v Canberra International Airport Pty Ltd (1999) ATPR ¶41-710 at 43,117-43,122 (Gyles J). 88 Plimer v Roberts (1997) 80 FCR 303 at [325]-[329] (Lindgren J).

70

The Australian Consumer Law

[2.115]

Under the common law of vicarious liability, a principal is not deemed to have engaged in the conduct at issue; rather, the principal is made legally liable for the conduct of the director, servant or agent who engages in the conduct. Under s 139B of the CCA, on the other hand, the principal is deemed to have engaged in the conduct at issue. A corporation will be directly liable for the acts of its directors, managers and other officers who are the governing mind and body of the corporation, as if their acts were the acts of the corporation in accordance with the principle accepted by the House of Lords in Tesco Supermarkets Ltd v Nattrass.89 In those circumstances no question of vicarious liability under s 139B of the CCA will arise. Whether the corporate principal will be liable for a contravention of the relevant substantive prohibition then depends on whether the other elements of that prohibition can be satisfied, in particular, • whether the principal is a corporation of the type defined in s 4(1) of the CCA; and • whether the principal was engaged “in trade or commerce” at the time the conduct occurred. Section 139B(2) of the CCA provides: Any conduct engaged in on behalf of a body corporate: (a) by a director, employee or agent of the body corporate within the scope of the actual or apparent authority of the director, employee or agent; or (b) by any other person: (i) at the direction of a director, employee or agent of the body corporate; or (ii) with the consent or agreement (whether express or implied) of such a director, employee or agent; if the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, employee or agent; is taken, for the purposes of this Part or the Australian Consumer Law, to have been engaged in also by the body corporate. This mirrors s 84(2) of the CCA. Bodies corporate cannot act except through the conduct of their directors, employees and agents. Section 139B(2) sets out the circumstances in which a body corporate will be held liable for the conduct of its directors, employees and agents. It is first necessary to establish that the person engaging in the conduct was acting “on behalf of” the body corporate. It is then necessary to establish that the person engaging in the conduct fell into one of the two categories specified: first, they were a director, employee or agent; or secondly, they were a person acting at the direction of a director, employee or agent, or with the consent or agreement of a director, employee or agent.

On behalf of [2.115]

Section 139B(2) of the CCA provides that any conduct engaged in “on behalf of” a body corporate by a director, employee or agent within the scope of the

89 Tesco Supermarkets Ltd v Nattrass [1972] AC 153.

[2.115]

2 Definitions and Key Concepts

71

person’s actual or apparent authority shall be deemed to have been engaged in by the body corporate. The words “on behalf of” do not require that the conduct must have been authorised by the body corporate. It was held in Walplan v Wallace90 that the phrase “on behalf of” does not have a strict legal meaning, but there is a limit as to how loose the connection can be. Something must be done “for” the company in the sense of “in the course of the body corporate’s affairs or activities”.91 In Wheeler Grace & Pierucci Pty Ltd v Wright92 the Full Court of the Federal Court considered the effect of s 84(2) of the TPA in light of the High Court decision in Hamilton v Whitehead.93 The appellant, Wheeler Grace & Pierucci Pty Ltd (WGP), carried on business as an investment adviser. Collins made misleading statements to the respondents regarding investments in a gold mining venture, Carbon Gold. Collins was the appointee of WGP to the board of Carbon Gold. The Full Court held that WGP was directly liable for Collins’ misleading statements. Lee J held: Furthermore, in s 84(2) of the Act, it has been expressly provided that any conduct engaged in on behalf of a body corporate by a director, servant or agent within the scope of the person’s actual or apparent authority or by any other person at the direction or with consent or agreement, express or implied, of a director, servant or agent, such direction, consent or agreement being within the scope of the actual or apparent authority of the director, servant or agent, is deemed for the purposes of the Act to have been engaged in also by the body corporate. Whether s 84(2) extends the common law is immaterial. What it does do is make clear that such activities by directors or agents of the company will attract direct liability to the company under provisions such as s 52 of the Act and no question of vicarious liability will arise in that circumstance.94

On the other hand, in Lisciandro v Official Trustee in Bankruptcy,95 Kiefel J held that a company was not responsible for the misleading or deceptive conduct of its “Service Agent”. The company, Alminco, appointed Radford as its service agent for North Queensland. This did not entitle Radford to represent the company or receive moneys on its behalf; rather, it was simply a licence permitting Radford to use Alminco’s parts in his business. Radford misleadingly induced the applicant to sign a guarantee in favour of Alminco. It was held that Radford had not been acting as an agent of Alminco in procuring the guarantee; rather, as a potential purchaser on credit, Radford had obtained the guarantee on his own account in order to raise finance. 90 Walplan v Wallace (1985) 8 FCR 27 at 37, Sweeney J agreeing at 28 and Neaves J at 39. In NMFM Property Pty Ltd v Citibank Ltd (2000) 107 FCR 270 at [1243] Lindgren J referred with approval to the views of Lockhart J in Walplan v Wallace. 91 See TPC v Queensland Aggregates (1982) 61 FLR 52 at 66. 92 Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATPR ¶40-940. 93 Hamilton v Whitehead (1989) ATPR ¶42-932. 94 Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATPR ¶40-940 at 50,256, citing TPC v Tubemakers of Australia Ltd (1983) 76 FLR 455 (Toohey J) at 474-6. 95 Lisciandro v Official Trustee in Bankruptcy (1995) ATPR ¶41-436 at 40-903-4.

72

The Australian Consumer Law

[2.120]

Lindgren J, in NMFM Property Pty Ltd v Citibank Ltd,96 said: It seems to me that an act is done “on behalf of” a corporation for the purpose of s 84(2) if either one of two conditions is satisfied: that the actor engaged in the conduct intending to do so “as the representative of” or “for” the corporation, or that the actor engaged in the conduct in the course of the corporation’s business, affairs or activities.97

In Ackers v Austcorp International Ltd,98 a group of companies in a property joint venture were held to be liable for the misleading conduct of an agent engaged by one of the joint venturers. Rares J held that the particular development was part of the ordinary business, affairs and activities of Austcorp and that representations made by the officers, subsidiaries, and agents was the conduct engaged in “on behalf of” Austcorp.99 In Bennett v Elysium Noosa Pty Ltd,100 Reeves J, after reviewing the authorities about the operation of s 84(2) of the TPA, summarised them in the following propositions: Among other things, they show that the level of involvement of the actor concerned may not be significant, provided it comprises “some” involvement. In context, I consider this means some real or genuine involvement. They also show that the actor’s subjective intention is one criterion for assessing whether he or she is acting on behalf of the company concerned. Alternatively, they show that an objective assessment of the actor’s conduct may lead to the conclusion that he or she was acting on behalf of that company. Finally, they show that the assessment as to whether the actor was acting on behalf of a company is ultimately dictated by the circumstances of each particular case. Thus it may conceivably involve a combination of the subjective and objective assessments (above) in a particular case.101

“Actual or apparent authority” [2.120]

Having established that the person engaging in the conduct was acting “on behalf of” the corporation, it is then necessary to establish that the person engaging in the conduct fell into one of the two categories specified. The first category specified in s 139B(2)(a) of the CCA is that the person engaging in the conduct was a director, employee or agent of the body corporate acting within the scope of their actual or apparent authority. In ACCC v South East Melbourne Cleaning Pty Ltd (in liq),102 Coverall was the franchisor of a professional cleaning services franchise system operating in Victoria. Mr Jones was the sole director of Coverall and effectively its owner. It was a small company and he was central to its operations. He was directly responsible within Coverall for franchisee recruitment, new business customer contract development and meeting weekly with Coverall’s Sales Manager, Ms Haley, to discuss the number of cleaning proposals delivered to potential customers and the number of accounts and the dollar value of the

96 NMFM Property Pty Ltd v Citibank Ltd (2000) 107 FCR 270. 97 NMFM Property Pty Ltd v Citibank Ltd (2000) 107 FCR 270 at [1244]. 98 Ackers v Austcorp International Ltd [2009] FCA 432. 99 Ackers v Austcorp International Ltd [2009] FCA 432 at [217]. 100 Bennett v Elysium Noosa Pty Ltd (2012) 202 FCR 72. 101 Bennett v Elysium Noosa Pty Ltd (2012) 202 FCR 72 at [207]. 102 ACCC v South East Melbourne Cleaning Pty Ltd (in liq) (formerly known as Coverall Cleaning Concepts South East Melbourne Pty Ltd) (2015) ATPR ¶42-503.

[2.120]

2 Definitions and Key Concepts

73

proposals won by Coverall. Ms Haley represented to a potential franchisee that if he purchased a franchise at a cost of $28,150 Coverall could provide him with work that would generate a minimum of $4,000 in revenue per month. Murphy J held that the making of the representation was within the scope of Ms Haley’s actual or apparent authority as an employee of Coverall and was deemed to be the conduct of Coverall pursuant to ss 84(2) and 139B of the CCA.103 The Corporations Act 2001 (Cth) sets out certain rules under which director or agents will be taken to have acted within the scope of their actual or apparent authority.104 The actual or apparent authority of the agent is to be determined according to common law principles. For example, in the case of a real estate agent, the agent’s apparent authority is limited to describing the property, representing its situation and representing any matter concerning its value.105 If a real estate agent represents that finance is available in order to induce the purchaser to buy the property, the agent will be acting outside the agent’s apparent authority and the vendor will not be liable for the agent’s misleading statement. Where an agent makes a statement which is within the agent’s apparent authority, but which the principal has expressly prohibited the agent from making, the question is more difficult. The wording of s 139B(2)(a) of the CCA would appear to be wide enough to make the principal liable for such a statement unless some limitation on the agent’s authority was known to the other party. Despite suggestions that an agent who makes a statement expressly prohibited by the principal is not acting “on behalf of” the principal,106 the words “on behalf of” in s 139B(2) of the CCA will extend to cases where the director or agent is acting within apparent authority in some way that is prohibited by the corporation including fraud.107 However, where the director or agent acts on their own behalf and not as a representative of the corporation, s 139B(2) will not apply. In Aliotta v Broadmeadows Bus Service Pty Ltd,108 the respondent wished to sell its property and engaged an estate agent to act on its behalf. The agent advised that it would be easier to sell the property as an investment property if it could be leased before sale. The applicant entered into an agreement for the purchase of the property conditional upon the property being leased. A lease was executed, but the use was found to be prohibited without a permit. A permit was refused and the lease was surrendered. The applicant sought return of the deposit alleging misleading conduct and false or misleading representations as to the use to which the land might lawfully be put, in breach of ss 52 and 53A(1)(b) of the TPA. He claimed that the vendor and the selling agent had both represented that the use described in the lease was permissible and the lease secure. 103 ACCC v South East Melbourne Cleaning Pty Ltd (in liq) (formerly known as Coverall Cleaning Concepts South East Melbourne Pty Ltd) (2015) ATPR ¶42-503 at [91]. 104 See Corporations Act 2001 (Cth), ss 126 – 129. 105 See Mullens v Miller (1882) 22 Ch D 194. 106 See TPC v Tubemakers of Australia Ltd (1983) 76 FLR 455 at 475 (Toohey J). 107 Serrata Investments Pty Ltd v Rajane Pty Ltd (1991) 6 WAR 419; Brockway v Pando (2000) 22 WAR 771. 108 Aliotta v Broadmeadows Bus Service Pty Ltd (1988) ATPR ¶40-873.

74

The Australian Consumer Law

[2.125]

Gray J held that, as a matter of common law, a vendor’s agent has authority to bind the vendor by any representation made as to the nature or quality of the property, even if it is false, unless some limitation on the agent’s authority is known to the intending purchaser. In addition, a company carrying on business as an estate agent is also liable for the acts of its servant within the scope of his actual or ostensible authority. His Honour held that the first respondent, the vendor of the property, was liable for the conduct of the vendor’s agent, which in turn was liable for the conduct of its employee. In Aliotta v Broadmeadows Bus Service the transaction involved the sale of commercial property so that both the respondent vendor and the agent were engaged in trade or commerce. It is clear from Argy v Blunts109 that where the vendor principal is not engaged in trade or commerce and is selling residential property, the vendor will not be liable for any misleading statements of the agent.

“At the direction of” or “with the consent of” [2.125]

Where the person engaging in the misleading conduct is not a director, employee or agent of the respondent corporation, it will be necessary to establish that they fall within the second category specified in s 139B(2)(b) of the CCA; namely, that the person was acting at the direction of, or with the consent of a director, employee or agent of the respondent corporation.

In Bennett v Elysium Noosa Pty Ltd,110 the real estate agents who engaged in the misleading conduct were not parties to the proceedings. Reeves J found that since the development was central to the business affairs of the developer and the marketing of the lots was an activity that was essential to their business, on an objective assessment, the real estate agents were acting “on behalf of” the developer when they engaged in the misleading conduct. The real estate agents were not employed by the developer. They were employed by an independent agency which was appointed by the developer to be the exclusive marketing consultant for the development. Accordingly, they could not fall within the first category in s 84(2) (now CCA, s 139B(2)(a)). Reeves J held that they fell within the second category (now CCA, s 139B(2)(b)) since the real estate agents had been briefed with sales material by a director who was the public relations and marketing manager of the developer. His Honour also found that the real estate agents had acted “at the direction of” a director of the developer.

Direct liability of non-corporate principals for conduct of employees or agents [2.130]

Section 139C(2) of the CCA provides:

Any conduct engaged in on behalf of a person (the principal) other than a body corporate: (a) by an employee or agent of the principal within the scope of the actual or apparent authority of the employee or agent; or 109 Argy v Blunts (1990) 26 FLR 112. 110 Bennett v Elysium Noosa Pty Ltd (2012) 202 FCR 72.

[2.135]

2 Definitions and Key Concepts

75

(b) by any other person: (i) at the direction of an employee or agent of the principal; or (ii) with the consent or agreement (whether express or implied) of such an employee or agent; if the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the employee or agent; is taken, for the purposes of this Part or the Australian Consumer Law, to have been engaged in also by the principal.

This re-enacts s 84(4) of the TPA. Subsection 139C(2) of the CCA has the same effect as s 139B(2) where conduct is engaged in on behalf of non-corporate principals. Section 139C(2) deems the conduct of an employee or agent to be the conduct of a natural person. If regard is had to the reasoning in Wright’s case, it cannot be concluded that the effect of s 139C(2) is to impose liability upon the principal. Rather, it is necessary to consider whether the other elements of the relevant substantive prohibition are satisfied and, in particular, whether the natural person was engaged in trade or commerce at the time the conduct occurred. This will not be the case, for example, where the sale related to the vendor’s private residence. There is very little authority on the liability of a natural person for the misleading conduct of a corporate agent. In MacCormick v Nowland111 the facts presented an opportunity for the question to be considered, but as liability was found in negligent misrepresentation the court did not consider whether the vendor had contravened s 52 of the TPA.

Direct liability: summary [2.135]

Sections 139B(2) and 139C(2) of the CCA operate to impose direct liability rather than vicarious liability on a principal. The sections deem the conduct of the agent to be the conduct of the principal. The sections do not deem the business of the agent to be the business of the principal. Thus, where for example, a vendor principal is not engaged in trade or commerce and is selling a private residence, the vendor will not be liable for a breach of a provision such as s 18 of the ACL for any misleading statements by the agent.112

The ACL (Application Acts) have equivalent provisions to ss 139B(2) and 139C(2) of the CCA.113

111 MacCormick v Nowland (1988) ATPR ¶40-852. 112 Williams v Pisano (2015) 299 FLR 172 at [39]. 113 See, eg, ACLFTA 2012 (Vic), s 196; FTA 1989 (Qld), s 95.

3

Misleading or Deceptive Conduct [3.05] INTRODUCTION .................................................................................................................. 78 [3.15] PART I: IDENTIFYING THE CONDUCT AT ISSUE ...................................................... 82

[3.15] Introduction ........................................................................................................... 82 [3.20] Doing any act ........................................................................................................ 83 [3.25] Refusing to do any act ......................................................................................... 84 [3.30] Silence in isolation ................................................................................................ 86 [3.35] Silence and other conduct ................................................................................... 86 [3.40] Relaying incorrect information supplied by another ..................................... 88 [3.50] Adopting or endorsing information supplied by another ............................ 92 [3.55] Contemporaneous disclaimers ........................................................................... 93 [3.60] PART II: ASSESSING WHETHER THE CONDUCT WAS MISLEADING, OR LIKELY TO MISLEAD ......................................................................................................................... 94

[3.60] Context all important ........................................................................................... 94 [3.65] Misleading conduct: objective test ..................................................................... 95 [3.70] Role of intention .................................................................................................... 96 [3.75] Conduct directed at identified persons ............................................................ 97 [3.80] Commercial negotiations involving identified persons ................................. 99 [3.85] Conduct directed at the public ........................................................................... 99 [3.90] Knowledge base of a reasonable member of the class ................................ 100 [3.95] Confusion or uncertainty .................................................................................. 102 [3.100] Silence as misleading conduct: general principles ..................................... 104 [3.105] Silence as misleading conduct: commercial negotiations .......................... 107 [3.110] Silence: making known specific transactional requirements ..................... 109 [3.115] Silence: unusual or unexpected matters ....................................................... 110 [3.120] Silence: subsequent change in circumstances .............................................. 112 [3.125] Silence: case examples ...................................................................................... 113 [3.130] Literal truth ........................................................................................................ 115 [3.135] Representations with respect to future matters ........................................... 115 [3.140] Case examples: representations about future matters ................................ 118 [3.145] Contractual promises ........................................................................................ 119 [3.150] Expressions of opinion, law and legal rights .............................................. 120

78

The Australian Consumer Law

[3.05]

[3.155] Information asymmetry ................................................................................... 123 [3.160] Exclusion clauses .............................................................................................. 124 [3.165] PART III: DID THE RESPONDENT’S CONDUCT CAUSE THE ALLEGED ERROR OR MISCONCEPTION? ................................................................................................... 125 [3.170] PART IV: ADVERTISING: GENERAL PRINCIPLES ................................................... 126

[3.170] [3.175] [3.180] [3.185] [3.190] [3.195] [3.200] [3.205]

Introduction ....................................................................................................... Knowledge base of the target audience ........................................................ Puffery or exaggeration in advertising ......................................................... Medium used to convey the advertisement ................................................ Qualifying statements and small print disclaimers .................................... Advertising on social media sites .................................................................. Assessing the advertisement ........................................................................... Comparative advertising .................................................................................

126 128 130 130 133 135 136 137

[3.210] PART V: MISLEADING CONDUCT AND PASSING-OFF ........................................ 139

[3.210] Introduction ....................................................................................................... 139 [3.215] Choice of name .................................................................................................. 139 [3.220] Design features or shape ................................................................................. 141 [3.225] Choice of get up ................................................................................................ 142 [3.230] PART VI: EXEMPTION FOR INFORMATION PROVIDERS .................................... 143

[3.235] Scope of the exemption for information providers .................................... 144 [3.240] Publication of an advertisement .................................................................... 145 [3.245] Exceptions to the exemption ........................................................................... 145 [3.250] PART VII: MISLEADING OR DECEPTIVE CONDUCT UNDER THE ASIC ACT . 147

[3.250] [3.255] [3.260] [3.285] [3.290]

Introduction ....................................................................................................... Background to the reform ............................................................................... Misleading or deceptive conduct under the ASIC Act .............................. Misleading or deceptive conduct ................................................................... Overlap between the ACL and ASIC Act .....................................................

147 148 149 153 156

INTRODUCTION [3.05] The legislative approach to the regulation of consumer protection adopted in Australia is to provide for three general protections and to supplement these with more prescriptive protections in relation to specific conduct. The first general protection is contained in s 18(1) of the ACL which provides that: A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead of deceive.

This prohibition does not substantively change compared to s 52(1) of the Trade Practices Act 1974 (Cth) (TPA), and the State and Territory equivalents in their Fair Trading Acts. The only difference is that s 18 is directed at the conduct of persons generally rather than corporations. If the conduct concerns that of a corporation, reliance will generally be placed on the ACL (Cth). If the conduct concerns that of

[3.05]

3 Misleading or Deceptive Conduct

79

natural persons, reliance will generally be placed on the ACL (Application Acts). Before considering the elements of a contravention of s 18 of the ACL, it is necessary to have some understanding of its policy objects and the policy objects of its predecessor, s 52 of the TPA. In Brown v The Jam Factory Pty Ltd,1 s 52(1) of the TPA was described by Fox J as: a comprehensive provision of wide impact, which does not adopt the language of any common law cause of action. It does not purport to create liability at all; rather does it establish a norm of conduct, failure to observe which has consequences provided for elsewhere in the same statute, or under the general law.2

In relation to s 52 of the TPA, Lockhart and Gummow JJ in Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd3 observed: the evident purpose and policy underlying Pt V, which includes s 52, recommends a broad construction of its constituent provisions, the legislation being of a remedial character so that it should be construed so as to give the fullest relief which the fair meaning of its language will allow.4

Their Honours also observed that s 52 imposes a “norm of conduct”,5 and the role of the courts was to apply it to a wide range of circumstances involving businesses as well as consumers. The policy object of s 52 of the TPA was to operate as a catch-all provision that could apply to objectionable conduct that might otherwise escape liability, on technical grounds, under the more specific provisions of the Act. According to Senator Murphy, who as Attorney-General was responsible for introducing the TPA, its role was to ensure that the law was not “continually one step behind businessmen who resort to smart practices”.6 By 1993, former Chief Justice of the High Court, Sir Anthony Mason commented on how the statutory remedies had eclipsed the traditional common law remedies: Section 52 of the Trade Practices Act 1974 (Cth), which provides a statutory cause of action sounding in damages in respect of misleading or deceptive conduct, has reduced the importance of actions for breach of warranty, fraudulent misrepresentation and negligence in those cases to which the statute applies.7

Similarly, French CJ and Kiefel J commented in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd:8 The cause of action for contravention of statutory prohibitions against conduct in trade or commerce that is misleading or deceptive or is likely to mislead or deceive has become a 1 Brown v The Jam Factory Pty Ltd (1981) 53 FLR 340. 2 Brown v The Jam Factory Pty Ltd (1981) 53 FLR 340 at 348. 3 Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470. 4 Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 503. 5 Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 505. 6 See Parliamentary Debates, Hansard, 1974, Vol S 60, p 547. 7 Sir Anthony Mason, “Changing the Law in a Changing Society” (1993) 67 Australian Law Journal 568. 8 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 at [5]. See also Mason, “Changing the Law in a Changing Society” (1993) 67 Australian Law Journal 568 at 568.

80

The Australian Consumer Law

[3.05]

staple of civil litigation in Australian courts at all levels. Its frequent invocation, in cases to which it is applicable, reflects its simplicity relative to the torts of negligence, deceit and passing off.

However, there were limits imposed on the general protection against misleading conduct in s 52 of the TPA. The policy object of the law was not to protect the unusually stupid or obtuse, or those who did not take reasonable steps to protect their own interests. In Campomar Sociedad Limitada v Nike International Ltd,9 the High Court stated: It is in these cases of representations to the public … that there enter the “ordinary” or “reasonable” members of the class of prospective purchasers. Although a class of consumers may be expected to include a wide range of persons, in isolating the “ordinary” or “reasonable” members of that class, there is an objective attribution of certain characteristics. … Where the persons in question are not identified individuals to whom a particular misrepresentation has been made or from whom a relevant fact, circumstance or proposal was withheld, but are members of a class to which the conduct in question was directed in a general sense, it is necessary to isolate by some criterion a representative member of that class. The inquiry thus is to be made with respect to this hypothetical individual why the misconception complained has arisen or is likely to arise if no injunctive relief be granted.10

In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd,11 it was held that a reasonable member of the target audience (members of the public who were in the market for an expensive make of furniture) would not be misled into buying a similarly designed “look-alike” product, because they would check the label to confirm that they were purchasing their desired brand. In Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd,12 the High Court held that intention was not a requirement for a person to have engaged in misleading conduct. The question whether conduct was misleading within the meaning of s 52(1) of the TPA was to be determined by the court itself, and the test was objective. Evidence that members of the target audience may in fact have been misled was admissible though not conclusive.13 Section 52(1) was interpreted expansively and this allowed it to be invoked in a wide variety of situations not traditionally associated with consumer protection.14 As a result, it had an impact on Australian law that was not anticipated when it 9 Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45. 10 Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45 at 85 per Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ. See also Google Inc v ACCC (2013) 249 CLR 435 at 443 (French CJ, Crennan and Kiefel JJ). 11 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191. 12 Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228 (Stephen J). 13 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198-9 (Gibbs CJ); Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202. 14 Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 223-6 (Stephen J); Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197-8 (Gibbs CJ) and 202-5 (Mason J); Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 601-2 (Mason CJ, Deane, Dawson and Gaudron JJ); 606-607 (Brennan J).

[3.10]

3 Misleading or Deceptive Conduct

81

was introduced as part of the TPA in 1974. Its location in the consumer protection parts of the TPA reflected an expectation that its role would be to protect consumers by improving the conduct of businesses in trade or commerce – their advertising, selling practices and promotional activities generally – and by prohibiting businesses from engaging in sharp practices when dealing with individual consumers.

[3.10] However, whilst s 52(1) was used to promote the interests of consumers in these ways, by far its most frequent use was in connection with disputes of a commercial nature between businesses. In effect, competitors held each other to account in complying with the raised standards of business conduct imposed by s 52(1). As a result it became one of Australia’s most litigated statutory provisions and, in conjunction with its Fair Trading Act equivalents, largely usurped important areas of common law including contract, tort and restitution.15 The same policy objects that informed the construction of s 52 of the TPA are likely to inform the construction of s 18 of the ACL. The principles for determining whether misleading conduct has occurred were considered by McHugh J in Butcher v Lachlan Elder Realty Pty Ltd: The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether a contravention of s 52 has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the corporation’s conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct. Thus, where the alleged contravention of s 52 relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole. The court is not confined to examining the document in isolation. It must have regard to all the conduct of the corporation in relation to the document including the preparation and distribution of the document and any statement, action, silence or inaction in connection with the document.16

The analysis of whether conduct is misleading or likely to mislead in this chapter will focus on the following three matters: • first, identifying or characterising the conduct at issue;17 • secondly, considering the approach taken by the courts in assessing whether the conduct at issue is misleading or likely to mislead; and 15 See Clarke, “Misleading or Deceptive Conduct Cases in the Supreme Court of Victoria” (2015) 89 Australian Law Journal 397. 16 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 625 [109] (citations omitted), approved in Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at 341-2 [102] (Gummow, Hayne, Heydon and Kiefel JJ). See also Google Inc v ACCC (2013) 249 CLR 435 at 443-4 [6]-[9] (French CJ, Crennan and Kiefel JJ) and ACCC v Dukemaster Pty Ltd (2009) ATPR ¶42-290 at [10] (Gordon J). 17 Campomar Sociedad, Limitada v Nike International (2000) 202 CLR 45 at [105]; National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000 at [18] (Dowsett J, with whom Jacobson and Bennett JJ agreed); Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106 at [37] (Wilcox, Bennett and Graham JJ); ACCC v Telstra Corporation Ltd (2007) ATPR ¶42-203 at [14]-[20] (Gordon J); IDP Education Ltd v Lejburg Pty Ltd [2015] VSC 650 (24 November 2015) at 54] (Judd J).

82

The Australian Consumer Law

[3.15]

• thirdly, the need to consider whether the respondent’s conduct caused the applicant’s error or misconception.18 The chapter then considers how the general protection in relation to misleading conduct has been applied in the context of advertising conduct, and in relation to passing-off. These two areas have generated a significant number of cases because of their importance in market economies which depend on consumers being provided with actuate information, and businesses competing fairly. Next, the statutory exemption for information providers in s 19(1) of the ACL is discussed. Finally, the prohibition of misleading conduct in relation to financial products and financial services in s 12DA(1) of the ASIC Act is considered.

PART I: IDENTIFYING THE CONDUCT AT ISSUE Introduction [3.15] The importance of identifying or characterising the relevant conduct alleged to be misleading has been stressed in a number of cases. For example, in Google Inc v ACCC, Hayne J stated: The generality with which s 52 was expressed should not obscure one fundamental point. The section prohibited engaging in conduct that is misleading or deceptive or is likely to mislead or deceive. It is, therefore, always necessary to begin consideration of the application of the section by identifying the conduct that is said to meet the statutory description “misleading or deceptive or … likely to mislead or deceive”. The first question for consideration is always: “What did the alleged contravener do (or not do)?” It is only after identifying the conduct that is impugned that one can go on to consider separately whether that conduct is misleading or deceptive or likely to be so.19

The concept of “engaging in conduct” is defined expansively in s 2(2) of the ACL. Section 2(2) of the ACL provides: (2) In this Schedule: (a) a reference to engaging in conduct is a reference to doing or refusing to do any act, including: (i) the making of, or the giving effect to a provision of, a contract or arrangement; or (ii) the arriving at, or the giving effect to a provision of, an understanding; or (iii) the requiring of the giving of, or the giving of, a covenant; and (b) a reference to conduct, when that expression is used as a noun otherwise than as mentioned in paragraph (a), is a reference to the doing of or the refusing to do any act, including: (i) the making of, or the giving effect to a provision of, a contract or arrangement; or (ii) the arriving at, or the giving effect to a provision of, an understanding; or (iii) the requiring of the giving of, or the giving of, a covenant; and (c) a reference to refusing to do an act includes a reference to: (i) refraining (otherwise than inadvertently) from doing that act; or 18 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [24] (French CJ). 19 Google Inc v ACCC (2013) 249 CLR 435 at 464-5 [89].

[3.20]

3 Misleading or Deceptive Conduct

83

(ii) making it known that that act will not be done; and (d) a reference to a person offering to do an act, or to do an act on a particular condition, includes a reference to the person making it known that the person will accept applications, offers or proposals for the person to do that act or to do that act on that condition, as the case may be.

This mirrors s 4(2) of the TPA. The concept of “engaging in conduct” as defined in s 2(2) of the ACL is not confined to a false or misleading representation. Section 18 is contained in Ch 2 of the ACL which is headed “General Protections”. Chapter 3 of the ACL is headed “Specific Protections” and prohibits a number of unfair practices that are confined to “false or misleading representations”.20 Other prohibitions in Ch 3 of the ACL are directed at “misleading conduct”.21 The same distinction between a “representation” and “conduct” is made in s 4 of the ACL, the evidentiary provision concerning representations with respect to future matters.22

Doing any act [3.20] The concept of “engaging in conduct” in s 2(2) of the ACL divides conduct into two broad categories: “doing any act” and “refusing to do any act”. The statutory language used does not require the making of some representation. As Hayne J observed in Google Inc v ACCC, the focus must be on the statutory text which focuses on “conduct” rather than “representations”: It will often be possible to identify the relevant conduct as the making of one or more representations, but it is necessary to bear in mind that s 52 was not confined to the prohibition of misrepresentations. It follows that a claim of contravention of s 52 need not be pleaded or argued by reference to the making of some representation. “It suffices that [the conduct] leads or is likely to lead into error”. Melding the two issues of conduct and characterisation is apt to distract and confuse. Especially is that so if the melding is achieved by using the language of misrepresentation to give a single composite description of both the conduct and its character. Describing the alleged misleading or deceptive conduct as “making a misrepresentation” is distracting and confusing….23

The proposition that the expression “conduct” extends beyond representations was also described as “sound” by a majority of the High Court in Butcher v Lachlan Elder Realty Pty Ltd.24 Where the relevant conduct consists of doing an act, the “act” will generally involve the making of some express or implied representation and there is a vast body of case law in which pre and post-contractual representations have been held to be misleading in contravention of s 52 of the TPA, and its State and Territory equivalents. Contractual representations in a commercial context, such as 20 ACL, ss 29, 30, and 37. 21 ACL, ss 31, 33 and 34. 22 See [3.135]. 23 Google Inc v ACCC (2013) 249 CLR 435 at 465-6 [92]-[96] (citations omitted). 24 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [32] (Gleeson CJ, Hayne and Heydon JJ), [102]-[110] (McHugh J) and [179] (Kirby J).

84

The Australian Consumer Law

[3.25]

advertising,25 franchising,26 leasing transactions,27 sales of businesses,28 and passing-off,29 have generated as many, if not more, cases than representations involving a consumer as the victim of misleading conduct. For the doing of an act to constitute a contravention of s 18(1) of the ACL it is only necessary to prove that the representation leads into error or is likely to lead into error.30 It does not require proof of fault on the part of the respondent. The determination of whether the representation was made is a question of fact. Where the evidence that the representation was made is contested, findings of fact will be required to be made on each point. The ultimate issue is whether the representation leads or is likely to lead into error.31

Refusing to do any act [3.25] The concept of “conduct” is defined expansively in s 2(2) of the ACL and includes doing or refusing to do any act. Section 2(2)(c), in turn, provides: A reference to refusing to do an act includes a reference to: (i) refraining (otherwise that inadvertently) from doing that act; or (ii) making it known that the act will not be done.

The words “otherwise than inadvertently” have been held to mean that an unintentional non-disclosure is not regarded as “conduct” for the purposes of s 2(2)(c).32 There is a substantial body of case law and commentary on the circumstances in which silence and non-disclosure gave rise to a contravention of 25 See eg, Gillette Aust Pty Ltd v Energizer Australia Pty Ltd (2002) 56 IPR 13; Hoover (Aust) Pty Ltd v Email Ltd (1991) ATPR ¶41-149; Country Road Clothing Pty Ltd v Najee Nominees Pty Ltd (1991) 20 IPR 419; Makita (Aust) Pty Ltd v Black & Decker (A’asia) Pty Ltd (1990) 18 IPR 270; Stuart Alexander & Co (Interstate) Pty Ltd v Blenders Pty Ltd (1981) 53 FLR 307; Telstra Corp Ltd v Optus Communications Pty Ltd (1996) 36 IPR 515; Bristol-Meyers Squibb Australia Pty Ltd v Astra Pharmaceuticals Pty Ltd (1999) 45 IPR 144; and R & C Products Pty Ltd v SC Johnson & Sons Pty Ltd (1993) FCR 188. 26 See eg, Jacques v Cut Price Deli Pty Ltd (1993) ATPR (Digest) ¶46-102; Thomson v Ice Creameries of Australia Pty Ltd (998) ATPR ¶41-611; and Poulet Frais Pty Ltd v The Silver Fox Co Pty Ltd (2005) 220 ALR 211. 27 See, eg, Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563; Murphy v Overton Investments Pty Ltd (2004) 21 CLR 388; Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601; Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535; John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR ¶41-249. 28 See eg, Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; Finucane v NSW Egg Corp (1988) 80 ALR 486; and Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) 72 ALR 601. 29 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 354; and Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 159 FCR 397. 30 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198. 31 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198 (Gibbs CJ); and Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [25] (French CJ). 32 Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1998) 155 ALR 714 at 722 (Finkelstein J); Johnson Tiles Pty Ltd v Esso Australia Ltd (1999) ATPR ¶41-696 at 42,888-9 (Merkel J).

[3.25]

3 Misleading or Deceptive Conduct

85

s 52 of the TPA and this jurisprudence will be equally applicable to s 18.33 Where silence is alleged to constitute misleading or deceptive conduct, it is first necessary to consider whether the respondent’s silence amounts to “conduct” as defined in s 2(2) of the ACL. This is a broad definition which includes, inter alia, “refraining” from doing an act.34 However, whilst this definition is sufficiently broad to embrace silence, it goes on to exclude from its ambit refraining from doing an act “inadvertently”. In Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd,35 Bowen CJ interpreted this to mean that the respondent’s failure to disclose information must be deliberate, so that should it be attributable to carelessness, or, perhaps, ignorance of the significance of the information involved, s 52 would not be contravened. Where the applicant complains not about some positive conduct on the respondent’s part, but about its failure to disclose information, the respondent can be found to have “engaged in conduct” only if this failure was deliberate. In the words of Finkelstein J in Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd: It is clear that a failure to provide information can be conduct which is misleading or deceptive. For the purposes of s 52(1) “engaging in conduct” is defined in s 4(2)(a) as a reference to doing or refusing to do any act and by s 4(2)(c) a reference to refusing to do an act includes a reference to refraining (otherwise than inadvertently) from doing that act. However, when the complaint is that s 52(1) has been infringed by conduct that involves either refusing or refraining from doing an act before that conduct is actionable it must have been deliberately engaged in.36

According to his Honour, this followed “from the use of the words ‘refuse’ and ‘refrain’ in s 4(2) of the TPA and was reinforced by the fact that in s 4(2)(c) conduct is said to include refraining from doing an act provided it is ‘otherwise than inadvertently’.” In Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd,37 McLure P drew attention to the requirement that the defendant must be aware of the undisclosed fact and that the silence must be intentional or deliberate: To refrain otherwise than inadvertently requires a deliberate decision to withhold information: Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211 at [58]; Rhone-Poulenc at 489-490; Costa Vraca at 723. Thus, the defendant must advert to the question and form an intention not to disclose. That conclusion is consistent with the natural and ordinary meaning of the term “refrain” which means to forebear or to keep oneself back.38 33 See Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 and Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83; Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest) ¶46-054 (French J); Warner v Elders Rural Finance Ltd (1993) 41 FCR 399; and General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164. For commentary on these cases see Gillies, “Non-disclosure Trade Practices Act, s 52” (2004) 78 Australian Law Journal 653. 34 ACL, s 2(2)(c). 35 Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 at 489. 36 Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1999) ATPR ¶41-694 at 42,879. See also Noor Al Houda Islamic College Pty Ltd v Bankstown Airport Ltd (2005) 215 ALR 625 at 657 (Hoeben J). 37 Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193. 38 Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193 at [59].

86

The Australian Consumer Law

[3.30]

Where a corporation engages in conduct that involves silence, and it is necessary to establish that the corporation deliberately failed to disclose within the definition of conduct in s 2(2)(c) of the ACL, s 139B(1) of the CCA must be considered. Section 139B(1) provides that if in a proceeding under the ACL (Cth) in respect of conduct engaged in by a body corporate, it is necessary to establish the state of mind of the body corporate, it is sufficient to show (a) “that a director, employee or agent of that body corporate engaged in that conduct within the scope of the actual or apparent authority of the director, employee or agent”; and (b) “that the director, employee or agent had that state of mind”.

Silence in isolation [3.30] Where silence occurs in isolation it is not always misleading. In Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd,39 Rhone-Poulenc alleged that UIM contravened s 52 of the TPA by selling an agricultural chemical product without disclosing that the sale and use of that product was prohibited in certain States. The applicant was a trade rival of UIM and also alleged that the latter had infringed one of its patents in producing and selling the product. In relation to the definition of “conduct” in s 4(2) of the TPA, Bowen CJ held: The appellants submit that UIM’s failure to warn customers of the risks of seizure and forfeiture constituted “engaging in conduct” within the special definition in s 4(2). I do not agree. Although s 4(2) recognises that an omission to do an act may constitute “engaging in conduct”, that will only be so where there has been a refusal to do, or a deliberate refraining from doing, an act. The words “refuse” and “refrain” clearly connote that the omission to do an act must be deliberate. I agree with the trial judge that s 4(2) does not materially assist the appellants.40

Unless there is a deliberate decision to withhold information, the silence will not be actionable. If the respondent’s silence is attributable to carelessness, or, perhaps, ignorance of the significance of the information involved, it will not be actionable.41

Silence and other conduct [3.35] In many situations the respondent’s silence will not occur in isolation. Rather, it will be accompanied by other acts or omissions so that when viewed as a whole, the respondent’s conduct may be misleading or deceptive in a positive manner. In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd, French CJ and Kiefel J drew attention to the distinction between “silence in isolation” cases and “silence including other acts or omissions” cases:

39 Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477. 40 Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 at 489-90. 41 See Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1998) 155 ALR 714 at 723 (Finkelstein J); Johnson Tiles Pty Ltd & Ors v Esso Australia Ltd (1999) ATPR ¶41-696 at 42,888-9 (Merkel J); Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211 at [58]; and Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193 at [59] (McLure P).

[3.35]

3 Misleading or Deceptive Conduct

87

Where silence or non-disclosure is relied upon, the pleading should identify whether it is alleged of itself to be, in the circumstances of the case, misleading or deceptive conduct or whether it is an element of conduct, including other acts or omissions, said to be misleading or deceptive.42

In cases where the silence is accompanied by other acts or omissions, the applicant will not need to establish that the respondent’s silence alone amounted to “conduct” within s 2(2) of the ACL. The presence of the additional acts or omissions, when combined with the respondent’s failure to disclose, may render the respondent’s conduct, viewed in its entirety, misleading or deceptive for the purpose of s 18 of the ACL. The definition of conduct in s 2(2) of the ACL has been adopted in the ACL (Application Acts).43 For this reason, when silence is alleged to constitute the basis of misleading or deceptive conduct, it will be desirable for the applicant to consider the whole of the conduct and whether there was something more involved than silence in isolation. As Reeves J observed in Bennett v Elysium Noosa Pty Ltd (in liq): Where a person is pleading an implied representation arising out of a failure to disclose, or silence, which has its foundation in the circumstances surrounding that silence, or separately some duty to disclose in the particular circumstances, it is absolutely critical that the circumstances relevant to either situation are pleaded clearly and precisely.44

Implied representations can arise in cases involving silence. The approach for determining whether an implied representation was made “is to determine whether what was actually said or done, in all the relevant circumstances, conveyed something more, such that it led the applicant into error”.45 For example, it may be implied that there was nothing material that needed to be disclosed to the other party. In Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (Henjo),46 it was held to be misleading to inform a prospective purchaser that a restaurant had a certain number of tables without also disclosing that a significant number of them were not allowed under the applicable liquor licensing laws. Similarly, in Noor Al Houda Islamic College Pty Ltd v Bankstown Airport Ltd,47 it was held to be misleading to point out the limitations of a site the respondent was proposing to lease without also mentioning the risks of contamination it presented. In cases involving the expression of an opinion, there may be an implied representation that the opinion is honestly held, or an implied representation that there is a reasonable basis for the opinion.48 These cases illustrate that in cases involving silence, the question is whether what was actually said, in all the relevant 42 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [5]. 43 See, eg, FTA 1989 (Qld), s 5A. 44 Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [78]. 45 Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [40] (Reeves J). 46 Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546. 47 Noor Al Houda Islamic College Pty Ltd v Bankstown Airport Ltd (2005) 215 ALR 625. 48 Global Sportsman v Mirror Newspapers (1984) 2 FCR 82 at 88; James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 at 372 (Toohey J); Wright v Wheeler Grace & Pierucci Pty Ltd (1988) ATPR ¶40-865 at 49,375-6 (French J); affirmed in Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189; Bateman v Slayter (1987) 71 ALR 553 at 559 (Burchett J). See [3.150].

88

The Australian Consumer Law

[3.40]

circumstances, would convey something more to a reasonable person in the position of the applicant, such that it was likely to lead into error.

Relaying incorrect information supplied by another [3.40] The conduct at issue may consist of merely relaying information supplied by another. In Yorke v Lucas,49 Mason A-CJ, Wilson, Deane and Dawson JJ considered a situation where a corporation purported to do no more than pass on information supplied by another in circumstances where it was apparent that the corporation was not the source of the information, and expressed the view that it was doubtful that the corporation could itself be engaging in conduct: That does not, however, mean that a corporation which purports to do no more than pass on information supplied by another must nevertheless be engaging in misleading or deceptive conduct if the information turns out to be false. If the circumstances are such as to make it apparent that the corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for what it is worth, we very much doubt that the corporation can properly be said to be itself engaging in conduct that is misleading or deceptive.50

This has subsequently been dubbed “the conduit defence”,51 where the intermediary acts as a mere “postman” and does not do anything to adopt the information.52 It arises in the context of principal–agency relationships, where the agent relays information imparted by the principal and seeks to immunise himself or herself by means of a contemporaneous disclaimer. It also arises in situations where an information provider, such as a newspaper or magazine, publishes an advertisement on behalf of a supplier of goods or services that may contain misleading representations, and the newspaper does not express its own views as to the truth or falsity of those representations. For example, in Dalton v Lawson Hill Estate Pty Ltd,53 the purchaser of a vineyard was unsuccessful in attempting to make an agent liable for representations about the area of the vines planted and the output of a bore on the property. The court noted that there were disclaimers in the promotional material that made it clear that the agent was not accepting any responsibility for the information provided by another person. The Full Federal Court held that the agent was not liable and stated: In considering the liability of an agent for sale for contravention of s 52 of the Trade Practices Act or s 42 of the Fair Trading Act, it is necessary to consider the character of the particular conduct of the particular agent in relation to the particular purchaser, bearing in mind what matters of fact each knew about the other as a result of the nature of their dealings and the conversations between them, of which each may be taken to have 49 Yorke v Lucas (1985) 158 CLR 661. 50 Yorke v Lucas (1985) 158 CLR 661 at 666. 51 See Gillies, “Misleading and Deceptive Conduct: Immunising the Intermediary – the Conduit Defence” (2006) 14 Trade Practices Law Journal 209; and McCabe, “In the Wake of Butcher: Decisions Affecting the Liability of Agents and Third Parties in Proceedings for Misleading or Deceptive Conduct” (2006) 14 Trade Practices Law Journal 46. 52 The term “postman” was used by French J in Gardam v George Willis & Co (1988) 82 ALR 415 at 427. 53 Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR ¶42-079 (Lindgren, Finn and Emmett JJ).

[3.40]

3 Misleading or Deceptive Conduct

89

known. The mere fact that a person had engaged in the conduct of supplying a document containing information which is in fact misleading does not necessarily mean that that person had engaged in misleading conduct. It is crucial to examine the role of the person in question.54

The Full Court distinguished John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd55 on the basis that in that case the agent held itself out as “Consultants to institutional investors and to developers of major properties”, and the representation concerned what the net lettable area of a building would be when it was constructed, a matter which the purchaser could not independently verify for itself.56 The liability of an intermediary or conduit was considered by the High Court in Butcher.57 In that case, Butcher purchased at auction an expensive waterfront property in Sydney. Prior to the auction, Butcher was shown the property by an estate agent, Lachlan, who provided a brochure describing the property. The brochure reproduced part of a survey done by a surveyor in 1980. The survey was inaccurate in certain details. The brochure contained the following statement: All information contained herein is gathered from sources we believe to be reliable. However, we cannot guarantee its accuracy and interested persons should rely on their own inquiries.

Before settlement, Butcher discovered that the boundary was not located as shown on the survey diagram. Butcher declined to proceed with the transaction and commenced proceedings against the vendor and against the agent, Lachlan, alleging that it had been guilty of misleading conduct contrary to s 52 of the TPA. In a joint majority judgment, Gleeson CJ, Hayne and Heydon JJ held that the intermediary, the agent Lachlan, was not in breach of s 52. The agent’s conduct and the disclaimer were part of the surrounding circumstances and had to be viewed as a whole.58 Their Honours cited with approval59 the decision of the New Zealand Court of Appeal Goldsbro v Walker,60 and concluded: The agent did not engage in conduct towards the purchasers which was misleading or deceiving. Whatever representation the vendor made to the purchasers by authorising the agent to issue the brochure, it was not made by the agent to the purchasers. The agent did no more than communicate what the vendor was representing, without adopting or endorsing it. The conclusion flows from the nature of the parties, the character of the transaction contemplated, and the contents of the brochure itself.61 (emphasis added) 54 Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR ¶42-079 at 43,252 [82]. 55 John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR ¶41-249. 56 Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR ¶42-079 at 43,252 [96]-[97]. 57 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592. 58 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 605 [39]; McHugh J expressed similar views at 625 [109].See also Campbell v Backoffice Investments at [29] (French CJ). 59 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 602, fn 38. 60 Goldsbro v Walker [1993] 1 NZLR 394. 61 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 605.

90

The Australian Consumer Law

[3.45]

[3.45] As regards the nature of the parties, it was significant that the relevant class of persons to whom the property was marketed (purchasers prepared to pay above $1 million in 1997) could be expected to have legal advice and the purchasers were “intelligent, shrewd and self-reliant”. The fact that the agent did not adopt or endorse the communication was a factor that supported the finding that the agent had done no more than pass on information from the vendor. Likewise, the disclaimers in the brochure were merely part of the circumstances relevant to the inquiry whether it would have been plain to a reasonable purchaser that the agent was not the source of the misleading information.62 In Orix Australia Corporation Ltd v Moody Kidell & Partners Pty Ltd,63 Orix, an international finance house involved in financing the acquisition of heavy industrial machinery, sought damages from a broker, Moody Kidell. Orix provided finance to QCE, an equipment hire business to acquire six cranes from Nelson Equipment. Orix acted in reliance upon information provided by Moody Kidell. The information provided contained a disclaimer to the effect that it had been provided to Moody Kidell by the proposed borrower/lessee and that Moody Kidell could not accept responsibility for its accuracy. The trial judge (White J) held that Moody Kidell did not adopt or endorse the misleading information, and that Moody Kidell did no more than communicate to Orix what QCE was representing, and was not liable under s 52 of the TPA. The New South Wales Court of Appeal dismissed the appeal. After an extensive analysis of what was said by the majority in Butcher, Ipp JA concluded: From the passages that I have quoted it appears that the ratio of the majority’s decision that the agent had not engaged in misleading conduct was that the agent did no more than communicate what the vendor was representing. Their Honours held that an innocent agent, who acts merely as a conduit and makes it clear, expressly or impliedly, that he or she is doing no more than passing on information obtained from others, does not attract liability under s 52.

The High Court considered the issue again in Google Inc v ACCC.64 The conduct at issue concerned Google’s well-known search engine, “Google search”. A search of the google.com search engine produced two types of result, “organic” search results and “sponsored links”. Organic search results consisted of information displayed free of charge. Sponsored links were advertisements which appeared at the top or right-hand side of the results page, and included a link to the web address displayed beneath the headline. The primary judge, Nicholas J held that in four instances advertisers had engaged in misleading conduct by falsely representing that there was a commercial association or affiliation with its competitor and that information regarding the competitor could be found by clicking on the advertiser’s web address. For example, advertisements for Harvey World Travel (HWT) appeared as sponsored links amid organic search results. STA Travel was a major competitor of HWT. The court held that the representation that there was a 62 Orix Australia Corporation Ltd v Moody Kidell & Partners Pty Ltd [2006] NSWCA 257 at [45]-[46]. 63 Orix Australia Corporation Ltd v Moody Kidell & Partners Pty Ltd [2006] NSWCA 257 (Ipp JA, with whom Spigelman CJ and Basten JA agreed). 64 Google Inc v ACCC (2013) 249 CLR 435.

[3.45]

3 Misleading or Deceptive Conduct

91

commercial association or affiliation between STA and HWT were made by STA, not by Google, and that Google did not adopt or endorse the representation.65 On appeal, the Full Federal Court held that Google engaged in misleading conduct because Google took an active role in the preparation, dissemination and publication of the advertisements, and endorsed the information supplied by the advertisers such as STA.66 Google’s appeal to the High Court was successful. Before the High Court there was no challenge to the findings of the primary judge that the advertisements were misleading.67 The question was whether Google had engaged in the conduct. The majority, French CJ, Crennan and Kiefel JJ, in their joint reasons held that the advertisers were the authors of the sponsored links. Google had no control over an advertiser’s choice of search terms, or an advertiser’s choice of keywords. Their Honours stated: It is critical to appreciate that, even with the facility of keyword insertion, the advertiser is the author of the sponsored link. As Google correctly submitted, each relevant aspect of a sponsored link is determined by the advertiser. The automated response which the Google search engine makes to a user’s search request by displaying a sponsored link is wholly determined by the keywords and other content of the sponsored link which the advertiser has chosen. Google does not create, in any authorial sense, the sponsored links that it publishes or displays.68

Their Honours held that Google was a mere conduit passing on the advertisements, without adopting or endorsing them: Google is not relevantly different from other intermediaries, such as newspaper publishers (whether in print or online) or broadcasters (whether radio, television or online), who publish, display or broadcast the advertisements of others. The fact that the provision of information via the internet will – because of the nature of the internet – necessarily involve a response to a request made by an internet user does not, without more, disturb the analogy between Google and other intermediaries. To the extent that it displays sponsored links, the Google search engine is only a means of communication between advertisers and consumers.69

Hayne and Heydon JJ wrote separate opinions but agreed that Google’s appeal should be upheld. The High Court’s decision in Google Inc provides comfort for intermediaries who disseminate, publish or broadcast information provided by others. So long as they can demonstrate that they have not been involved in the preparation of the material by, for example, drafting the wording of the advertisement, they will not be liable for the content they publish or distribute. Publishers of advertisements are provided additional protection by s 251 of the ACL. However, once intermediaries 65 ACCC v Trading Post Australia Pty Ltd (2011) 197 FCR 498. 66 ACCC v Google Inc (2012) 201 FCR 503 at [93]. 67 Google Inc v ACCC (2013) 249 CLR 435 at 455 [54] (French CJ, Crennan and Kiefel JJ). 68 Google Inc v ACCC (2013) 249 CLR 435 at 459 [68]. 69 Google Inc v ACCC (2013) 249 CLR 435 at 459 [69].

92

The Australian Consumer Law

[3.50]

become aware that the information supplied by another is misleading, they must act promptly to remove it, otherwise they risk becoming involved in the contravention as an accessory.70

Adopting or endorsing information supplied by another [3.50] Where, however, an intermediary adopts or endorses the representations supplied by another, the intermediary will be equally culpable if the representations are false or misleading. In Downey v Carlson Hotels Asia Pacific Pty Ltd,71 the appellant, Carlson Hotels, previously known as Raddison Hotels, was in the business of running hotels and apartments of high quality. It lent its name to a development known as “Raddison Suites”, which was being developed by Valco Developments Pty Ltd. A brochure was prepared to promote the development. The name “Raddison” appeared on the brochure 31 times. Raddison approved of the brochure and knew that it would be provided to potential purchasers to promote the sale of units in the Raddison Suites development. The suites were to be managed for letting purposes and the brochure contained an “Investment Analysis” which guaranteed a net 7% per annum for five years. On the last page of the investment analysis was the following disclaimer: Whilst the information inside this publication is believed to be true and correct, the figures and advice supplied are given as a guide only and no responsibility will be taken for any errors and omissions.

Mr and Mrs Downey were investors who purchased units in the development, but the investment return did not materialise. Although Carlton Hotels were not selling the units, it was alleged to have adopted or endorsed the representations of the developer, Valco. Keane JA (with whom Williams JA and Atkinson J agreed) concluded that after considering the material in its entirety, including the disclaimer, that the appellant’s conduct was misleading. His Honour acknowledged72 that disclaimers could be effective if they made it clear that they were only communicating the information prepared by Valco, but the disclaimer in the case before him did not have this effect. On the contrary, his Honour concluded73 that a reasonable purchaser in the position of the Downeys would have formed the view that the brochure contained a representation by the appellant that it was endorsing the information prepared by Valco, and was not merely passing it on for what it was worth. It was making two representations: first, a representation that the units would be a good investment; and secondly, a representation that potential investors could rely on its opinion as to the quality of the investment. The Full Federal Court considered this issue in Granitigard Pty Ltd v Termicide Pest Control Pty Ltd.74 In that case, the trial judge held that Termicide had not adopted a 70 ACCC v Allergy Pathway Pty Ltd (No 2) (2011) 192 FCR 34 at [33] (Finkelstein J) and see [3.195]. 71 Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199. 72 Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 at [83]. 73 Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 at [85]-[117]. 74 Granitigard Pty Ltd v Termicide Pest Control Pty Ltd (2011) 281 ALR 1.

[3.55]

3 Misleading or Deceptive Conduct

93

Commonwealth Scientific and Industrial Research Organisation (CSIRO) appraisal document under which experts employed by the CSIRO were engaged in assessing new building products to determine whether they complied with the relevant Australian Standard.75 On appeal, Reeves J (with whom Kenny and Lander JJ agreed) considered that Termicide had adopted the CSIRO appraisal document as its own. It had not merely provided a means by which the CSIRO appraisal document could be read, without using any words or otherwise doing anything to adopt or endorse it. Instead, it took additional steps that amounted to an adoption of it. These steps were removing the CSIRO logo and reproducing parts of the appraisal document on its own website under the Termicide logo.

Contemporaneous disclaimers [3.55] Agents and intermediaries sometimes seek to protect themselves from liability by alerting those who may rely on the information being disseminated that the agent or intermediary is not the source of the information by means of contemporaneous disclaimers. A contemporaneous disclaimer refers to a notice of the kind at issue in Butcher v Lachlan Elder Realty Pty Ltd.76 There, the disclaimer was made available during pre-contractual negotiations. It stated that the information contained in the brochure had been obtained from other sources and that the agent could not guarantee its accuracy. Where, however, the evidence shows that the agent or intermediary is the source of the information; or is responsible for its preparation; or has subsequently endorsed it, the agent or intermediary will not be a mere conduit and will share liability with the principal if it is misleading.77 In Havyn Pty Ltd v Webster,78 the court distinguished the information sought to be disclaimed from that at issue in Butcher’s case. In Butcher, the information concerned the boundaries of the property which surveyors normally certify, while in Havyn the information concerned the floor area of flats in a building which could easily be measured by a person without expertise and fell within the competence of a real estate agent.79 In summary, in deciding whether a disclaimer is effective to protect an agent or intermediary, the courts have regard to the following factors: • The nature of the parties to the transaction: whether the agent or intermediary held itself out as an expert in transactions of that kind and would be expected to know the accuracy of the information being imparted; whether the circumstances made it clear that the other party was acting in reliance on the agent, or intended to make its own inquiries. 75 Granitgard Pty Ltd v Termicide Pest Control Pty Ltd (No 5) [2010] FCA 313 (Logan J). 76 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592. See also The Saints Gallery Pty Ltd v Plummer (1988) 80 ALR 525 at 530-531 and Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535 at 552-3, 556-8. 77 John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR ¶41-249; and Havyn Pty Ltd v Webster (2005) 220 ALR 211 (Santow JA, with whom Tobias JA and Brownie AJA agreed). 78 Havyn Pty Ltd v Webster (2005) 220 ALR 211. 79 Havyn Pty Ltd v Webster (2005) 220 ALR 211 at [88]-[91].

94

The Australian Consumer Law

[3.60]

• The nature of the information: whether it is was the kind of information the agent would be expected to possess; whether it concerned a “hard physical fact”80 admitting of only one answer and which should be within the knowledge of the agent, or alternatively, some matter that the agent was clearly not in a position to express a view about its veracity; and whether it was possible for the other party to independently verify it. • The character of the transaction: the more valuable the transaction the more likely the purchaser will make independent inquiries, engage other professionals to advise, and not rely on the information provided by the agent. • The contents of the disclaimer itself: the size, clarity, prominence and specificity of the disclaimer, and whether it was brought to the attention of the purchaser prior to entry into the transaction.

PART II: ASSESSING WHETHER THE CONDUCT WAS MISLEADING, OR LIKELY TO MISLEAD Context all important [3.60] The central concept in s 18(1), that of “misleading or deceptive” conduct, is not defined in the ACL. There are no specific categories of misleading or deceptive conduct although some guidance is provided in relation to representations about future matters by s 4(1) of the ACL.81 In Google Inc, Hayne J stated: Analysis of the decided cases is not to be glossed over and obscured by attempting to identify particular species of misleading or deceptive conduct, attaching some general description to each (such as a “misrepresentation” case, an “advertisement” case or a “mere conduit” case) and then applying s 52 by fitting the case into one of those constructed categories. Analogical reasoning is important but analogies can be drawn only after understanding the full factual context in which it was held that s 52 did or did not apply.82

In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd,83 Gibbs CJ held: The words of s 52 require the Court to consider the nature of the conduct of the corporation against which proceedings are brought and to decide whether that conduct was, within the meaning of that section, misleading or deceptive or likely to mislead or deceive. Those words are on any view tautologous. One meaning which the words “mislead” and “deceive” share in common is “to lead into error”. If the word “deceptive” in s 52 stood alone, it would be a question whether it was used in a bad sense, with a connotation of craft or overreaching, but “misleading” carries no such flavour, and the use of that word appears to render “deceptive” redundant. The words “likely to mislead or deceive”, which were inserted by amendment in 1977, add little to the section; at most they make it clear that it is unnecessary to prove that the conduct in question actually deceived or misled anyone.84 80 Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR ¶42-079 at 43,253 [87]. 81 See [3.135]. 82 Google Inc v ACCC (2013) 249 CLR 435 at 467-8 [102]. 83 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191. 84 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198.

[3.65]

3 Misleading or Deceptive Conduct

95

The conduct is of the prohibited kind for the purposes of s 18(1) of the ACL if “the conduct viewed as a whole has a tendency to lead a person into error”.85 In deciding whether conduct is misleading or deceptive, regard must be had to the context in which that conduct took place. Conduct that is misleading in one context may not be so in another.86 In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd, Gibbs CJ stated: The conduct of a defendant must be viewed as a whole. It would be wrong to select some words or act, which, alone, would be likely to mislead if those words or acts, when viewed in their context, were not capable of misleading. It is obvious that where the conduct complained of consists of words it would not be right to select some words only and to ignore others which provided the context which gave meaning to the particular words. The same is true of acts.87

Accordingly, the courts will undertake a very detailed analysis of the evidence, and each case turns on its own specific facts and context. This is a “quintessential question of fact”.88 It is for this reason that Hayne J in Google Inc v ACCC warned about the dangers of extrapolating from decided cases: Because it is the statutory text which controls, there is no little danger in attempting to extrapolate from the decided cases to a rule of general application. No such rule can stand in the place of the statutory text. This is not to say that the decided cases are unimportant or that they do not contribute to the proper understanding of how the Act operates. But each case must be understood by reference to the statutory text and the particular facts that were identified as relevant to the application of that text. When considering what was said in the reasons for decision in a s 52 case, the description of the relevant conduct is as important as are the facts and circumstances identified as bearing upon whether that conduct was misleading or deceptive.89

Misleading conduct: objective test [3.65] In determining whether conduct is misleading or deceptive under s 18 of the ACL, an important consideration will be the nature of the audience at whom it was directed. Early in the history of s 52 of the TPA it was held that conduct will be regarded as misleading or deceptive only if it misled or deceived (or is likely to mislead or deceive) members of that audience.90

85 ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 at [39] (French CJ, Crennan, Bell and Keane JJ); Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [25] (French CJ). 86 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 625 [109] (McHugh J). 87 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199. 88 ACCC v Telstra (2004) 208 ALR 459 at [49]. For commentary on the tendency of the courts to undertake a very detailed analysis of the evidence and the purported representations see Rickett, “Some Reflections on Open-Textured Commercial Contracting” [2001] AMPLA Yearbook 374 at 378-379 and Stewart and McClurg, “Playing Your Cards Rights: Obligations of Disclosure in Commercial Negotiations” [2007] AMPLA Yearbook 36 at 51. 89 Google Inc v ACCC (2013) 249 CLR 435 at 467 [100]-[101]. 90 Weitmann v Katies Ltd (1977) 29 FLR 336 (Franki J).

96

The Australian Consumer Law

[3.70]

If conduct was not misleading in relation to the target audience, it did not contravene s 52 merely because it misled, or was capable of misleading, some other person to whom it may have been communicated, at least where this could not reasonably have been anticipated.91 In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd, Gibbs CJ stated: Although it is true, as has often been said, that ordinarily a class of consumers may include the inexperienced as well as the experienced, and the gullible as well as the astute, the section must in my opinion by [sic] regarded as contemplating the effect of the conduct on reasonable members of the class. The heavy burdens which the section creates cannot have been intended to be imposed for the benefit of persons who fail to take reasonable care of their own interests.92

These principles were confirmed by the High Court in Campomar Sociedad Limitada v Nike International Ltd: It is in these cases of representations to the public … that there enter the “ordinary” or “reasonable” members of the class of prospective purchasers. Although a class of consumers may be expected to include a wide range of persons, in isolating the “ordinary” or “reasonable” members of that class, there is an objective attribution of certain characteristics.93

In Telstra Corp Ltd v Cable & Wireless Optus Ltd,94 Goldberg J thought that the “[t]he extremely stupid, and perhaps the gullible may well be excluded from the class”.95 The class does not include those who fail to take reasonable care of their own interests.96 Reasonable members of the class would take reasonable steps to look after their own interests.

Role of intention [3.70] Intention was not a necessary element of the contravention of s 52 of the TPA. The section involved no questions of intent upon the part of the person whose conduct was in question. Thus, in Google Inc v ACCC, French CJ and Crennan and Kiefel JJ noted that: Section 52 is not confined to conduct which is intended to mislead or deceive. A corporation could contravene s 52 even though it acted reasonably and honestly.97

In Butcher v Lachlan Elder Realty Pty Ltd, McHugh J stated: 91 Parkview (Keppell) Pty Ltd v Mytarc Pty Ltd (1984) 3 FCR 186 at 190-191 (McGregor J). 92 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199. See also Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at 371 [22] (French CJ and Kiefel J). 93 Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 85 [102] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ) (citations omitted). 94 Telstra Corp Ltd v Cable & Wireless Optus Ltd [2001] FCA 1478. 95 Telstra Corp Ltd v Cable & Wireless Optus Ltd [2001] FCA 1478 at [23]. 96 See Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 85 [105]; Cantarella Bros Pty Ltd v Valcorp Fine foods Pty Ltd (2002) ATPR ¶41-856 at [35]-[36] (Lindgren J). 97 Google Inc v ACCC (2013) 249 CLR 435 at 443. See also Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228 (Stephen J) and Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197 (Gibbs CJ).

[3.75]

3 Misleading or Deceptive Conduct

97

Section 52 looks at the conduct of a corporation and is concerned only with whether that conduct misled or was likely to mislead a consumer. It is not concerned with the mental state of the corporation.98

However, intention is not entirely irrelevant. In Campomar v Nike the primary judge, Sheppard J, found that Campomar deliberately marketed the Nike Sports Fragrance products in order to take advantage of the goodwill and reputation of Nike International.99 The High Court held, where there is a finding of intention to deceive, the court may more readily infer that the intention has been or in all probability will be, effective.100 The same approach applies in relation to s 18 of the ACL. Conduct may be found to contravene s 18 of the ACL even though the respondent acted honestly and did not intend to mislead or deceive. On the other hand, where the respondent did intend to mislead or deceive, a court may more readily find that the conduct was misleading or likely to mislead.101 In ACCC v TPG Internet Pty Ltd, the High Court majority stated: [W]here a representation is made in terms apt to create a particular mental impression in the representee, and is intended to do so, it may properly be inferred that it has that effect. Such an inference may be drawn more readily where the business of the representor is to make such representations and where the representor’s business benefits from creating such an impression.102

Two other areas where intention has a role to play are where the misleading conduct at issue consists of refraining from doing an act,103 and where an applicant seeks to establish accessorial liability for misleading conduct.104

Conduct directed at identified persons [3.75] The courts draw a distinction between conduct directed at particular individuals in a one-on-one situation and conduct directed at the public or a segment of the public. Where conduct is directed at identified persons, rather than the public at large, French CJ in Campbell v Backoffice Investments Pty Ltd, stated: In the case of an individual it is not necessary that he or she be reconstructed into a hypothetical, ’ordinary person’. Characterisation may proceed by reference to the circumstances and context of the questioned conduct. The state of knowledge of the 98 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 634 [139]. 99 Nike International Ltd v Campomar Sociedad Limitada (1996) ATPR ¶41-518 at 42,478, 42,480. 100 Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at [33] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ). This principle has been applied in subsequent cases. See, eg, ACCC v Singtel Optus Pty Ltd (No 3) (2010) 276 ALR 102 where Perram J inferred that Optus intended its misleading advertising campaign to have a substantial impact in the broadband market, based on the amount of money which Optus spent on the campaign, and concluded that the effect of the campaign was substantial (at [16]-[17]). 101 S & I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd (1998) 88 FCR 354 at 361-363 (Hill, RD Nicholson and Emmett JJ). 102 ACCC v TPG Internet Pty Ltd (2013) 304 ALR 189 at 198 [55] (French CJ, Crennan, Bell and Keane JJ) (Citations omitted). 103 See [3.25]. 104 See [14.175]–[14.195].

98

The Australian Consumer Law

[3.75]

person to whom the conduct is directed may be relevant, at least in so far as it relates to the content and circumstances of the conduct.105

Where the conduct at issue consists of misleading pre-contractual representations such as those at issue in Butcher v Lachlan Elder Realty Pty Ltd,106 directed at identified persons, then whether the conduct is misleading is to be assessed in relation to the individual applicants alone. According to the majority in Butcher’s case: So here, it is necessary to consider the character of the particular conduct of the particular agent in relation to the particular purchasers, bearing in mind what matters of fact each knew about the other as a result of the nature of their dealings and the conversations between them, or which each may be taken to have known. Indeed, counsel for the purchasers conceded that the mere fact that a person had engaged in the conduct of supplying a document containing misleading information did not mean that that person had engaged in misleading conduct: it was crucial to examine the role of the person in question.107

Thus, assessing whether conduct which consists of a representation made to a particular person is misleading or likely to mislead will be ascertained by reference to the context in which the parties are situated, and may involve a combination of subjective and objective assessments. The assessment of whether the conduct is likely to mislead proceeds by reference to what “a reasonable person in the position of the [representees], taking into account what they knew, would make of the [representor]’s behaviour”.108 Thus, if the applicant claims to have been misled, the conduct will not contravene s 18 if a hypothetical reasonable person who possessed the applicant’s knowledge of the surrounding circumstances would not have been misled by the conduct at issue. In Traderight (NSW) Pty Ltd v Bank of Queensland Ltd,109 Barrett JA (with whom Bathurst CJ and Beazley P agreed) stated: It is the quality of the conduct in terms of capacity or tendency, objectively ascertained, that must be judged, not its actual impact on a particular person. Where… the conduct consists of a representation actively made to a particular person in a one-on-one situation, the quality of the conduct is to be ascertained by reference to the context in which the parties are situated, including such matters as their respective states of prior knowledge and understanding. It is within the whole of that context that the court must address the question whether the representation consists of a representation actively made to a particular person in a one-on-one situation, the quality of the conduct is to be ascertained by reference to the representee. The question whether the representee relied or acted upon the representation is irrelevant to that inquiry.110

105 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [26]. See R V Miller, Australian Competition and Consumer Law Annotated (37th ed, Lawbook Co, Sydney, 2015), [1.S2.18.50]. 106 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592. 107 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [37]. 108 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [50]. Applied in Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 at [69]. 109 Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 (14 April 2015). 110 Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [161].

[3.85]

3 Misleading or Deceptive Conduct

99

Commercial negotiations involving identified persons [3.80] Section 18 of the ACL applies to statements made in the course of private negotiations between commercial entities and is not limited consumer transactions.111 The cases indicate that the courts place particular emphasis upon the whole context of the pre-contractual negotiations between the parties. In considering their effect of the conduct at issue on a reasonable person in the applicant’s position the courts may take into account the following matters: • the character of the particular conduct by the respondent towards the aggrieved party;112 • the nature of the dealings between the parties and what matters of fact each knew about the other as a result of their dealings; in particular, what discussions took place, at what times, and what documents were exchanged;113 • the relative commercial experience of the aggrieved party; • the length of time over which the negotiations took place; and • any professional advice (valuation, survey, legal, or accounting) that the aggrieved party may have sought or received in coming to a decision whether to enter into the transaction.

Conduct directed at the public [3.85] However, where misleading representations are not directed at identified individuals, but to the public generally and the relief sought is an injunction under ACL, s 232, it is necessary to determine who could fairly be regarded as its target. This may have been a segment of the public, or the public as a whole, and it is necessary to isolate some criterion or criteria of a representative member.114 In Campomar Sociedad Limitada v Nike International Ltd, the majority, in a joint judgment stated: Where the persons in question are not identified individuals to whom a particular misrepresentation has been made or from whom a relevant fact, circumstance or proposal was withheld, but are members of a class to which the conduct in question was directed in a general sense, it is necessary to isolate by some criterion a representative member of that class. The inquiry thus is to be made with respect to this hypothetical individual why the misconception complained has arisen or is likely to arise if no injunctive relief be granted. In formulating this inquiry, the courts have had regard to what appears to be the outer limits of the purpose and scope of the statutory norm of conduct fixed by s 52.115 (citations omitted) 111 See eg, Lam v Ausintel Investments Australia Pty Ltd (1990) ATPR ¶40-990 at 50,880 (Gleeson CJ, Samuels AP and Meagher JA concurring). The same view was taken in Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 at 26 (Burchett J); General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164 especially at 177-179 (Davies and Einfeld JJ); Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601 at 40,513 (Branson and Emmett JJ), and Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2011] FCAFC 119 at [111]-[115] (Gilmour, Jagot and Nicholas JJ). 112 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [37]. 113 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [37]. 114 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [36]. 115 Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 85 [103] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ). See also Google Inc v ACCC (2013) 249 CLR 435 at [6]-[9] (French CJ, Crennan and Kiefel JJ); Astrazeneca Pty Ltd v GlaxoSmithKline Australia

100

The Australian Consumer Law

[3.90]

Thus, where conduct is directed at the public, the class is first identified. Having identified the class, the effect of the conduct is assessed having regard to the reactions of the “hypothetical individual” – the ordinary, reasonable member of the class, not those of persons whose reactions are “extreme or fanciful”.116 The test is an objective one. As Beach J observed in ACCC v Hillside (Australia New Media) Pty Ltd (t/as Bet365), “[t]his hypothetical construct avoids using the very gullible or the highly astute to assess effect or likely effect”.117

Knowledge base of a reasonable member of the class [3.90] The ordinary or reasonable consumer does not exist in the abstract, but depends on the specific context in which the public statement was made. The level of knowledge to be imputed to a reasonable member of the pleaded target audience will be crucial for the obvious reason that the more sophisticated and knowledgeable the audience, the more difficult it will be to prove that a reasonable member of that audience would be likely to be misled or deceived by the statement at issue. In ACCC v TPG Internet Pty Ltd Murphy J stated that “[t]he degree of knowledge to be imputed to the class, and thus to the ordinary or reasonable consumer, is a matter of inference from the evidence”.118 In misleading or deceptive conduct cases involving a statement directed towards a specific individual, the court may be assisted by receiving evidence pertaining to this issue from that person. Similarly, where the statement was directed towards a target audience of prospective purchasers, evidence of this nature may be given by members of that audience. For example, in National Exchange Pty Ltd v ASIC,119 the Australian Securities and Investment Commission (ASIC) led evidence concerning the reactions of shareholders to the two dollar offers, two of whom were confused or misled at least temporarily.120 As regards this evidence, Dowsett J stated: There is evidence that both Mr Locke and Ms Normoyle were at least temporarily misled by the offer. It is not clear whether this was as a result of the impact upon them of the format of the offer or as a result of their not giving sufficient attention to the payment provision. It would be wrong to place great weight on their having been misled. Further, there is no evidence of any substantial number of people having been mislead [sic].121 Pty Ltd (2006) ATPR ¶42-106 at [37] (Wilcox, Bennett and Graham JJ); ACCC v Telstra Corporation Ltd (2007) ATPR ¶42-203 at [14]-[15] (Gordon J); Energizer Australia Pty Ltd v Remington Products Australia Pty Ltd (2008) ATPR ¶42-219 at [16] (Moore J); and ACCC v Prouds Jewellers Pty Ltd (2008) ATPR ¶42-217 at [16]-[19] (Moore J). 116 Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 86-7 [105]. See also Forrest v ASIC (2012) 247 CLR 486 at [49]-[50] (French CJ, Gummow, Hayne and Kiefel JJ). 117 ACCC v Hillside (Australia New Media) Pty Ltd (t/as Bet365) [2015] FCA 1007 at [70]. 118 ACCC v TPG Internet Pty Ltd (2011) ATPR ¶42-383 at 44,686 [25]. 119 National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000. 120 ASIC led evidence that a third shareholder had also been confused or misled: National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000 at 48,712 [7] (Dowsett J). However, Dowsett J considered that it would be unfair to give that evidence any weight due to its ambiguity (at 48,716 [29]). 121 National Exchange Pty Ltd v Australian Securities and Investments Commission (2004) ATPR ¶42-000 at 48,719 [41].

[3.90]

3 Misleading or Deceptive Conduct

101

If evidence is led that members of the target audience have actually been misled by the public statement, the task of the court is to ascertain whether they were “reasonable” members of the target audience, or whether they were misled because they made assumptions that were extreme or fanciful.122 In ACCC v Coles Supermarkets Pty Ltd Allsop CJ stated: Evidence that someone was actually misled or deceived may be given weight. The presence or absence of such evidence is relevant to an evaluation of all the circumstances relating to the impugned conduct. Where the conduct and representations are to the public generally and concern a body of simple direct advertising, the absence of individuals saying they were misled may not be of great significance. There was no such evidence here. The ACCC was criticised for that. That criticism is unfounded. The objective assessment of advertising using ordinary English words in an attempt to persuade can be undertaken without the lengthening of a trial by the bringing of witnesses of indeterminate numbers. Language, especially advertising, seeking to raise intuitive senses and associations, can have its ambiguities and subtleties. The task of evaluating the objective character and meaning of the language in the minds of reasonable members of the public is not necessarily one that will be assisted in any cost-effective manner by calling members of the public. The question is one for the Court.123

Identifying the attributes of the target audience is a crucial step in applying the test. Higher standards of accuracy are expected where members of the intended audience are naive, unsophisticated or impressionable. On the other hand, where members of the intended audience are sufficiently “tough, shrewd and sceptical”124 they can, to a greater extent, be expected to look after their own interests and make their own judgments. Individual judges vary in their assessments of the ability of members of the target audience to assess the purport of the words used in the context the conduct as a whole. It is clearly an area where there is room for legitimate differences of opinion.125 The target audience may be found to consist of sub-classes. One sub-class may have a greater awareness or knowledge of the way a particular industry operates than the other. If so, the conduct at issue is be tested by reference to its likely impact on a reasonable member of the unaware sub-class. In ACCC v Jewellery Group Pty Ltd,126 the ACCC alleged that the respondent breached s 52 of the TPA by distributing catalogues with higher prices that were struck through with a line and next to that price was another lower price indicated as the sale price. Lander J accepted that the relevant class would have consisted of both persons who were aware of the discount culture in the jewellery market, and persons who were 122 AstraZeneca v GSK (2006) ATPR ¶42-106 at 44 891 [37] (Wilcox, Bennett and Graham JJ), citing Campomar (2000) 202 CLR 45 at 85-6 [104]–[105] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ). 123 ACCC v Coles Supermarkets Pty Ltd [2014] FCA 634 at [45] citing Taco Co of Australia v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202. 124 Forrest v ASIC (2012) 247 CLR 486 at [105] (Heydon J). 125 ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 at 475-6. (Gyles J). See Corones, “Misleading Conduct Arising from Public Statements: Establishing the Knowledge Base of the Target Audience” (2014) 38 (1) Melbourne University Law Review 281. 126 ACCC v Jewellery Group Pty Ltd (2012) ATPR ¶42-411.

102

The Australian Consumer Law

[3.95]

unaware of the discount culture.127 His Honour focussed on the effect of the “strike through pricing” on the unaware members of the class, who would have thought that the strike through price was the actual price at which the jewellery item had been sold, rather than a negotiable price. The savings representation was false because the items had been sold at a price less than the strike through price because of the respondent’s price negotiation policy.128

Confusion or uncertainty [3.95] It is necessary to draw a distinction between conduct that is misleading or likely to mislead, and conduct that causes confusion or uncertainty. Conduct that has a tendency to cause confusion or uncertainty does not suffice to establish that it was misleading or deceptive within s 18(1) of the ACL. In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd,129 Gibbs CJ held: that to prove a breach of s 52 it is not enough to establish that the conduct complained of was confusing or caused people to wonder whether two products may have come from the same source.130

In McWilliam’s Wines Pty Ltd v McDonald’s System of Australia Pty Ltd,131 advertisements prepared for McWilliams, flagons of its wine were described by a journalist as “the Big Mac”. McDonald’s sought an injunction to restrain this use of the words “Big Mac” on the ground that they contravened TPA, s 52 by falsely implying that there was a business connection between McDonald’s and McWilliam’s, or that they were engaged in a joint promotion. It succeeded at first instance. However, an appeal by McWilliam’s was successful because the Full Court found that although readers of the advertisement may have been confused about the existence of a possible connection between the two firms, it would not actually mislead them into thinking that there was such a connection. In Taco Co (Aust) Inc v Taco Bell Pty Ltd, Deane and Fitzgerald JJ said: Conduct which produces or contributes to confusion or uncertainty may or may not be misleading or deceptive for the purposes of s 52. In some circumstances, conduct could conceivably be properly categorized as misleading or deceptive for the very reason that it represents that confusion or uncertainty exists where, in truth, there is no proper room for either. Ordinarily, however, a tendency to cause confusion or uncertainty will not suffice to establish that conduct is of the type described in s 52. The question whether particular conduct causes confusion or wonderment cannot be substituted for the question whether the conduct answers the statutory description contained in s 52.132 127 ACCC v Jewellery Group Pty Ltd (2012) ATPR ¶42-411 at [36] adopting the reasoning of Mansfield J in ACCC v Ascot Four Pty Ltd (2008) 250 ALR 467 which was approved by the Full Federal Court in Ascot Four Pty Ltd v ACCC (2009) 176 FCR 106. 128 ACCC v Jewellery Group Pty Ltd (2012) ATPR ¶42-411 at [38] and [152] applying Ascot Four Pty Ltd v ACCC (2009) 176 FCR 106 at [43]-[49]. The decision was upheld by the Full Federal Court in Jewellery Group Pty Ltd v ACCC [2013] FCAFC 144. 129 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191. 130 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198-199. 131 McWilliam’s Wines Pty Ltd v McDonald’s System of Australia Pty Ltd (1980) 49 FLR 455. 132 Taco Co (Aust) Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 201.

[3.95]

3 Misleading or Deceptive Conduct

103

This was endorsed by the High Court in Campomar Sociedad Limitada v Nike International Ltd.133 The distinction drawn in these cases is between misleading conduct and conduct which merely causes uncertainty or confusion. In practice, however, there will often be no sharp dividing line between the two. Thus, for example, in Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 8),134 Darrell Lea made significant use of purple in relation to packaging and point of sale displays. An expert witness for Cadbury, Dr Gibbs, gave evidence that in his opinion Darrell Lea’s use of purple was likely to cause informationprocessing errors to occur among consumers of chocolate confectionery, including misidentification when consumers seeking to buy Cadbury chocolate mistakenly identify a Darrell Lea product as a Cadbury product, and therefore buy the Darrell Lea product by mistake. Heerey J concluded that these “information processing errors” did not amount to misleading conduct. His Honour held: Much of Dr Gibbs’ opinions as to misinference and misassociation would seem to be examples of the “caused to wonder” reaction by consumers (and others such as employees and competitors). Insofar as they are, they would seem to raise matters outside the purview of the Trade Practices Act or the tort of passing off, even if they are matters of commercial concern to Cadbury.135

In Bridge Stockbrokers Ltd v Bridges,136 Lockhart J drew attention to the legislative policy behind s 52, namely to prevent the public being misled in a practical sense by the conduct of corporations and provided the following illustration where confusion may cross the dividing line and constitute misleading conduct: The corporation may deliberately produce and market the new brand of soap with a similar get-up, style and name to the already established soap for the purpose of increasing market share by confusing the public so that they are uncertain whether the two products come from the same source. The corporation would know that a not insignificant number of people would buy its product in those circumstances. It is not straining credulity too much, or indeed at all, to conceive of such a corporation, with ready access to competent marketing advice, planning its marketing strategy so that it could not be said that the public would think that the two products in fact came from the same source. But the corporation would know that, by stopping short of such conduct at the point where the public is merely confused or uncertain, it will nevertheless increase its sales and market share at the expense of the established product. In my view, the corporation is guilty of misleading or deceptive conduct within s 52. It is cheating.137

In relation to s 18 of the ACL, the court must decide objectively whether the representations made are misleading or deceptive or likely to mislead or deceive. 133 Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45 at 87 [106]. See also Google Inc v ACCC (2013) 249 CLR 435 at 443 [8] (French CJ, Crennan and Kiefel JJ). 134 Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 8) [2008] FCA 470 (11 April 2008). 135 Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 8) [2008] FCA 470 (11 April 2008) at [88]. 136 Bridge Stockbrokers Ltd v Bridges (1985) 57 ALR 401. 137 Bridge Stockbrokers Ltd v Bridges (1985) 57 ALR 401 at 415.

104

The Australian Consumer Law

[3.100]

Evidence of the kind led in Cadbury Schweppes Pty Ltd v Darrell Lea from expert witnesses that members of the public are likely to be confused of caused to wonder will not suffice.

Silence as misleading conduct: general principles [3.100]

Whether silence amounts to “conduct” for the purposes of s 18 of the ACL is considered at [3.25]-[3.35].

Assuming that the definition of “conduct” in s 2 of the ACL can be satisfied, it is then necessary to consider whether the omission or withholding of information in a particular case was misleading.138 In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd, different approaches were taken for determining whether the conduct at issue was misleading.139 One approach was to analyse whether the conduct viewed as a whole, conveyed a representation which was misleading. Another approach was to analyse whether the circumstances gave rise to a “reasonable expectation” that if some relevant fact existed, it would be disclosed to the person who claimed to have been misled.140 French CJ and Kiefel J observed: Reasonable expectation analysis is unnecessary in the case of a false representation where the undisclosed fact is the falsity of the representation. A party to precontractual negotiations who provides to another party a document containing a false representation which is not disclaimed will, in all probability, have engaged in misleading or deceptive conduct. When a document contains a statement that is true, non-disclosure of an important qualifying fact will be misleading or deceptive if the recipient would be misled, absent such disclosure, into believing that the statement was complete.141

The facts of the case were that Consolidated Timber Holdings, a borrower, engaged insurance broker, Miller & Associates (Miller), to assist it in applying for an insurance premium funding loan with a lender, BMW. Miller supplied BMW with documentation which included a memorandum and certificate of insurance with HIH. BMW lent Consolidated a sum of money which Consolidated did not fully repay. The insurance policy was not a cancellable policy. A cancellable property policy provides a form of security for a lender because in the event of a default by the borrower, the lender can cancel the policy and recover the unused premium. BMW claimed that Miller engaged in misleading conduct on two different bases: first, that the HIH certificate falsely represented that the underlying policy was cancellable and good security for the loan, when it was not; and secondly, that Miller failed to disclose to BMW an unattractive feature of the policy (that it was non-cancellable) a feature that BMW was not aware of. 138 See R V Miller, Australian Competition and Consumer Law Annotated (37th ed, Lawbook Co, Sydney, 2015), [1.S2.18.85]. 139 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [19]. See McCabe, “When Silence Misleads, and When it Doesn’t?” (2011) 19 Australian Journal of Competition and Consumer Law 47 at 49-51. 140 The genesis of the “reasonable expectation” approach is to be found in the judgment of Gummow J in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 41. 141 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [23].

[3.100]

3 Misleading or Deceptive Conduct

105

As regards, BMW’s first case, the majority (Heydon, Crennan and Bell JJ), concluded that the HIH certificate did not convey a representation that it was a cancellable policy.142 As regards BMW’s second case, the majority noted that BMW was known by Miller to be an “experienced premium lender”143 and the parties were “commercially sophisticated”.144 The majority held that Miller had not engaged in misleading conduct: Miller had supplied BMW with a copy of the policy. BMW was an experienced premium lender. The policy was not a lengthy document. It was apparent that it did not insure the holders against loss or damage to property. It did not contain a cancellation clause. Miller’s failure to draw to BMW’s attention a circumstance that the document itself disclosed was not misleading or deceptive.145

French CJ and Kiefel J agreed with the majority that, the HIH certificate did not contain a false representation that it was a cancellable policy.146 As regards BMW’s second case, on a close analysis of all the circumstances of the transaction, their Honours held that BMW could not have had a reasonable expectation that Miller would disclose that the policy was not cancellable. A copy of the policy was provided to BMW and they simply failed to read it.147 Their Honours observed: s 52 does not require a party to commercial negotiations to volunteer information which will be of assistance to the decision-making of the other party. A fortiori it does not impose on a party an obligation to volunteer information in order to avoid the consequences of the careless disregard, for its own interests, of another party of equal bargaining power and competence.148

Commenting more broadly on the “reasonable expectation” test, their Honours observed: The language of reasonable expectation is not statutory. It indicates an approach which can be taken to the characterisation, for the purposes of s 52, of conduct consisting of, or including, non-disclosure of information. That approach may differ in its application according to whether the conduct is said to be misleading or deceptive to members of the public, or whether it arises between entities in commercial negotiations. An example in the former category is non-disclosure of material facts in a prospectus.149

The “reasonable expectation” test is predicated on the assumption that one party is aware of an undisclosed fact and the circumstances and context of the case give rise to an objectively reasonable expectation on the part of the other party that the fact should be disclosed because it would be relevant or material in its decision-making. The reasonableness of the alleged expectation is to be assessed objectively, and not 142 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 383 at [87]. 143 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 383 at [85]. 144 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 384 at [91]. 145 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 386 at [96]. 146 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 383 at [24]. 147 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 383 at [26]. 148 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Lyd (2010) 241 CLR 357 at [22]. See also Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193 at [91]. 149 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [19]-[20].

106

The Australian Consumer Law

[3.100]

be reference to the subjective expectation of the other party to the transaction.150 All of the members of the High Court in Miller & Associates v BMW were of the opinion that the lender could not have had a reasonable expectation that the broker would disclose that the policy was not cancellable.151 In Rhone-Poulenc,152 and a number of subsequent cases, it was suggested that silence will amount to misleading conduct where there was a “duty” to disclose the information withheld. Subsequently, this situation was incorporated into a general proposition that silence will amount to misleading conduct where the surrounding circumstances give rise to a “reasonable expectation” on the part of the respondent that information would be disclosed. In Demagogue Pty Ltd v Ramensky,153 Black CJ observed: Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of “mere silence” or of duty of disclosure can divert attention from that primary question. Although “mere silence” is a convenient way of describing some fact situations, there is in truth no such thing as “mere silence” because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed.154

A reasonable expectation of disclosure may arise if the supplier inserts a term into a contract that is highly unusual or harsh from the consumer’s perspective. A reasonable expectation of disclosure is less likely to arise in the case of agreements between two commercial parties of roughly equal bargaining strength, experience and commercial sophistication. It is important to note that silence or a failure to disclose highly unusual or harsh term may also demonstrate a lack of good faith, and be a relevant consideration for determining whether a supply or acquisition of goods or services fell within the prohibition of statutory unconscionability in s 21 of the ACL.

150 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [20]. 151 For a summary of the relevant principles, see Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [209] (Sackville AJA) cited with approval by Barrett JA in Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [192]. 152 Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477. 153 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31. 154 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32. See Gillies, “Non-disclosure: Trade Practices Act, s 52” (2004) 78 Australian Law Journal 653; O’Shea, “Undisclosed Unusual and Unexpected Matters – Liability Issues under s 52 of the Trade Practices Act” (2006) 14(1) Competition & Consumer Law Journal 1; McCabe, “When Silence Misleads, and When it Doesn’t?” (2011) 19 Australian Journal of Competition and Consumer Law 47 at 50.

[3.105]

3 Misleading or Deceptive Conduct

107

Silence as misleading conduct: commercial negotiations [3.105]

In the context of commercial negotiations the courts have been reluctant to impose additional obligations of disclosure to those already imposed by the common law, such as where a fiduciary duty is owed to the other party, or where there is a sufficient relationship of proximity.155 In Lam v Ausintel Investments Australia Pty Ltd, Gleeson CJ observed: Where parties are dealing at arm’s length in a commercial situation in which they have conflicting interests it will often be the case that one party will be aware of information which, if known to the other, would or might cause that other party to take a different negotiating stance. This does not of itself impose any obligation on the first party to bring that information to the attention of the other party, and failure to do so would not, without more, ordinarily be regarded as dishonest or even sharp practice.156 (emphasis added)

There is no need to impose additional burdens where the parties are of roughly equal bargaining strength and each party is capable of ascertaining the relevant information. The “more” to which his Honour refers applies to other circumstances which may give rise to a “reasonable expectation of disclosure”. In Miller v BMW Australia, French CJ and Kiefel J observed: In commercial dealings between individuals or individual entities, characterisation of conduct will be undertaken by reference to its circumstances and context. Silence may be a circumstance to be considered. The knowledge of the person to whom the conduct is directed may be relevant. Also relevant, as in the present case, may be the existence of common assumptions and practices established between the parties or prevailing in the particular profession, trade or industry in which they carry on business. The judgment which looks to a reasonable expectation of disclosure as an aid to characterising non-disclosure as misleading or deceptive is objective. It is a practical approach to the application of the prohibition in s 52.157

For example, in Traderight (NSW) Pty Ltd v Bank of Queensland Ltd,158 the New South Wales Court of Appeal held that there was no reasonable expectation by prospective franchisees that the BOQ would disclose information regarding business volumes achieved by existing franchisees. The Bank operated through corporate branches and agencies which from 2001 to 2003 were converted to franchises and became known as Owner Manager Branches (OMBs). Eleven OMB principals who operated OMBs in NSW sued BOQ for losses they claimed to suffer from entering into their respective franchise agreements. Barrett JA (with whom Bathurst CJ and Beazley P agreed) stated that the crucial question was whether the 155 See Gillies, “Non-disclosure: Trade Practices Act, s 52” (2004) 78 Australian Law Journal 653 at 657-60; and Stewart and McClurg, “Playing your Cards Right: Obligations of Disclosure in Commercial Negotiations” (2007) Australian Mining and Petroleum Laws Association Handbook 36 at 36-8. 156 Lam v Ausintel Investments Australia Pty Ltd (1990) ATPR ¶40-990 at 50,880 (Gleeson CJ, Samuels AP and Meagher JA concurring). The same view was taken in Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 at 26 (Burchett J); General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164 especially at 177-9 and Leda Holdings Pty Ltd v Oraka Pty Ltd (1997) ATPR ¶41-601 at 40,513. 157 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [20]. 158 Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94.

108

The Australian Consumer Law

[3.105]

“course of dealing” by BOQ with each prospective franchisee was such as to give rise to an objectively reasonable expectation of disclosure.159 His Honour found that no objectively reasonable expectation of disclosure arose that BOQ should volunteer the information that BOQ possessed about the actual financial performance of existing OMBs in NSW because “all OMB principals were persons of some commercial sophistication, all had business experience and most had specifically banking experience”,160 and the OMB principals were told by BOQ that it was for them to investigate the feasibility and viability of their business proposal.161 By way of contrast, in Fabcot Pty Ltd v Port Macquarie-Hastings Council162 the Macquarie-Hastings Council was seeking to develop a parcel of land into a supermarket. The Council issued as an Expression of Interest (EOI) and conditionally accepted an offer from Woolworths, although the Council did not expressly state in the EOI process that it was negotiating with Woolworths exclusively. On 19 May 2009 the Council decided to negotiate with Coles for the sale of the land. The New South Wales Court of Appeal held that the EOI process gave rise to a reasonable expectation by Woolworths that it would receive notification before the Council commenced negotiations with a third party. The following factors were held to be relevant in the “course of dealing” between the successful tenderer (Woolworths) and the Council as part of the Expression of Interest (EOI) process: • the nature of the EOI process and the fact that a single bidder was selected; • the Council’s communication that it had conditionally accepted Woolworths’ offer; and • the nature of the project and the fact the proposal accepted by the Council would require a substantial level of collaboration by the negotiating parties.163 However, the EOI process did not give rise to an expectation that Woolworths would be entitled to notification for an indefinite period.164 Once it became clear that there were “substantial impediments to the finalisation of an agreement,”165 there was no longer any reasonable expectation that Woolworths was entitled to a period of exclusivity by reason of the EOI process. By 1 April 2009, serious issues remained unresolved. Sackville AJA stated:

159 Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [203]. 160 Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [204]. 161 Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [207]; Clifford v Vegas Enterprises [2011] FCAFC 135 at 144 and 226. 162 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 (Sackville AJA with whom Beazley JA and Campbell JA agreed). 163 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [223]. 164 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [225]. 165 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [227].

[3.110]

3 Misleading or Deceptive Conduct

109

A reasonable observer would have concluded at that point that in view of the urgency of completing a sale of the Land, the Council might well seek another negotiating partner and that Woolworths could no longer have an expectation that it would receive prior notice of the Council’s intention to do so.166

Thus, the Council had not engaged in misleading conduct on the 19 May 2009 when it decided to negotiate with Coles for the sale of the Land.

Silence: making known specific transactional requirements [3.110]

The circumstances or contextual factors that may be relevant in giving rise to a reasonable expectation of disclosure will now be considered. A reasonable expectation of disclosure is more likely to arise where one party, during pre-contractual negotiations, explicitly makes known a particular purpose or objective which that party is seeking to achieve, or specific transactional requirements by entering into the transaction.167 In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd, Heydon, Crennan and Bell JJ held: There was nothing in the conduct of the parties … to convey that cancellability was important to the determination of this later application. The request for guarantees suggested that it was not. There was no foundation for the conclusion that the known importance of cancellability gave rise to a reasonable expectation, in the circumstances of this transaction, that Miller would not supply the HIH certificate in response to BMW’s request without disclosing at that time or later that the policy was not cancellable.168

This factor has been held to be relevant in other cases. For example, in Whitaker v Paxad Pty Ltd,169 a real estate agent acting in the sale of his mother’s home and who had grown up in the home, had a thorough knowledge of its defects which included water drainage problems in the garage. The purchasers informed the agent that they wished to use the garage as a home office. The agent disclosed to the purchasers that the back shed contained asbestos, but made no mention of the drainage problems in the garage. Blaxel J held that in the circumstances, it was reasonable for the purchasers to expect that if the garage was not suitable for their disclosed intended use, the agent would have told them so.170 Similarly, in EK Nominees Pty Ltd v Woolworths Ltd,171 a property developer, EK Nominees, and the owner of a chain of supermarkets, Woolworths, commenced negotiations for a lease that provided for construction of a supermarket on EK Nominees’ land (the Auburn Road site). EK Nominees expended significant amounts obtaining development approval and preparing the land for development in anticipation of obtaining a formal lease with Woolworths. Subsequently, a third 166 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [229]. 167 For example, in Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 583 and 587-588 (Brennan, Deane, Gaudron and McHugh JJ), where the appellants made clear to the respondent’s agent that their express purpose was to acquire a tenanted property that would generate a 10% return on their investment. The seller was found to have breached s 52 of the TPA for failing to disclose a collateral agreement with the tenant for a rent-free period that would prevent the 10% return being realised. 168 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [95]. 169 Whitaker v Paxad Pty Ltd [2009] WASC 47. 170 Whitaker v Paxad Pty Ltd [2009] WASC 47 at 98. 171 EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172.

110

The Australian Consumer Law

[3.115]

party developer (Markham Corporation) approached Woolworths with a superior development opportunity and Woolworths withdrew from the negotiations with EK Nominees. EK Nominees pleaded that Woolworths made two representations which were misleading. White J considered that Woolworths made an implied representation that it intended to enter into a lease on the terms and conditions contained in its approval letter of 18 July 2011, and that it was a continuing representation.172 White J held: The relevant conduct is the advertent failure to disclose Woolworths’ alleged change in intentions. It was Mr Hunt who deliberately made no disclosure of the approach of Markham Corporation or the implications that might have for the Auburn Road site. … If circumstances changed after the Property Committee’s approval was given, so that a decision had to be made as to whether Woolworths should go ahead, that decision would be made by representatives of the Property Committee, which did not include Mr Hunt. Mr Hunt was not the person authorised to decide whether or not Woolworths should enter into an agreement for lease.173

However, White J found: Woolworths’ failure to disclose its changed position, whilst continuing to encourage E K Nominees to carry out work on the project, and continuing to negotiate terms of the agreement for lease, was conduct, in trade or commerce, which was misleading or deceptive, or likely to mislead or deceive.174

By way of contrast, in Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd,175 Mr Anderson had been shown premises in which he planned to store his collection of antiques and art works. During a pre-lease inspection of the building Mr Anderson observed sprinkler heads and formed the erroneous impression that the premises had an operational sprinkler system. Mr Anderson stated that the building had to be “air-conditioned, waterproof and secure”, but said nothing about the need for fire protection. The trial judge found that Clambake had engaged in misleading conduct by failing to disclose that despite the visible sprinkler system, the premises did not have an operational fire protection system. On appeal, McLure P took into account that at no time during the inspection did Mr Anderson seek any information concerning the type of fire protection system in the building, and that Mr Anderson’s erroneous impression had never been expressly or impliedly communicated to Clambake.176 The appeal was upheld.

Silence: unusual or unexpected matters [3.115]

The existence of something unusual or unexpected may give rise to a reasonable expectation of disclosure in the circumstances of a particular case. If the other party is unable to find out the true position by conducting searches of public records or making other inquiries, a reasonable expectation of disclosure is more

172 EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 at [139]. 173 EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 at [147]-[149]. 174 EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 at [156]. 175 Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193. 176 Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193 at [91].

[3.115]

3 Misleading or Deceptive Conduct

111

likely to arise. Deliberately concealing the existence of the unusual or unexpected matter may amount to misleading conduct. For example, in negotiating the sale of a quantity of scrap metal copper a reasonable expectation of disclosure arose where the purchaser became aware that it may have been stolen, but did not disclose this suspicion to the vendor.177 In negotiating the terms for a lease of premises for conducting a flying school, a reasonable expectation of disclosure arose where the lessor’s agent knew that there had been a risk of contamination on the site.178 In Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd,179 Barrett J, the primary judge, found that a developer (Peninsula) had breached s 52 of the TPA by failing to disclose to a building contractor (Abigroup) the existence of an agency agreement pursuant to which a third company (the superintendent) was Peninsula’s agent in all matters relating to the design and construction of the project. However, on appeal,180 the New South Wales Court of Appeal held that the primary judge erred in his finding of misleading or deceptive conduct. Hodgson JA stated: In my opinion, for conduct to be misleading or deceptive, it must be such as is apt to mislead or deceive in some non-trivial respect; so that to make out a case under s 52, Abigroup needed to show that the non-disclosure of the project management agreement was apt to do just that.181

There is nothing unusual or unexpected about undisclosed agency agreements. Generally, neither the principal nor the agent would engage in misleading conduct if the agent entered into a contract with a third party and failed to disclose the existence of the agency agreement. However, silence as regards the existence of a bid rigging arrangement may give rise to misleading or deceptive conduct. In Norcast SarL v Bradken Ltd (No 2),182 a request for bids was made in the United States by Norcast S ar L (Norcast) in relation to its subsidiary, a Canadian company, Norcast Wear Solutions Inc (NWS). There was an arrangement between Castle Harlan Inc (a private equity investment firm) and Bradken that Castle Harlan Inc would bid for NWS and Bradken would not bid (the bidding provision). It was at least possible that Castle Harlan Inc and Bradken would have competed with each other to acquire the shares in NWS but for the bid rigging arrangement. Norcast alleged that Castle Harlan and Bradken engaged in misleading or deceptive conduct during the course of the NWS sales process. Norcast relied upon Bradken’s silence about the bidding provision, the back-to-back sale arrangement with Castle Harlan and the fact that it and Castle Harlan were co-operating for the purpose of acquiring NWS. Gordon J found that Bradken took deliberate and deceptive steps: 177 Metal Corp Recyclers Pty Ltd v Metal Manufacturers Ltd (2004) ATPR (Digest) ¶46-243 at 54,203-54,204 (Handley JA). 178 Noor Al Houda Islamic College Pty Ltd v Bankstown Airport Ltd (2005) 215 ALR 625 (Hoeben J). 179 Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd (2001) ATPR (Digest) 46-213. 180 Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd [2002] NSWCA 211 (Hodgson JA, with whom Mason P and Stein JA agreed). 181 Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd [2002] NSWCA 211 at [54]. 182 Norcast SarL v Bradken Ltd (No 2) (2013) 219 FCR 14.

112

The Australian Consumer Law

[3.120]

to prevent disclosure of its direct involvement in Castle Harlan’s acquisition of NWS. In doing so, by its silence, Bradken represented that it was not involved in Castle Harlan’s acquisition of NWS. That conduct was misleading and deceptive… Even in the absence of the Bid Rigging Arrangement, in all the circumstances, Bradken and Castle Harlan’s silence constituted misleading or deceptive conduct in contravention of the ACL. Bradken further submitted that Bradken’s silence was not misleading or deceptive in circumstances where Norcast knew that it was not uncommon for a private equity business to resell a company it had acquired. Norcast’s general awareness of the likelihood that Castle Harlan might, at some time in the future, sell NWS cannot and does not cure Bradken’s misleading or deceptive conduct by silence.183

Bradken appealed against the decision, but the parties subsequently reached a settlement so that no appeal was required. The Full Court made orders setting aside the orders of the primary judge, but left intact the reasoning and legal and factual conclusions.

Silence: subsequent change in circumstances [3.120]

A failure to qualify a statement made earlier in negotiations which is no longer accurate because of a subsequent change in circumstances, or varying agreed terms, may give rise to a reasonable expectation of disclosure. In Gregg v Tasmanian Trustees Ltd,184 it was held to be misleading for the respondent to ask the applicant to sign mortgage documents relating to her property without first informing her that the terms differed significantly from what they had agreed earlier. According to Merkel J: The fact that the mortgage departed in significant respects from the transaction agreed to by the respondent, gave rise to a reasonable expectation that the changes and their effect would be brought to the attention of the applicant. A failure to do so and remaining silent in the circumstances, in itself, can constitute conduct in contravention of s 52 …185

It may be misleading or deceptive conduct not to correct a representation which was true when it was originally made but which later becomes false, or qualified in some way due to a subsequent change in circumstances. The common law rule that representations, once made, are treated as continuing beyond the time they are made, was applied in relation to the TPA. For example, in Wildsmith v Dainford Ltd,186 the applicants purchased a unit off-the-plan on the basis of a representation that the balconies would have certain features substantially in accordance with the sketch in the contract. When constructed the balconies departed in significant respects from the sketch. Similarly, in Burg Design Pty Ltd v Wolki,187 the applicant purchased a business (selling barbecued chicken) on the basis of representations by 183 Norcast SarL v Bradken Ltd (No 2) (2013) 219 FCR 14 at [317]-[318]. 184 Gregg v Tasmanian Trustees Ltd (1997) 73 FCR 91. 185 Gregg v Tasmanian Trustees Ltd (1997) 73 FCR 91 at 108. See also Finucane v NSW Egg Corp (1988) 80 ALR 486 (Lockhart J); Johnson Tiles Pty Ltd & Ors v Esso Australia Ltd & Anor (1999) ATPR ¶41-696 at 42,888-9 (Merkel J); and Metalcorp Recyclers Pty Ltd v Metal Manufacturers Ltd (2004) ATPR (Digest) ¶46-243 at 54,203 [14] (Handley JA). 186 Wildsmith v Dainford Ltd (1983) 51 ALR 24 at 31-34 (Smithers J). 187 Burg Design Pty Ltd v Wolki (1999) ATPR ¶41-689 at 42,810 (Burchett J).

[3.125]

3 Misleading or Deceptive Conduct

113

the respondent that it made “$130,000 a year by way of net profit”. Burchett J held that it was misleading to fail to correct the previous statements and accounts. The issue of failure to disclose subsequent changes also arose in Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd.188 It was held to be misleading for MSDA not to qualify its pharmaceutical Product Information brochure for Vioxx once it was aware of the results of the subsequent VIGOR trial which demonstrated that the use of Vioxx increased the risk of heart attack. Jessup J did not hold that the initial Product Information was misleading. Rather, his Honour held that the misleading conduct was constituted by the failure to draw the attention of doctors and other health care professionals to the increased cardiovascular risk that emerged from the VIGOR study. Jessup J held: …MSDA’s failure to provide any qualification to what was then contained in the Product Information did … amount to misleading information.189

Silence: case examples [3.125]

Cases where a reasonable expectation of disclosure has arisen include:

• on the part of a purchaser, where the trading figures disclosed were accurate, but they misrepresented the true trading position;190 • on the part of a purchaser, where the vendor knew that its major client, which represented almost two-thirds of its annual sales, had just had its Government funding reduced by 40% and future orders would be reduced in consequence;191 • on the part of a purchaser negotiating the sale of a restaurant, where the vendor knew that the actual seating capacity differed from the licensed seating capacity;192 • on the part of a purchaser, where the vendor’s agent informed the purchaser that there was a proposal to lease the property in a certain manner when the agent knew that it could not be used in this manner without a local government permit which had not been obtained;193 • on the part of a shopping centre developer negotiating terms for a lease, where the prospective anchor tenant failed to disclose that it had already decided not to take up a lease in the shopping centre;194 188 Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd (2010) 184 FCR 1 (Jessup J). 189 Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd (2010) 184 FCR 1 at 338 [904]. This finding was not challenged on the appeal. 190 See CPI Group Ltd v Stora Enso Australia Pty Ltd (2007) ATPR ¶42-193 (Branson, Stone and Edmonds JJ). See also Townsend v Roussety & Co (WA) Pty Ltd (2007) 33 WAR 321 at [92] (Buss JA, with whom Wheeler JA and McClure JA agreed). 191 Caffwy v Leatt-Hayter (No 3) [2013] WASC 348 (Beech J). 192 Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546 (Lockhart J, Burchett and Foster JJ concurring). 193 Aliotta v Broadmeadows Bus Service Pty Ltd (1988) ATPR ¶40-873 (Gray J). 194 E K Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 (16 November 2006).

114

The Australian Consumer Law

[3.125]

• on the part of potential investors in a joint venture corporation, where one of the directors was an undischarged bankrupt;195 and, • on the part of a prospective purchaser of a Pizza Haven restaurant, where the vendor failed to disclose that a Pizza Hut restaurant was opening nearby.196 Cases in which no objectively reasonable expectation of disclosure has arisen include: • on the part of a purchaser, that a bank would disclose that the vendor’s business was unprofitable because the bank was under a pre-existing duty of confidence to the vendor;197 • on the part of a commercial borrower, that a lender will explain the intricacies of the financial system and the risk of loss;198 • on the part of a building contractor, that a mortgagee would disclose that a property developer was facing insolvency and would not be able to pay for the work done;199 • on the part of a lessor, that a prospective tenant had changed its intention to take up the lease where the correspondence made clear that either party was free to withdraw at any time prior to execution;200 • on the part of a purchaser, that the vendor of a Service Centre for trucks and cars would disclose the past history or causes of fracturing in pavement bitumen which was unsuitable for heavy vehicles in the absence of specific questions raised by the purchaser;201 • on the part of new franchisees, that the franchisor would share with them information that the franchisor possessed about the financial performance and business levels achieved by existing franchisees, when it had been made clear, both orally and in writing, that it was for the prospective franchisees to investigate the feasibility and viability of their own business proposal;202 and, 195 Dawson v LNG Holdings [2008] NSWSC 137 (White J). 196 Hardy v Your Tabs Pty Ltd [2000] NSWCA 150 (22 June 2000) (Heydon JA, with whom Meagher JA and Foster AJA agreed). 197 Kabwand v National Australia Bank (1989) ATPR ¶40-950 (Lockhart, Hartigan and Hill JJ) and Finding v Commonwealth Bank of Australia [2001] 1 Qd R 168. The Banks were found not to have breached s 52 for failing to disclose information concerning the business or financial affairs of another client. In the absence of a fiduciary relationship to disclose matters regarding other clients there could be no reasonable expectation of disclosure in such circumstances because of the duty of confidentiality owed by a bank to a client. See also Advanced Switching Services Pty Ltd v State Bank of New South Wales [2007] FCA 954 (Rares J) and Ibrahim v Phan [2007] NSWCA 215, where the NSW Court of Appeal held that in the circumstances of that case there was no reasonable expectation of disclosure by a solicitor. 198 Warner v Elders Rural Finance Ltd (1993) 113 ALR 517 at 522-523 (Hill J). 199 Winterton Constructions Pty Ltd v Hambros Australia Ltd (1993) ATPR ¶41-205 (Hill J). A borrower is entitled to expect that his financier will keep confidential matters concerning the borrower’s financial affairs. 200 BBB Constructions Pty Ltd v Aldi Foods Pty Ltd [2010] NSWSC 1352 at [254]-[256] (McDougall J). 201 Mercland Investment Group Pty Ltd v Duncalm Pty Ltd [2012] FCA 183 at [117] (Edmonds J). 202 Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [203]-[213] (Barrett JA, with whom Bathurst CJ and Beazley P agreed).

[3.135]

3 Misleading or Deceptive Conduct

115

• on the part of a sports program supplier, that a customer was engaged in discussions with an alternative program supplier.203

Literal truth [3.130]

While a statement may be literally true or factually accurate, it may, depending on its context, create a misleading impression. In Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd, Stephen J held: [W]hat the Hornsby Centre has done is, in a sense, no more than to use its own corporate name in association with its activities. No doubt the meaning of the statutory prohibition which s 52(1) enunciates must be gained from the terms of the subsection itself; but nothing in those terms suggests that a statement made which is literally true, ie, that the centre at Hornsby is conducted by Hornsby Building Information Centre Pty Ltd may not at the same time be misleading and deceptive. It clearly may be. To announce an opera as one in which a named and famous prima donna will appear and then to produce an unknown young lady bearing by chance that name will clearly be to mislead and deceive. The announcement would be literally true but none the less deceptive, and this because it conveyed to others something more than the literal meaning which the words spelled out.204

Similarly, in National Exchange Pty Ltd v ASIC,205 it was held to be misleading or deceptive in contravention of s 1041H of the Corporations Act 2001 (Cth) for the appellant to compare the price it was offering to pay shareholders for their shares with the current market price without drawing attention to the fact that the purchase price it was offering would be paid by instalments over 15 years. Although there were no false statements in the offer document, it created the false impression that was likely to mislead members of the target audience. In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd, French CJ and Kiefel J observed: When a document contains a statement that is true, non-disclosure of an important qualifying fact will be misleading or deceptive if the recipient would be misled, absent such disclosure, into believing that the statement was complete. In some cases it might not be necessary to invoke non-disclosure at all where a statement which is literally true, but incomplete in some material respect, conveys a false representation that it is complete.206

Representations with respect to future matters [3.135]

Section 4 of the ACL contains an important evidentiary provision which may assist an applicant in a claim based on s 18 of the ACL. Where the conduct at issue contains a representation as to a future matter, the person making the representation must adduce evidence that there were reasonable grounds for making the representation or it will be deemed be misleading.

203 Seven Network Ltd v News Ltd [2007] FCA 1062 (27 July 2007) (Sackville J). This finding was not challenged on the appeal. 204 Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 227-8. 205 National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000. 206 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [23].

116

The Australian Consumer Law

[3.135]

Section 4 of the ACL provides: (1) If: (a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and (b) the person does not have reasonable grounds for making the representation; the representation is taken, for the purposes of this Schedule, to be misleading. (2) For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by: (a) a party to the proceeding; or (b) any other person; the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary. (3) To avoid doubt, subsection (2) does not: (a) have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or (b) have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation. (4) Subsection (1) does not limit by implication the meaning of a reference in this Schedule to: (a) a misleading representation; or (b) a representation that is misleading in a material particular; or (c) conduct that is misleading or is likely or liable to mislead; and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation.

Section 4 of the ACL is based on s 51A of the TPA.207 According to the Second Explanatory Memorandum: Section 4 of the ACL includes a provision that replaces section 51A of the TPA. It places an evidentiary burden on a defendant who is alleged to have made a representation as to a future matter that is misleading. When compared to section 51A, the new provision seeks to clarify that • the burden of proof under this section is evidentiary in nature and does not place a legal burden on defendants to prove that representations were not misleading; • satisfying the burden of proof under this section does not constitute a substantive defence for breach of any other section of the ACL; and • the section can operate in proceedings against accessories to contraventions as well as primary contraveners.208

If the respondent adduces no evidence as to the existence of reasonable grounds for making the representations, ss 4(1) and (2) of the ACL operate to deem the representations to be misleading and contrary to s 18 of the ACL.209 Adducing 207 Duke, “Representations as to the Future under the Proposed Australian Consumer Law” (2009) 33 Melbourne University Law Review 454. 208 Second Explanatory Memorandum, [2.22]-[2.26]. 209 ACCC v South East Melbourne Cleaning Pty Ltd (in liq) (formerly known as Coverall Cleaning Concepts South East Melbourne Pty Ltd) [2015] FCA 25 at [94] and [102].

[3.135]

3 Misleading or Deceptive Conduct

117

some evidence that tends to establish reasonable grounds for making the representation discharges the onus on the respondent/representor and eliminates the operation of the deeming provision in s 4(2) of the ACL. There will be no automatic deeming as there would be if the respondent adduced no evidence at all. When the respondent adduces evidence, it will then be a matter for the court to determine whether that evidence establishes reasonable grounds.210 For example, in Bennett v Elysium Noosa Pty Ltd (in liq),211 the applicant purchaser alleged that real estate agents had no reasonable grounds for making oral representations that a Community Centre would be completed in Stage 1 of a development. Reeves J found that the respondent (property developer) had adduced quite extensive evidence to avoid the deeming provision in TPA, s 51A(2) (now ACL, s 4(2)).212 It was then a matter for Reeves J to assess under TPA, s 51A(1) (now ACL, s 4(1)), on all the evidence, whether he was satisfied on the balance of probabilities, that the property developer had reasonable grounds to make the representations it did. If it had reasonable grounds the representations would not be taken to be misleading. If it did not have reasonable grounds, the representations would be taken to be misleading. If the court was not persuaded either way, the applicant would fail because the onus of proof still rested on the applicant.213 His Honour concluded that there were no reasonable grounds and the representations were misleading: This review of the evidence relating to the Community Centre building as at early 2005, when the Burkes made the representations about it, shows that it was a component of the Elysium Noosa development for which there was no development approval, no final plans or design drawings, no construction program, no reliable costings and no genuine commitment to it by the joint venture partners.214

Section 4 of the ACL highlights the importance of preserving contemporaneous evidence that substantiates any representations made during pre-contractual negotiations or in advertising material. In relation to s 51A (now s 4, ACL) Heerey J stated in Sykes v Reserve Bank of Australia:215 If there was a representation as to a future matter, s 51A requires the representor to show: • some facts or circumstances • existing at the time of the representation • on which the representor in fact relied • which are objectively reasonable and • which support the representation made.216 210 See McGrath v Australian Naturalcare Products Pty Ltd (2008) 165 FCR 230 at [191]-[192] (Allsop J) and ALDI Stores v EFTPOS Payments Australia Ltd (2011) ATPR ¶42-371 at 44,319 (Jacobson J). 211 Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [78]. 212 Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [120]. 213 Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [120]. 214 Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [161]. 215 Sykes v Reserve Bank of Australia (1998) 88 FCR 511. 216 Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 513. Sundberg J agreed.

118

The Australian Consumer Law

[3.140]

The third proposition – a requirement that that the representor show that the grounds said to be reasonable were in fact relied upon by the representor at the time of making the representation – was not contained within the wording of s 51A. It was said to be “implicit” in the provision.217 Whether the Sykes requirement is thought to be implicit in the language of s 4 of the ACL remains to be seen.218 If a person intends to rely on s 4 of the ACL they ought to plead to that effect so that the person alleged to have made the representation as to a future matter has notice that they are required to adduce evidence to avoid the deeming effect of s 4(1) of the ACL. In SPAR Licensing Pty Ltd v MIS QLD Pty Ltd,219 Foster J stated: In my view, a party who wishes to rely upon s 51A (or its equivalent in the Australian Consumer Law) should specifically plead its intention to do so in the first pleading where it is appropriate to do so. Although not bearing any ultimate onus of proof on the issue of reasonable grounds, the counter-party ought then be required to plead that it had reasonable grounds for making the relevant statement and to specify with particularity the nature of those grounds and, by way of particulars, the substance of the evidence it intends to adduce to establish those grounds.220

Case examples: representations about future matters In Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd221 the Dib Group was a franchisor of services stations. The Chief Executive Officer was Mr George Dib. The plaintiff was a small lending business. It lent $100,000 to E-Style Marketing which operated three service stations as a franchisee and lessee from the Dib Group. E-Style was placed into receivership and the loan was not repaid. The plaintiff claimed that it was induced to make the loan on the basis of representations made by the Dib Group and Mr George Dib that were misleading. The plaintiff’s case was based on positive representations that were alleged to be misleading: Mr Dib recommended E-Style as a suitable borrower. He represented that its owners were running a good business and would be suitable borrowers. Mr Dib also stated:

[3.140]

Short-term lending normally brings 20%. You will be helping us and we will be helping you… Nothing will go wrong, I assure you. It will be OK trust me. The Dib Group won’t let anything go wrong.

Slattery J found that Mr Dib did encourage the plaintiff to invest in service stations sites franchised from the Dib Group by lending money to Dib Group franchisees and that such a conversation did occur.222 His Honour held: 217 Botany Bay City Council v Jazabas Pty Ltd [2001] NSWCA 94 at [85] (Mason P). 218 See Eastwood, “Future Representations and the Grounds that May Be Relied on to Establish Reasonableness” (2015) 89 Australia Law Journal 270. 219 SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50. 220 SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50 at [77] and O’Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455 at 461-3 [15]–[21]). See McCabe, “Important Lessons on the Approach to Claims of Misleading or Deceptive Conduct that Involve Representations as to Future Matter” (2014) 22 Australian Journal of Competition and Consumer Law 215. 221 Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 (13 September 2010). 222 Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 at [23].

[3.145]

3 Misleading or Deceptive Conduct

119

The repeated emphasis at the time of these assurances on the role of the Dib Group and the role of Mr George Dib as the speaker and CEO of the Dib Group also support the inference that the defendants were representing that they would ensure that the proposed $100,000 loan would be repaid with interest.223

These representations related to future matters and the case relied upon s 51A of the TPA. His Honour concluded: The defendants have not established that they did have reasonable grounds for making representations as to the future matters about which Mr George Dib assured Ms Ventouris. The absence of evidence of reasonable grounds and evidence in this case compels the inference that the defendants engaged in misleading and deceptive conduct.224

The New South Wales Court of Appeal confirmed that Mr Dib did not have reasonable grounds for making the relevant representations.225 Section 18 of the ACL, and its predecessor s 52 of the TPA, have been used extensively in the context of representations made to potential investors about the future profitability of a business or investment.226 Section 18 of the ACL, and its predecessor s 52 of the TPA, have also been used extensively in the context of representations made to potential purchasers about the facilities, uses and amenities that will be available when a property development is completed.227

Contractual promises [3.145]

Section 2(2)(a) and (b) of the ACL defines engaging in conduct to include “the making of, or giving effect to a provision of, a contract”. As a result, “making” a contract, as well as “refusing” to perform its terms, can amount to engaging in conduct for the purposes of s 18. A contractual promise about an existing matter of fact will contravene s 18 where the facts are not as promised and this misleads someone whom the promisor knew may rely on that promise. In such a case, the promise will convey a misrepresentation to that person and liability will arise for that reason. A promise may also contain an implied representation of existing fact, namely that the promisor has a present intention to make good the promise, or that the promisor has the means to do so.228

223 Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 at [88]. 224 Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 at [94]. 225 Dib Group Pty Ltd v Ventouris Enterprises Pty Ltd (2011) 284 ALR 601; [2011] NSWCA 300 at [41]-[45] (Allsop P, with whom Macfarlan and Handley JJA agreed). 226 ACCC v South East Melbourne Cleaning Pty Ltd (in liq) [2015] FCA 25; ACCC v Halkalia Pty Ltd (No 2) (2012) ATPR ¶42-399; Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199; ACCC v Oceana Commercial Pty Ltd (2004) ATPR (Digest) ¶46-244; Nescor Industries Group Pty Ltd v Miba Pty Ltd (1998) ATPR ¶41-609; Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATPR ¶50-239; Bateman v Slater (1987) 71 ALR 553; Jelin Pty Ltd v Murdoch Pty Ltd (1985) ATPR ¶40-562; Gardiner v Suttons Motor (Homebush) Pty Ltd (1983) 48 ALR 142; Lyons v Kern Konstructions (Townsville) Pty Ltd (1983) 47 ALR 114; Thompson v Mastertouch TV Services Pty Ltd (No 2) (1977) 29 FLR 270. 227 Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72; John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR ¶41-249; Havyn Pty Ltd v Webster (2005) 220 ALR 211; Bowler v Hilda (1998) 80 FCR 191; Byers v Dorotea Pty Ltd (1987) ATPR ¶40-760; and Stack v Coast Securities No 9 Pty Ltd (1983) 46 ALR 451. 228 Body Bronze International Pty Ltd v Fehcorp Pty Ltd (2011) 34 VR 536 at [49].

120

The Australian Consumer Law

[3.150]

In Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd, Lockhart and Gummow JJ observed: the making of a statement as to a presently existing state of affairs, if false, may be the engaging in misleading or deceptive conduct, where the statement is embodied as a provision of a contract.229

This observation was endorsed by French CJ in Campbell v Backoffice Investments Pty Ltd, who stated: There is no reason in principle why the fact that a false statement is contained in a contractual document thereby takes the use of that statement in the document out of the scope of “misleading or deceptive conduct”.230

Where the promise is about some future matter, assistance may be derived from s 4 of the ACL which is discussed at [3.135]. Where a contractual promise is about some future matter, the mere failure of the promisor to perform the promise will not constitute misleading or deceptive conduct. According to the Full Court in Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd this is because: [T]he non-fulfilment of a promise when the time comes for performance arrives does not of itself establish that the promisor did not intend to perform it when it was made or that the promisor’s intention lacked any, or any adequate, foundation.231

However, the promisor must adduce some evidence that tends to establish reasonable grounds for making the contractual promise to discharge the onus on the promisor and eliminate the operation of the deeming provision in s 4(2) of the ACL. In Digi-Tech (Australia) Ltd v Brand,232 the New South Wales Court of Appeal held that a representation expressed as a belief that projected sales would be achieved or a belief concerning the potential profitability of products did not preclude it from having the character of a representation as to a future matter.233

Expressions of opinion, law and legal rights [3.150]

The early case law on s 52 of the TPA drew a distinction between expressions of fact and expressions of opinion. Having identified the impugned statement as an opinion, the court then inquired into the mental state of the maker of the statement to determine whether the opinion was honestly held, and also whether it was reasonable for the maker of the statement to hold that opinion. In Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd, the Full Court held that:

229 Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 505. 230 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at 322 [35]. 231 Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88. See R V Miller, Australian Competition and Consumer Law Annotated (37 ed, Lawbook Co, Sydney, 2015), [1.S2.18.90]. 232 Digi-Tech (Australia) Ltd v Brand (2004) ATPR (Digest) ¶46-248 (Sheller JA, Ipp JA and McColl JA). 233 Digi-Tech (Australia) Ltd v Brand (2004) ATPR (Digest) ¶46-248 at 54,241 [114]. See also Sydney Harbour Casino Properties Pty Ltd v Coluzzi (2003) ATPR (Digest) ¶46-238 at [24] (Mason P); Ting v Blanche (1993) 118 ALR 543 at 553 (Hill J); Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 514 (Heerey J) and 520-521 (Sundberg J).

[3.150]

3 Misleading or Deceptive Conduct

121

An expression of opinion which is identifiable as such conveys no more than that the opinion expressed is held and perhaps that there is a basis for the opinion. At least if those conditions are met, an expression of opinion, however erroneous, misrepresents nothing.234

Something must have been misleading at the time the statement was made. An expression of opinion may be misleading if it implies a representation of an existing fact which is false. For example, the expression of an opinion may be accompanied by an implied representation that the speaker holds that opinion. In such cases liability for misleading conduct may well arise should that implied representation be false.235 Thus, a reasonable reader of an expression of opinion would expect the person expressing the opinion to have a genuine and reasonable basis for making the statements,236 or that it is based upon appropriate research. For example, in Bateman v Slatyer,237 the respondents’ representations concerning the cash flow of the business being sold to the applicants and their ability to afford it were found to contravene s 52 because no serious attempt had been made to establish a basis for the cash flow projection and the respondents could not have believed that the figures it used were soundly based. Similarly, in Thompson v Ice Creameries of Australia Pty Ltd,238 a representation as to the suitability of a site for the establishment of an ice cream franchise was found to be misleading because there were no reasonable grounds for this opinion. As the speaker held himself out to be a leader in the industry, the representation conveyed not merely that he believed that the site was suitable but that, based on information available to him there were reasonable grounds for that belief. As there were no such grounds, s 52 was contravened. An incorrect statement of law or a statement about legal rights can constitute misleading conduct, but one needs to be cautious about reaching a conclusion that such a representation has been made. In ASIC v Fortescue Metals Group Ltd [No 5],239 the issue was whether Fortescue Metals Group Ltd (“FMG”) and its Chief Executive Officer, Mr Forrest, had contravened s 1041H of the Corporations Act, which prohibits misleading conduct by a person in relation to a financial product or a financial service, by announcing to investors and potential investors in FMG shares in emphatic, unequivocal and unqualified terms that FMG had entered into “binding contracts” with Chinese state-owned entities, when, in fact, the contracts were not legally binding.240 At first instance, Forrest and FMG were successful in 234 Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88. 235 Amadio Pty Ltd v Henderson (1998) 81 FCR 149 at 239 (Macaulay AJA, with whom Harper JA and Hansen JA agreed). 236 Global Sportsman v Mirror Newspapers (1984) 2 FCR 82 at 88; James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 at 372 (Toohey J); Wright v Wheeler Grace & Pierucci Pty Ltd (1988) ATPR ¶40-865 at 49,375-6 (French J); affirmed in Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189; Bateman v Slayter (1987) 71 ALR 553 at 559 (Burchett J). 237 Bateman v Slatyer (1987) 71 ALR 553. 238 Thompson v Ice Creameries of Australia Pty Ltd (1998) ATPR ¶41-611 at 40,693 (Lehane J). 239 ASIC v Fortescue Metals Group Ltd [No 5] (2009) 264 ALR 201, 341 [684] (Gilmour J). 240 Forrest v ASIC (2012) 247 CLR 486. See Humphrey and Corones,“Forrest v ASIC: A Perfect Storm” (2014) 88(1) Australian Law Journal 26.

122

The Australian Consumer Law

[3.150]

the Federal Court,241 but then they lost an appeal by ASIC to the Full Federal Court, which unanimously upheld the appeal.242 On a further appeal, the High Court unanimously found that FMG and Forrest had not engaged in misleading or deceptive conduct.243 French CJ, Gummow, Hayne and Kiefel JJ, in their joint reasons, did not think that the representations conveyed some message about legal enforceability: it is ultimately unprofitable to attempt to classify the statement according to some taxonomy, no matter whether that taxonomy adopts as its relevant classes fact and opinion, fact and law, or some mixture of these classes. It is necessary instead to examine more closely and identify more precisely what it is that the impugned statements conveyed to their audience.244

Heydon J reached the same conclusion as the majority that FMG’s statements were not misleading, but his approach differed from that of the majority. His Honour adopted the fact/opinion distinction. Heydon J considered that the existence of reasonable grounds to support an opinion had come to be expected in the pre-existing case law. Heydon J observed: It is also often said that to state an opinion which one does hold implies that one has reasonable grounds for holding it. In some circumstances that may be so, but why should it be so in all? Assume that two people are asked: “In your opinion, is that document a contract?”, one answers “Yes”, and the other answers “Yes, and I have reasonable grounds for that view”. The two answers are different. The first answer does not imply the second, unless there are special circumstances indicating that it should.245

Heydon J cast doubt on the existence of a requirement that there be any grounds or reasonable grounds for an opinion: As noted above, the case which originated the fact/opinion distinction in this field offered no support for the requirement that there be grounds, let alone reasonable grounds, for an opinion if it were not to be misleading. … The matter calls for examination on some future occasion.246

In some cases the conduct at issue may involve a combination of representations as to present fact, future matters and opinion. Where a business makes false or misleading claims about the past performance characteristics of its product, and predicted rates of future success in a comparative advertising campaign, it will be required to adduce evidence of reasonable grounds if the operation of s 4(2) of the ACL is to be avoided.247

241 ASIC v Fortescue Metals Group Ltd [No 5] (2009) 264 ALR 201. 242 ASIC v Fortescue Metals Group Ltd (2011) 190 FCR 364 at 504 [32]. 243 Forrest v ASIC (2012) 247 CLR 486. 244 Forrest v ASIC (2012) 247 CLR 486 at 505 [33]. 245 Forrest v ASIC (2012) 247 CLR 486 at 525 [102] (citations omitted). 246 Forrest v ASIC (2012) 247 CLR 486 at 525 [103], citing Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88 (Bowen CJ, Lockhart and Fitzgerald JJ). 247 IDP Education Ltd v Lejburg Pty Ltd [2015] VSC 650 at [67] (Judd J).

[3.155]

3 Misleading or Deceptive Conduct

123

Information asymmetry [3.155]

In cases involving information asymmetry, or where representors hold themselves out as having specialist knowledge or expertise, the court may find that a reasonable member of the target audience may conclude that the representation conveyed not merely that the maker believed the claim, but also that there were reasonable grounds for that belief, or, in the case of scientific or medical claims, that there was an adequate scientific or medical basis for the claim. If there is no adequate basis to substantiate the claim it will be found to be misleading.

In ACCC v Safe Breast Imaging Pty Ltd,248 the respondent conducted a breast imaging business using a device known as a multi-frequency electrical impedance mammograph (MEM device). The respondent made a number of representations, including a representation that the MEM device could be used for assessing whether a customer was at risk from breast cancer and the level of that risk (the risk of cancer representation), and that imaging with the MEM device was a substitute for a breast cancer screening mammogram, such as ultrasound and magnetic resonance imaging (the substitute for mammography representation). Barker J found that the risk of cancer representation in the promotional materials “conveyed the representation that the MEM device could provide an adequate scientific basis for assessing whether a customer was at risk from breast cancer and if so, the level of such risk”.249 Similarly, in ACCC v Breast Check Pty Ltd,250 Breast Check published promotional pamphlets stating that its thermography devices for conducting breast imaging could be used for assessing whether a customer was at risk from breast cancer and the level of that risk. The ACCC also alleged that Breast Check’s claim contained representation that there was an adequate scientific basis for using the thermography devices as a substitute for mammography. It was held that Breast Check had contravened s 53(c) of the TPA and s 29(1)(g) of the ACL. Barker J found: In the context of a representation of a medical nature …it would be entirely reasonable for a consumer to conclude that, where a service of a medical nature is being provided, there would be scientific medical evidence of a sufficient quality to support the use of the equipment used to provide such a service and that the use of breast imaging devices would not be promoted in a way as to be contrary to the state of scientific medical knowledge.251

What constitutes an “adequate” basis was considered by Barker J stated: As to the question of the representation conveying that there is an adequate scientific or medical basis, I accept the submission made on behalf of ACCC that the word “adequate” should be taken in the sense by which it is generally understood. In the medical context that is that the service is provided according to evidence based medical knowledge and that there is sufficient support in medical science for the use of the devices for the 248 ACCC v Safe Breast Imaging Pty Ltd (2014) ATPR ¶42-464 (Barker J). 249 ACCC v Safe Breast Imaging Pty Ltd (2014) ATPR ¶42-464 at [68]. 250 ACCC v Breast Check Pty Ltd (2014) ATPR 42-479. 251 ACCC v Breast Check Pty Ltd (2014) ATPR ¶42-479 at [141].

124

The Australian Consumer Law

[3.160]

purposes represented. This is particularly so in the context of assessing whether or not a person may have or be at risk of breast cancer, which is clearly a question of medical science.252

Finally, in ACCC v Homeopathy Plus! Australia Pty Ltd,253 the respondent made representations on its website to the effect that there was a reasonable basis, in the sense of an adequate foundation, to enable it to state that its homeopathic treatments were a safe and effective alternative treatment to the whooping cough vaccine. It was found to have contravened s 18 and s 29(1)(a) of the ACL by representing that its homeopathic treatments were of a particular standard or quality, and s 29(1)(g) of the ACL by representing that its homeopathic treatments had a use or benefit. The court found that there was no reasonable basis, in the sense of an adequate foundation, in medical science to make such a representation. Perry J stated: In line with the lack of published evidence supporting the asserted effectiveness of homeopathic treatments for whooping cough, the consensus based on medical science is that homeopathic treatments are not an effective alternative to the whooping cough vaccine for the prevention of whooping cough.254

In summary, the “real question” in a misleading conduct case is not the “mental state” of the maker of the statement, but the effect of a statement upon its audience – whether the statement is apt to mislead those to whom it is published. This in turn will depend on the knowledge base attributed to a reasonable member of the target audience. However, if the opinion concerns a future matter, the speaker must adduce some evidence that tends to establish reasonable grounds for holding it, in order to eliminate the operation of the deeming provision in s 4(2) of the ACL.

Exclusion clauses [3.160]

An exclusion clause refers to a provision of a contract which purports to exclude or exempt one party from liability for misleading conduct that has already occurred. Such a clause will not normally break the nexus between pre-contractual misleading conduct and the loss or damage suffered as a result of entering into the contract. For many years the courts have consistently recognised that as a matter of public policy, an exclusion clause should not be allowed to defeat the operation of s 18 of the ACL.255

252 ACCC v Breast Check Pty Ltd (2014) ATPR 42-479 at [139]. There is a line of authority that supports this approach. See Global Sportsman v Mirror Newspapers (1984) 2 FCR 82 at 88 (Bowen CJ, Lockhart and Fitzgerald JJ); James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 at 372 (Toohey J); Wright v Wheeler Grace & Pierucci Pty Ltd (1988) ATPR ¶40-865 at 49,375-6 (French J); affirmed in Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189; Bateman v Slayter (1987) 71 ALR 553 at 559 (Burchett J); and Thompson v Ice Creameries of Australia Pty Ltd (1998) ATPR ¶41-611 at 40,693 (Lehane J). Cf Forrest v ASIC (2012) 247 CLR 486 at 525 [103] (Heydon J). 253 ACCC v Homeopathy Plus! Australia Pty Ltd [2014] FCA 1412. 254 ACCC v Homeopathy Plus! Australia Pty Ltd [2014] FCA 1412 at [264]. 255 See Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546 at 561 (Lockhart J); Benlist Pty Ltd v Olivetti Australia Pty Ltd (1990) ATPR ¶41-043 at 51,590 (Burchett J); Burg Design Pty Ltd v Wolki (1999) 162 ALR 639; Bowler v Hilda Pty Ltd (1998) 80 FCR 191 (Heerey J); Warwick Entertainment Centre Pty Ltd v Alpine Holdings Pty Ltd (2005) ALR 134 at 147-8 (Steytler P, with

[3.165]

3 Misleading or Deceptive Conduct

125

However, it may be possible to avoid liability of misleading conduct by means of a declaration of non-reliance. Where one party expressly acknowledges in writing that it has not relied on a representation that was misleading in deciding to enter into a transaction, the courts will take this into account in deciding the question of causation in relation to the cause of action for damages under s 236 of the ACL.256 The issue is considered at [14.75].

PART III: DID THE RESPONDENT’S CONDUCT CAUSE THE ALLEGED ERROR OR MISCONCEPTION? [3.165]

There must be a causal connection between the respondent’s conduct and the applicant’s alleged error or misconception.257 In Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd258 Stephen J held that in order to determine whether there had been a contravention of s 52 of the TPA it was necessary to inquire whether there is a sufficient nexus between the conduct at issue, which may include refraining from doing an act, and the error that was alleged to have arisen. This was approved by a unanimous High Court in Campomar Sociedad Limitada v Nike International Ltd.259 The respondent’s conduct must cause or materially contribute to the applicant’s misapprehension applying, inter alia, the “but for” test of factual causation.260 The issue of whether the conduct caused or contributed to error suffered by the applicant is separate and anterior to the issue of whether the misleading conduct caused the claimed loss or damage said to flow from the misleading conduct as required by s 236 of the ACL. According to the French J (as his Honour then was), in Johnson Tiles Pty Ltd v Esso Australia Ltd: There must be a logical causal connection between the conduct and some hypothesised error. But not every case involving a logical connection between conduct and alleged error will result in the conduct being regarded as misleading or deceptive for the purposes of s 52. There is an evaluative judgment involved. As the Full Court said in SAP Australia Pty Ltd v Sapient Australia Pty Ltd (1999) 169 ALR 1 at 14: The characterisation of conduct as “misleading or deceptive or likely to mislead or deceive” involves a judgment of a notional cause and effect relationship between the conduct and the putative consumer’s state of mind. Implicit in that judgment is a selection process which can reject some causal connections, which, although theoretically open, are too tenuous or impose responsibility otherwise than in accordance with the policy of the legislation. By way of example, it might be said that, strictly speaking, a causal connection exists between conduct and error where the error is based upon erroneous assumption derived whom McLure and Pullin JJA agreed); CH Real Estate Pty Ltd v Jainran Pty Ltd [2010] NSWCA 37 (1 April 2010) (Beazley, Basten and Young JJA). See R V Miller, Australian Competition and Consumer Law Annotated (37th ed, Lawbook Co, Sydney, 2015), [1.S2.18.95]. 256 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at 321 [31] (French CJ). See also IOOF Australia Trustees (NSW) Ltd v Tantipech (1998) 156 ALR 470 at 480. 257 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [26] (French CJ). 258 Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228 (Stephen J). 259 Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 83-4 [98]. 260 Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193 at 209 [67] (McLure P).

126

The Australian Consumer Law

[3.170]

from but not logically justified by the conduct. The conduct will not ordinarily be treated on that account, as misleading or deceptive in such a case.261

In Sutton v A J Thompson Pty Ltd (in liq),262 the Full Federal Court referred to the principles of law relating to the common law action of deceit as expressed by Wilson J in Gould v Vaggelas.263 These, the court held, were equally applicable to breaches of s 52 of the TPA.264 According to the first of these principles, if a representation is false and fraudulent, and the representee does not rely upon it, the representee has no case. The Full Federal Court stated in relation to s 52 of the TPA: Similarly, if a person is so determined to enter into a contract that he is not in truth influenced by some false representation made to him, he clearly has no case.265

The need for a causal connection of this nature means that where the evidence reveals that a statement or representation was made by the respondent it will not contravene s 18 where the applicant’s error or misconception was attributable to: • an erroneous assumption on the part of the applicant;266 or • the applicant relying on representations or conduct of a third party; or • the applicant relying on his or her own assessment of the situation, rather than on the representations or conduct of the respondent.

PART IV: ADVERTISING: GENERAL PRINCIPLES Introduction [3.170]

Misleading advertising can be a major source of consumer detriment. The OECD, in its Consumer Policy Toolkit, defines consumer detriment broadly to include financial detriment and non-financial detriment.267 It may take the form of structural detriment or personal detriment. Structural detriment arises where misleading advertising increases demand for one product over a rival’s product even though it may be inferior to the rival’s product.268 Personal detriment focuses on consumers’ experiences once a product has been purchased, and includes stress and disappointment: The disappointment and the monetary and time losses that a consumer experience after purchasing and using a weight loss product that fails to deliver on its advertised promise 261 Johnson Tiles Pty Ltd v Esso Australia Ltd (2001) ATPR ¶41-794 at [42,547]. 262 Sutton v A J Thompson Pty Ltd (in liq) (1987) ATPR ¶40-789 at 46,607 (Forster, Woodward and Wilcox JJ). 263 Gould v Vaggelas (1984) 56 ALR 31 at 46. 264 Sutton v A J Thompson Pty Ltd (in liq) (1987) ATPR ¶40-789 at 46,606. 265 Sutton v A J Thompson Pty Ltd (in liq) (1987) ATPR ¶40-789 at 46,607. 266 McWilliams Wines Pty Ltd v McDonald’s System of Australia Pty Ltd (1980) 49 FLR 455 at 464 (Smithers, with whom Northrop J generally agreed). See also Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 203-4 (Mason J) and Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 200 (Deane and Fitzgerald JJ). 267 See OECD, Consumer Policy Toolkit, (OECD, Paris, 2010), pp 12 and 52. 268 See Colgate-Palmolive Pty Ltd v Rexona Pty Ltd (1981) ATPR ¶40-242 at 43,185-6.

[3.170]

3 Misleading or Deceptive Conduct

127

are examples of such detriment. In addition to money and time costs, personal detriment includes negative psychological impacts such as stress.269

Advertising has been the subject of action by individual consumers, the ACCC (on behalf of consumers generally) and rivals of the firm advertising to ensure that it was accurate and did not mislead consumers.270 The ACCC has stated that truth in advertising is a current priority enforcement area, “particularly where misleading claims are made by large businesses with the potential to result in significant consumer detriment, or where conduct is likely to become widespread if the ACCC does not intervene”.271 The ACCC has been particularly active in relation credence claims made in food labelling. However, most actions have been initiated by rival firms which face a loss of revenue and market share arising from misleading advertising. The general principles for determining when an advertisement is misleading or deceptive in contravention of s 18 of the ACL are set out at [3.60]-[3.165]. Of particular importance is the principle that each case needs to be determined on its own particular facts and context, so that decisions reached in similar cases in the past can only ever provide guidance and cannot determine the outcome of a new case.272 In relation to advertisements the courts pay particular attention to the following matters: • the attributes of the target audience; • the need to consider the entirety of the advertisement rather than considering some words in isolation; • the nature of the product being promoted; • the medium used to convey the advertisement; and • any qualifying statements or disclaimers. The general principles to be applied in the context of advertising are usefully summarised by Judd J in IDP Education Ltd v Lejburg Pty Ltd: Conduct is misleading or deceptive if it has a tendency to lead into error, although there must be a sufficient causal link between the conduct and the error on the part of the relevant class exposed to the conduct. Consideration of conduct under inquiry should not involve a dissection, or line by line analysis. The conduct should be considered as a whole, in its proper context. Context will include the market to which the conduct is directed, the nature of the product being promoted and the characteristics of those in the particular market to whom the promotion is directed. Regard must also be had to qualifying statements, disclaimers or explanations. 269 OECD, Consumer Policy Toolkit, (OECD, Paris, 2010), p 53. 270 See R V Miller, Australian Competition and Consumer Law Annotated (37th ed, Lawbook Co, Sydney, 2015), [1.S2.18.155]-[1.S2.18.205]. 271 See ACCC Compliance and Enforcement Policy (February 2015), p 4. 272 See, eg, ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 (Gyles J); Singtel Optus Pty Ltd v Telstra Corp Ltd [2004] FCA 859; ACCC v Commonwealth Bank of Australia (2003) 133 FCR 149; Cassidy v Medical Benefits Fund of Australia Ltd (2002) ATPR ¶41-892 (Hill J); on appeal, Medical Benefits Fund of Australia Ltd v Cassidy (2003) 205 ALR 402 (Stone J with whom Moore and Mansfield JJ agreed); and ACCC v Target Australia Pty Ltd (2001) ATPR ¶41-840 (Lee J).

128

The Australian Consumer Law

[3.175]

A contravention of ss 18 or 29 of the Australian Consumer Law does not depend upon the intention or belief concerning the accuracy of the facts stated, but upon whether the statement conveys a meaning that is false or misleading. When the impugned conduct involves statements made in a public forum, such as the internet, regard must be had to the effect of the statements or representations on ordinary or reasonable members of the class of prospective purchasers. The dominant message of promotional or advertising material will be of crucial importance. The advertising or promotional material must be considered as a whole, rather than straining at the meaning of critical words and phrases. The first impression conveyed by promotional material is often that which creates the greatest impact on the member of the class to which it is directed.273

Because most advertising is directed at the public at large or a particular segment or group of the public, the test of what is misleading or likely to mislead is an objective one for the court, the outcome will depend first, on the characteristics or attributes of the target audience at whom the advertisement was directed; and secondly, on the views of the particular judge as to how an ordinary, reasonable member of the class is likely to respond to the advertisement. As a result, an advertisement which may be misleading or deceptive when directed towards one audience may not be so were it directed towards another. This can give rise to legitimate differences of opinion, as Gyles J observed in ACCC v Telstra Corporation Ltd: Reading the numerous cases in this field makes it perfectly apparent that individual judges vary considerably in their assessments of the effect of advertising. Some take a robust view and credit consumers with a fair amount of cynicism about advertisements and a fair amount of ability to make their own judgments. Others are convinced of the power of advertisements and are protective of the consumer. Neither side is right or wrong – it is a matter of opinion.274

Knowledge base of the target audience [3.175]

Advertisements are directed at the public generally or a segment of the public that acquires the particular goods or services being advertised. As a first step, it will be necessary to determine the knowledge base of the class of consumers at whom it is directed. This will involve considering such matters as their age, geographical location, sophistication, unusual predilections (if any) and familiarity with the subject. Generally speaking, higher standards of accuracy are expected in connection with advertisements directed towards unsophisticated or impressionable audiences such as children or teenagers.

For example, in M K Hutchence (Trading as INXS) v South Sea Bubble Co,275 applicants were members of a pop group known as INXS. As well as performing, they also merchandised goods, including T-shirts, using their name. The respondents manufactured and sold T-shirts which were copied from those authorised by the applicants. A small sign at the stalls selling these products indicated that they were 273 IDP Education Ltd v Lejburg Pty Ltd [2015] VSC 650 at [56]-[59] (citations omitted). 274 ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 at 475-6. 275 M K Hutchence (Trading as “INXS”) v South Sea Bubble Co (1986) ATPR ¶40-667.

[3.175]

3 Misleading or Deceptive Conduct

129

not authorised. The applicants sought orders restraining the respondents from dealing with these T-shirts on the ground, inter alia, that their conduct contravened s 52 of the TPA. In identifying the target audience, Wilcox J held: In the present case the section of the public likely to be affected by the sale of T-shirts bearing the names of, or symbols relating to, INXS is the body of people who enjoy the music of that group: the people who attend their concerts, purchase their records and/or listen to their music on the radio or on television. Bearing in mind the notorious fact that the proportion of persons in any given age group who are rock enthusiasts tends to diminish with increasing age, it is reasonable to assume that a major proportion of INXS followers are teenagers or persons in their twenties. There is no reason to assume otherwise than that, in intelligence and educational attainments, INXS followers will represent a fair cross-section of the community.276

Advertising directed at a smaller, professional target audience arose for consideration in Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd.277 The advertisements and flyers were placed in Australian Doctor, a professional publication directed at general medical practitioners by Glaxo to promote the prescription by general practitioners of Glaxo’s drug, “Seretide”. Glaxo claimed that virtually all or a majority of asthma patients would achieve total control of their symptoms if Seretide was prescribed. The flyers and the advertisements were headed, “Seretide TOTAL CONTROL*”. The asterisk, referred to the findings of “The Gaining Optimal Asthma Control Study” (GOAL study), according to which, only 41% of patients achieved total control and 71% achieved substantial relief from using Seretide. The appellant, another pharmaceutical company, took exception to the representations made in the advertisements. The primary judge dismissed the appellant’s application. The appellant argued that the references to the GOAL study were deficient in that they failed to point out that the GOAL study did not include patients with significant concomitant diseases, smokers and patients below 12 years of age. The Full Court held that the representations contained in the advertisements and flyers were not made to identified individuals, nor were they made to the public at large.278 The section of the community towards whom the conduct had been directed was the community of general practitioners throughout Australia: The task of the Court is to determine whether any misconceptions or deceptions alleged to arise or to be likely to arise from the conduct complained of are properly to be attributed to the ordinary or reasonable members of the section of the community towards whom the conduct has been directed. The Court may disregard assumptions drawn by persons to whom the conduct is directed, where those assumptions or their reactions are extreme or fanciful …279

“Seretide TOTAL CONTROL” was nothing more than an alternative brand name and the elucidator was effective to clarify the extent of the control that was 276 M K Hutchence (Trading as “INXS”) v South Sea Bubble Co (1986) ATPR ¶40-667 at 47,376-7. 277 Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106. 278 Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106 at [35] (Wilcox, Bennett and Graham JJ). 279 Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106 at [37].

130

The Australian Consumer Law

[3.180]

achievable using Seretide. After carefully considering each of advertisements and flyers in their entirety, the Full Court agreed with the primary judge that they were not misleading. None of the advertisements or flyers represented that the GOAL study patients were representative of the community at large; the footnotes clearly indicated that the study was based on the observations of “3,416 patients with uncontrolled asthma” and no more.280

Puffery or exaggeration in advertising [3.180]

“Puffery” refers to exaggeration in the course of advertising with a view to attracting customers. Section 18 of the ACL does not prohibit the expression of exaggerated opinions, or the making of grandiose claims in advertising, where the audience to whom they are addressed could not reasonably be misled by them. Thus, in Stuart Alexander & Co (Interstate) Pty Ltd v Blenders Pty Ltd, Lockhart J said: a robust approach is called for when determining whether television commercials of this kind are false, misleading or deceptive. The public is accustomed to the puffing of products in advertising.281

However, the courts will carefully scrutinise claims based on “puffery”. If the representation is one of specific fact that is false, it will not be dismissed as puffery. In Eveready Australia Pty Ltd v Gillette Australia Pty Ltd, Lindgren J found: the words “lasts up to four times longer” hold out to the viewer that Duracell batteries do offer a meaningful advantage over competing brands. The specificity of those words is inconsistent with the nature of advertising puff. To my mind it is misleading and deceptive to appear to a reasonable television viewer to be saying something meaningful on which the viewer is invited to rely as a basis for action….282

Medium used to convey the advertisement [3.185]

Corporations advertise their goods and services on the radio and television, in newspapers and in brochures distributed to clients and prospective clients and more recently, on social media sites. Questions sometimes arise as to whether any significance should be placed on the choice of medium. In ACCC v TPG Internet Pty Ltd,283 the High Court emphasised the importance of the context in which the advertisements were broadcast and contrasted it with the context in which the alleged misleading conduct arose in Parkdale v Puxu. The High Court majority stated: TPG’s target audience did not consist of potential purchasers focused on the subject matter of their purchase in the calm of the showroom to which they had come with a substantial purchase in mind. Here, the advertisements were an unbidden intrusion on the consciousness of the target audience. … [W]hile the attention of the audience might have been arrested, it cannot have been expected to pay close attention to the advertisement …284 280 Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106 at [48]. 281 Stuart Alexander & Co (Interstate) Pty Ltd v Blenders Pty Ltd (1981) 53 FLR 307 at 311. See also Lymquartz v 2 Elizabeth Bay Road [2007] NSWSC 457 at [183] (Biscoe AJ). 282 Eveready Australia Pty Ltd v Gillette Australia Pty Ltd (2000) ATPR ¶41-751 at 40,694. 283 ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640. 284 ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 at 654 [47] (French CJ, Crennan, Bell and Keane JJ).

[3.185]

3 Misleading or Deceptive Conduct

131

A distinction is drawn between radio, television and cinema advertisements which are fleeting or ephemeral forms of advertising, and newspapers, magazines and brochures which are static forms of advertising and allow for a more considered approach to understanding the representations contained in the advertisements. A distinction is also made between static forms of advertising and internet advertising. In ACCC v Jetstar Airways Pty Ltd,285 Foster J found that the impugned conduct was not the same as advertising in print and radio and television broadcasts, and that the relevant target audience was not the public at large as the ACCC contended, but a narrower class consisting of members of the public who had internet access and possessed some level of knowledge and experience in navigating the internet and using online booking services, including an understanding of the use of hyperlinks to navigate particular websites.286 This finding was crucial to his Honour’s ultimate finding that, while in the case of Jetstar the website representations in May 2013 were misleading and contrary to ACL, ss 18 and 29(1)(i),287 the disclosures made in 2014 were adequate and not false or misleading.288 Prior to the High Court’s decision in ACCC v TPG, the significance of the medium used to convey the advertisement was considered by the Full Federal Court in Medical Benefits Fund of Australia Ltd v Cassidy.289 MBF commissioned an advertising agency to produce a series of television, print and railway billboard advertisements for its private health insurance products. The advertisements presented the image of a pregnant woman and contained a representation that MBF would waive private health insurance waiting periods. In the television advertisements the following statement appeared at the bottom of the screen for less than five seconds: “12 month waiting periods such as pre-existing conditions and obstetrics still apply”. The Full Federal Court held: Even an astute and observant viewer may not have had sufficient time to peruse the fine print with sufficient care to notice the qualification and it is not unlikely that even a reasonably careful viewer might have been misled … the disproportion in both the television and billboard advertisements between the dominant representations and the qualification of those representations was such that the qualification was insufficient to draw the attention of prospective customers to the fact that a waiting period applied for obstetrics claims. It is the entire effect, particularly the first impression, that makes the advertisements misleading.290

However, it was held that the print advertisements were not misleading as the qualifying statement could more readily be viewed in that context. In ACCC v Telstra Corporation Ltd,291 Telstra placed various advertisements using the expression “$0*” and “$0 upfront” to promote the sale of handsets and mobile 285 ACCC v Jetstar Airways Pty Ltd [2015] FCA 1263. 286 ACCC v Jetstar Airways Pty Ltd [2015] FCA 1263 at [168]. 287 ACCC v Jetstar Airways Pty Ltd [2015] FCA 1263 at [181]. 288 ACCC v Jetstar Airways Pty Ltd [2015] FCA 1263 at [186]. 289 Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at 17 [36]-[37]. 290 Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at 18 [40]-[41]. 291 ACCC v Telstra Corporation Ltd (2004) 208 ALR 459.

132

The Australian Consumer Law

[3.185]

telephone services in newspapers and brochures. Particular handsets that a subscriber might acquire under the Phone Option were promoted in the brochure with the expression “$0*” displayed prominently alongside a picture of each. The asterisk (*) symbol referred to additional information displayed in fine print in a footnote at the bottom of each relevant page. The ACCC alleged that these expressions contravened ss 52 and 53(a) and (g) of the TPA with respect to the price of the relevant handset, because it amounted to a representation that the handset could be obtained at no extra cost. Gyles J concluded that the expression “$0*” was misleading because the telephone service could be obtained without the mobile phone for significantly less than the ultimate cost of the bundled price, so an amount must have been attributed to the handset.292 On the other hand, the expression “$0 upfront” was not misleading as the plan did not require an initial payment.293 As regards the significance of the medium used to advertise the handset and telephony services, his Honour observed: The newspaper advertisement and the brochure are different media and, to an extent, would be read differently. The newspaper advertisement would have a wider and more random circulation and would tend to be more ephemeral. It would tend to catch the eye and raise interest rather than lead to a decision as to purchase. The brochure would be more likely to be picked up and read by those with a closer interest in acquiring a phone and closer to the time of making a decision. It is more likely to be taken away and read with some care.294

The significance of the medium used to display the advertisement was also considered by Perram J in ACCC v Singtel Optus Pty Ltd (No 1).295 In that case, the advertising campaign was conducted using five different media: television, online, metropolitan and local newspapers, billboards, and direct marketing with flyers. Perram J observed: Each form of medium, of course, presents its own subtleties in terms of gauging whether an advertisement is misleading or not. Less attention is generally paid by the public to a billboard commercial than to a television commercial and that kind of commercial, in turn, generally receives less attention from consumers than do some online commercials. These general observations have some truth, however, only because people do not stare at computer screens in quite the same way in which they stare at television screens and also because most people do not stare at billboards at all. Generalisations in this field are, however, difficult to justify because the nature of any particular advertisement is such a significant variable in the calculus of deception. Some television commercials are quite transfixing and, by the same token, many online advertisements are tedious and are readily ended with a simple click. The central principle is that each advertisement must be considered in the context of the medium in which it is expressed taking full cognisance of the different consumer experiences arising with different media. Much beyond that it is difficult to go.296 292 ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 at [54]. 293 ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 at [54]. 294 ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 at [52]. 295 ACCC v Singtel Optus Pty Ltd (No 1) [2010] FCA 1177 (29 October 2010). 296 ACCC v Singtel Optus Pty Ltd (No 1) [2010] FCA 1177 at [5].

[3.190]

3 Misleading or Deceptive Conduct

133

Qualifying statements and small print disclaimers [3.190]

Where an advertisement consists of a dominant message in a bold headline statement with a small print footnote that attempts to disclaim, limit, or qualify the dominant message the courts adopt a two-stage approach in assessing whether there is a real rather than a remote chance that a reasonable member of the target audience will be led into error.297 The first stage is to identify what representations are made by the advertisement in its dominant message to the intended audience. The second stage is to determine whether the corrective information was sufficiently prominent to dispel the false dominant message. Accurate information in a footnote may not remedy a false headline statement because a reasonable consumer may glance only at the headline. The issue in ACCC v TPG298 was the effectiveness of small print elucidators to clarify a bold headline statement in a television advertisement. This will depend on the all the surrounding circumstances but especially the medium used to convey the advertisement, and whether it allows a reasonable member of the target audience the opportunity to carefully consider the advertisement in its entirety. The ACCC was successful in the Federal Court at first instance, with the primary judge finding that an ordinary or reasonable member of the target audience would not have assumed that ADSL2+ services were bundled when this was not immediately apparent, and that the “dominant message” of the advertisements was that the entire cost of the service was only $29.99 per month.299 The ACCC lost an appeal by TPG Internet Pty Ltd (“TPG”) to the Full Federal Court. The Full Federal Court held that a reasonable consumer would have read the advertisement in its entirety, not just the dominant message, and that the bundling condition could not have been missed except on a “perfunctory” viewing or listening.300 The High Court majority upheld the ACCC’s appeal and agreed with the primary judge that TPG’s advertising stratagems were misleading.301 The Full Court (Jacobson, Bennett and Gilmour JJ) rejected the primary judge’s two-stage approach of first identifying the dominant message and then examining whether the corrective information was effective to dispel the misleading dominant 297 See ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 at [20], [40] and [45] (French CJ, Crennan, Bell and Keane JJ); ACCC v Signature Security Group Pty Ltd (2003) ATPR ¶41-908 at 46 538-9 [26]-[27] (Stone J); Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at 17-18 [35]-[39] (Stone J), with whom Mansfield J agreed: at 11 [17]. Both of these cases are authority for the principle that the qualifying material must be sufficiently prominent or conspicuous to prevent the headline statement from being misleading. See also ACCC v Telstra (2004) 208 ALR 459, 475-8 [49]-[62] (Gyles J); ACCC v Singtel Optus Pty Ltd [2010] FCA 1177 (29 October 2010) at [28][29] (Perram J); National Exchange v ASIC (2004) ATPR ¶42-000 at 48 724–5 [48]-[59] (Jacobson and Bennett JJ); ACCC v Panasonic Australia Pty Ltd (2010) 269 ALR 622, 631-4 [43]-[58], where Mansfield J held that it was misleading to publish promotional material informing the purchasers of television sets that they would receive a “Bonus Wii”, but failed to convey the fact that matters outside the control of the purchaser (such as the delivery time for televisions paid for at a retail store) could disqualify the purchaser from receiving the Bonus Wii. 298 ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640. 299 ACCC v TPG Internet Pty Ltd (2011) ATPR ¶42-383. 300 TPG Internet Pty Ltd v ACCC (2012) 210 FCR 277. 301 ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640.

134

The Australian Consumer Law

[3.190]

message. In their joint reasons, their Honours stated that there was only one question, and that was “whether … the ordinary or reasonable consumer would be led into error by the advertisements, read or viewed as a whole, in their full context”.302 The High Court majority (French CJ, Crennan, Bell and Keane JJ) held that the Full Court erred in two respects: first, the Full Court erred in holding that the primary judge was wrong to place importance on the dominant message of the advertisements; and secondly, the Full Court erred in considering that the tendency of TPG’s advertisements to mislead was neutralised by the Full Court’s attribution of a higher level of knowledge to members of the target audience that TPG’s ADSL2+ services were being offered as part of a bundle.303 The High Court majority concluded that even with this higher attributed level of knowledge of the bundling method of sale, TPG’s advertisements still had a tendency to mislead because the target audience was “left only with the general thrust or dominant message”.304 The High Court majority accepted that viewers cannot realistically be expected to absorb and digest the small print in cases involving bold headline statements of attractive prices, especially in television advertisements where the opportunity to do so is fleeting. The High Court majority observed: As the primary judge said, the vice of TPG’s advertisements was that they required “consumers to find their way through to the truth past advertising stratagems which have the effect of misleading or being likely to mislead them”.305

The High Court held that TPG intended to emphasise the most attractive component of its offer and to downplay the less attractive components, rather than give equal prominence to each component of the package. In such circumstances it may properly be inferred that the advertisement had the effect of leaving the target audience with the general thrust or dominant message.306 In the case of fleeting or ephemeral advertisements as opposed to static advertisements, it is necessary to consider the dominant message in the context of the advertisement as a whole. Unless the advertiser gives equal prominence to the less attractive features of the advertised product, a court is likely to infer that the advertisement had the effect of leaving a reasonable member of the target audience with the general thrust or dominant message. In ACCC v Hillside (Australia New Media) Pty Ltd (t/as Bet365),307 Beach J found that Bet365’s Australian and United Kingdom companies, Hillside (Australia New Media) and Hillside (Shared Services) engaged in misleading conduct concerning promotions relating to “Free Bets” for new customers as part of an internet advertising campaign. The dominant message contained in the promotional offer on its homepage (http:// 302 TPG Internet Pty Ltd v ACCC (2012) 210 FCR 277 at 289 [100]; see also at 289 [103]. 303 ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 [45]. 304 ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 [53]. 305 ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 at [54], quoting ACCC v TPG Internet Pty Ltd (2011) ATPR ¶42-383 at 44 697 [116] (Murphy J). 306 ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 at [55] and [57] (citations omitted). 307 ACCC v Hillside (Australia New Media) Pty Ltd (t/as Bet365) [2015] FCA 1007.

[3.195]

3 Misleading or Deceptive Conduct

135

www.bet365.com.au) stated “$200 FREE BETS FOR NEW CUSTOMERS”. However, there were important conditions that qualified the dominant message, including that the customer had to pay a deposit and risk that deposit before being entitled to make a “free” bet and that the customer had to risk the value of their deposit and the amount of the “free” bet three times prior to making a withdrawal. These conditions were not displayed on the webpage containing the promotional offer. Beach J found that the digital pathway to the terms and conditions was “complicated and problematic”.308 The use of a small print qualifier in a static advertisement was at issue in George Weston Foods Ltd v Goodman Fielder Ltd.309 Bread packaging declared in large typeface: “Now Twice the Fibre*”. As regards the target audience, Moore J concluded: The broadest description of the class is consumers of bread. However, in my opinion, the relevant class can more appropriately be described as consumers of bread who have some interest in the fibre content of bread.310

Moore J held that an asterisk can be sufficient to draw the attention of a consumer to a qualification of a representation. Moore J observed that the asterisk was prominent and would have been taken to signify some qualification or explanation of the words used. One could expect a consumer interested in fibre content to seek out the qualification or explanation. Not only was the explanation within 2 cm of the words on the package (albeit in much smaller type) but it was repeated elsewhere on the packaging.311

Advertising on social media sites [3.195]

Corporations may also provide information about their goods and services by means of posts on their website, Facebook and Twitter pages. The provisions relating to misleading or deceptive conduct impose strict liability. An aspect of strict liability is that a corporation that fails to remove misleading comments from its website, Facebook, or Twitter page will be liable for a contravention of s 18 of the ACL.

In ACCC v Allergy Pathway Pty Ltd (No 2),312 Finkelstein J held that Allergy Pathway was responsible for Facebook and Twitter comments by fans on its account in breach of an undertaking not to make misleading claims about its allergy treatments. His Honour concluded: While it cannot be said that Allergy Pathway was responsible for the initial publication of the testimonials (the original publisher was the third party who posted the testimonials on Allergy Pathway’s Twitter and Facebook pages) it is appropriate to conclude that Allergy Pathway accepted responsibility for the publications when it knew of the publications and decided not to remove them. Hence it became the publisher of the testimonials. In any event it is clear that it caused them to continue to be published from 308 ACCC v Hillside (Australia New Media) Pty Ltd (t/as Bet365) [2015] FCA 1007 at [101]. 309 George Weston Foods Ltd v Goodman Fielder Ltd (2000) 49 IPR 553. 310 George Weston Foods Ltd v Goodman Fielder Ltd (2000) 49 IPR 553 568 [37]. 311 George Weston Foods Ltd v Goodman Fielder Ltd (2000) 49 IPR 553 at 571-2 [46]. 312 ACCC v Allergy Pathway Pty Ltd (No 2) (2011) 192 FCR 34.

136

The Australian Consumer Law

[3.200]

the time when it became aware of their existence, which is enough to put Allergy Pathway in breach of the second limb of its undertaking.313 (emphasis added)

The test adopted by Finkelstein J has two elements. Suppliers of goods and services that have Facebook and Twitter pages will incur primary or accessorial liability when they have actual knowledge of the publications on their Facebook and Twitter pages and they decide not to remove them. This does not mean that they can avoid liability by keeping themselves in a state of ignorance. Where a person wilfully turns a blind eye, or deliberately abstains from asking questions or making enquiries, they may be held to have actual knowledge sufficient to attract accessorial liability.314 Actual knowledge may be inferred from a combination of suspicious circumstances and a failure to make inquiry.315 Accordingly, corporations should pre-monitor comments left by third party users of their Facebook and Twitter pages to ensure that they comply with the ACL before they are posted.

Assessing the advertisement [3.200]

Having identified the target audience, the effect of the advertisement must be assessed having regard to the reactions of an ordinary, reasonable member of the target audience, not those of persons whose reactions are extreme or fanciful.

For example, in ACCC v Singtel Optus Pty Ltd (No 1),316 Optus advertised its internet broadband plans and represented that for a monthly payment, a consumer would receive an overall cap or quota data allowance of broadband which was then split into two allowances: a peak allowance (midday to midnight) and an off-peak allowance (midnight to midday). The “headline” claim was accompanied by a disclaimer in smaller or less prominent print noting “Speed limited once peak data exceeded”. The ACCC alleged that Optus had not sufficiently disclosed that the service would be speed limited once consumers exceeded their peak data allowance. The target audience was held to be the general public with a need or desire for broadband internet access. The trial judge, Perram J, held that in 2010 consumers must be taken to have a certain degree of background knowledge of internet usage; to understand that broadband plans have usage limits and that when those limits are exceeded considerable inconvenience is likely to result.317 In assessing the likely impact of the advertisement on a reasonable member of the target audience, Perram J found that Optus had contravened s 52 of the TPA: I accept that a careful reading of the small print disclaimer at the bottom of the page, “Speed limited once peak data exceeded”, and some meditation upon the full import of that statement would lead sophisticated persons to deduce that the 150GB was not the total of two distinct usage allowances but in fact a theoretical maximum which could be 313 ACCC v Allergy Pathway Pty Ltd (No 2) (2011) 192 FCR 34 at [33]. 314 See the discussion of this issue in the judgment of Stone J in Medical Benefits Fund of Australia Ltd v Cassidy; John Bevins Pty Ltd v Cassidy (2003) 135 FCR 1 at 84-93.See also ACCC v IMB Group Ltd [2003] FCAFC 17 at [135] (Cooper, Kiefel, and Emmett JJ) and Keller v LED Technologies Pty Ltd (2010) 185 FCR 449 at [335]-[336] (Besanko J). 315 Pereira v Director of Public Prosecutions (1988) 82 ALR 217 at 219-220 (Mason CJ, Deane, Dawson, Toohey and Gaudron JJ). 316 ACCC v Singtel Optus Pty Ltd (No 1) [2010] FCA 117 (29 October 2010). 317 ACCC v Singtel Optus Pty Ltd (No. 1) [2010] FCA 117 at [28].

[3.205]

3 Misleading or Deceptive Conduct

137

obtained only by using the 75GB off-peak allowance in full before exhausting the 75GB peak allowance. But that is not what an ordinary person reading it would have understood.318 (emphasis added)

A pecuniary penalty of $5.26 million was imposed,319 which was reduced on appeal by the Full Federal Court to $3.61 million.320

Comparative advertising [3.205]

Comparative advertising is a form of advertising whereby a firm seeks to promote sales of its products by comparing them favourably with a rival products, or by denigrating a rival products in some way. In Gillette Australia Pty Ltd v Energizer Australia Pty Ltd, Heerey J observed: The characterisation of advertising as comparative does not of itself have legal significance, or create any kind of presumption in favour of a party alleging a breach of Pt V of the TPA. There is no basis in the TPA for regarding comparative advertising as an inherently disreputable form of commercial conduct, to be viewed with suspicion by the courts. On the contrary, to the extent that comparative advertising provides consumers with accurate hard facts about competing products, it assists in the making of better informed consumer choices and thereby results in more effective competition.321

Nevertheless, advertisers using this form of advertising would be well advised to take special care to ensure that the representations they make are accurate and that there is no real chance they are likely to mislead ordinary consumers.322 As with other forms of advertising, it is necessary to consider the scope of the representations that are being made, the audience to whom they are being conveyed, and the likely effect the representations will have on an ordinary, reasonable member of the target audience. For example, in Telstra Corporation Ltd v Singtel Optus Pty Ltd,323 Optus conducted a comparative advertising campaign in relation to its 3G and 4G mobile networks in which it represented that: “When it comes to the percentage of Australians the Optus mobile network reaches, there isn’t much difference between us and Telstra. In fact, it’s less than 1%.” Optus contended that a hypothetical ordinary or reasonable member of the target audience would know that the representations made concerning 98.5% and 99.3% coverage could not possibly relate to geographic coverage. Elliott J of the Supreme Court of Victoria found that Optus’ advertising campaign contravened ACL, s 18 and 29(1)(b) and (g). It misled consumers on the 318 ACCC v Singtel Optus Pty Ltd (No. 1) [2010] FCA 117 at [25]. 319 ACCC v Singtel Optus Pty Ltd (No 4) (2011) 282 ALR 246. 320 Singtel Optus Pty Ltd v ACCC (2012) 287 ALR 249. 321 Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (2002) 193 ALR 629 at [20]. See also Specsavers Pty Ltd v The Optical Superstore Pty Ltd (No 2) [2010] FCA 566 at [1], where Katzmann J stated: “provided it is accurate and does not involve half-truths, it promotes competition and helps consumers make informed choices”. 322 See, for example, Hoover (Australia) Pty Ltd v Email Ltd (1991) 104 ALR 369 at 375.4 (Gummow J), referring with approval to Duracell Australia Pty Ltd v Union Carbide Australia Ltd (1988) ATPR ¶40-918 at 49,861.8 col 1 (Burchett J); see also Stuart Alexander & Co (Interstate) Pty Ltd v Blenders Pty Ltd (1981) 37 ALR 161 at 163.9 (Lockhart J). 323 Telstra Corporation Ltd v Singtel Optus Pty Ltd [2014] VSC 35.

138

The Australian Consumer Law

[3.205]

extent of its network coverage on the basis that it misrepresented the geographical coverage of Optus’ mobile network and the comparative coverage of the two networks. In reaching that conclusion, Elliott J held that an ordinary or reasonable person in the target audience would be likely to “accept the Representations at face value”,324 and gave weight to the fact that the advertisement was “part of a deliberate advertising strategy that was calculated to benefit Optus’ business”.325 Finally, the fact that the advertisement was a television commercial, a medium that did not allow a reasonable member of the target audience the opportunity to carefully consider the advertisement, meant that it was likely to mislead.326 Elliott J held: it is irrefutable that a key component of the Advertisement is the focus upon the Geographic Coverage of the Optus mobile network and the comparison with the Telstra mobile network. This aspect of the Advertisement provides the platform upon which Optus seeks to make it attractive to “switch” and enter into the deals that are being offered.327

On the other hand, in Samsung Electronics Australia Pty Ltd v LG Electronics Pty Ltd,328 Samsung used a form of 3D technology known as “active shutter” technology. In April 2011, LG produced 3D televisions which operated using a different form of technology known as “passive technology”. Samsung alleged that LG produced a television commercial which represented that the shuttering effect of active shutter technology caused discomfort and interfered with the viewing experience, and in doing so was misleading or deceptive, in contravention of s 18 of the ACL. The television commercial featured a man in a “lab coat” dressed up as a scientist or technician conducting a “3D TV test” which was “in the nature of a comical and exaggerated comparison of different types of 3D television technology”.329 Nicholas J found that although the material conveyed technical information that would normally be taken seriously by viewers, the humorous style was a contextual matter that had to be borne in mind when determining whether reasonable viewers would make significant allowance for what was readily discernible as exaggeration and parody.330 However, his Honour found certain representations made by LG relating to specific technical features contravened the ACL.

324 Telstra Corporation Ltd v Singtel Optus Pty Ltd [2014] VSC 35 at [72]. 325 Telstra Corporation Ltd v Singtel Optus Pty Ltd [2014] VSC 35 at [53]. See the role of intention at [3.70]. 326 Telstra Corporation Ltd v Singtel Optus Pty Ltd [2014] VSC 35 at [73]. See the medium used to convey the advertisement at [3.185]. 327 Telstra Corporation Ltd v Singtel Optus Pty Ltd [2014] VSC 35 at [93]. 328 Samsung Electronics Australia Pty Ltd v LG Electronics Pty Ltd [2015] FCA 227. 329 Samsung Electronics Australia Pty Ltd v LG Electronics Pty Ltd [2015] FCA 227 at [88]. 330 Samsung Electronics Australia Pty Ltd v LG Electronics Pty Ltd [2015] FCA 227 at [94].

[3.215]

3 Misleading or Deceptive Conduct

139

PART V: MISLEADING CONDUCT AND PASSING-OFF Introduction Section 52 of the TPA was intended to protect consumers,331 however, early in the life of s 52 of the TPA it was held that businesses could also take advantage of the general protection provided by it.332 Businesses have made considerable use of s 52 of the TPA and s 18 of the ACL in order to protect their business goodwill, and incidentally to protect consumers from being misled as to the source or origin of goods and services. The common law action of passing off is intended to protect business goodwill, while s 18 of the ACL is designed primarily to protect consumers.333 The two causes of action are separate and require separate analysis, however, they will frequently be pleaded together. In order to succeed in each cause of action the applicant must establish an adequate reputation in its name or logo or the design features of its product.334

[3.210]

Choice of name [3.215]

Sometimes businesses use, as a part, or all, of their name, words that describe the nature of the business, or adopt a get-up that is confusingly similar to that of another existing business. In such cases, the central issue is whether the words used, while descriptive of the business, have also acquired a meaning that identifies the existing business in the eyes of consumers so as to make it misleading for another firm to adopt them. In Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd,335 the Sydney Building Information Centre (Sydney) conducted an information centre in Sydney. At this Centre, building products and techniques were displayed, without charge, to members of the public. Sydney derived its revenue from the exhibitors who displayed their products. It was the only business of this kind. In 1975 the Hornsby Building Information Centre commenced a similar business in the Sydney suburb of Hornsby. Sydney then brought proceedings in the Australian Industrial Court (the court then having jurisdiction over trade practices matters) seeking an injunction restraining Hornsby from conducting its business under its corporate name. It argued that this conduct contravened s 52 because it would

331 Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at [108] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ). 332 Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 223-6 (Stephen J); Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197-8 (Gibbs CJ) and 202-5 (Mason J); Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 601-2 (Mason CJ, Deane, Dawson and Gaudron JJ); 606-7 (Brennan J). 333 Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at [108] and [109] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ); Con Agra Inc v McCain Foods (Aust Pty Ltd (1992) 33 FCR 302 at 355-6 (Gummow J); Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 159 FCR 397 at [97]-[98]. 334 See R V Miller, Australian Competition and Consumer Law Annotated (37th ed, Lawbook Co, Sydney, 2015), [1.S2.18.495]-[1.S2.18.575]. 335 Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216.

140

The Australian Consumer Law

[3.215]

mislead or deceive others into believing that Hornsby was associated in some way with Sydney. An interim injunction was issued against Hornsby from which it appealed to the High Court. The High Court held: There is a price to be paid for the advantages flowing from the possession of an eloquently descriptive trade name. Because it is descriptive it is equally applicable to any business of a like kind, its very descriptiveness ensures that it is not distinctive of any particular business and hence its application to other like businesses will not ordinarily mislead the public. In cases of passing off, where it is the wrongful appropriation of the reputation of another or that of his goods that is in question, a plaintiff which uses descriptive words in its trade name will find that quite small differences in a competitor’s trade name will render the latter more immune from action.336

Sometimes generic or descriptive words can acquire a secondary meaning, or product features can acquire a secondary meaning with a sufficient number of consumers, such that if the words are copied or the features are copied by a competitor they may give rise to an action for passing off and/or an action based on a contravention of ACL, s 18. For example, in S & I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd,337 the appellant, S&I Publishing Pty Ltd (S&I) commenced publishing Triathlon & Multi Sport Magazine. The respondent, who published Triathlon Sports, sought to restrain S&I from selling or distributing the new magazine in its current format on the ground that, inter alia, doing so contravened s 52 of the TPA. The respondent succeeded at first instance and S&I appealed to the Full Court. The Full Court held: It is difficult to see how the name of a sport on its own could ever become distinctive of particular products of a person. No such suggestion is directly made in the present case. But no doubt the name of a sport, like the name of an article such as an opal, may be used as part of a get-up including a name such that it could become distinctive of a particular person’s business or product. However, it will not be the name of the sport that creates the necessary distinctiveness to enable the circumstances to fall within s 52. Rather it will be a combination of names or the get-up adopted which will bring about this result. We do not doubt that the name Triathlon Sports used over a period of time in connection with a magazine could become and indeed (as his Honour found) did become distinctive of the magazine of Life Saver. No doubt anyone using the same name would engaged in conduct within the meaning of s 52 of the Act. We do not think that the mere use of the name Triathlon & Multi Sport Magazine on its own is sufficiently similar to the name Triathlon Sports to itself constitute conduct which is misleading and deceptive. Indeed it would seem that the trial judge took the same view for his Honour did not concentrate on the name itself but on the prominence which the word “triathlon” had in the masthead or, in other words, upon the get-up which S & I had adopted. So much is clear from the orders made by his Honour as well as the reasons to which we have already referred.338 336 Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228 (Stephen J) citing Office Cleaning Services Ltd v Westminster Window and General Cleaners Ltd (1946) 63 RPC 39 at 42 (Lord Simonds). 337 S & I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd (1998) 88 FCR 354. 338 S & I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd (1998) 88 FCR 354 at 363-4.

[3.220]

3 Misleading or Deceptive Conduct

141

The Court concluded that the S&I masthead was sufficiently differentiated from the Life Saver masthead and allowed the appeal. In Roses Only & Lush Pty Ltd v Mark Lyons Pty Ltd,339 there was a dispute between two companies each carrying on a business taking telephone orders for the delivery of packages containing roses to retail customers. The applicant has conducted its business since 1995 under the name “Roses Only”, while the respondent commenced its business in early March 1999 under the name “Roses Plus”. The interlocutory claim was based solely on an alleged breach of s 52 of the TPA. Sackville J made an interlocutory order restraining the respondent from advertising, in certain formats, its business as “Roses Plus” on the basis that there was a serious question of fact as to whether the name “Roses Only” has acquired a reputation or secondary meaning distinctive of the applicant’s business.340 The adoption of the same name as that of an existing manufacturer, as occurred in Campomar v Nike, will not always be misleading. The conduct of the respondent – the acts or words or silence – must be viewed in their context. For example, in Lego Australia Pty Ltd v Paul’s (Merchants) Pty Ltd,341 “Lego” is a well-known brand applicable to the applicant’s Lego toys. The respondent imported irrigation equipment that bore the name “Lego”. Deane and Fitzgerald JJ considered that an ordinary or reasonable purchaser of irrigation equipment would not be misled into thinking that there was a connection with the toy manufacturer. Their Honours concluded: “The fact that companies may and sometimes do expand the range of products they produce cannot of itself warrant a conclusion that a particular company has done so”.342

Design features or shape [3.220]

Section 18 and passing off claims can be relied upon to protect product designs. Such claims do not replace proprietary intellectual property rights such as design registrations. In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd,343 Parkdale (the rival) sold furniture that was virtually identical in appearance to those sold by Puxu; however, sewn into the front of each of Parkdale’s chairs was a label, “Parkdale Custom Built Furniture”. The Puxu furniture had acquired an established reputation, but the claims based on s 52 and passing off were not established because “potential purchasers of a suite of furniture costing about $1,500, would, if acting reasonably, look for a label, brand or mark if they were concerned to buy a suite of particular manufacture”.344 In Playcorp Group of Companies Pty Ltd v Peter Bodum A/S,345 Bodum alleged that it had a reputation or secondary meaning in the Chambord Coffee Plunger and the 339 Roses Only & Lush Pty Ltd v Mark Lyons Pty Ltd (1999) ATPR ¶41-706. 340 Roses Only & Lush Pty Ltd v Mark Lyons Pty Ltd (1999) ATPR ¶41-706 at 43,051 [23]. 341 Lego Australia Pty Ltd v Paul’s (Merchants) Pty Ltd (1982) 42 ALR 344. 342 Lego Australia Pty Ltd v Paul’s (Merchants) Pty Ltd (1982) 42 ALR 344 at 352. 343 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191. 344 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199. 345 Playcorp Group of Companies Pty Ltd v Peter Bodum A/S [2010] FCA 23 (Middleton J).

142

The Australian Consumer Law

[3.225]

Assam Teapot, based on the products’ features, and that the promotion of similar articles by Playcorp constituted a breach of s 52 and passing off. Middleton J held that Playcorp had not engaged in passing off or in conduct in breach of s 52 of the TPA. On appeal,346 a majority (Greenwood J, with whom Tracey J agreed) examined the “vast amount of advertising”347 engaged in by Bodum and concluded that Bodum had a reputation or secondary meaning in the features of the Bodum plunger. Although much of the advertising featured some reference to the Bodum name or trade mark, Greenwood J was satisfied that the evidence established “a very significant secondary reputation in the features of the Bodum Chambord Coffee Plunger associated in the minds of consumers with Bodum as the manufacturer of the product…”.348 In reaching this conclusion his Honour considered “all of the contextual circumstances.”349 DKSH had not done enough to distinguish its coffee plunger. Unlike the Puxu case, the rival had not affixed a trade mark on the product itself as opposed to on the packaging.350

Choice of get up [3.225]

However, in cases where a new trader deliberately sets out to “cash in” on the reputation of an existing trader, the courts are likely to find a breach of s 18 and to find that a claim based on passing of is made out.351

For example, in The Kettle Chip Co Pty Ltd v Apand Pty Ltd,352 the respondent was the largest manufacturer of potato chips in Australia and marketed its products under the name “Smith’s”. The applicant entered the market in 1989 with a chip called a “kettle chip”, which was cooked in batches rather than mass-produced in a continuous fryer. The chips had a distinctive flavour and texture and were sold at a premium price under the registered business name “The Kettle Chip”. The Kettle chips were very successful and in 1992 the respondent brought onto the market a new line of potato chips called “Country Kettle”. In addition to the use of the word “Kettle”, the respondent’s packet bore a picture of a stylised cauldron and utilised a similar colour scheme to that of the applicant. Later in 1992 the respondent modified the packets by removing the cauldron and replacing it with a pastoral scene.

346 Bodum v DKSH Australia Pty Ltd [2011] FCAFC 98. 347 Bodum v DKSH Australia Pty Ltd [2011] FCAFC 98 at [51]. 348 Bodum v DKSH Australia Pty Ltd [2011] FCAFC 98 at [197]. 349 Bodum v DKSH Australia Pty Ltd [2011] FCAFC 98 at [255] and [261]. 350 Bodum v DKSH Australia Pty Ltd [2011] FCAFC 98 at [256] and [257]-[258] citing Koninklijke Philips Electronics NV v Remington Products Australia Pty Ltd (2000) 100 FCR 257 and Dr Martens Australia Pty Ltd v Rivers (1999) 95 FCR 136. 351 Twentieth Century Fox Film Corporation v The South Australian Brewery Co Ltd (1996) 66 FCR 451 at 467 (Tamberlin J). In that case it was found that the intention of the brewery was to persuade consumers that there was a strong association between its product and “The Simpsons” animated television series (466-7). 352 The Kettle Chip Co Pty Ltd v Apand Pty Ltd (1993) 46 FCR 152.

[3.230]

3 Misleading or Deceptive Conduct

143

The applicant brought proceedings against the respondent, alleging that the use by the respondent of the word “Kettle” and similar features on its packaging contravened ss 52, 53(c) and (d) of the TPA. Burchett J held: In my opinion, this evidence makes it clear that potato chips sold in the new packets will continue to benefit from the goodwill of the applicant misappropriated by the original promotion and packaging of “Country Kettle”. The image of “Country Kettle” which the respondent desired to create, and did in part create by its passing off and its misrepresentation, will continue to sustain the sale of the new packets, and will be recalled to the minds of consumers by compelling visual and other links.353

His Honour’s finding in relation to s 52 was confirmed by the Full Federal Court.354 In Red Bull Australia Pty Ltd v Sydneywide Distributors Pty Ltd, the trial judge, Conti J, found that Sydneywide had adopted a get up for its LiveWire energy drink that was calculated to deceive potential purchasers into thinking that it was the Red Bull energy drink, or believing that the LiveWire energy drink was made by, or with the licence or approval of Red Bull.355 On appeal, in Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd,356 Weinberg and Dowsett JJ (with whom Branson J agreed) upheld the findings of the primary judge. Their Honours confirmed that while there is no requirement that there be an actual, subjective intention to mislead, as an element that has to be demonstrated in a passing off action, “that does not detract from the evidentiary value of deliberate borrowing”.357 Similarly, in relation to a contravention of s 18 of the ACL, while there is no requirement that there be an actual, subjective intention to mislead as an element that has to be demonstrated, the courts are more likely to conclude that where a trader deliberately sets out to mislead to consumers, the conduct is likely to do so. See [3.70].

PART VI: EXEMPTION FOR INFORMATION PROVIDERS [3.230]

The provisions relating to misleading or deceptive conduct impose strict liability. An aspect of strict liability is that any newspaper which publishes, or television or radio station which broadcasts, misleading or deceptive news, information, opinion or commentary has engaged in misleading or deceptive conduct. It may, however, be possible for information providers to rely on the statutory exemption in ACL, s 19(1), which states that the provisions relating to misleading or deceptive conduct do not apply to an information provider if the information provider made a publication in the course of carrying on a business of providing information, unless the publication is related directly to its business activities.

353 The Kettle Chip Co Pty Ltd v Apand Pty Ltd (1993) 46 FCR 152 at 174. 354 Apand Pty Ltd v The Kettle Chip Company Pty Ltd (1994) 52 FCR 474. 355 Red Bull Australia Pty Ltd v Sydneywide Distributors Pty Ltd (2001) 53 IPR 481 at [69]-[70]. 356 Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 354. 357 Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 354 at [62] citing the reasons of Dixon and McTiernan JJ in Australian Woollen Mills Ltd v F S Walton & Co Ltd (1937) 58 CLR 641 at 657.

144

The Australian Consumer Law

[3.235]

Scope of the exemption for information providers [3.235]

Section 19 provides:

(1) This Part does not apply to a publication of matter by an information provider if: (a) in any case – the information provider made the publication in the course of carrying on a business of providing information; or (b) if the information provider is the Australian Broadcasting Corporation, the Special Broadcasting Service Corporation or the holder of a licence granted under the Broadcasting Services Act 1992 – the publication was by way of a radio or television broadcast by the information provider.

However, the scope of s 19(1) is circumscribed by ss 19(2)(3) and (4). This exemption does not apply to: • advertisements; • a publication in connection with the supply (or promotion of the supply) of goods or services by the information provider; or • a publication in connection with the sale or grant (or promotion of the sale or grant) of an interest in land by the information provider. In relation to publishers of advertisements there is a special defence created by s 251 of the ACL considered at [13.330]. Section 19 of the ACL replaces and clarifies s 65A of the TPA. The Second Explanatory Memorandum states: Section 19 of the ACL operates in the same way as the repealed subsections 65A(1) and (2) of the TP Act, and the jurisprudence on the understanding, interpretation and application of those provisions is relevant to section 19.358

Section 65A was enacted because decisions of the Federal Court had suggested that a newspaper publisher may be taken to have engaged in conduct for the purposes of s 52 of the TPA if the newspaper contained inaccurate information.359 Section 65A operated to exempt the media and other persons engaged in the business of providing information from the operation of Pt V, Div 1 of the TPA, so as not to inhibit the provision of news and other information. The term “information provider” is defined in s 19(5) to mean “a person who carries on a business of providing information”. Section 19(6) provides that it includes media organisations such as radio and television stations (including the Australian Broadcasting Corporation and the Special Broadcasting Service Corporation), as well as publishers of newspapers and magazines. The rationale for such an approach is that the information provider is merely a conduit and it is apparent from the circumstances that the information provider is 358 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [3.19]-[3.20]. 359 Universal Telecasters (Qld) Ltd v Guthrie (1978) 32 FLR 360; Universal Telecasters (Qld) Ltd v Ainsworth Consolidated Industries Ltd (1983) ATPR ¶40-384 and Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82. See also Australian Ocean Line Pty Ltd v West Australian Newspapers Ltd (1983) 66 FLR 453, and Australian Ocean Line Pty Ltd v West Australian Newspapers Ltd (1985) 58 ALR 549.

[3.245]

3 Misleading or Deceptive Conduct

145

not the source of the information and is passing it on for what it is worth.360 In ACCC v Channel Seven Brisbane Pty Ltd, French CJ and Kiefel J held that the rationale of s 65A(1) of the was to maintain a free and vigorous press “by releasing newspapers and electronic media proprietors, inter alia, from undesirable inhibitions on the provision, by them, of news, information, opinion and comment.”361 However, the exemption did not extend to the provision of information where information provider had a commercial interest in the content of the information, such as “advertorial content”, where a newspaper has agreed to publish a “news” item about a product in exchange for the product supplier taking out paid advertising in that publication. Such advertorial content fell outside the exemption.362 The Second Explanatory Memorandum states: The prohibition in section 18 of the ACL does not apply to publications by an information provider, where the information provider made the publication in the course of carrying on a business of providing information or, in the case of a radio or television broadcaster, the publication was by radio or television broadcast by the information provider.

Publication of an advertisement [3.240]

Section 19(2) provides that the exemption does not apply to the publication of an advertisement. This mirrors s 65A(1)(b) of the which provided that “publication of matter in connection with … an advertisement” was not protected under s 65A of the TPA. In order to protect the publishers of misleading advertisements a special defence is created by s 251 of the ACL (previously s 85(3) of the TPA). This defence is considered at [13.330].

Exceptions to the exemption [3.245]

There are a number of exceptions to the exemption in ACL, s 19(1). Section 19(3) of the ACL deprives the information provider of immunity in the following circumstances: (3) Subsection (1) does not apply to a publication of matter in connection with the supply or possible supply of, or the promotion by any means of the supply or use of, goods or services (the publicised goods or services), if: (a) the publicised goods or services were goods or services of a kind supplied by the information provider or, if the information provider is a body corporate, by a body corporate that is related to the information provider; or (b) the publication was made on behalf of, or pursuant to a contract, arrangement or understanding with, a person who supplies goods or services of the same kind as the publicised goods or services; or (c) the publication was made on behalf of, or pursuant to a contract, arrangement or understanding with, a body corporate that is related to a body corporate that supplies goods or services of the same kind as the publicised goods or services.

Section 19(4) of the ACL makes similar provision in relation to the publication of matter in connection with the grant of an interest in land. 360 See Gillies, “Avoiding Infringement of Section 52: Reconciling the Information Provider’s Defence and the Conduit Defence” (2009) 17 Trade Practices Law Journal 186. 361 ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305 at [42]. 362 See Bond v Barry (2007) 73 IPR 490 (French J); TCN Channel Nine Pty Ltd v Ilvariy Pty Ltd (2008) 71 NSWLR 323 at [52]-[53] (Spigelman CJ, Beasley and Hodgson JJA).

146

The Australian Consumer Law

[3.245]

Sections 19(3) and (4) have been drafted in such a way as to maintain the High Court’s interpretation of s 65A of the TPA in ACCC v Channel Seven Brisbane Pty Ltd.363 In ACCC v Channel Seven Brisbane Pty Ltd,364 the question for determination whether Channel Seven had contravened the TPA in the course of broadcasting two episodes of the current affairs television program “Today Tonight” which reported on a “mentoring program” for women, the Wildly Wealthy Women Millionaire Mentoring Program. The ACCC alleged that in the course of broadcasting the episodes the Seven Licensees (Channel Seven Brisbane Pty Ltd, Channel Seven Sydney Pty Ltd, Channel Seven Melbourne Pty Ltd and Channel Seven Perth Pty Ltd) contravened s 52 of the TPA by making or adopting as their own, misleading representations concerning the mentoring program. The Channel Seven Licensees submitted that even if misleading representations were made, s 65A provided a complete defence. The ACCC argued that the Channel Seven Licensees’ conduct fell within the statutory exception, s 65A(1)(a), to the general exemption, namely a publication in connection with the supply of services of the information provider. The trial judge, Bennett J, found in favour of the ACCC.365 The Full Federal Court upheld Bennett J’s findings that Seven had made the representations in the program.366 However, the Full Court concluded that the services being promoted were the Wildly Wealthy Women’s financial services, and these were not services of a kind being supplied by the Channel Seven licensees, so the exemption applied to the media proprietors. Before the High Court, the ACCC succeeded in establishing that the exemption in s 65A did not apply because the exception in s 65A(1)(a)(vi) applied. Their Honours observed: Where, however, the information provider publishes matter in connection with goods or services which it itself provides, or publishes an advertisement for its own or someone else’s goods or services, the rationale of maintaining a free and vigorous press does not require its exemption from the prohibition of misleading or deceptive conduct. The same is true where the information provider promotes the goods or services of a third party pursuant to a contract, arrangement or understanding with that party. It would be true also of publications critical of goods or services provided by competitors of the information provider or of a third party with whom the information provider has a contract, arrangement or understanding.367

Seven had entered into an agreement to produce a number of episodes of “Today Tonight” with the Wildly Wealthy Women and misleading representations were made in connection with the promotion of the Wildly Wealthy Women’s financial services. Accordingly, the exception in s 65A(1)(a)(vi) applied. The publication was 363 Second Explanatory Memorandum, at [3.21]; ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305. 364 ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305 (French CJ, Gummow, Hayne and Kiefel JJ, Heydon J dissenting). 365 ACCC v Seven Network Ltd (2007) 244 ALR 343. 366 Channel Seven Brisbane Pty Ltd v ACCC (2008) 173 FCR 91 at 103-104 [47]-[57] (Sundberg, Jacobson and Lander JJ). 367 ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305 at [42].

[3.250]

3 Misleading or Deceptive Conduct

147

made on behalf of or pursuant to a contract, arrangement or understanding with a person who supplies goods or services of that kind, and Seven did not have the benefit of the s 65A protection. Their Honours held: Sub-paragraph (vi) is concerned with contracts, arrangements or understandings between information providers and the suppliers of goods or services. The information provider that publishes matter in connection with the supply of goods or services, and engages in misleading or deceptive conduct in so doing by the adoption or making of misrepresentations, is the party affected by this exception. This case was well within the purposes of the exception. Other cases may require consideration of the range of arrangements or understandings that fall within it.368

PART VII: MISLEADING OR DECEPTIVE CONDUCT UNDER THE ASIC ACT Introduction [3.250] The Financial Sector Reform (Consequential Amendments) Act 1998 (Cth) inserted Pt II Div 2, commonly known as the consumer protection provisions, into the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). The provisions are general and specific protections against misleading and other unfair practices, such as unconscionable conduct in relation to financial services. On 1 July 1998, the Australian Securities and Investments Commission (ASIC) took over the ACCC’s powers and functions in relation to the enforcement of these provisions. From 2006 to 2010, Australia underwent a fundamental revision and reform of its generic consumer protection laws, resulting in the Australian Consumer Law (ACL). The government decided to exclude financial services and financial products from many of those reforms. Subclause 3.1.3 of the Intergovernmental Agreement for the Australian Consumer Law (IGA), signed by the Council of Australian Governments on 2 July 2009, required the Commonwealth to enact changes to the consumer investor protection provisions of the ASIC Act, and, to the extent necessary, the Corporations Act 2001 (Cth), to ensure that they are consistent with the ACL. Part 2 of the ACL regulates misleading conduct, unconscionable conduct, and unfair terms; however, it does not extend to financial products and contracts in relation to the supply of financial services (other than linked credit providers). Section 131A of the CCA provides: (1) Despite section 131, this Division does not apply (other than in relation to the application of Part 5-5 of Schedule 2 as a law of the Commonwealth) to the supply, or possible supply, of services that are financial services, or of financial products.

This reflects the current referral of power by the States and Territories set out in the Corporations Agreement 2002 and administered by the Ministerial Council for Corporations (MINCO). The consumer protection provisions of the ASIC Act have been amended to maintain consistency with the ACL. However, the consumer guarantees law in the ACL does not apply to financial services, with the exception of linked credit provider services. Section 12ED of the ASIC Act only implies 368 ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305 at [48]-[50].

148

The Australian Consumer Law

[3.255]

warranties of due care and skill and fitness for purpose into contracts for the supply financial services to a consumer in the course of a business. There have been very few cases in which consumers have sought to rely on a breach of these implied warranties.369 Proceedings for breaches of the consumer protections of the ASIC Act are brought by the ACCC pursuant to a delegation from ASIC.370 Consumer credit regulation was referred to the Commonwealth by the States and Territories in 2009. The Uniform Consumer Credit Code was replaced by the National Consumer Credit Protection Code from 1 July 2010. This Part is primarily concerned with the consumer protection provisions of the ASIC Act in relation to financial services and the powers of enforcement and remedies available to ASIC for breaches or potential breaches of Pt II Div 2 of the ASIC Act.

Background to the reform [3.255] The provisions of the ASIC Act and the Corporations Act 2001 operate in a complementary way to the misleading conduct provisions of the ACL (Cth) and the ACL (Application Acts) in different areas of commercial activity, but without overlapping. In Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq),371 Rares J trenchantly criticised the government for replacing the “elegantly simple” s 52 of the TPA with “a labyrinth of statutes”.372 His Honour observed: Of course, each Act has a myriad of complex definitions of what is a financial product or a financial service or are financial services. Each Act gives a person, who suffers loss or damage by conduct of another in contravention of the prohibition, the right to compensation (eg, s 1041I(1), s 12GF) coupled with substantively identical related exceptions and qualifications concerning proportionate liability. Since the end result of this legislative morass seems to be the same, it is difficult to discern why the public, their lawyers (if they can afford them) and the Courts must waste their time turning up and construing which of these statutes applies to the particular circumstance.373

The rationale for this “tangled legislative weave”374 is ASIC’s role as a specialist consumer protection regulator for financial services which resulted from recommendations of the Wallis Committee. In March 1997 the Wallis Committee in its Financial System Inquiry Final Report (FSI) recommended to the Government that: in relation to the regulatory framework for market integrity and consumer protection in the financial system it would be desirable to ensure that: • the regulatory structure is flexible and responsive to the forces for change operating on the system; 369 See eg, St George Bank Ltd v Wright [2009] QSC 337 at [54]-[59] (McMurdo J) and Transmarket Trading Pty Ltd v Sydney Future Exchange Ltd (2010) 188 FCR 1 at [113]-[116] (Perram J). 370 See ACCC v Original Mama’s Pizza & Ribs [2008] FCA 370 (18 March 2008) and ACCC v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393 (19 December 2014). 371 Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) [2012] FCA 1028 (21 September 2012). 372 Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) [2012] FCA 1028 at [947]. 373 Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) [2012] FCA 1028 at [948]. 374 Guglielman v Trescowthick [2004] FCA 326 at [35] (Mansfield J).

[3.265]

3 Misleading or Deceptive Conduct

149

• there is consistency in regulation of similar financial products to promote competition by improving comparability; • financial markets are more contestable, efficient and fair; • regulation of financial conglomerates is effective which will facilitate competition and efficiency; and • international competitiveness of the Australian financial system is facilitated.

The Wallis Committee also recommended that there should be a self-contained regulatory regime in relation to fundraising and other dealings in securities that required the issue of a prospectus. The rationale for the different regimes was explained by Wallis in the following terms: The provisions of the Corporations Law require positive disclosure and provided tailored defences. The balance between disclosure, liability and defences has been carefully struck, and is consistent with provisions governing securities issues and takeovers in the United Kingdom, the United States, Canada and New Zealand … The provisions of the Trade Practices Act apply generally and were not constructed in the context of provisions which require positive disclosure. Unlike the consumption of products and services in general, many investments provide a return to investors based on their bearing a share of the risks which are intrinsic to financial activity. This distinguishes the act of investment from the act of consumption. Among the risks that investors may be rewarded for bearing are those deriving from imperfect information. It is vital to economic efficiency that regulation not unduly interfere with this risk allocation function of the financial system.375

The factors that led to the adoption of industry-specific regulation in relation to financial services and a specialist regulator (ASIC) in this area include: • the complex nature of financial products generally; • the compulsory nature of superannuation, the attendant risks of poor decisionmaking by consumers and the serious consequences that would flow from this; • ASIC’s specialist knowledge of financial markets and its ability to co-ordinate consumer protection enforcement with its other compliance work.

Misleading or deceptive conduct under the ASIC Act [3.260]

Part II, Div 2, Subdiv D of the ASIC Act mirrors the ACL (Cth). It contains a broad general protection (s 12DA) against misleading or deceptive conduct in relation to financial services or financial products, the equivalent of s 18 of the ACL, and then contains two sets of more specific protections – first, the making of specific false or misleading representations in relation to financial services;376 and, second, unfair sales techniques.377

Financial products, financial services

[3.265]

“Financial product” is defined in s 2 of the ACL to have the same meaning as s 12BAA of the ASIC Act. See [3.270]. “Financial service” is defined in

375 Wallis Committee, Financial System Inquiry Final Report (March 1997), p 251. 376 ASIC Act, s 12DB(1). 377 ASIC Act, ss 12DC, 12DD, 12DE, 12DF, 12DG, 12DH, 12DI, 12DJ, 12DK, 12DL and 12DM.

150

The Australian Consumer Law

[3.270]

s 2 of the ACL to have the same meaning as s 12BAB of the ASIC Act. The ASIC Act contains a very broad definition of “financial service” which is linked with the definition of “financial product”. Section 12BAB(1) of the ASIC Act provides: a person provides a financial service if they: (a) provide financial product advice (see subsection (5)); or (b) deal in a financial product (see subsection (7)); or (c) make a market for a financial product (see subsection (11)); or (d) operate a registered scheme; or (e) provide a custodial or depository service (see subsection (12)); or (f) operate a financial market (see subsection (15)) or clearing and settlement facility (see subsection (17)); or (g) provide a service that is otherwise supplied in relation to a financial product; or (h) engage in conduct of a kind prescribed in regulations made for the purposes of this paragraph.

Financial services are similarly defined in s 766A of the Corporations Act 2001 (Cth) except that the clauses (f) and (g) are not included. Financial product

[3.270]

A “financial product” is defined in s 12BAA(1) of the ASIC Act.

a financial product is a facility through which, or through the acquisition of which, a person does one or more of the following: (a) makes a financial investment (see subsection (4)); (b) manages financial risk (see subsection (5)); (c) makes non cash payments (see subsection (6)). Section 12BAA(4) of the ASIC Act provides that a person makes a financial investment if the investor gives money or money’s worth (the contribution) to another person and the other person uses the contribution to generate a financial return or other benefit for the investor, or the investor intends the other person to use the contribution to generate a financial return, and the investor does not have day-to-day control over the use of the contribution to generate the return or benefit. This definition would include an investor paying money to receive an issue of shares in a company. This general definition of “financial product” is then followed by a number of specific products that are included within the general concept (set out in subs (7)), and a number of specific products that are excluded from the general concept (set out in subs (8)). Section 12BAA(7) of the ASIC Act provides that the following transactions are financial products: (a) a security; (b) any of the following in relation to a managed investment scheme: (i) an interest in the scheme; (ii) a legal or equitable right or interest in an interest covered by subparagraph (i);

[3.270]

3 Misleading or Deceptive Conduct

151

(iii) an option to acquire, by way of issue, an interest or right covered by subparagraph (i) or (ii); (c) a derivative; (d) a contract of insurance (see subsection (9)) (except health insurance provided as part of a health insurance business as defined by Division 121 of the Private Health Insurance Act 2007); (e) a life policy, or a sinking fund policy, within the meaning of the Life Insurance Act 1995, that is not a contract of insurance (see subsection (9)); (f) a beneficial interest in a superannuation fund (as defined by section 10 of the Superannuation Industry (Supervision) Act 1993); (g) an RSA (retirement savings account) within the meaning of the Retirement Savings Accounts Act 1997; (h) any deposit-taking facility made available by an ADI (within the meaning of the Banking Act 1959) in the course of its banking business (within the meaning of that Act), other than an RSA (RSAs are covered by paragraph (g)); (i) a debenture, stock or bond issued or proposed to be issued by a government; (j) a foreign exchange contract; (k) a credit facility (within the meaning of the regulations); (l) anything declared by the regulations to be a financial product for the purposes of this subsection.

A credit facility for the purposes of s 12BAA(7)(k) of the ASIC Act is defined in reg 2B of the Australian Securities and Investments Commission Regulations 2001 (Cth). Regulation 2B lists nine separate transactions and deems each to be a credit facility: (1) For paragraph 12BAA (7) (k) of the Act, each of the following is a credit facility: (a) the provision of credit: (i) for any period; and (ii) with or without prior agreement between the credit provider and the debtor; and (iii) whether or not both credit and debit facilities are available; (b) a facility: (i) known as a bill facility; and (ii) under which a credit provider provides credit by accepting, drawing, discounting or indorsing a bill of exchange or promissory note; (c) the provision of credit by a pawnbroker in the ordinary course of a pawnbroker’s business (being a business which is being lawfully conducted by the pawnbroker); (d) the provision of credit by the trustee of the estate of a deceased person by way of an advance to a beneficiary or prospective beneficiary of the estate; (e) the provision of credit by an employer, or a related body corporate of an employer, to an employee or former employee (whether or not it is provided to the employee or former employee with another person); (f) the provision of a mortgage that secures obligations under a credit contract (other than a lien or charge arising by operation of any law or by custom); (g) a guarantee related to a mortgage mentioned in paragraph (f); (h) a guarantee of obligations under a credit contract; (i) a facility for making non-cash payments (within the meaning of section 763D of the Corporations Act) if payments made using the facility will all be debited to a facility mentioned in paragraphs (a) to (h).

152

The Australian Consumer Law

[3.275]

(2) The provision of consumer credit insurance that includes a contract of general insurance for the Insurance Contracts Act 1984 is not a credit facility. (3) In this regulation: credit means a contract, arrangement or understanding: (a) under which: (i) payment of a debt owed by one person (a debtor) to another person (a credit provider) is deferred; or (ii) one person (a debtor) incurs a deferred debt to another person (a credit provider); and (b) including any of the following: (i) any form of financial accommodation; (ii) a hire purchase agreement; (iii) credit provided for the purchase of goods or services; (iv) a contract, arrangement or understanding for the hire, lease or rental of goods or services, other than a contract, arrangement or understanding under which: (A) full payment is made before or when the goods or services are provided; and (B) for the hire, lease or rental of goods – an amount at least equal to the value of the goods is paid as a deposit in relation to the return of the goods; (v) an article known as a credit card or charge card; (vi) an article, other than a credit card or a charge card, intended to be used to obtain cash, goods or services; (vii) an article, other than a credit card or a charge card, commonly issued to customers or prospective customers by persons who carry on business for the purpose of obtaining goods or services from those persons by way of a loan; (viii) a liability in respect of redeemable preference shares; (ix) a financial benefit arising from or as a result of a loan; (x) assistance in obtaining a financial benefit arising from or as a result of a loan; (xi) issuing, indorsing or otherwise dealing in a promissory note; (xii) drawing, accepting, indorsing or otherwise dealing in a negotiable instrument (including a bill of exchange); (xiii) granting or taking a lease over real or personal property; (xiv) a letter of credit.

In essence, a person provides a financial service if they provide financial product advice or deal in financial products. Providing financial product advice

[3.275]

Financial product advice is defined in s 12BAB(5) of the ASIC Act to mean a recommendation or a statement of opinion, or a report of either of those things, that: (a) is intended to influence a person or person in making a decision in relation to a particular financial product; or (b) could reasonably be regarded as being intended to have such an influence.

[3.285]

3 Misleading or Deceptive Conduct

153

Section 12BAB(6) of the ASIC Act provides that advice given by a lawyer in his or her professional capacity about matters of law or legal interpretation or the application of the law to any facts, is not financial product advice. However, the ASIC Act provision could, nevertheless, apply to lawyers who act as financial brokers or arrange loans for clients. Dealing in financial products

[3.280]

Section 12BAB(7) of the ASIC Act provides that the following conduct constitutes dealing in a financial product: (a) applying for or acquiring a financial product; (b) issuing a financial product; (c) in relation to securities or managed investment schemes – underwriting the securities or interests; (d) varying a financial product; (e) disposing of a financial product.

Section 12BAB(8) provides that “arranging for a person to engage in conduct referred to in s 12BAB(7) is also dealing in a financial product, unless the actions concerned amount to providing financial advice”.

Misleading or deceptive conduct [3.285]

Section 12DA provides:

(1) A person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive. (1A) Conduct: (a) that contravenes: (i) section 670A of the Corporations Act (misleading or deceptive takeover document); or (ii) section 728 of the Corporations Act (misleading or deceptive fundraising document); or (b) in relation to a disclosure document or statement within the meaning of section 953A of the Corporations Act; or (c) in relation to a disclosure document or statement within the meaning of section 1022A of the Corporations Act; does not contravene subsection (1).

In ACCC v Original Mama’s Pizza & Ribs,378 the misleading conduct consisted of representations that the “purchasers” of the pizza ovens financed their acquisition by leases from third party financiers, could try them for six months, and if they were not satisfied, they could be returned to the financiers, and the “purchasers” would have no further financial obligations in relation to the lease. In fact, there was no six month trial period, and no entitlement to be released from the obligations after six months. A credit facility for the purposes of s 12BAA(7)(k) of the ASIC Act is defined in reg 2B of the Australian Securities and Investments 378 ACCC v Original Mama’s Pizza & Ribs (2008) ATPR ¶42-236.

154

The Australian Consumer Law

[3.285]

Commission Regulations 2001 (Cth).379 Madgwick J held that the representations contravened s 12DA(1) and s 12DB(1)(g) of the ASIC Act – making a false or misleading representation concerning the existence or effect of a right. The test for deciding whether conduct is misleading under s 18 of the and s 12DA of the ASIC Act is the same, namely whether the conduct is likely to mislead a reasonable member of the class at whom the conduct is directed.380 For example, in GPG (Australia Trading) Pty Ltd v GIO Australia Holdings Ltd,381 GPG commenced actions against GIO for contraventions of s 52 of the TPA, s 42 of the FTA 1987, s 995(2) of the Corporations Law and s 12DA of the ASIC Act. GPG alleged misrepresentations in the announcement of 24 September 1999 to the ASX concerning the extent of its exposure. Gyles J stated that in his opinion there was no relevant difference between the various statutory provisions and that s 12DA of the ASIC Act was the pertinent provision.382 His Honour held the 24 September 1999 announcement made by GIO to the ASX was misleading. The reasonable reader would assume that there was no relevant change for the worse in what was to be expected in relation to reinsurance claims from events known to GIO compared with the announcements in August 1999. Put another way, the reasonable reader would assume that no further doubt had been cast upon the adequacy of the current provisions on that account.383 In Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq),384 Grange Securities Ltd (Grange), which had been acquired by Lehman Brothers Australia Ltd in March 2007, was engaged by three local councils to acquire complex financial products (synthetic collateralised debt obligations – SCDOs). Before dealing with Grange, the councils had invested conservatively. The councils were concerned to ensure that ratepayers’ funds were not invested in products that had a substantive risk of loss. Nevertheless, the councils wanted to ensure their funds earned best returns available, consistent with their conservative investment policies. Grange put itself forward as a financial adviser that understood the investment requirements of local governments, including the relevant legislative and policy constraints. Grange represented to the councils that the SCDO investments were suitable for a conservative investment strategy. After the Global Financial Crisis began to develop in mid-2007, many of the councils’ SCDOs suffered “credit events” causing the money invested in them to be lost. The councils suffered significant losses. The councils alleged that Grange had engaged in misleading or deceptive conduct in breach of s 12DA of the ASIC Act. 379 See Australian Securities and Investments Corporations 2001, reg 2B(3)(b)(iv) which includes hire, lease or rental of goods other than one under which full payment is made. 380 National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000. 381 GPG (Australia Trading) Pty Ltd v GIO Australia Holdings Ltd (2001) 117 FCR 23. 382 GPG (Australia Trading) Pty Ltd v GIO Australia Holdings Ltd (2001) 117 FCR 23 at [100]. 383 GPG (Australia Trading) Pty Ltd v GIO Australia Holdings Ltd (2001) 117 FCR 23 at [101]. 384 Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) [2012] FCA 1028.

[3.285]

3 Misleading or Deceptive Conduct

155

Rares J held that Grange engaged in misleading conduct when it promoted SCDOs to councils as suitable for investors with a conservative investment strategy. This was not the case; investment in SCDOs was not consistent with a conservative investment strategy. Grange had failed to look at the individual managed portfolio agreement entered into by Wingecarribee and Grange in January 2007 which contained a prohibition on the acquisition of any product that did not have an active secondary market.385 In ACCC v Fisher & Paykel Customer Services Pty Ltd,386 the ACCC alleged false or misleading representations regarding consumer guarantees in the context of businesses offering extended warranties. The proceedings were brought by the ACCC under the ASIC Act pursuant to a delegation from the ASIC, as the extended warranty in this case was a financial product under the ASIC Act. Between January 2011 and December 2012, Fisher & Paykel and Domestic & General sent letters to consumers who had purchased a Fisher & Paykel appliance inviting them to purchase an extended warranty. The letters contained a number of statements, including: Your Fisher & Paykel [appliance] is now a year old, which means that you have 12 months remaining – after that your appliance won’t be protected against repair costs.

Wigney J held that the extended warranty offered by Domestic & General, as agent for Fisher & Paykel Customer Services, was a financial product as defined in subss 12BAA(1) and (5) of the ASIC Act because it was a facility through which a person (the consumer) managed financial risk by managing the financial consequences to them of the appliance breaking down.387 In sending the extended warranty letters to consumers, F & P Customer Services and Domestic & General contravened s 12DA of the ASIC Act because the letters represented that the consumer would not be protected against repair costs for the appliance after a period of two years from the date of purchase of the appliance unless the consumer purchased the extended warranty. Under the consumer guarantees regime in Pt 3-2, Div 1 of the ACL, a consumer may have had a right to have the appliance replaced or repaired beyond a period of two years depending on the nature of the failure to comply with the guarantee, without the purchase of an extended warranty. Under the guarantee of acceptable quality in s 54 of the ACL, an appliance used for residential purposes could be expected to last for up to five years or more. Section 259 of the ACL creates a right of action against a supplier in respect of, amongst other things, non-compliance with a guarantee of acceptable quality under s 54 of the ACL. The right of action under s 259 of the ACL contains no time limit. A consumer can take action under s 259 at any time so long as the terms of s 259 are satisfied. The right of action does not cease two years after purchase, or upon the expiry of any warranty provided by the manufacturer or supplier. The Court found that Fisher & Paykel did not make the relevant consumer guarantees clear to consumers. 385 Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) [2012] FCA 1028 at [753], [957] and [962]. 386 ACCC v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393. 387 ACCC v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393 at [24].

156

The Australian Consumer Law

[3.290]

The effect of s 12DA(1A) is that the section does not apply to dealings in securities involving: • • • •

a a a a

misleading takeover document; or misleading fundraising document; or financial services guide; or product disclosure statement.

Section 12DB of the (concerning false or misleading representations) also contains a subsection equivalent to s 12DA(1A). Why are dealings in securities involving disclosure documents excluded? In order to answer this question it is necessary to understand the different policy rationales for consumer protection and investor protection. Broadly speaking, consumer protection relates to goods and services used by consumers to meet their daily needs. The test for misleading conduct under s 18 of the ACL is an objective one: what is the likely effect of the conduct on a reasonable member of the target audience? Investor protection recognises that the value of the choses in action being acquired (eg, shares, debentures etc) will depend on the underlying value of the business. It accepts that there will always be an element of risk involved, but the investor is entitled to make an informed decision and the information made available to investors through disclosure document (eg, prospectus) must be reliable. However, so long as those responsible for preparing the disclosure document have made all reasonable inquiries, and any statements or predictions are based on reasonable grounds, there should be no further liability, if something is omitted or the predictions do not come to pass. Thus, there is some justification for due diligence defences in relation to dealings in securities.

Overlap between the ACL and ASIC Act [3.290]

Where goods are supplied in combination with financial products or services, such as goods supplied in conjunction with a credit facility,388 or goods supplied in conjunction with an extended warranty that is a financial product,389 it can cause difficulties in determining which legislative scheme applies as Rares J observed in Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq).390 It may be necessary to plead under both legislative schemes. In the case of public enforcement, the proceedings are generally brought by the ACCC under the ASIC Act pursuant to a delegation from ASIC under s 102(2)(e) of the ASIC Act. Enforcement of the ACL and the related ASIC Act provisions is regulated at an operational level by a Memorandum of Understanding (MOU) between the ACCC, ASIC and State and Territory consumer agencies.391

388 ACCC v Original Mama’s Pizza & Ribs (2008) ATPR ¶42-236. 389 ACCC v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393. 390 Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) [2012] FCA 1028 at [948]. 391 Australian Consumer Law, Memorandum of Understanding, 6 July 2010. Available at: http:// www.consumerlaw.gov.au/files/2015/06/acl_mou.pdf.

4

Unconscionable Conduct [4.05] INTRODUCTION ................................................................................................................ 157 [4.10] PART I: UNCONSCIONABLE CONDUCT: THE UNWRITTEN LAW ..................... 159

[4.15] Meaning of the unwritten law from time to time ........................................ 160 [4.20] Unconscientious exploitation of special disadvantage ................................ 162 [4.40] PART II: STATUTORY UNCONSCIONABLE CONDUCT .......................................... 166

[4.40] Introduction ......................................................................................................... 166 [4.45] Supply and acquisition arrangements covered ............................................. 166 [4.50] Statutory unconscionable conduct under ss 51AB and 51AC of the TPA . 166 [4.55] Interpretative principles – s 21(4) .................................................................... 168 [4.75] Procedural unconscionable conduct ................................................................ 170 [4.80] Substantive unconscionable conduct ............................................................... 172 [4.85] Different interpretations ..................................................................................... 172 [4.95] Statutory factors .................................................................................................. 176 [4.195] PART III: UNCONSCIONABLE CONDUCT UNDER THE ASIC ACT .................. 200

[4.200] Imbalance of bargaining power ..................................................................... 204 [4.205] Unreasonable conditions ................................................................................. 204 [4.210] Exploitative pricing .......................................................................................... 205 [4.215] Lack of good faith ............................................................................................. 206

INTRODUCTION [4.05] The second general protection in the Australian Consumer Law (ACL) prohibits persons from engaging in unconscionable conduct towards consumers and businesses, but does not define the concept of “unconscionable conduct” for the purposes of the ACL. Statutory unconscionable conduct is to be determined in the light of the values and norms expressed by Parliament in s 22 of the ACL. When the ACL took effect on 1 January 2011, the unconscionable conduct provisions fell into three categories: • s 20 – unconscionable conduct within the meaning of the unwritten law of the States and Territories; • s 21 – unconscionable conduct in the context of a business’s dealings with consumers; and • s 22 – unconscionable conduct in the context of a business’s dealings with other businesses, either as a customer or as a supplier.

158

The Australian Consumer Law

[4.05]

Section 20 was based on s 51AA of the TPA which prohibited a corporation from engaging in unconscionable conduct “within the meaning of the unwritten law from time to time”. Section 21 of the ACL was based on s 51AB of the TPA which prohibited a corporation, in trade or commerce, from engaging in conduct that was unconscionable in connection with the supply or possible supply of goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption. What could be regarded as “unconscionable conduct” was not restricted to the kinds of conduct that were so characterised under the unwritten law. Section 22 of the ACL was ACL based on s 51AC of the TPA which was introduced in 1998. It prohibited a corporation, in trade or commerce, from engaging in unconscionable conduct in relation to businesses as suppliers and acquirers in relation to any type of goods or services provided that they were being acquired for the purpose of trade or commerce. This was also unrestricted by the unwritten law. On 27 November 2009, the then Minister for Competition Policy and Consumer Affairs, the Hon Dr Craig Emerson MP, established an expert panel to advise him whether the unconscionability provisions in s 51AC of the TPA should be amended to include a list of examples that constitute unconscionable, or include a statement of principles concerning unconscionable conduct.1 Minister Emerson released the expert panel’s report, Strengthening Statutory Unconscionable Conduct and the Franchising Code of Conduct, on 3 March 2010.2 The principal findings of the Expert Panel regarding s 51AC were that a list of examples should not be included for the reason that it was impossible to identify examples that would be unconscionable in all circumstances. As the Panel noted, a finding of unconscionable conduct is “fact-dependent” requiring a consideration of all the circumstances, and conduct that is unconscionable in one set of circumstances may not be unconscionable in another.3 Instead, the Panel recommended that a statement of interpretative principles should be included in statutory unconscionability provisions. The Competition and Consumer Legislation Amendment Act 2011 (Cth) implemented the Expert Panel’s recommendations on unconscionable conduct. It amended the ACL and the ASIC Act to include a list of interpretative principles and unified the consumer and business related provisions prohibiting unconscionable conduct.4 In the Second Reading Speech, that accompanied the Competition and Consumer Legislation Amendment Bill 2011, the Minister stated: The Bill will also remove the distinction in the existing provisions between unconscionable conduct that affects businesses and that which affects consumers. 1 The expert panel consisted of Professor Bryan Horrigan, Mr David Lieberman and Mr Ray Steinwall. 2 Available at: http://www.treasury.gov.au/contentitem.asp?NavId=014&ContentID=1744. 3 Strengthening Statutory Unconscionable Conduct and the Franchising Code of Conduct, p 24. 4 The Government previously introduced the Competition and Consumer Legislation Amendment Bill 2010, into Parliament on 27 May 2010. The Bill was referred to the Senate Economics Committee, which recommended that the Bill be passed. However, the Bill lapsed with prorogation of the Parliament for the 2010 Federal Election.

[4.10]

4 Unconscionable Conduct

159

It combines existing sections 21 and 22 of the Australian Consumer Law and sections 12CB and 12CC of the ASIC Act, respectively, into one section and rationalises their drafting to apply a single set of specific factors which the court could consider. This amendment will eliminate the potential that the concept of unconscionable in the two existing provisions could diverge, through a false assumption that the existence of the two provisions signals a distinction in policy. Any divergence has the potential to lead to confusion, and the distinction should be removed before any such notion develops.5

The 2011 amendments came into operation on 1 January 2012. First, ACL, s 20 remains a general prohibition of unconscionable conduct within the meaning of the unwritten law (ASIC Act, s 12CA). Secondly, ACL, ss 21 and 22 (ASIC Act, ss 12CB and 12CC) were repealed and replaced by the new ss 21 and 22 (ASIC Act, new ss 12CB and 12CC). Thirdly, the new s 21 unified the old ss 21 and 22 to create a single, general, prohibition of unconscionable conduct in connection with the supply or acquisition of goods or services (or possible supply or acquisition) other than to or from, respectively, a listed public company within the meaning found in the Income Tax Assessment Act 1997 (Cth). It is designed to confer the same level of protection on consumers and businesses, except where the business is conducted through a listed public company. Fourthly, a new s 21(4) (ASIC Act, s 12CD(4)) includes a list of interpretive principles designed to make sure that the prohibition is interpreted expansively. Fifthly, the new s 22 sets out a non-exhaustive list of factors that may be taken into account by a court in deciding whether s 21 has been contravened. This list replicates the list of 12 matters that previously applied under the old s 22 to transactions involving business consumers. Finally, a new s 22A applies s 4 of the ACL (which deals with misleading representations about the future) to ss 21 and 22. The prohibitions in ss 20 and 21 are directed to “a person”. However, as a law of the Commonwealth they apply only to corporations.6 Non-corporate persons are instead made subject to the ACL via the State or Territory law making the ACL part of the law of the jurisdiction in which the conduct occurred. Chapter 4 is divided into three parts.

• Part I – examines the scope of unconscionable conduct under the “unwritten law”. • Part II – considers the scope of statutory unconscionable conduct under the ACL. • Part III – considers the scope of statutory unconscionable conduct under the ASIC Act. PART I: UNCONSCIONABLE CONDUCT: THE UNWRITTEN LAW [4.10] Section 20 of the ACL provides: (1) A person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time. 5 The Hon David Bradbury MP, Second Reading Speech to the Competition and Consumer Legislation Amendment Bill 2011, 15 June 2011, p 5. 6 CCA, s 131(1).

160

The Australian Consumer Law

[4.15]

(2) This section does not apply to conduct that is prohibited by section 21. Section 20 of the ACL re-enacts s 51AA of the TPA which prohibited a corporation, in trade or commerce, from engaging in conduct that was unconscionable according to the “unwritten law” of the States and Territories.7 Section 20 of the ACL is a general prohibition of unconscionable conduct; that is, one that has the potential to apply to all types of transactions and in favour of all types of victims unless – because of the exception created by s 20(2) – the conduct in question is prohibited by s 21. However, it does not alter what is to be recognised as unconscionable conduct. This remains governed by “the unwritten law from time to time”. Two further points should be noted about the scope of s 20 of the ACL. First, the prohibition in s 20 is on unconscionable conduct generally, provided it occurs in trade or commerce. It is not restricted, as is s 21, to conduct arising in connection with the “supply or possible supply” of “goods or services”. Thus, unlike s 21, it can apply to unconscionable conduct engaged in by, as well as towards, a consumer and to transactions not involving goods or services. Secondly, reliance on s 21 is open to both businesses and consumers. However, s 20(2) provides that the section does not apply to conduct covered by s 21. This requires a person to determine that the defendant’s conduct is not covered by s 21 before being able to invoke s 20, or to plead a contravention of s 20 or s 21, in the alternative.

Meaning of the unwritten law from time to time [4.15] According to the Explanatory Memorandum to the Competition and Consumer Legislation Amendment Bill 2011, “the unwritten law from time to time” refers to: the array of common law and equitable principles that have developed in the Australian courts over many years as they apply and relate to the concept of unconscionable conduct. Previous jurisprudence developed in the courts of England and Wales prior to the independence of the Australian judicial system, which occurred with the reception of the laws and statutes of England and Wales and the establishment of the colonial Supreme Courts in the nineteenth century, is also relevant, as are the decisions of the Privy Council exercising its now ended appellate jurisdiction over State courts.8

Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ in Tanwar Enterprises Pty Ltd v Cauchi observed: The terms “unconscientious” and “unconscionable” are, as was emphasised in ACCC v C G Berbatis Holdings Pty Ltd, used across a broad range of the equity jurisdiction. They describe in their various applications the formation and instruction of conscience by reference to well developed principles.9

In ACCC v CG Berbatis Holdings Pty Ltd (No 2),10 French J (as his Honour then was) indicated that the concept of unconscionability under the unwritten law has two different meanings. At the generic level it is the fundamental principle according to 7 See R V Miller, Australian Competition and Consumer Law Annotated (37th ed, Lawbook Co, Sydney, 2015), [1.S2.20.10]-[1.S2.20.115]. 8 Explanatory Memorandum, Competition and Consumer Legislation Amendment Bill 2011, at [2.14]. 9 Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [20]. 10 ACCC v CG Berbatis Holdings Pty Ltd (No 2) (1999) 96 FCR 491.

[4.15]

4 Unconscionable Conduct

161

which equity acts and embraces not just unconscientious exploitation by one person of a serious disadvantage of another but also equitable estoppel; relief from forfeiture and penalties. At the specific level it is a distinct ground of equitable relief most often associated with the unconscientious exploitation of a special disadvantage as in Commercial Bank of Australia v Amadio.11 In ACCC v Samton Holdings Pty Ltd,12 the Full Federal Court recognised five categories of case under which equity will provide relief against the consequences of unconscionable conduct thus falling within the “unwritten law” for the purposes of s 51AA of the TPA: • knowing exploitation of special disadvantage which may be constitutional (age, illness, poverty, inexperience or lack of education), or situational (deriving from the relationship of the actors such as emotional dependence);13 • setting aside as against third parties a transaction entered into as the result of defective comprehension by a party to the transaction;14 • preventing a party exercising a legal right based on equitable estoppel;15 • relief against forfeiture and penalty;16 and • rescinding contracts entered into under the influence of unilateral mistake.17 It is outside the scope of this work to deal in any depth with these specific equitable doctrines; however, they may come to the aid of consumers, especially unconscientious exploitation of serious disadvantage which will be discussed briefly.18 The object of s 51AA of the TPA was to make available the extensive and flexible remedies under the TPA for unconscionable conduct in equity. This objective has been carried over into the ACL. According to the Second Explanatory Memorandum, “[t]he principal purpose and function of s 20 of the ACL, is to allow the penalties and remedies available under Ch 5 of the ACL to be imposed with respect to conduct that is found to be considered to be unconscionable within the meaning of the unwritten law.”19 11 Commercial Bank of Australia v Amadio (1983) 151 CLR 447. 12 ACCC v Samton Holdings Pty Ltd (2002) 117 FCR 301 at [48] (Gray, French and Stone JJ). Followed in Body Bronze International Pty Ltd v Fehcorp Pty Ltd (2011) 282 ALR 571 at [87] (Macaulay AJA, with whom Harper and Hansen JJA agreed) and Tenth Vandy Pty Ltd v Natwest Markets Australia Pty Ltd [2012] VSCA 103 at [115] (Nettle and Neave JJA, with whom Bell AJA agreed). 13 Commercial Bank of Australia v Amadio (1983) 151 CLR 447; Louth v Diprose (1992) 175 CLR 621. 14 Garcia v National Australia Bank Ltd (1998) 194 CLR 395. 15 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Commonwealth v Verwayen (1990) 170 CLR 394. 16 Legione v Hateley (1983) 152 CLR 406; Stern v Mc Arthur (1988) 165 CLR 489. 17 Taylor v Johnson (1983) 151 CLR 422. 18 See Dal Pont, “The Varying Shades of ‘Unconscionable Conduct’ – Same Term, Different Meaning” (2000) 19 Australian Bar Review 135. 19 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [4.22].

162

The Australian Consumer Law

[4.20]

Unconscientious exploitation of special disadvantage [4.20] Unconscientious exploitation of special disadvantage is a recognised equitable doctrine that falls within the “unwritten law”. It is first necessary to indentify a particular person at whom the conduct is directed. Having identified that person it is then necessary to satisfy three elements: • the person identified must be suffering from a special disadvantage vis-à-vis the stronger party; • the stronger party must have knowledge of that special disadvantage or it must be sufficiently evident; and • there must be a taking advantage by the stronger party of the other person’s special disadvantage in a way that offends good conscience.20 Special disadvantage

[4.25] In relation to the first element, the class of circumstances which might amount to “special disadvantage” has tended to focus on: • a constitutional disadvantage arising from some inherent weakness, such as illiteracy, drunkenness, poverty, need, sickness, advanced age, infirmity of body or mind; • lack of education and lack of assistance or explanation when assistance or explanation is necessary;21 • lack of, or limited comprehension of, the English language;22 and • emotional dependence such as that which arose in Louth v Diprose23 where the appellant manufactured an atmosphere of crisis about her accommodation in order to influence the respondent to provide her with money to purchase a house. The respondent’s concern for the appellant’s welfare seriously affected his ability to make a judgment as to his own best interests. Proof of a constitutional disadvantage is not, of itself, sufficient to invoke the equitable doctrine; it must lead to an inability to make a rational judgment. For example, poverty alone does not prove that a person is not capable of making a rational decision; however, if it can be demonstrated that a person lacked the means to obtain a proper education and was accordingly unable to understand the nature or terms and conditions of the transaction in question, this will constitute a special disadvantage. In Permanent Mortgages Pty Ltd v Vandenbergh, Murphy JA held that advanced age does not of itself constitute a “special disadvantage”, but may in combination with other factors such as limited or lack of education, 20 See Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 462 (Mason J) and 474-480 (Deane J). See also Blomley v Ryan (1956) 99 CLR 362 at 405 (Fullagar J); and Louth v Diprose (1992) 175 CLR 621 at 626 (Brennan J). 21 Blomley v Ryan (1956) 99 CLR 362 at 405, 415. 22 Commercial Bank of Australia v Amadio (1983) 151 CLR 447. 23 Louth v Diprose (1992) 175 CLR 621.

[4.30]

4 Unconscionable Conduct

163

contribute to the condition of being under a special disadvantage.24 Illiteracy, lack of education or unfamiliarity with the language often indicate “special disadvantage”.25 Lack of business knowledge can constitute “special disadvantage” especially where the transaction in question is not a commonplace one.26 While absence of independent legal advice does not constitute a “special disadvantage” on its own it may be of factual importance in determining whether a special disadvantage exists.27 At first instance in ACCC v CG Berbatis Holdings Pty Ltd (No 2),28 French J stated that the categories of special disadvantage are open and may extend to situational disadvantage as well as constitutional disadvantage. However, it is clear that a mere imbalance of bargaining power will not constitute special disadvantage for the purposes of the equitable doctrine. As Gleeson CJ stated in ACCC v CG Berbatis Holdings Pty Ltd: A person is not in a position of relevant disadvantage, constitutional, situational or otherwise, simply because of inequality of bargaining power. Many, perhaps even most, contracts are made between parties of unequal bargaining power, and good conscience does not require parties to contractual negotiations to forfeit their advantages, or neglect their own interests.29

The essential point is that the “special disadvantage” must be “one which seriously affects the ability of the innocent party to make a judgment as to [their] own best interests”.30 Actual knowledge of special disadvantage

[4.30] The second element is actual knowledge of the special disadvantage or something less than actual knowledge. In Commercial Bank of Australia Ltd v Amadio Mason J stated: If A having actual knowledge that B occupies a situation of special disadvantage in relation to an intended transaction, so that B cannot make a judgment as to what is in his own interests, takes unfair advantage of his (A’s) superior bargaining power or position by entering into that transaction, his conduct in so doing is unconscionable. And if, instead of having actual knowledge of that situation, A is aware of the possibility that that situation may exist or is aware of facts that would raise that possibility in the mind of any reasonable person, the result will be the same.31 24 Permanent Mortgages Pty Ltd v Vandenbergh (2010) 41 WAR 353 at [235]-[236], citing Australia and New Zealand Banking Group Ltd v Dzienciol [2001] WASC 305 at [289]-[290]. Applied in Choice Constructions Pty Ltd v Janceski (No 3) [2011] WASC 358 at [136] (Simmonds J). 25 Permanent Mortgages Pty Ltd v Vandenbergh (2010) 41 WAR 353 at [231]; Choice Constructions Pty Ltd v Janceski (No 3) [2011] WASC 358 at [148]. 26 Choice Constructions Pty Ltd v Janceski (No 3) [2011] WASC 358 at [183]. 27 Bridgewater v Leahy (1998) 194 CLR 457 at [41]; Permanent Mortgages Pty Ltd v Vandenbergh (2010) 41 WAR 353 at [232]. 28 ACCC v CG Berbatis Holdings Pty Ltd (No 2) (2000) 96 FCR 491. 29 ACCC v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 at 64 [11] and [14]. See also Gummow and Hayne JJ at 77-79 and Callinan J at 115-116. 30 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 462 (Mason J). 31 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 467.

164

The Australian Consumer Law

[4.35]

Deane J expressed this element in the following terms: [Was the] disability … sufficiently evident to the stronger party to make it prima facie unfair or “unconscientious” that he procure, or accept, the weaker party’s assent to the impugned transaction in the circumstances in which he procured or accepted it.32

In ACCC v Radio Rentals Ltd,33 Finn J cited the above passages from Amadio’s case, and concluded that Radio Rentals had not contravened ss 51AA and 51AB of the in circumstances where a pensioner who, as a result an intellectual disability and schizophrenia, entered into 39 agreements relating to electrical appliances which consumed 30-40% of his income. The pensioner could not read or understand the terms of these agreements; however, his disability was not sufficiently evident to the Radio Rentals staff to make their conduct unconscionable. Unconscientious exploitation of special disadvantage

[4.35] As regards the third element, unconscientious exploitation of special disadvantage, the focus is on procedural, rather than substantive unconscionable conduct. Procedural unconscionable conduct refers to bargaining misconduct. Substantive unconscionable conduct refers to the terms of the contract and the conduct of a party in carrying it out. Factors going to the process of the bargain include the conduct of the negotiations in adverse circumstances, absence of meaningful choice, and the use of an influential third party or lack of information.34 The question is whether the antecedent conduct was such that the party suffering from the special disadvantage was unable to reach a rational decision as to what was in their best interests. The focus is on the effect of the conduct on a particular person. Cases of unconscientious exploitation of special disadvantage are most likely to be successful in business to consumer transactions where there is some dependency on the business party by the consumer claiming unconscionability. Such dependency may also exist in business-to-business transactions; however, the courts will carefully scrutinise whether the dependency results in one business party being incapable of making a rational decision as to what was in their best interests. For example, in ACCC v CG Berbatis, Mr and Mrs Roberts were in a difficult position because they had no option to renew their lease. The prospects of selling their business depended on the co-operation of the lessor in agreeing to grant them an extension. However, in giving up their claims against the lessor in return for an extension they made a rational decision as to what was in their best interests.35 Similarly, in ACCC v Samton Holdings,36 the Full Federal Court held: The disadvantage under which the Rinaldis and Executive Bloodstock laboured had arisen from a combination of considered commercial judgment (the decision to borrow 32 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 474. 33 ACCC v Radio Rentals Ltd (2005) 146 FCR 292. 34 G E Dal Pont and D R C Chalmers, Equity and Trusts in Australia (4th ed, Lawbook Co, 2011), at [9.10]. 35 ACCC v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 at 64-5 [15] (Gleeson CJ); 77 [56] (Gummow and Hayne JJ); 115-6 [185] (Callinan J). 36 ACCC v Samton Holdings Pty Ltd (2002) 117 FCR 301.

[4.35]

4 Unconscionable Conduct

165

heavily in order to purchase the business), and Mr Rinaldi’s oversight in neglecting to exercise the option in good time. These factors did not impair the Rinaldis’ ability to make a decision about the best course of action in the circumstances. At least in the case of an experienced business person there must, in our opinion, be something more than commercial vulnerability (however extreme) to elevate disadvantage into special disadvantage.37

In Kakavas v Crown Melbourne Ltd,38 the High Court denied a remedy to a person who voluntarily engaged in gambling, an inherently risky activity. For many years Mr Kakavas was not permitted to gamble at Crown Casino because the management were concerned that he may have been addicted to gambling. Towards the end of 2004, Mr Kakavas was permitted to gamble after Crown Casino received a psychologist’s report stating that he was not addicted to gambling. By August 2005, Mr Kakavas had sustained losses of $20.5 million, and in 2007 he commenced proceedings against Crown claiming that it had engaged in unconscionable conduct contrary to s 51AA of the TPA. Mr Kakavas argued that Crown exploited his inability to make decisions that were in his best interests because of his pathological urge to gamble. In a unanimous judgment the High Court held: equitable intervention does not relieve a plaintiff from the consequences of improvident transactions conducted in the ordinary and undistinguished course of a lawful business. A plaintiff who voluntarily engages in risky business has never been able to call upon equitable principles to be redeemed from the coming home of risks inherent in the business. The plaintiff must be able to point to conduct on the part of the defendant, beyond the ordinary conduct of the business, which makes it just to require the defendant to restore the plaintiff to his or her previous position. … The appellant seeks to distinguish his dealings with Crown from the ordinary course of its business, but it is difficult to see the special factual foundation required to shift responsibility for his own conduct onto the party whose conduct did not go beyond accommodating the appellant’s wish to engage in risky business.39

The court elaborated on what is required to invoke equitable intervention: Equitable intervention to deprive a party of the benefit of its bargain on the basis that it was procured by unfair exploitation of the weakness of the other party requires proof of a predatory state of mind. Heedlessness of, or indifference to, the best interests of the other party is not sufficient for this purpose. The principle is not engaged by mere inadvertence, or even indifference, to the circumstances of the other party to an arm’s length commercial transaction. Inadvertence, or indifference, falls short or the victimisation or exploitation with which the principle is concerned.40

Thus, those persons who are capable of making a judgment as to their own best interests, and who carelessly fail to look after their own interests are not in a situation of special disadvantage for the purposes of the specific equitable concept. 37 ACCC v Samton Holdings Pty Ltd (2002) 117 FCR 301 at 323 [64]. 38 Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392. 39 Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 at [20]-[21] 40 Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 at [161].

166

The Australian Consumer Law

[4.40]

PART II: STATUTORY UNCONSCIONABLE CONDUCT Introduction [4.40] Section 21(1) of the ACL provides: A person must not, in trade or commerce, in connection with: (a) the supply or possible supply of goods or services to a person (other than a listed public company); or (b) the acquisition or possible acquisition of goods or services from a person (other than a listed public company); engage in conduct that is, in all the circumstances, unconscionable.

Supply and acquisition arrangements covered [4.45] Section 21(1) of the ACL applies to: • conduct by a person (the “supplier”) in connection with the supply or possible supply of goods or services to another person, other than a listed public company (the “customer”);41 and • conduct by a person (the “acquirer”) in connection with the acquisition or possible acquisition of goods or services from another person, other than a listed public company (the “supplier”).42 Section 21(1) is designed to protect persons generally, including “business consumers” and “business suppliers” from unconscionable conduct by persons occupying more powerful positions. There are no limits on the kind of businesses that might seek to rely on s 21(1); the only limitations are that the goods or services supplied or acquired must be supplied or acquired for the purpose of trade or commerce and the conduct must not be directed towards a publicly listed company.43 The protection extends to cover not just the exercise of the terms of the contract (substantive unconscionable conduct), but also to the conduct surrounding the bargaining process (procedural unconscionable conduct) since s 21 of the ACL expressly refers to the possible supply of goods or services.44 Section 21 does not define “unconscionable conduct”, although it does contain three interpretative principles in s 21(4), which give some indication as to Parliament’s intention regarding its scope. Before considering these interpretative principles, it is necessary to consider what was the scope of statutory unconscionable conduct under the repealed ss 51AB and 51AC of the TPA.

Statutory unconscionable conduct under ss 51AB and 51AC of the TPA [4.50] In ACCC v Allphones Retail Pty Ltd (No 2)45 Foster J summarised the meaning of statutory unconscionable conduct in TPA, s 51AC in three propositions: 41 ACL, s 22(2). 42 ACL, s 22(3). 43 See R V Miller, Australian Competition and Consumer Law Annotated (37th ed, Lawbook Co, Sydney, 2015), [1.S2.21.10]-[1.S2.21.60]. 44 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [294] (Allsop CJ). 45 ACCC v Allphones Retail Pty Ltd (No 2) (2009) ATPR ¶42-274 at [113].

[4.50]

4 Unconscionable Conduct

167

(a) The scope of s 51AC is wider than that of s 51AA. The meaning of unconscionable for the purposes of s 51AC is not limited to the meaning of the word according to established principles of common law and equity; (b) The ordinary or dictionary meaning of unconscionable, which involves notions of serious misconduct or something which is clearly unfair or unreasonable, is picked up by the use of the word in s 51AC. When used in that section, the expression requires that the actions of the alleged contravenor show no regard for conscience, and be irreconcilable with what is right or reasonable. Inevitably the expression imports a pejorative moral judgment; and (c) Normally, some moral fault or moral responsibility would be involved. This would not ordinarily be present if the critical actions are merely negligent. There would ordinarily need to be a deliberate (in the sense of intentional) act or at least a reckless act.46 [citations omitted]

Two decisions of the Full Court of the Federal Court of Australia, Hurley v McDonald’s Australia Ltd,47 and ASIC v National Exchange Pty Ltd,48 provided guidance as to what the term “unconscionable” meant for the purposes of ss 51AB and 51AC of the TPA. In Hurley v McDonald’s Australia Ltd, the Full Court held: For conduct to be regarded as unconscionable, serious misconduct or something clearly unfair or unreasonable, must be demonstrated – Cameron v Qantas Airways Ltd … (1994) 55 FCR 147 at 179. Whatever “unconscionable” means in ss 51AB and 51AC, the term carries the meaning given by the Shorter Oxford English Dictionary, namely, actions showing no regard for conscience, or that are irreconcilable with what is right or reasonable – Qantas Airways Ltd v Cameron … (1996) 66 FCR 246 at 262. The various synonyms used in relation to the term “unconscionable” import a pejorative moral judgment – Qantas Airways Ltd v Cameron … at 283-4 and 298.49 (emphasis in the original)

In the spectrum of commercial conduct, there is a clear demarcation between conduct which is merely shrewd or opportunistic, and that which can properly be characterised as “unconscionable” in the sense described by the Full Federal Court in Australian Securities Investment Commission v National Exchange Pty Ltd.50 Spigelman CJ, in a case involving another statutory unconscionable conduct provision in the Retail Leases Act 1994 (NSW) which mirrors s 51AC of the TPA, drew attention to the dangers of setting the bar too low: Over recent decades legislatures have authorised courts to rearrange the legal rights of persons on the basis of vague general standards which are clearly capable of misuse unless their application is carefully confined. Unconscionability is such a standard. … restraint in decision-making [is] appropriate. Unconscionability is a concept which requires a high level of moral obloquy. If it were to be applied as if it were equivalent to what was 46 These propositions were cited with approval by Gordon J in ACCC v Dukemaster Pty Ltd (2009) ATPR ¶42-290 at [127] and by Macaulay AJA (with whom Harper and Hansen JJA agreed) in Body Bronze International Pty Ltd v Fehcorp Pty Ltd (2011) 282 ALR 571 at [89]. 47 Hurley v McDonald’s Australia Ltd (2000) ATPR ¶41-741 at 40,585. 48 Australian Securities and Investments Commission v National Exchange Pty Ltd (2005) 148 FCR 132 (National Exchange case). The decision at first instance is reported as Aevum Ltd v National Exchange Pty Ltd (2004) 142 FCR 316. 49 Hurley v McDonald’s Australia Ltd (2000) ATPR ¶41-741 at 40,585 (Heerey, Drummond, Emmett JJ). 50 ASIC v National Exchange Pty Ltd (2005) 148 FCR 132.

168

The Australian Consumer Law

[4.55]

“fair” or “just”, it could transform commercial relationships … The principle of “unconscionability” would not be a doctrine of occasional application, when the circumstances are highly unethical, it would be transformed into the first and easiest port of call when any dispute about a retail lease arises.51 (emphasis added)

In ASIC v National Exchange Pty Ltd, the Full Federal Court noted that the legislative purpose of s 12CC of the ASIC Act, which mirrors s 51AC of the TPA, was “… to build on and not be constrained by the unwritten law”.52 According to the Court, on its ordinary and natural interpretation, unconscionable conduct means “doing what should not be done in good conscience”,53 which the Court interpreted as requiring a “high level of moral obloquy”.54 The New South Wales Court of Appeal held in Tonto Home Loans Australia Pty Ltd v Tavares,55 that: It is neither possible nor desirable to provide a comprehensive definition. The range of conduct is wide and can include bullying and thuggish behaviour, undue pressure and unfair tactics, taking advantage of vulnerability or lack of understanding, trickery or misleading conduct. A finding requires an examination of all of the circumstances.56

Interpretative principles – s 21(4) [4.55] Section 21(4) of the ACL sets out three interpretative principles that provide some indication as to Parliament’s intention regarding its scope. According to the Explanatory Memorandum, the interpretative principles have been drawn from existing case law, and they are intended to clarify rather than alter the meaning of statutory unconscionalbility.57 Section 21(4) provides: (4) It is the intention of the Parliament that: (a) this section is not limited by the unwritten law relating to unconscionable conduct; and (b) this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and (c) in considering whether conduct to which a contract relates is unconscionable, a court’s consideration of the contract may include consideration of: (i) the terms of the contract; and (ii) the manner in which and the extent to which the contract is carried out; and is not limited to consideration of the circumstances relating to formation of the contract. 51 Attorney General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557 at [119], [121]. See also Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 585-586 (Kirby P) and Leading Edge Events Australia Pty Ltd v Te Kanawa [2007] NSWSC 228 at [231] (Bergin J). 52 ASIC v National Exchange Pty Ltd (2005) 148 FCR 132 at 140 [30]-[31]. 53 ASIC v National Exchange Pty Ltd (2005) 148 FCR 132 at 140 [33]. 54 ASIC v National Exchange Pty Ltd (2005) 148 FCR 132 at 140 [43], referring to Spigelman CJ’s judgment in Attorney-General of NSW v World Best Holdings Ltd (2005) 63 NSWLR 557. 55 Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389. 56 Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 at [291]. 57 Explanatory Memorandum, Competition and Consumer Legislation Amendment Bill 2010, at [2.19].

[4.65]

4 Unconscionable Conduct

169

First interpretative principle

[4.60] In the Second Reading Speech introducing the Competition and Consumer Legislation Amendment Bill 2011, the Minister stated: The first principle will deal with concerns that the practical application of the equitable concept of unconscionable conduct is too narrow when applied to business and consumer relationships. Courts have tended to stick closely to the traditional equitable concept when applying the statutory prohibitions that were sections 51AB and 51AC of the former Trade Practices Act (now sections 21 and 22 of the Australian Consumer Law) and sections 12CB and 12CC of the ASIC Act.58

Statutory unconscionable conduct in s 21(1) of the ACL is not limited to unconscionable conduct under the unwritten law. Also, a number of the factors listed in s 22(1) (considered at [4.95]–[4.190]) that may be taken into account in deciding whether the conduct at issue is unconscionable goes beyond those that have been considered under unconscientious exploitation of serious disadvantage.59 Second interpretative principle

[4.65] The Expert Panel recommended the inclusion of an interpretative principle which recognises that statutory unconscionable conduct focuses on the conduct itself and it is not necessary to identify a specific or particular person who is the victim of the conduct.60 It is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as the victim of that conduct or behaviour. According to the Explanatory Memorandum, The unconscionable conduct provisions of the ACL are not limited to individual transactions. Rather, the focus of the provisions is on conduct that may be said to offend against good conscience; it is not specifically on the characteristics of any possible “victim” of the conduct (though these may be relevant to the assessment of the conduct).61

The same point was made in the Second Reading Speech, introducing the Competition and Consumer Legislation Amendment Bill 2011. The Minister stated: Unconscionable conduct is not limited to individual transactions or events. A pattern of systemic conduct or patterns of behaviour occurring over a period of time – which might include an accumulation of minor incidents – can also amount to unconscionable conduct.62

Under the Amadio species of unconscionability the focus is on a particular individual under a special disadvantage and whether, because of that special 58 The Hon David Bradbury MP, Second Reading Speech, to the Competition and Consumer Legislation Amendment Bill 2010,, 15 June 2011, p 5. 59 See ACCC v CG Berbatis (No 2) (1999) 96 FCR 491; Dai v Telstra (2000) 171 ALR 348; ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) ATPR ¶41-790 and ACCC v Radio Rentals Ltd (2005) 146 FCR 292. 60 Strengthening Statutory Unconscionable Conduct and the Franchising Code of Conduct, p 34. 61 Competition and Consumer Legislation Amendment Bill 2010, Explanatory Memorandum, at [2.21]. 62 The Hon David Bradbury MP, Second Reading Speech, to the Competition and Consumer Legislation Amendment Bill 2011, 15 June 2011, p 5. This reflects the views of the Expert Panel who stated: “a system of conduct or pattern of behaviour may be unconscionable, and that statutory unconscionable conduct is not limited to an examination of particular transactions”. See Strengthening Statutory Unconscionable Conduct and the Franchising Code of Conduct, p 33.

170

The Australian Consumer Law

[4.70]

disadvantage, they are able to decide what is in their best interests. Statutory unconscionability for the purposes of s 21 of the ACL focuses on the conduct of the dominant party and whether that conduct, looked at as a whole, can be said to offend good conscience. In relation to the equivalent interpretative principle in s 12CB(4)(b) of the ASIC Act, Allsop CJ stated in Paciocco v Australia and New Zealand Banking Group: Section 12CB(4)(b) emphasises that, even if there are factors militating against a conclusion that there was any unconscionable conduct by ANZ in its dealing with Mr Paciocco and SDG, that does not mean the “system of conduct or pattern of behaviour” of ANZ cannot exhibit unconscionable conduct.63

The Full Federal Court had already held in ASIC v National Exchange Pty Ltd,64 that statutory unconscionable conduct is capable of applying to a system or pattern of conduct.65 Third interpretative principle

[4.70] The third interpretative principle recognises that statutory unconscionable conduct is not limited to conduct relating to the formation of the contract. Consideration may be given to the terms of the contract and the manner and extent to which a contract is carried out. Statutory unconscionable conduct under the ACL is concerned with both procedural unconscionable conduct (the bargaining process leading to the making of the contract) and substantive unconscionable conduct (the terms of the contract and the conduct of the parties in carrying it out).66 According to the Explanatory Memorandum, The prohibition of unconscionable conduct is not restricted to situations where there is a contract between two or more parties. However, where there is a contract, this provision clarifies that unconscionable conduct can extend beyond the formation of the contract to both its terms and the way in which it is carried out.67

Unconscionable conduct can also manifest itself in the way in which the stronger party enforces its strict contractual rights. According to the third interpretative principle, statutory unconscionability may consist of procedural unconscionable conduct or substantive unconscionable conduct, or both.

Procedural unconscionable conduct [4.75] Procedural unconscionable conduct has been said to arise during the process of contract formation, and the rationale for rendering a contract provision procedurally unconscionable is that an inequality of bargaining power can give rise to a situation where there is no genuine negotiation and an absence of meaningful choice. 63 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [309]. 64 ASIC v National Exchange Pty Ltd (2005) 148 FCR 132. 65 ASIC v National Exchange Pty Ltd (2005) 148 FCR 132 at [33]. 66 Strengthening Statutory Unconscionable Conduct and the Franchising Code of Conduct, pp 32-33. 67 Explanatory Memorandum, Competition and Consumer Legislation Amendment Bill 2010, at [2.25].

[4.75]

4 Unconscionable Conduct

171

However, in relation to the application of s 21 of the ACL, the existence of one of the factors, such as lack of bargaining power, will not be enough on its own to constitute unconscionable conduct. Mere knowledge of the existence of inequality of bargaining power does not give rise to statutory unconscionable conduct. There must be some direct evidence of some deliberate misuse of the bargaining positions between the parties in a way that offends good conscience. For example, in PSAL Ltd v Kellas-Sharpe,68 PSAL agreed to lend Ms Kellas-Sharpe the sum of $1,139,368 on a short-term, 2 month loan. The Loan Agreement defined the interest rate as being 7.5% per month, but while the borrower was not in default the lender would accept interest at the concessional rate of 4%. Clause 4.3 of the loan agreement provided: If any payment of interest required to be paid under this agreement or any part of it is not paid on the due date, the interest in arrears may, at the election of the Lender … be capitalised and be immediately added to the Debt and shall bear interest accordingly from the day when the interest is capitalised.

Ms Kellas-Sharpe failed to repay the loan after two months, and by December 2010 the amount outstanding had increased to $2,040,420.The defendants relied on the statutory unconscionability provisions of the ASIC Act, and in the alternative statutory unconscionability under the TPA. In deciding whether there was procedural unconscionable conduct in the formation of the loan contract, Applegarth J considered the relative strengths of the bargaining positions of the supplier and the service recipient, and the fact that PSAL was unwilling to change the terms upon which it was prepared to enter into the contract. His Honour found that there was no procedural unconscionability and that PSAL did not exploit Ms Kellas-Sharpe’s vulnerability in negotiation the loan.69 She was under pressure to secure the purchase of a property and PSAL knew this, but the pressure to secure finance was largely of her own making. She did not make the purchase of the property subject to finance, and took the risk of not being able to obtain finance. She was experienced in business and was able to understand the terms of the loan negotiated.70 With the settlement of the property contract only a few days away PSAL became her “lender of last resort”. Applegarth J adopted the following observations of Marshall J in Chilcott v Homesec Finance Express Pty Ltd: It did no more than carry on its usual business as a lender of last resort at transparently high interest rates to people who had a choice not to go ahead with the transaction at the risk of losing their deposit … The [borrowers] were not placed at a serious disadvantage simply because of the high rates charged … There was no unconscientious exploitation by [the lender] of [the borrowers’] inability to conserve their own interests. The [borrowers] had a choice. They were able to walk away from the … transaction and not enter a short term loan.71 68 PSAL Ltd v Kellas-Sharpe [2012] QSC 31. 69 PSAL Ltd v Kellas-Sharpe [2012] QSC 31 at [97]. 70 PSAL Ltd v Kellas-Sharpe [2012] QSC 31 at [95]-[96]. 71 Chilcott v Homesec Finance Express Pty Ltd [2011] FCA 729 at [40].

172

The Australian Consumer Law

[4.80]

Substantive unconscionable conduct [4.80] According to the third interpretative principle discussed at [4.70], statutory unconscionability can be found without bargaining misconduct. Substantive unconscionable conduct deals with the content of the contract, and whether there are any unreasonable terms that overwhelmingly favour one party, and that are enforced in a way that offends goods conscience. The rationale for rendering a contract provision substantively unconscionable is that the alleged contravenor, in asserting their rights under the contract, is knowingly exploiting a vulnerable target. However, in Paciocco v Australia and New Zealand Banking Group,72 the Full Federal Court would not characterise a term of a contact imposing an exorbitant fee as unconscionable conduct in isolation. It held that the term had to be considered in the light of the conduct that led to the formation of the contract.73 Different interpretations [4.85] Two lines of authority have developed around the interpretation of statutory unconscionable conduct for the purposes of ss 51AB and 51AC of the TPA, s 12CB of the ASIC Act, and s 21 of the ACL. According to the first line of authority, statutory unconscionable conduct is targeted at commercial conduct involving a “high level of moral obloquy”,74 or at least some moral tainting. This judicially imposed requirement of a “high level of moral obloquy” or moral tainting has been applied in a number of cases of statutory unconscionable conduct. For example, in Canon Australia Pty Ltd v Patton,75 the New South Wales Court of Appeal overturned the finding of the trial judge, that the conduct of the appellant was unconscionable under s 51AC of the TPA. The Pattons incorporated a business, James Aston Pty Ltd, as a vehicle for selling parts for Canon and Hewlett-Packard printers. The conduct at issue consisted of a failure by Canon to supply spare parts; a failure to supply for cash in advance; and refusal to accept the return of stock. James Aston was experiencing cash flow problems. Campbell JA (with whom Harrison J agreed) concluded that Canon had not engaged in unconscionable conduct under s 51AC of the TPA for refusing to supply spare parts to a customer who was $160,000 in arrears and experiencing cash flow problems. It was also held that Canon’s refusal to take back unsaleable stock, when it was not part of the terms of trade and there was no evidence of the age or condition of the stock, was 72 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50. 73 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [341]. 74 See Attorney-General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557 at 583 [121] (Spigelman CJ); CIT Credit Pty Ltd v Keable [2006] NSWCA 130 (Spigelman CJ, with whom Giles JA and Gzell J agreed); Canon Australia Pty Ltd v Patton (2007) ATPR ¶42-183; [2007] NSWCA 246 at [55]; ACCC v Excite Mobile Pty Ltd [2013] FCA 350 at [178] (Mansfield J); Director of Consumer Affairs Victoria v Scully (No 3) (2013) 303 ALR 168 at [58]. See also DPN Solutions Pty Ltd v Tridant Pty Ltd [2014] VSC 511 (Hargrave J) and Sgargetta v National Australia Bank Ltd [2014] VSCA 159 (Whelan and Santamaria JJA). See Paterson and Brody, “Safety Net Consumer Protection: Using Prohibitions on Unfair and Unconscionable Conduct to Respond to Predatory Business Models” (2015) 38 Journal of Consumer Policy 331 at 342-3; and McLeod, “Statutory Unconscionable Conduct under the ACL: The Case against a Requirement of “Moral Obloquy”” (2015) 23(2) Competition & Consumer Law Journal 123. 75 Canon Australia Pty Ltd v Patton (2007) 244 ALR 759.

[4.85]

4 Unconscionable Conduct

173

not unconscionable under s 51AC of the TPA. The commercial possibility that it would not be paid, prevented Canon’s conduct being of “… such a high level of moral impropriety that it could properly be described as ‘unconscionable’.”76 However, Basten JA disagreed with this approach: to treat the word “unconscionable” as having some larger meaning, derived from ordinary language, and then to seek to confine it by such concepts as high moral obloquy is to risk substituting for the statutory term language of no greater precision in an attempt to impose limits without which the Court may wander from well-trodden paths without clear criteria or guidance. That approach should not be adopted unless the statute clearly so requires.77

In CIT Credit Pty Ltd v Keable,78 the New South Wales Court of Appeal overturned the trial judge’s decision that the actions of CIT Credit were unconscionable under s 51AC of the TPA, although they were misleading or deceptive. The respondent had signed a guarantee, without reading it, based on a false representation that it would be operative only whilst the respondent was a director of the company. The court held that “to say that a misrepresentation has been made and, therefore, that there was false or misleading conduct in trade or commerce, is a long way from a conclusion of unconscionability, or of unjustness”.79 The appellant was not responsible for the respondent’s failure to read the guarantee before executing it. The decision not to read it was that of the appellant alone. He had access to legal and accounting advice if he had thought it appropriate to seek it. None of the terms of the guarantee was unreasonable or unjust. In ACCC v Excite Mobile Pty Ltd,80 Mansfield J held the sales method adopted by Excite Mobile for the promotion of its day cap plan for mobile services was unconscionable conduct contrary to s 51AB of the TPA.81 The telemarketing sales strategy set out to sign up every day users to a plan that was unsuitable for them and likely to expose them to very significant additional monthly charges. Mansfield J held: It was unfair to such a degree as to attract a strong adverse moral judgment … the Excite Mobile plan was destined to expose its consumers to quite substantial monthly charges but was presented in such a way that it effectively concealed that reality … and it did so when Excite Mobile knew that its plan was not suited to the requirements of the everyday user. … in my view, its marketing approach judged objectively was cynically indifferent to the interests of its potential customers, and was unconscionable for the reasons given.82

The requirement of a high moral obloquy in relation to statutory unconscionable conduct has been recognised in other State courts. In Director of Consumer Affairs 76 Canon Australia Pty Ltd v Patton (2007) 244 ALR 759 at [55]. 77 Canon Australia Pty Ltd v Patton (2007) 244 ALR 759 at [4]. 78 CIT Credit Pty Ltd v Keable [2006] NSWCA 130 (Spigelman CJ, with whom Giles JA and Gzell J agreed). 79 CIT Credit Pty Ltd v Keable [2006] NSWCA 130 at [70], citing ACCC v 4WD Systems Pty Ltd (2003) 200 ALR 491 at [184]-[185]. 80 ACCC v Excite Mobile Pty Ltd [2013] FCA 350. 81 ACCC v Excite Mobile Pty Ltd [2013] FCA 350 at [175]. 82 ACCC v Excite Mobile Pty Ltd [2013] FCA 350 at [178].

174

The Australian Consumer Law

[4.90]

Victoria v Scully (No 3),83 the Victorian Court of Appeal had to consider the scope of the equivalent statutory unconscionable conduct provision of the Fair Trading Act 1999 (Vic). The Director of Consumer Affairs in Victoria argued that moral obloquy was not required to prove statutory unconscionable conduct. In dismissing the appeal, the Court of Appeal held that, “the trial judge understood statutory unconscionability as involving moral taint, and that absent such taint, conduct which might be thought otherwise to be unfair or unreasonable should not be held to be ‘unconscionable’.”84

[4.90] According to another line of authority, the statutory language needs to be given its ordinary and natural interpretation and the normative inquiry involved is not limited to finding “moral obloquy”. In ACCC v Lux Distributors Pty Ltd, the Full Federal Court held that conduct is “unconscionable” for the purposes of s 21 of the ACL if it is “not done in good conscience”.85 Statutory unconscionable conduct is an evaluative standard to be understood by taking into account the values and norms that Parliament considered relevant when it identified the non-exhaustive list of factors in s 22 of the ACL, and s 12CC of the ASIC Act.86 It is to be applied according to the particular context of the case by asking: what is the current moral or ethical standard in relation to the conduct at issue? According to the Full Federal Court in Lux Distributors: The task of the Court is the evaluation of the facts by reference to a normative standard of conscience. That normative standard is permeated with accepted and acceptable community values. In some contexts, such values are contestable. Here, however, they can be seen to be honesty and fairness in the dealing with consumers. The content of those values is not solely governed by the legislature, but the legislature may illuminate, elaborate and develop those norms and values by the act of legislating, and thus standard setting. The existence of State legislation directed to elements of fairness is a fact to be taken into account… These laws of the States and the operative provisions of the ACL reinforce the recognised societal values and expectations that consumers will be dealt with honestly, fairly and without deception or unfair pressure.87

In relation to the prohibition of statutory unconscionable conduct in s 12CB of the ASIC Act, in Paciocco v Australia and New Zealand Banking Group, Allsop CJ said: 83 Director of Consumer Affairs Victoria v Scully (No 3) (2013) 303 ALR 168 (Neave, Osborn and Santamaria JJA). 84 Director of Consumer Affairs Victoria v Scully (No 3) (2013) 303 ALR 168 at [58]. See also DPN Solutions Pty Ltd v Tridant Pty Ltd [2014] VSC 511 (Hargrave J) and Sgargetta v National Australia Bank Ltd [2014] VSCA 159 (Whelan and Santamaria JJA). 85 See ACCC v Lux Distributors Pty Ltd [2013] FCAFC 90 at [41] (Allsop CJ, Jacobson and Gordon JJ). Leave to appeal to the High Court was refused. See [2014] HCASL 55. See also Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [262] (Allsop CJ) in relation to “unconscionability” in s 12CB of the ASIC Act. See JM Paterson and G Brody, ““Safety Net” Consumer Protection: Using Prohibitions on Unfair and Unconscionable Conduct to Respond to Predatory Business Models” (2015) 38 Journal of Consumer Policy 331 at 341-6. 86 ACCC v Lux Distributors Pty Ltd [2013] FCAFC 90 at [23]); and Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [262] (Allsop CJ) in relation to statutory unconscionable conduct in s 12CB of the ASIC Act. 87 ACCC v Lux Distributors Pty Ltd [2013] FCAFC 90 at [23].

[4.90]

4 Unconscionable Conduct

175

More specific guidance to the meaning and operation of s 12CB as a consumer provision is given by the matters set out in s 12CC … to which a court may have regard for the purposes of considering the question of unconscionable conduct. These matters assist in setting a framework for the values that lie behind the notion of the relevant conscience of the parties in trade or commerce identified in s 12CB. Those values and conceptions can be seen as: fairness and equality: see paras (a), (b), (d) – (k); a lack of understanding or ignorance of a party: para (c); the risk and worth of the bargain: paras (e) and (i); and good faith and fair dealing: para (l).88

Allsop CJ stated that in applying s 12CB of the ASIC Act, what is required is: an evaluation of business behaviour (conduct in trade or commerce) as to whether it warrants the characterisation of unconscionable, in the light of the values and norms recognised by the statute. The task is not limited to finding “moral obloquy”; such may only divert the normative inquiry from that required by the statute, to another, not tied to the words of the statute.89

A system or pattern of conduct was again at issue in ACCC v Coles Supermarkets Australia Pty Ltd.90 The Federal Court, by consent, made declarations that Coles had engaged in unconscionable conduct in contravention of then s 22 of the ACL (now s 21 of the ACL) by forcing its Tier 3 suppliers to make payments in relation to a new streamlined logistics system without providing them sufficient information to assess the benefits of the system. Tier 3 suppliers comprised “smaller” suppliers for whom Coles believed it represented about 30% of the supplier’s business. Gordon J made no mention of the need to establish moral obloquy or moral tainting in order to establish statutory unconscionable conduct. Her Honour described Coles’ conduct as being “deliberate, orchestrated and relentless”.91 Her Honour stated: Coles’ misconduct was serious, deliberate and repeated. Coles misused its substantial bargaining power. Its conduct was “not done in good conscience”. Coles accepted that in its dealings with the five suppliers it treated them in a manner inconsistent with acceptable business practice, was not respectful of the suppliers’ needs for full and timely transparency, and nor did it properly respect the responsibility attached to Coles’ bargaining power.92

This approach has been followed by some State courts. In PT Ltd v Spuds Surf Chatswood Pty Ltd,93 Sackville AJA, (Leeming and McColl JJA concurring) suggested that a requirement of “high moral obloquy” in relation to statutory unconscionability was “too stringent” and adopted the approach of the Full Federal Court in Lux Distributors, since it had “the advantage of adhering closely to the statutory language”.94 88 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [285]. 89 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [304]-[305]. 90 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405. 91 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [96]. 92 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [104]-[106]. 93 PT Ltd v Spuds Surf Chatswood Pty Ltd [2013] NSWCA 446 (Sackville AJA, Leeming and McColl JJA). 94 PT Ltd v Spuds Surf Chatswood Pty Ltd [2013] NSWCA 446 at [105].

176

The Australian Consumer Law

[4.95]

Statutory factors [4.95] Statutory unconscionable conduct is an evaluative standard to be understood by taking into account the values and norms that Parliament considered relevant when it identified the non-exhaustive list of factors in s 22 of the ACL, and s 12CC of the ASIC Act.95 Section 22(1) of the ACL provides: (1) Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier) has contravened section 21 in connection with the supply or possible supply of goods or services to a person (the customer), the court may have regard to: (a) the relative strengths of the bargaining positions of the supplier and the customer; and (b) whether, as a result of conduct engaged in by the supplier, the customer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and (c) whether the customer was able to understand any documents relating to the supply or possible supply of the goods or services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the customer or a person acting on behalf of the customer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and (e) the amount for which, and the circumstances under which, the customer could have acquired identical or equivalent goods or services from a person other than the supplier; and (f) the extent to which the supplier’s conduct towards the customer was consistent with the supplier’s conduct in similar transactions between the supplier and other like customers; and (g) the requirements of any applicable industry code; and (h) the requirements of any other industry code, if the customer acted on the reasonable belief that the supplier would comply with that code; and (i) the extent to which the supplier unreasonably failed to disclose to the customer: (i) any intended conduct of the supplier that might affect the interests of the customer; and (ii) any risks to the customer arising from the supplier’s intended conduct (being risks that the supplier should have foreseen would not be apparent to the customer); and (j) if there is a contract between the supplier and the customer for the supply of the goods or services: (i) the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the customer; and (ii) the terms and conditions of the contract; and 95 ACCC v Lux Distributors Pty Ltd [2013] FCAFC 90 at [23] (Allsop CJ); and Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [262] (Allsop CJ) in relation to statutory unconscionable conduct in s 12CB of the ASIC Act.

[4.95]

4 Unconscionable Conduct

177

(iii) the conduct of the supplier and the customer in complying with the terms and conditions of the contract; and (iv) any conduct that the supplier or the customer engaged in, in connection with their commercial relationship, after they entered into the contract; and (k) without limiting paragraph (j), whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the customer for the supply of the goods or services; and (l) the extent to which the supplier and the customer acted in good faith. Section 22(2) provides: (2) Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the acquirer) has contravened section 21 in connection with the acquisition or possible acquisition of goods or services from a person (the supplier), the court may have regard to: (a) the relative strengths of the bargaining positions of the acquirer and the supplier; and (b) whether, as a result of conduct engaged in by the acquirer, the supplier was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the acquirer; and (c) whether the supplier was able to understand any documents relating to the acquisition or possible acquisition of the goods or services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the supplier or a person acting on behalf of the supplier by the acquirer or a person acting on behalf of the acquirer in relation to the acquisition or possible acquisition of the goods or services; and (e) the amount for which, and the circumstances in which, the supplier could have supplied identical or equivalent goods or services to a person other than the acquirer; and (f) the extent to which the acquirer’s conduct towards the supplier was consistent with the acquirer’s conduct in similar transactions between the acquirer and other like suppliers; and (g) the requirements of any applicable industry code; and (h) the requirements of any other industry code, if the supplier acted on the reasonable belief that the acquirer would comply with that code; and (i) the extent to which the acquirer unreasonably failed to disclose to the supplier: (i) any intended conduct of the acquirer that might affect the interests of the supplier; and (ii) any risks to the supplier arising from the acquirer’s intended conduct (being risks that the acquirer should have foreseen would not be apparent to the supplier); and (j) if there is a contract between the acquirer and the supplier for the acquisition of the goods or services: (i) the extent to which the acquirer was willing to negotiate the terms and conditions of the contract with the supplier; and

178

The Australian Consumer Law

[4.100]

(ii) the terms and conditions of the contract; and (iii) the conduct of the acquirer and the supplier in complying with the terms and conditions of the contract; and (iv) any conduct that the acquirer or the supplier engaged in, in connection with their commercial relationship, after they entered into the contract; and (k) without limiting paragraph (j), whether the acquirer has a contractual right to vary unilaterally a term or condition of a contract between the acquirer and the supplier for the acquisition of the goods or services; and (l) the extent to which the acquirer and the supplier acted in good faith. The statutory factors in s 22(1) and (2) of the ACL are largely based on those in the repealed s 51AC(3) of the TPA and s 12CC of the ASIC Act. In the National Exchange case, the Full Federal Court stated: The starting point in making this determination as to unconscionability is the list of factors to which the Court’s attention is drawn by s 12CC(2) [which mirrors s 22(1) and (2) of the ACL]. These factors should be considered and weighed as a whole. Some may weigh in favour of a characterisation of the conduct as unconscionable and others may not. It is not appropriate to approach this list as exhaustive. This list is indicative of some of “the relevant circumstances”.

The s 22 factors direct a court towards considering the conduct at issue within the commercial context in which the contract was negotiated and performed.96 They direct attention to both procedural and substantive unconscionability, and involve a combination of subjective and objective inquiries. For example, s 22(1) and (2)(f) require an inquiry into the extent to which the stronger party’s conduct towards the weaker party was consistent with its conduct in similar transactions. Section 22(1) and (2)(d) require an inquiry into whether the stronger party exercised any undue pressure or unfair tactics. These factors suggest a subjective inquiry. Others will involve an objective inquiry. For example, s 22(1) and (2)(b) require an investigation as to whether the conditions imposed were reasonably necessary for the protection of the legitimate interests of the stronger party. Section 22(1) and (2)(i) require an inquiry into whether the stronger party unreasonably failed to disclose information to the weaker party. However, identifying the presence of one or more statutory factors will not be sufficient to establish a contravention of s 21 of the ACL; the conduct as a whole must offend good conscience. Imbalance of bargaining power

[4.100]

Section 22(1)(a) and (2)(a) provide that the court may consider the relative strengths of the bargaining positions of the parties. In ACCC v Coles Supermarkets Australia Pty Ltd,97 the court held that Coles relied on its superior bargaining position as a substantial buyer to require payments from vulnerable suppliers to recoup the cost of a new supply logistics portal installed by Coles. Coles represented 30% of the small suppliers’ total business, and to this extent they

96 See R V Miller, Australian Competition and Consumer Law Annotated (37th ed, Lawbook Co, Sydney, 2015), [1.S2.22.10]-[1.S2.22.45]. 97 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405.

[4.100]

4 Unconscionable Conduct

179

were “vulnerable” suppliers and this was the reason they were targeted by Coles.98 In ACCC v ACN 117 372 915 Pty Ltd (in liq),99 it was held the patients who were subjected to high pressure selling techniques suffered from a significant imbalance of bargaining power. The fact that standard terms may be imposed with no opportunity to negotiate does not alone render conduct unconscionable. In Paciocco v Australia and New Zealand Banking Group,100 the Full Federal Court confirmed the decision of the primary judge, Gordon J, that ANZ’s late payment fees were not unconscionable within the meaning of s 12CB or the ASIC Act. Allsop CJ observed: It is true that the fees were charged under contracts of adhesion, reflecting a strength of bargaining power to impose terms. But these terms could only be imposed whilesoever the person remained a customer. The accounts could be closed at will. The fees were not charged if the customer kept within the original terms of the account. The terms were openly disclosed.101

As an example of the circumstances in which this factor may be relevant consider a franchisee–franchisor relationship. There will be some imbalance of bargaining power, given the position of power enjoyed by the franchisor. The definition of “franchise agreement” in cl 4(1)(b) of the Franchising Code of Conduct in fact requires some level of control being exercised by the franchisor over the way the franchisee conducts the business. It provides: A franchise agreement is an agreement … in which a person (the franchisor) grants to another person (the franchisee) the right to carry on the business of offering, supplying or distributing goods or services in Australia under a system or marketing plan substantially determined, controlled or suggested by the franchisor … (emphasis added)102

This imbalance will be greater in the case of an existing franchisee, as they will have already committed a significant investment of time and resources into their franchise, which may not be fully recoverable if they terminate the contract. A prospective franchisee without these sunk costs may be able to demand a better deal from the franchisor, or walk away if the deal offered is unsatisfactory. An existing franchisee may, for example, feel compelled to renew their franchise agreement on less satisfactory terms than their initial agreement, to avoid losing their investment in the franchise. The fact that a franchisee is legally represented and can air their grievances with the franchisor in a robust fashion does not preclude an imbalance of bargaining power. This argument was raised by the franchisor in Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) (the Allphones case), in which it argued that there was no

98 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [35], [44], [50],[56],[62], [68] and [102]-[105]. 99 ACCC v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd) [2015] FCA 368 at [947]. 100 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50. 101 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [346]-[347]. 102 Trade Practices (Industry Codes – Franchising) Regulations 1998, s 4(1).

180

The Australian Consumer Law

[4.100]

evidence that its oppressive and bullying conduct had any effect on the franchisee, which was “more than up to the task of batting back to Allphones anything that was thrown at them and did so.”103 Rares J dismissed the argument: While [the franchisee] could talk or send letters, it received an insouciant reception from Allphones. Whatever they “batted back” was not scoring runs … [the franchisee] could complain as much as it liked, but Allphones had the substantive power in the relationship and used it.104

This statutory factor will also overlap, to some extent, with another statutory factor of whether the supplier (franchisor) was willing to negotiate on terms.105 While inequality of bargaining power alone is not sufficient to constitute a special disadvantage for the purposes of the equitable doctrine of unconscionability106 it may be sufficient for the purposes of s 21 of the ACL. Where contract terms confer a discretion on the stronger party (for example, renewal, assignment or termination clauses) the stronger party will need to exercise considerable care taking into account any situational advantage which the weaker party may be suffering. For example, if a franchisee’s personal circumstances make that party particularly vulnerable, the franchisor must not try to take advantage of that weakness in order to extract some concession or benefit that might not otherwise be obtainable. A franchisee attempting to sell a business will almost always be at a situational disadvantage because if the lease is not renewed there is a risk of losing the goodwill. Although this type of “situational disadvantage” may be insufficient to attract the Amadio species of unconscionability,107 it may be sufficient for the conduct of the stronger party to contravene s 21 of the ACL. For example, in Coggin v Telstar Finance Company (Q) Pty Ltd,108 the respondent was found to have engaged in unconscionable conduct. Here, the applicant provided a fishing boat valued at over $200,000 as security for a loan of $65,000 made to him by the respondent at “a truly extortionate rate of interest of 10% per month”.109 This money was raised to finance the acquisition of a franchise business that was essentially for the benefit of a person acting for the respondents and his associates, rather than the applicant. These factors, together with taking advantage of the applicant’s ill health and his desire to assist his daughter, led to the transaction being overwhelmingly against his interests and in favour of the respondent’s interests. This combined with the receipt of secret profits, led Heerey J to conclude that something more than unfairness had been established and s 51AC contravened. 103 Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) (2008) ATPR ¶42-240 at [408]. 104 Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) (2008) ATPR ¶42-240 at [409]. 105 ACL, s 22(1) and (2)(j)(i). 106 ACCC v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 at 64 [11] and [14] (Gleeson CJ). 107 See, eg, ACCC v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51; ACCC v Samton Holdings Pty Ltd (2002) 117 FCR 301. 108 Coggin v Telstar Finance Company (Q) Pty Ltd (2006) ATPR ¶42-107. 109 Coggin v Telstar Finance Company (Q) Pty Ltd (2006) ATPR ¶42-107 at 44,905.

[4.110]

4 Unconscionable Conduct

181

The importance of the respondent’s conduct offending good conscience, as distinct from the respondent merely occupying a significantly superior bargaining position, is illustrated by National Australia Bank Ltd v Meeke.110 Here, the bank sought to enforce a mortgage given to it by the Meekes to secure advances it had made to a company with which they were associated. The Meekes sought to resist this claim by relying on s 51AC, arguing that the bank was in a much stronger bargaining position than they were when the transaction was entered into. Although the weakness of their position was accepted, this was held to be insufficient on its own to render the bank’s conduct unconscionable. To be so characterised it was necessary that the bank had “unlawfully, unfairly or unreasonably taken advantage of its stronger bargaining position” and this had not been established.111 Unreasonable conditions

[4.105]

Section 22(1)(b) and (2)(b) provide that the court may have regard to whether, as a result of conduct engaged in by the supplier or acquirer, the other party was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier or acquirer. This factor requires an objective inquiry. First, it is necessary to consider what the legitimate interests of the supplier or acquirer are; and, secondly, whether any conditions imposed on the other party are reasonably necessary to protect those interests.

The mere reliance on the terms of a contract cannot, without something more, constitute unconscionable conduct.112 For example, it may be reasonably necessary to protect the legitimate interests of a franchisor to require a franchisee to disclose to the franchisor the names and addresses of all the franchisee’s customers. Mere disclosure of the names and addresses of all the franchisee’s customers is unlikely to be unconscionable; however, it would be unconscionable conduct under s 21 for the franchisor to use that information to poach the franchisee’s clients or to otherwise compete with the franchisee.113 Similarly, where a contract contains onerous provisions allowing for termination on the slightest default, the inclusion of those provisions may not be unconscionable, but relying on them where there is reasonable doubt about whether the franchisee has, in fact, breached the term,114 or where the breach is of a minor or technical nature, may be unconscionable. Understanding of documents

[4.110]

Section 22(1)(c) and (2)(c) provide that the court may have regard to whether the other party “was able to understand any documents relating to the

110 National Australia Bank Ltd v Meeke (2007) ATPR (Digest) ¶46-272. 111 National Australia Bank Ltd v Meeke (2007) ATPR (Digest) ¶46-272 at 54,549. 112 Hurley v McDonald’s Australia Ltd (2000) ATPR ¶41-741 at 40,586. 113 See, eg, ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253. 114 See, eg, Automasters Australia Pty Ltd v Bruness Pty Ltd [2002] WASC 286.

182

The Australian Consumer Law

[4.110]

supply or possible supply of the goods or services”. The inability to understand documents can arise from lack of, or limited ability to understand the English language, or lack of education, or lack of understanding of specialist legal or business concepts. In ACCC v Australian Power and Gas Company Ltd,115 the Federal Court imposed a penalty of $200,000 for a contravention of s 21 of the ACL in the context of door-to-door sales conduct that breached the ACL, when its sales representatives dealt with a non-English speaking customer. Similarly, in ACCC v Origin Energy Electricity Ltd,116 the Federal Court imposed a total penalty of $600,000 on Origin Energy Electricity Ltd (Origin) for a contravention of s 21 of the ACL in the context of unlawful door-to-door selling when its sales representatives dealt with a non-English speaking customer. Lack of understanding of specialist legal or business concepts has arisen in a number of cases. In ASIC v National Exchange,117 the Full Federal Court held that there was some doubt as to whether the recipients who accepted the offer were able to understand the offer document: since, on its face, it is difficult to see why or how a recipient would be persuaded to part with shares, without bargaining, where the price offered was admitted by the offeror to be substantially less than half the offeror’s estimate of the value of the shares, and less that one quarter of the initial market price of the shares.118

In ACCC v Coles Supermarkets Australia Pty Ltd,119 the court held that Coles had failed to supply sufficient details to enable the suppliers to understand how Coles had calculated savings to each supplier’s business.120 Furthermore, Coles’ claim that the data sharing and the ordering system would lead to value to the Supplier of at least a specified percentage of the price Coles paid for the supplier’s grocery products was based on assumptions. Coles had not sought to establish whether the assumptions reflected the actual value of the ordering system to the Tier 3 supplier. In other words, Coles unreasonably failed to disclose information about the value of the ARC system to the small suppliers before obliging them to make a decision about whether to pay the 1% rebate and whether it represented value for money. There are a number of steps which a supplier or acquirer can take to mitigate the risk of documents not being understood, including: • drafting the relevant documents in “plain English”; • providing a genuine opportunity for the other party to obtain independent legal advice;

115 ACCC v Australian Power and Gas Company Ltd [2013] FCA 1358 (Logan J). 116 ACCC v Origin Energy Electricity Ltd [2015] FCA 278 (Katzmann J). 117 ASIC v National Exchange (2005) 148 FCR 132. 118 ASIC v National Exchange (2005) 148 FCR 132 at 142 [40]. 119 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405. 120 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [35], [44], [50], [56], [62] and [68].

[4.120]

4 Unconscionable Conduct

183

• requiring the other party to obtain a certificate from their legal advisors, confirming that those advisors have explained the nature and effect of the agreement (and any other relevant documents) to them;121 and, • taking extra care where the language in which the documents are written is not the first language of the other party. The supplier or acquirer should not, under any circumstances, prevent or dissuade the other party from obtaining independent legal advice, or engage in conduct which could be construed as doing so. This type of conduct was held to contravene s 51AC of the TPA in the Dataline case.122 Undue influence or pressure, unfair tactics

[4.115]

Section 22(1)(d) and (2)(d) provide that the court may have regard to whether any undue influence or pressure was exerted on, or any unfair tactics were used by the supplier or acquirer against the other party in relation to the supply or possible supply of the goods or services.

Business-to-consumer context

[4.120]

This factor was relied upon in a business-to-consumer context by the Full Federal Court in ACCC v Lux Distributors Pty Ltd.123 In 2010 and 2011 sales representatives of the respondent made door-to-door sales of vacuum cleaners to three elderly women. The respondent required its representatives to contact potential customers by telephone, offering to conduct a “free maintenance check” of their existing vacuum cleaner. This offer was a ruse to gain entry to their home. Once there, having conducted a maintenance check, the representative would persuade them that their existing machine needed to be replaced by a new one, which they would then sell to the occupant. On the three occasions in question the sales representative contravened Commonwealth or State legislation governing “direct selling” (door-to-door selling). At issue in these proceedings was whether their conduct was also unconscionable under s 51AB of the TPA (for two sales occurring in 2010), or the original s 21 of the ACL (for a sale occurring in 2011). The application failed at first instance; the ACCC appealed to the Full Court which held that Lux had contravened the statutory unconscionable conduct provisions. The ACL proscribes various highly unfair and exploitative trading practices including certain door-to-door selling practices, bait advertising, pyramid selling, and asserting a right to payment for unsolicited goods. The prior existence of these laws

121 Obtaining Certificates of Independent Advice are now a standard practice in relation to the giving of Third Party Guarantees following cases such as Commercial Bank of Australia v Amadio (1983) 151 CLR 447 and Garcia v National Australia Bank (1998) 194 CLR 395. 122 ACCC v Dataline.net.au Pty Ltd (2006) 236 ALR 665 at 684, 695. The relevant contracts in this case involved default clauses which allowed the supplier to seize the business and client-base of its resellers if the reseller defaulted in the slightest way. The court inferred that the supplier prevented or dissuaded the resellers from obtaining independent legal advice so they would not be informed of the effect of the default terms, and the undesirability of entry into a contract which contained them. 123 ACCC v Lux Distributors Pty Ltd (2013) FCAFC 90.

184

The Australian Consumer Law

[4.120]

in relation to door-to-door selling was of considerable assistance to the Full Federal Court in finding that the conduct at issue in Lux Distributors was unconscionable.124 In ACCC v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd),125 Advanced Medical Institute Pty Ltd (AMI) conducted a business promoting and supplying medication and services for the treatment of male sexual dysfunction. AMI was placed into voluntary administration on 22 December 2010, the day after the ACCC instituted proceedings against it. AMI continued to trade during its voluntary administration but in June 2011 sold the AMI business to NRM. Shortly afterwards, AMI was placed into voluntary liquidation. NRM conducted the AMI business following its acquisition in June 2011. The ACCC alleged that AMI engaged in unconscionable conduct in breach of the TPA and NRM engaged in unconscionable conduct in breach of the CCA. The court found: The technique of frightening men by telling them of the dire adverse consequences of not agreeing to treatment and assuring them that the treatment was effective was part of the business system of AMI and NRM. It was formulated by management and imparted in an organised fashion through scripts and training sessions … Training salespeople to trap vulnerable men into agreeing to treatment programs by the use of high-pressure selling was dishonest conduct. It resulted in undue pressure on the consumer, which is a marker of possible unconscionable conduct referred to in s 51AB(2)(d) of the TPA, s 21(2)(d) of the ACL operating between 1 January 2011 and 1 January 2012, and s 22(1)(d) of the ACL in operation after 1 January 2012.126

The salespeople employed by AMI and NRM were paid by commission which meant that they had an interest in selling the higher priced programs. If they disclosed that they were paid on commission, the patients may have been alerted to the interest of the salespeople in selling the higher priced programs and that the patients were not consulting a traditional medical practice. The court concluded: The failure to disclose the basis of the remuneration of salespeople was dishonest and exploitative, it was sharp practice and deceptive, particularly in the circumstances when men believed they were consulting a medical practice which characteristically make patient welfare a primary concern. It was an unfair tactic, which is a possible marker of unconscionable conduct …127

In ACCC v Origin Energy Electricity Ltd,128 Origin Energy Electricity Ltd (Origin) and Origin’s marketing company, SalesForce Australia Pty Ltd (SalesForce) admitted that they engaged in two contraventions of s 21(1) of the ACL. In one instance, a sales representative spent about 30 to 45 minutes with a consumer, Witness C, under the false pretext that he was from Witness C’s existing electricity 124 ACCC v Lux Distributors Pty Ltd [2013] FCAFC 90 at [23] and [71]. 125 ACCC v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd) [2015] FCA 368. 126 ACCC v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd) [2015] FCA 368 at [897]-[899]. 127 ACCC v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd) [2015] FCA 368 at [905]. 128 ACCC v Origin Energy Electricity Ltd [2015] FCA 278 (Katzmann J).

[4.125]

4 Unconscionable Conduct

185

supplier. The sales representative continued to negotiate with Witness C, who was a native Tamil speaker, after being advised by Witness C that he had difficulty understanding English. The sales representative then telephoned SalesForce and prompted Witness C to say “yes” to questions to confirm and electricity contract with Origin. Katzmann J observed: In conducting himself as he did, the sales representative exerted undue influence or pressure over Witness C and deployed unfair tactics. The sales representative knew or ought to have known from both his observations of, and conversations with, Witness C that Witness C had difficulty understanding, reading and speaking English, that he might require assistance to read and understand the documents, that he was vulnerable and that he was susceptible to undue influence and pressure and unfair tactics. Yet he did not provide Witness C with a reasonable opportunity to obtain assistance to read and understand the documents and took advantage of, or obtained an advantage from, his vulnerable position.129

In a second instance, the sales representative continued to negotiate with a consumer, Witness E, after she informed him that she was not the authorised account holder, and repeatedly advised that she was not interested in changing her electricity supplier. During a telephone call with SalesForce to confirm a contract with Origin, the sales representative instructed Witness E to state that her husband, who was the authorised account holder, had signed the agreement when this was not the case.130 This conduct was held to contravene s 21 of the ACL.131 Business-to-business context

[4.125]

This factor was relied upon in a business-to-business context by Gordon J in ACCC v Coles Supermarkets Australia Pty Ltd.132 The court held that Coles exerted undue influence and pressure and used unfair tactics against vulnerable suppliers to obtain payments from them in relation to a new supply logistics portal installed by Coles. It required the suppliers to agree to ongoing payments without providing them with enough time to assess the value of the benefits of the portal. This required a subjective enquiry into whether Coles exercised any undue pressure or unfair practices. Coles provided the category managers with training and scripts. The scripts included threats to delete the supplier’s product from its shelves if it did not pay the rebate and the supplier would be denied the opportunity to participate in promotions. Prizes were awarded to category managers who collected payments.133 This factor has been considered in a number of cases involving franchises. The nature of the franchisor–franchisee relationship gives the franchisor a degree of power and control over the franchisee. Where the franchisee is dependent upon the 129 ACCC v Origin Energy Electricity Ltd [2015] FCA 278 at [41]. 130 ACCC v Origin Energy Electricity Ltd [2015] FCA 278 at [52]. 131 ACCC v Origin Energy Electricity Ltd [2015] FCA 278 at [57]. 132 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405. 133 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [35], [44], [50], [56], [62] and [68].

186

The Australian Consumer Law

[4.125]

franchisor for goods or services which are essential to the operation of its business, withholding supply can place considerable pressure on the franchisee to comply with the franchisor’s demands. In the Simply No-Knead case,134 the franchisor had made a number of unreasonable demands on franchisees, including that they pay for and distribute unwanted advertising brochures which contained only the contact details for the franchisor’s own retail outlet, pay for unrequested deliveries, and supply the franchisor with details of the franchisee’s customers in circumstances where the franchisor had no right to that information, and the franchisees had reason to believe that the franchisor would use that information to poach their clients.135 On several occasions, the franchisor refused to supply the franchisees with essential products unless they complied with the franchisor’s unreasonable demands. The court characterised these refusals to supply as done “in order to put pressure on the franchisees to do what [the franchisor] wanted done, but had no entitlement to have done.”136 The court held it to be the exertion of pressure on, and the unfair use of tactics against the franchisees within the meaning of s 51AC(3)(d),137 and the franchisor was held to have contravened s 51AC for its conduct including this refusal to supply. In the Dataline case, Dataline was a supplier of internet services in the nature of a wholesaler. It contracted with a number of other companies (Virtual Internet Service Providers, or “VISPs”) who resold those services. It was alleged that Dataline threatened the VISPs with disconnection of the resold internet services (which would have put those VISPs immediately out of business) unless the VISPs complied with Dataline’s demands, including: • entering into a new and different contract with Dataline; • carrying on its business with its customers in the manner and at a level of performance required by Dataline; • entering the VISPs’ client’s credit card information into a database operated by Dataline; • paying to Dataline debts which were owing to Dataline by an unrelated VISP, the business of which had been purchased by the VISP; and • reselling the services at a price specified by Dataline.138 The court held that the threats of disconnection, regarding the first two of the above demands, contravened s 51AC.139 In another incident, Dataline wrongfully ceased to supply services to one of its clients (HTE), putting HTE’s business in jeopardy. Dataline then offered to acquire 134 ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253. 135 ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253 at 258-60. 136 ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253 at 268. 137 ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253 at 267-368. 138 ACCC v Dataline.net.au Pty Ltd (2006) 236 ALR 665 at 671-2. Dataline’s demands with respect to setting the price at which the services could be resold constituted resale price maintenance which is prohibited by s 48 of the TPA. 139 ACCC v Dataline.net.au Pty Ltd (2006) 236 ALR 665 at 695.

[4.130]

4 Unconscionable Conduct

187

HTE’s contracts with its clients, in return for a commission on sales. HTE refused to deal with Dataline on this basis. Dataline subsequently sabotaged computer equipment belonging to HTE (but in the possession of Dataline) which was used to supply services to HTE’s clients, by changing the passwords used to access that equipment.140 The court held that by wrongly ceasing to supply HTE, and then offering to acquire HTE’s contracts with its customers, Dataline had contravened s 51AC.141 It can be seen from these cases that refusal to supply essential inputs is likely to contravene s 21 of the if it is done for an improper purpose or to extract concessions from the weaker party which the stronger supplier is not entitled to. On the other hand, it will not be unconscionable to refuse supply because of genuine credit management concerns.142 It will not be unconscionable conduct if the failure to supply is due to management and financial problems on the part of the stronger party, rather than a deliberate decision made to withhold supply to exploit the vulnerable position of the weaker party.143 Exploitative pricing

[4.130]

Section 22(1)(e) and (2)(e) of the ACL provide that the court may have regard to the amount for which, and the circumstances under which, the other party could have acquired identical or equivalent goods or services from a person other than the supplier; see also [4.210].

In ACCC v 4WD Systems Pty Ltd, Selway J indicated that this factor may be relevant if the franchisee is compelled to purchase all of its supplies of goods or services from the franchisor.144 In ACCC v Seal-A-Fridge,145 Logan J found that a franchisor Seal-A-Fridge Pty Ltd had engaged in unconscionable conduct towards its franchisees. Seal-A-Fridge was the franchisor of a mobile refrigeration seal replacement business run by franchisees around Australia. The court declared that in 2001 and 2004 Seal-AFridge engaged in unconscionable conduct towards certain franchisees by demanding, and ultimately obtaining, payment of increases of up to 50% in the ongoing weekly fees for access to the national telephone number. In 2001 Seal-A-Fridge disconnected these franchisees from the phone number for failing to pay the full amount of the fee increase. In 2004 Seal-A-Fridge required the franchisees to agree to vary their franchise agreements to provide for the fee increase. The national phone number was used by the franchisees to receive customer inquiries and work and was essential to their business. The court found that Seal-A-Fridge had no contractual basis for the fee increases. Logan J concluded: 140 ACCC v Dataline.net.au Pty Ltd (2006) 236 ALR 665 at 672. 141 ACCC v Dataline.net.au Pty Ltd (2006) 236 ALR 665 at 684, 696. 142 Canon Australia Pty Ltd v Patton (2007) ATPR ¶42-183; [2007] NSWCA 246. 143 See eg, ACCC v 4WD Systems Pty Ltd (2003) 200 ALR 491 at 545. 144 ACCC v 4WD Systems Pty Ltd (2003) 200 ALR 491 at 545. 145 ACCC v Seal-A-Fridge (2010) 268 ALR 321.

188

The Australian Consumer Law

[4.135]

In the context of the present case, and having regard to the central role played by the 13 number in the promotion by various advertising means of the generic “Seal-A-Fridge” business name, there can be no doubt that continued access to calls directed to a franchisee following a call to that 13 number was essential to the continued conduct of that franchisee’s business. Essentiality of access to the 13 number by franchisees gave Seal-A-Fridge a position of strength in relation to them in the event of non-payment. Yet that essentiality does not per se make the highlighting of the withdrawal of access to that service in the event of non-payment unconscionable. So much was, as I understood it, accepted by the ACCC. Rather, so the ACCC submitted, it was the abuse of that position of strength that was relevant to the characterisation of the conduct of Seal-A-Fridge as unconscionable, in all of the circumstances. I agree. What emerges is that the 2001 weekly fee increase was demanded and obtained by Seal-A-Fridge, without contractual authority but supported by falsehood and abuse of a position of strength for the purpose of gaining additional profit.146

Inconsistent treatment

[4.135]

Section 22(1)(f) and (2)(f) of the ACL provide that the court may have regard to the extent to which the supplier’s conduct towards the other party was consistent with the supplier’s conduct in similar transactions with other like customers. For example, this factor may be enlivened if a franchisor discriminates against a particular franchisee. It will be highly relevant if the franchisor decides to take punitive action against a franchisee with the intention of intimidating other franchisees.147 This was the case in Allphones, where a senior manager of the franchisor told the franchisee that he “intended to make an example of” the franchisee “to show other franchisees what would happen to them if they opposed Allphones”.148 Allphones’ conduct was characterised as “vindictive”, the court finding that “[n]o justification existed, at that time, to treat [the franchisee] in accordance with ‘the Admiral Byng principle’”.149 Applicable industry codes

[4.140]

Codes of conduct are used to set standards of good business behaviour in particular industry sectors. Well-established codes of conduct reflect good business practice and can be used to identify statutory unconscionable conduct. Section 22(1)(g) and (2)(g) provide that the court may have regard to the requirements of any “applicable industry code”. Section 51ACA(1) of the CCA defines an “applicable industry code” to mean the prescribed provisions of any mandatory industry code relating to the industry and the prescribed provisions of any voluntary industry code that binds a corporation. A “mandatory industry code” is defined to mean an industry code that is declared by regulations under s 51AE of the CCA to be mandatory. In other words, an industry code is only mandatory if it is prescribed by regulation. Four codes have been declared to be mandatory:

146 ACCC v Seal-A-Fridge (2010) 268 ALR 321 at [145]-[146]. 147 See, eg, Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) (2008) ATPR ¶42-240 at [139]. 148 Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) (2008) ATPR ¶42-240 at [139]. 149 Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) (2008) ATPR ¶42-240 at [409].

[4.145]

4 Unconscionable Conduct

189

• the Franchising Code of Conduct; • the Oilcode (Cth); • the Horticulture Code; and • the Unit Pricing Code. To date only the Franchising Code of Conduct has been used by the courts in assessing whether conduct is unconscionable. Franchising Code of Conduct

[4.145]

The Franchising Code of Conduct set out in Sch 1 of the Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Cth) (the New Code) took effect on 1 January 2015. The New Code replaces the Franchising Code of Conduct set out in the Sch to the Trade Practices (Industry Codes – Franchising) Regulations 1998 as in force immediately before 1 January 2015 (the Old Code). Non-compliance with the provisions of the Old Code by franchisors has been taken into account in s 51AC cases, especially where the non-compliance was of a serious nature, such as a failure to provide disclosure documents or a failure to abide by the dispute resolution provisions.150

In relation to the Old Code, the courts sometimes implied an obligation of good faith as a matter of law into the franchise contract.151 Clause 6 of the New Code provides for an express obligation to act in good faith forms part of the New Code. According to the Explanatory Statement accompanying the Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Cth): The most significant change from the 1998 Code is the introduction of an obligation on the parties to a franchise agreement to act in good faith (clause 6). This obligation applies both to franchisors and franchisees in respect of any matter arising under or in relation to the franchise agreement or the Franchising Code. The meaning of good faith under the Franchising Code is the same as at common law. While the obligation is not defined the Franchising Code contains a non-exhaustive list of matters that the courts may have regard to when determining whether a breach of the obligation has occurred. The purpose of this list is also to provide some guidance to assist franchise participants to understand the nature of their obligation to act in good faith.

The scope of the obligation of good faith at common law is becoming clearer. In Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd, the New South Wales Court of Appeal stated: The content of the obligation has commonly been held to embrace three related matters: 1. An obligation on the parties to co-operate to achieve the contractual objectives. 2. Compliance with honest standards of conduct. 150 See, eg, ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253; Automasters Australia Pty Ltd v Bruness Pty Ltd [2002] WASC 286; Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) (2008) ATPR ¶42-240. 151 Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NWSCA 187 at [164]; ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) ATPR ¶41-790; and Automasters Australia Pty Ltd v Bruness Pty Ltd [2002] WASC 286.

190

The Australian Consumer Law

[4.145]

3. Compliance with standards of conduct that are reasonable having regard to the interests of the parties.152

A franchisor is not required to act in a contractually altruistic manner or in a manner akin to a fiduciary. Nor is a franchisor required to subordinate the franchisor’s own immediate or longer-term business or other interests to those of the franchisee. However, the courts recognise the relational nature of franchise contracts, and that the franchisor’s interests arise in the context of an interdependent, mutual relationship where the franchisee reasonably expects that regard will be paid to the franchisee’s interests. For example, where a franchisor has a discretion to give or withhold consent to a transfer of a franchise, the right must not be exercised “capriciously or for some extraneous purpose”.153 For avoidance of doubt, cl 6(3), (5) and (6) of the New Code set out a number of matters to which the court may have regard in considering the scope of the obligation of good faith: • whether the party acted honestly (a subjective standard is adopted); • whether the party acted arbitrarily or capriciously for some irrelevant purpose; • whether the party co-operated for the purposes of the agreement; and • whether the party acted to protect a legitimate commercial interest. These matters are also taken into account under the common law obligation of good faith. One advance over the common law position is cl 6(4) of the New Code. In so far as the implied obligation of good faith at common law is an implication made as a matter of fact rather than law, an express term excluding good faith would be upheld by courts. However, cl 6(4) of the New Code provides: A franchise agreement must not contain a clause that limits or excludes the obligation to act in good faith, and if it does, the clause is of no effect.

However, it seems that the supplier or acquirer is not required to deny its legitimate interests. In Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd,154 Finkelstein J held that it was not unconscionable under s 51AC for Subaru to give a notice of termination of a motor vehicle dealership after the dealer refused to adopt the 6-star program. Subaru had not given notice of its reasons for termination, as required by cl 22 of the Old Code, but the dealer was well aware of the reasons for termination. The dealer sought to have the notice of termination withdrawn after it indicated its willingness to abide by the 6-star program. Subaru refused to withdraw the notice. Finkelstein J observed: In my view, a term of a contract that requires a party to act in good faith and fairly, imposes an obligation upon that party not to act capriciously. It would not operate so as to restrict actions designed to promote the legitimate interests of that party.155 152 Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 at [145]. See also Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [287]-[294] (Allsop CJ) and Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) [2015] FCA 825 at [003]-[019] (Edelman J). 153 Far Horizons Pty Ltd v McDonald’s Australia Ltd [2000] VSC 310 at [120]. 154 Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR ¶41-703. 155 Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR ¶41-703 at 43,014.

[4.150]

4 Unconscionable Conduct

191

His Honour held: its failure to adopt the program and its criticism of certain aspects of the program, could reasonably be regarded by the first respondent as an indication that the applicant was not willing to act in the best interests of the first respondent … No doubt this led to a loss of confidence in the applicant. That loss of confidence would not necessarily be overcome by a change of attitude on the part of the applicant. Many relationships can only operate satisfactorily if there is mutual confidence and trust. Once that confidence and trust has broken down the position is not easily restored. It is not unconscionable to terminate a relationship where that trust and confidence has been undermined.156

Food and Grocery Code of Conduct

[4.150]

The relationship between supermarkets and their suppliers is regulated by the Food and Grocery Industry Code of Conduct contained in Competition and Consumer (Industry Codes – Food and Grocery) Regulation 2015.157 The Food and Grocery Industry Code of Conduct was declared to be a legally enforceable, voluntary prescribed code under the CCA on 26 February 2015. Retailers have to choose to opt-in to the Code. The Code is then binding on that retailer.158

As a Code “prescribed under the CCA” it will be enforceable by the ACCC or by a private right of action. The ACCC is provided with an audit, compliance and enforcement role to oversee the operation of and compliance with the Code. When a retailer agrees to be bound by the Code, the retailer must deal with its suppliers in accordance with the Code. This includes offering suppliers a grocery supply agreement in writing that complies with the Code.159 In relation to the conduct at issue in ACCC v Coles Supermarkets Australia Pty Ltd,160 the Code restricts the circumstances under which a retailer is allowed to make unilateral and retrospective variations to Grocery Supply Agreements. Subclause 9(1) provides that retailers must not unilaterally vary the grocery supply agreement without the consent of the supplier concerned. However, subclause 9(2) affords that if the original grocery agreement provides expressly for the retailer to vary the agreement, and sets out clearly the changed circumstances in which a variation may be made, then a variation may be made in accordance with its terms if the supplier concerned is given reasonable notice of the variation. A variation which involves an adjustment in the quantity of goods to be supplied must specify the basis or methodology to determine the amount of the variation. Subclause 10(1) provides that a retailer must not vary a grocery supply agreement with retrospective effect. However, subclause 10(2) allows for a retrospective variation if the original grocery supply agreement clearly sets out the change in circumstances that allow for the variation and this change is beyond the retailer’s 156 Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR ¶41-703 at 43,016. 157 The Food and Grocery Industry Code of Conduct is available at http://www.comlaw.gov.au/ Details/F2015L00242. 158 Food and Grocery Industry Code, Cl 4(1). 159 Food and Grocery Industry Code, Cl 7 and Pt 2. 160 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405.

192

The Australian Consumer Law

[4.155]

control. A variation which involves an adjustment in the quantity of goods to be supplied must specify the basis or methodology to determine the amount of the variation. There is a difference between unilateral and retrospective variation. For unilateral variation the original agreement must provide for such a variation and clearly set out the circumstances in which it will be permissible. For retrospective variation the change in circumstances must be set out in the agreement, but there is an additional requirement: the change in circumstances must be beyond the control of the retailer. This will limit the uncertainty and risk for the supplier associated with such a change. It also recognises that unilateral variations may be a necessary business practice in the light of unforeseen changes in business circumstances. The Code contains loopholes that will allow supermarkets to engage in the challenged conduct. Clause 9 does not ban variations altogether. Clause 9(1) provides that a variation to a Grocery Supply Agreement may be made with the consent of the supplier. This leaves it open to the supermarkets to coerce their suppliers into consenting to a variation and effectively contracting out of the Code provisions. The supermarkets maintain that such contracting out provides the flexibility that both sides need to run their businesses. The Code represents an improvement in terms of transparency and certainty for suppliers, including the requirement for written agreements and the prohibition of retrospective changes to those agreements except in very limited circumstances. It is likely to stop the more egregious conduct such as retrospective payments for supermarket promotions. On 24 September 2015, the ACCC issued a media release in which it expressed its concern over the manner in which Woolworths and Aldi were presenting new Grocery Supply Agreements, leaving the supplier with the impression that they were non-negotiable. The Code was developed to establish good faith negotiations between retailers and suppliers and to ensure that suppliers were not subject to random requests for payments.161 Other industry codes

[4.155]

There are a large number of voluntary codes that, as the name suggests, are not binding on industry participants that have not adopted the code.162 However, the fact that they are not binding does not mean that they are legally irrelevant. These voluntary industry codes are intended to promote fair trading practices. In deciding whether a corporation has engaged in unconscionable conduct for the purposes of s 21 of the ACL. Section 22(1)(h) and (2)(h) provide that the court may have regard to the requirements of any “other industry code”, if the customer acted on the reasonable belief that the supplier would comply with that code. What constitutes a “reasonable belief” requires an objective inquiry. Section 2 of the ACL provides that the term “industry code” has the meaning given by s 51ACA of the CCA. Section 51ACA(1) defines “industry code” in very broad 161 ACCC, Media release MR 185/15 (24 September 2015). 162 Section 51ACA(2) of the CCA.

[4.165]

4 Unconscionable Conduct

193

terms to mean “a code regulating the conduct of participants in an industry towards other participants in the industry or towards consumers in the industry”. Failure to disclose intended conduct or risk

[4.160]

Section 22(1)(i)(i) and (2)(i)(i) provide that the court may have regard to the extent to which the supplier or acquirer unreasonably failed to disclose to the other party any intended conduct that might affect the interest of the other party. Section 22(1)(i)(ii) and (2)(i)(ii) provide that the court may have regard to the extent to which the supplier or acquirer unreasonably failed to disclose to the other party any risks arising from the supplier’s intended conduct, being risks that the supplier should have foreseen would not be apparent to other party. For example, a tenant’s lease of premises in a shopping centre may be about to expire. The landlord may have decided not to renew the lease, or may have decided to offer to renew the lease, but with a much higher rent and other onerous conditions. If the tenant embarks upon a new, expensive fit-out of the premises and the landlord fails to disclose its intended conduct or the risks arising from the intended conduct, this would be relevant to an assessment as to whether the landlord was guilty of any unconscionable conduct. The very weak bargaining power of sitting captive tenants due to their lack of a real choice, if they do not want to relinquish the benefit of the past years of trading, makes them “vulnerable targets ripe for exploitation” by landlords in a way that is contrary to good conscience. The landlord will be in possession of much commercial information that will have a bearing on the viability and profitability of a shopping centre complex. This information will be of interest to lessees who are about to sign up for new leases, or to exercise options to renew. In deciding whether to disclose that information, the landlord should act reasonably and should disclose any information that can have a bearing on the risks that tenants are about to assume.

Refusal to negotiate

[4.165]

Section 22(1)(j)(i) and (2)(j)(i) provide that the court may have regard to the extent to which the supplier or acquirer was willing to negotiate the terms and conditions of the contract with the other party. For example, in ACCC v Coles Supermarkets Australia Pty Ltd,163 the court found that Coles had not conducted any informed negotiation with suppliers about the value to the suppliers of data sharing or the ordering system.164 This factor does not impose an obligation on the supplier or acquirer to negotiate in all cases. As Selway J said in the 4WD Systems case: It is in the nature of a franchise system that the agreements with each franchisee are likely to be reasonably standard. And there is nothing surprising or inappropriate in the use of standard term contracts. Of course it may be different where a party has expended considerable funds in advance of entering the written contract and is presented with an unreasonable and unexpected standard document. In such a case the party may 163 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405. 164 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [35], [44], [50], [56], [62] and [68].

194

The Australian Consumer Law

[4.170]

effectively be a “captive”. If the franchisor, knowing of this, refuses to negotiate then this might be viewed as “unconscionable” or as an aspect of it. … Effectively they would have had no choice because of the commitment they had already made in entering into the franchise. (citations omitted)165

The mere adoption of “unmeritorious negotiating positions” will not amount to unconscionable conduct. It would be necessary to demonstrate that the conduct at issue was unreasonable in the sense stated in the Simply No-Knead case.166 Unreasonable refusal to negotiate in order to resolve genuine grievances with franchisees, or unreasonable refusal to negotiate collectively with franchisees, may constitute unconscionable conduct.167 Terms and conditions of the contract

[4.170]

Sections 22(1)(j)(ii) and (2)(j)(ii) provide that the court may have regard to the terms and conditions of the contract. This factor recognises that statutory unconscionability under s 21 of the ACL includes substantive unconscionability, not just procedural unconscionability.

Conduct in complying with terms and conditions

[4.175]

Section 22(1)(j)(iii) and (2)(j)(iii) provide that the court may have regard to the conduct of the supplier or acquirer in complying with the terms and conditions of the contract. There may be a degree of overlap between this statutory factor and s 21(1)(f) and (2)(l) which relate to the extent to which the acquirer and the supplier acted in good faith. The court will be required to examine the exercise of discretionary power by the supplier, especially the power to terminate, against the circumstances that provoked it, considering what protection may be appropriate for the other party. It seems that to succeed in a claim of this type under s 21 of the ACL, the other party will need to produce compelling evidence of motive and that an argument based on inference alone is likely to fail. The mere fact that the other party may suffer financially as a result of the supplier enforcing its strict contractual rights is unlikely, in itself, to be sufficient to constitute a breach of s 21 of the ACL. It would seem that something more than reliance upon strict legal rights is required to render the post-formation conduct unconscionable within the meaning of s 21 of the ACL. For example, an unjustifiable refusal to consent to an assignment by a franchisor/ landlord may be relevant in deciding whether there has been a breach of s 21 of the ACL. A franchisee or shopping centre lessee may incur considerable set-up costs by a combination of a requirement to pay a franchise fee, fit-out, the acquisition of specialised equipment and inventory. These costs may be “sunk” costs if the franchisee or lessee is prevented from transferring the business to a third party.

165 ACCC v 4WD Systems Pty Ltd (2003) 200 ALR 491 at 545. 166 See, eg, Pacific National (ACT) Ltd v Queensland Rail (2006) ATPR (Digest) ¶46-268 at [933]. 167 ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253 at 268-9.

[4.175]

4 Unconscionable Conduct

195

The New Franchising Code of Conduct imposes a number of requirements relating to transfers of franchises, including that requests for consent to transfer must be made in writing,168 the franchisor must not unreasonably withhold its consent,169 and that the franchisor is deemed to have consented if the franchisor does not within 42 days give written notice that its consent is withheld and giving reasons for that decision.170 In Masterclass Enterprises Pty Ltd v Bedshed Franchisors (WA) Pty Ltd,171 Bedshed was a franchisor of retail stores. Masterclass was a franchisee of the Claremont store. Bedshed’s franchisee selection criteria provided that the most successful franchise structure was an “owner-operated” model because the owner invested capital in the franchise, the owner was more likely to be motivated to increase sales. Clause 12.2 of the franchise agreement provided that Masterclass was not entitled to transfer the franchise without the prior written approval of Bedshed. Masterclass wanted to transfer the franchise. The prospective purchaser did not intend to operate the business. Instead, it intended to put a manager in the store. Bedshed refused because business would not be “owner-operated” in accordance the franchisee selection criteria. Newnes J of the Supreme Court of Western Australia held it was not unreasonable for Bedshed to refuse consent to transfer and to require that a franchise business be supervised by someone with a substantial investment in the Franchisee.172 It was reasonable for Bedshed to take the view that a manager without an investment in the business would lack the level of motivation and commitment to the business that Bedshed considered necessary.173 It would seem to follow from the Allphones case174 , that in considering whether the exercise of a right to terminate a contract constitutes unconscionable for the purposes of s 51AC, the court is required to focus solely on what caused the decision to terminate, and to ignore other conduct and circumstances which have no causal nexus with the decision to terminate. In that case the primary judge, Rares J, considered the conduct of Allphones as a whole and decided that it was unconscionable under s 51AC. Accordingly, Allphones was not entitled to exercise its strict legal right to terminate.175 Rares J granted an injunction under s 87 preventing the termination of the franchise because of Allphones’ unconscionable conduct. On appeal, a majority of the Full Federal Court held that the decision to terminate needed to be assessed independently of the other conduct and surrounding circumstances and that one could only consider matters that had a causal nexus 168 New Franchising Code, subcl 20(1). 169 New Franchising Code, subcl 20(2). 170 New Franchising Code, subcl 20(4). 171 Masterclass Enterprises Pty Ltd v Bedshed Franchisors (WA) Pty Ltd [2008] WASC 67 (13 May 2008). 172 Masterclass Enterprises Pty Ltd v Bedshed Franchisors (WA) Pty Ltd [2008] WASC 67 at [114]. 173 Masterclass Enterprises Pty Ltd v Bedshed Franchisors (WA) Pty Ltd [2008] WASC 67 at [120]. 174 Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd (2009) ATPR ¶42-294 at [5]. 175 Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) (2008) ATPR ¶42-240 at [427].

196

The Australian Consumer Law

[4.175]

with the decision to terminate.176 Since the sole motivating factor to terminate had been Hoy Mobile’s fraudulent conduct, the exercise of Allphones’ contractual right to terminate could not constitute unconscionable conduct under s 51AC. Most franchise agreements spell out the circumstances under which the parties may terminate their agreement. The discretion allocated to the franchisor to terminate will vary from system to system. Differences in termination rights may reflect differences in bargaining power, the marketing strategy of the franchisor and the competitive conditions in the market. Termination can be an essential means of replacing inefficient and non-performing franchisees whose deficiencies can undermine the value of the system. The franchisor will generally be guided by enlightened self-interest and will generally have no economic incentive to terminate arbitrarily franchisees who contribute value to a franchise system. The franchisor should only terminate for “good cause”. The New Franchising Code of Conduct provides that before terminating the franchise agreement, the franchisor must give reasonable written notice of the proposed termination, and reasons for it, to the franchisee.177 In Automasters Australia Pty Ltd v Bruness Pty Ltd, Hasluck J held that the plaintiff’s conduct amounted to an infringement of s 51AC: I have already observed, in the course of dealing with the good faith issue, that the plaintiff acted capriciously and unreasonably in circumstances where there was not a sufficient basis to terminate the contract. I have found that there was an element of oppression in the plaintiff’s conduct, and this was referable to a conscious determination to bring the Franchise Agreement to an end, notwithstanding an awareness that there was a degree of ambiguity surrounding the allegations of default to be relied upon.178

Apart from these provisions of the New Code and s 22 of the ACL, the courts may imply an obligation of good faith as a matter of law into a franchise contract.179 The mere fact that a franchisee may suffer financially as a result of a franchisor’s refusal to consent to a transfer, is not in itself, sufficient to constitute a breach of the implied obligation of good faith. It would be necessary to establish that the refusal to consent was exercised capriciously, or that there was no rational basis for the refusal. Where the denial of consent is calculated to deny the franchisee the ability to obtain the full value of the established goodwill or to enable the franchisor to exercise a right of first refusal and to buy back the franchise at an under value, it is likely that it would held to be contrary to an implied obligation of good faith. The courts will require compelling evidence of motive and are unlikely to accept an argument by the franchisee based on inference alone.

176 Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd (2009) ATPR ¶42-294 at [5]. 177 New Franchising Code, Subcl 22(3). 178 Automasters Australia Pty Ltd v Bruness Pty Ltd [2002] WASC 286 at [388]-[399]. 179 See Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NWSCA 187 at [164]; ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) ATPR ¶41-790; and Automasters Australia Pty Ltd v Bruness Pty Ltd [2002] WASC 286. See Dixon, “What is the Content of the Common Law Obligation of Goods Faith in Commercial Franchises?” (2005) 33(3) Australian Business Law Review 207.

[4.185]

4 Unconscionable Conduct

197

Conduct in connection with the commercial relationship

[4.180]

Section 22(1)(j)(iv) and (2)(j)(iv) provide that the court may have regard to any conduct that the supplier or acquirer engaged in, in connection with their commercial relationship, after they entered into the contract. This factor recognises that statutory unconscionability under s 21 of the ACL includes substantive unconscionability, not just procedural unconscionability. This is confirmed by the third interpretative principle considered at [4.70].

There have been a number of cases in which one party decides to break a contract with the other party to the contract. There may be nothing that offends good conscience in taking such a decision especially where the burden of performance may be more onerous than the liability to be incurred from the breach. Such a breach arises from rational commercial considerations rather than unconscionable conduct. For example, in Body Bronze International Pty Ltd v Fehcorp Pty Ltd,180 Macaulay AJA (with whom Harper and Hansen JJA agreed) said: it should be recognised that not every breach of contract, even a deliberate breach, necessarily involves the moral obloquy that the authorities suggest needs be present for unconscionable conduct in breach of s 51AC to be made out.181

Macaulay AJA, after considering all the circumstances surrounding Body Bronze enforcing its strict contractual rights, concluded that it had not engaged in substantive unconscionability with s 51AC of the TPA. In particular, in deciding to enforce its strict contractual rights Body Bronze was entitled to consider: [its] own tight financial position, its concern about the workability of its relationship with Fehcorp, and that it foreshadowed its action to Fehcorp whom it knew had access to legal advice and a demonstrated capacity to employ such advice effectively.182

Lack of good faith

[4.185]

Section 22(1)(l) and (2)(l) of the ACL provides that the court may have regard to the extent to which the acquirer and the supplier acted in good faith. In Paciocco v Australia and New Zealand Banking Group, Allsop CJ had to consider the meaning to be given to “good faith” in the equivalent provisions of the ASIC Act, s 12CC(1)(l) and (2)(l). His Honour observed that good faith had been recognised as a feature of Australian contract law and summarised the developing jurisprudence: The usual content of the obligation of good faith that can be extracted from cases such as Renard Constructions, Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91, Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NSWCA 187; 69 NSWLR 558, Alcatel Australia Ltd v Scarcella [1998] NSWSC 483; 44 NSWLR 349, and United Group Rail Services Ltd is an obligation to act honestly and with a fidelity to the bargain; an obligation not to act dishonestly and not to act to undermine the bargain entered or the substance of the contractual benefit bargained for; and an

180 Body Bronze International Pty Ltd v Fehcorp Pty Ltd [2011] VSCA 196. 181 Body Bronze International Pty Ltd v Fehcorp Pty Ltd [2011] VSCA 196 at [91]. 182 Body Bronze International Pty Ltd v Fehcorp Pty Ltd [2011] VSCA 196 at [97].

198

The Australian Consumer Law

[4.185]

obligation to act reasonably and with fair dealing having regard to the interests of the parties (which will, inevitably, at times conflict) and to the provisions, aims and purposes of the contract, objectively ascertained.183

In relation to statutory unconscionable conduct, Allsop CJ stated this obligation to act reasonably must not only be observed in relation to the exercise of the terms of the contract, but also in relation to the conduct surrounding the bargaining process since s 12CB of the ASIC Act (and s 21 of the ACL) expressly refer to the possible supply of goods and services.184 This does not require the stronger party to act selflessly, but they must not take actions which would prevent the performance of the contract or withhold the benefits of the contract from the weaker party. In discussing an obligation of good faith in Overlook v Foxtel, Barrett J observed: It must be accepted that the party subject to the obligation is not required to subordinate the party’s own interests, so long as pursuit of those interests does not entail unreasonable interference with the enjoyment of a benefit conferred by the express contractual terms so that the enjoyment becomes (or could become) … “nugatory, worthless or, perhaps, seriously undermined” … the implied obligation of good faith underwrites the spirit of the contract and supports the integrity of its character. A party is precluded from cynical resort to the black letter. But no party is fixed with the duty to subordinate self-interest entirely which is the lot of the fiduciary … The duty is not a duty to prefer the interests of the other contracting party. It is, rather, a duty to recognise and to have due regard to the legitimate interests of both the parties in the enjoyment of the fruits of the contract as delineated by its terms.185

Examples of such conduct in a franchising context include: • purporting to terminate a franchise when there was serious doubt as to whether the franchisee was in breach, the franchisor had likely contributed to any breaches, and an independent report had recommended against termination;186 • competing with franchisees, including advertising within their territories, selling franchised products to independent retail outlets within those territories, and misusing information supplied by franchisees to “poach” their clients;187 and • making life difficult for franchisees with the intent to cause them to terminate or not renew their franchise agreements.188 This factor looks not only at the extent to which the supplier acted in good faith, but the extent to which the business consumer acted in good faith. This appears to contemplate that the actions of a business consumer in bad faith could, in effect, cancel out the actions of a supplier that were in bad faith; however, this will not necessarily be the case. 183 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [288]. See also Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) [2015] FCA 825 at [1010] (Edelman J). 184 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [294]. 185 Overlook Management BV v Foxtel Management Pty Ltd (2002) ATPR (Digest) ¶46-219 at [65]-[67], cited in Auto Masters Australia Pty Ltd v Bruness Pty Ltd (2003) ATPR (Digest) ¶46-229 at [357]. 186 Auto Masters Australia Pty Ltd v Bruness Pty Ltd (2003) ATPR (Digest) ¶46-229. 187 ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253. 188 ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253.

[4.185]

4 Unconscionable Conduct

199

In the Allphones case, both franchisor and franchisee were each systematically defrauding the other – the franchisor by charging fees to which it was not entitled and withholding commissions due to all its franchisees, and the relevant franchisee, Hoy Mobile, by “unlocking” and selling mobile phones held on consignment from the franchisor for a price higher than that reported to the franchisor. Although Rares J acknowledged that the “propriety of the conduct of both parties may be relevant”, and both parties were engaged in “equally dishonest conduct”, this did not prevent a finding that the franchisor had acted unconscionably in contravention of s 51AC of the TPA.189 With respect to the unlocking issue, Rares J concluded that Hoy Mobile had been guilty of fraud. However, his Honour held that the franchisor’s express power to terminate because of that fraud could not be exercised because of the franchisor’s earlier repudiation in making deductions from the amounts that should have been paid to Hoy Mobile. Accordingly, Allphones had engaged in unconscionable conduct within the meaning of s 51AC in respect of the purported termination. Rather than examine the contractual right to terminate separately, Rares J considered the franchisor’s conduct as a whole and held that it acted unconscionably for the purposes of s 51AC of the TPA. According to Rares J, s 51AC authorises the Court to look more broadly at the whole of the relationship and to assess the corporation’s conduct in that broader context. That context includes the breaches of the franchise agreement which I have found Allphones to have committed as the basis of my finding that it was not entitled to terminate the franchise agreement because it was itself in breach of an essential term or evincing an intention not to be bound. In addition, Allphones engaged in other conduct which is relevant under s 51AC(1) and (2).190

On appeal,191 the Full Federal Court (Goldberg, Jacobson and Perram JJ) took a different approach. It examined the contractual entitlement to terminate separately from the alleged unconscionable conduct. As regards the exercise of the contractual right to terminate by Allphones, the Full Court unanimously held that the primary judge erred in finding and declaring that the franchisor did not have a contractual entitlement to terminate. It was not necessary to decide whether a party who had repudiated a contract could take advantage of a breach by the other party of an essential term and terminate the agreement. This was because the contract itself contained an express power of termination even where the party seeking to do so had repudiated the agreement.192 In denying leave to appeal to the High Court French CJ stated: The power of Allphones to terminate its contract with Hoy Mobile was conferred by the terms of the written agreement between them. The conclusion reached by the Full Court 189 Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) (2008) ATPR ¶42-240 at [423], [427]. 190 Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) (2008) ATPR ¶42-240 at [419]. 191 Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd (2009) ATPR ¶42-294. 192 Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd (2009) ATPR ¶42-294 at [55].

200

The Australian Consumer Law

[4.190]

that the power was not qualified by anterior repudiation of the contract by the terminating party is not, in our opinion, attended with sufficient doubt to warrant the grant of special leave. The Full Court also decided, by majority, that the exercise by Allphones of its contractual right to terminate could not constitute conduct which was unconscionable for the purposes of s 51AC of the Trade Practices Act. Without endorsing all that was said by the Full Court in the circumstances which gave rise to Allphones’ contractual power to terminate, an appeal against this decision has insufficient prospects of success to warrant the grant of special leave.193

Summary

[4.190]

There are two different interpretations of statutory unconscionable conduct for the purposes of ss 51AB and 51AC of the TPA, s 12CB of the ASIC Act, and s 21 of the ACL. According to the first line of authority, statutory unconscionable conduct is targeted at commercial conduct involving a “high level of moral obloquy”, or at least some moral tainting. According to the second, the statutory language needs to be given its ordinary and natural interpretation and the normative inquiry involved is not limited to finding “moral obloquy”. In Paciocco v Australia and New Zealand Banking Group, Allsop CJ provided a useful summary of the values and norms recognised by the statute that are relevant in evaluating business behaviour to determine whether it warrants the characterisation of being unconscionable: The working through of what a modern Australian commercial, business or trade conscience contains and requires, in both consumer and business contexts, will take its inspiration and formative direction from the nation’s legal heritage in Equity and the common law, and from modern social and commercial legal values identified by Australian Parliaments and courts. … It is an evaluation which must be reasoned and enunciated by reference to the values and norms recognised by the text, structure and context of the legislation, and made against an assessment of all connected circumstances. The evaluation includes a recognition of the deep and abiding requirement of honesty in behaviour; a rejection of trickery or sharp practice; fairness when dealing with consumers; the central importance of the faithful performance of bargains and promises freely made; the protection of those whose vulnerability as to the protection of their own interests places them in a position that calls for a just legal system to respond for their protection, especially from those who would victimise, predate or take advantage; a recognition that inequality of bargaining power can (but not always) be used in a way that is contrary to fair dealing or conscience; the importance of a reasonable degree of certainty in commercial transactions; the reversibility of enrichments unjustly received; the importance of behaviour in a business and consumer context that exhibits good faith and fair dealing; and the conduct of an equitable and certain judicial system that is not a harbour for idiosyncratic or personal moral judgment and exercise of power and discretion based thereon.194

PART III: UNCONSCIONABLE CONDUCT UNDER THE ASIC ACT [4.195]

The Competition and Consumer Legislation Amendment Act 2011 (Cth), combined the existing ss 12CB and 12CC of the ASIC Act into one section and

193 Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd [2009] HCA Trans 325. 194 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [296].

[4.195]

4 Unconscionable Conduct

201

rationalised their drafting to apply a single set of specific factors which the court may consider. The former s 12CC of the ASIC Act was the subject of some negative judicial comment. Perram J, in Transmarket Trading Pty Ltd v Sydney Futures Exchange Ltd, observed: The wisdom of giving statutory force to such ill-defined moral precepts which of their nature are likely to vary between different people and judges may seriously be questioned. Further, common experience with litigation shows that the prescription of such vague and contestable standards is apt to multiply disputation and prolong litigation whilst parties debate the application of a rule whose content is not only obscure but elusive. Worse, because most parties in litigation regard themselves as being in the right, the insertion of a standard resting on a moral precept such as conscience is likely to mean that each side sees such a provision as assisting it. A less wholesome incentive to the reduction of litigation is difficult to imagine.195

Part II Div 2 Subdiv C of the now contains only two substantive prohibitions. Section 12CA provides: (1) A person must not, in trade or commerce, engage in conduct in relation to financial services if the conduct is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories. (2) This section does not apply to conduct that is prohibited by section 12CB

Section 12CB provides: (1) A person must not, in trade or commerce, in connection with: (a) the supply or possible supply of financial services to a person (other than a listed public company); or (b) the acquisition or possible acquisition of financial services from a person (other than a listed public company); engage in conduct that is, in all the circumstances, unconscionable. (2) This section does not apply to conduct that is engaged in only because the person engaging in the conduct: (a) institutes legal proceedings in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition; or (b) refers to arbitration a dispute or claim in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition. (3) For the purpose of determining whether a person has contravened subsection (1): (a) the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and (b) the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section. (4) It is the intention of the Parliament that: (a) this section is not limited by the unwritten law of the States and Territories relating to unconscionable conduct; and (b) this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and (c) in considering whether conduct to which a contract relates is unconscionable, a court’s consideration of the contract may include consideration of: 195 Transmarket Trading Pty Ltd v Sydney Futures Exchange Ltd (2010) 188 FCR 1 at [127].

202

The Australian Consumer Law

[4.195]

(i) the terms of the contract; and (ii) the manner in which and the extent to which the contract is carried out; and is not limited to consideration of the circumstances relating to formation of the contract.

The meaning of “unconscionable” in s 12CB of the ASIC Act is the same as that in s 21 of the ACL. The Full Federal Court in ASIC v National Exchange Pty Ltd,196 noted that the legislative purpose of s 12CC of the ASIC Act was “to build on and not be constrained by the unwritten law”.197 According to the Court, on its ordinary and natural interpretation, unconscionable conduct means “doing what should not be done in good conscience”,198 which the Court interpreted as requiring a “high level of moral obloquy.”199 In Paciocco v Australia and New Zealand Banking Group the Full Federal Court held that conduct is “unconscionable” for the purposes of s 12CB of the ASIC Act if it is “against conscience”.200 It is to be tested according to current norms and standards of what is regarded as acceptable business behaviour, and this may, but does not necessarily, involve a moral judgment.201 The Full Federal Court confirmed the decision of the primary judge, Gordon J, that ANZ’s late payment fees were not unconscionable within the meaning of s 12CB or the ASIC Act.202 One basis for the statutory unconscionable conduct claim was that ANZ’s late fees were too high. Allsop CJ observed that “s 12CB does not transform the Court in to a price regulator”.203 The court will not intervene on the basis that a price may be said to be too high in the absence of other indicators that demonstrate “exorbitant exercises of bargaining power that bespeak predation and taking advantage that contravene fair dealing and that may be unconscionable”.204 There was evidence that other banks charged similar fees. In addition, the fact that standard terms were imposed with no opportunity to negotiate did render the fees unconscionable. Allsop CJ observed: In all the circumstances, in particular, the lack of any proven predation on the weak or poor, the lack of real vulnerability requiring protection, the lack of financial or personal compulsion or pressure to enter or maintain accounts, the clarity of disclosure, the lack of secrecy, trickery or dishonesty, and the ability of people to avoid the fees or terminate the 196 ASIC v National Exchange Pty Ltd (2005) 148 FCR 132. 197 ASIC v National Exchange Pty Ltd (2005) 148 FCR 132 at 140 [30]-[31]; PSAL Ltd v Kellas-Sharpe [2012] QSC 31 at [85] (Applegarth J). 198 ASIC v National Exchange Pty Ltd (2005) 148 FCR 132 at 140 [33]. 199 ASIC v National Exchange Pty Ltd (2005) 148 FCR 132 at 140 [43], referring to Spigelman CJ’s judgment in Attorney-General of NSW v World Best Holdings Ltd (2005) 63 NSWLR 557. See McGill, “Asset Lending, Unconscionable Conduct and Intermediaries” (2014) 42 Australian Business Law Review 146. 200 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [262]. 201 ACCC v Lux Distributors Pty Ltd [2013] FCAFC 90 at [23] in relation to s 21 of the ACL; and Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [298] in relation to statutory unconscionable conduct in s 12CB of the ASIC Act. 202 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50. 203 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [335]. 204 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [335].

[4.195]

4 Unconscionable Conduct

203

accounts, I do not consider the conduct of ANZ to have been unconscionable. To do so would require the court to be a price regulator in banking business in connection with otherwise honestly carried on business in which high fees were extracted from customers.205

The High Court has granted special leave to hear an appeal from the decision of the Full Federal Court in Paciocco v Australia and New Zealand Banking Group.206 Section 12CC sets out the matters the court may have regard to for the purposes of s 12CB. Section 12CC(1) sets out the matters the court may have regard to in determining whether a supplier of financial services has engaged in unconscionable conduct. It provides: (1) Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier) has contravened section 12CB in connection with the supply or possible supply of financial services to a person (the service recipient), the court may have regard to: (a) the relative strengths of the bargaining positions of the supplier and the service recipient; and (b) whether, as a result of conduct engaged in by the supplier, the service recipient was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and (c) whether the service recipient was able to understand any documents relating to the supply or possible supply of the financial services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the service recipient or a person acting on behalf of the service recipient by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the financial services; and (e) the amount for which, and the circumstances under which, the service recipient could have acquired identical or equivalent financial services from a person other than the supplier; and (f) the extent to which the supplier’s conduct towards the service recipient was consistent with the supplier’s conduct in similar transactions between the supplier and other like service recipients; and (g) if the supplier is a corporation–the requirements of any applicable industry code (see subsection (3)); and (h) the requirements of any other industry code (see subsection (3)), if the service recipient acted on the reasonable belief that the supplier would comply with that code; and (i) the extent to which the supplier unreasonably failed to disclose to the service recipient: (i) any intended conduct of the supplier that might affect the interests of the service recipient; and (ii) any risks to the service recipient arising from the supplier’s intended conduct (being risks that the supplier should have foreseen would not be apparent to the service recipient); and (j) if there is a contract between the supplier and the service recipient for the supply of the financial services: (i) the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the service recipient; and 205 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [346]-[347]. 206 Paciocco v Australia and New Zealand Banking Group [2015] HCATrans 229.

204

The Australian Consumer Law

[4.200]

(ii) the terms and conditions of the contract; and (iii) the conduct of the supplier and the service recipient in complying with the terms and conditions of the contract; and (iv) any conduct that the supplier or the service recipient engaged in, in connection with their commercial relationship, after they entered into the contract; and (k) without limiting paragraph (j), whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the service recipient for the supply of the financial services; and (l) the extent to which the supplier and the service recipient acted in good faith.

Section 12CC(2) sets out the same matters the court may have regard to in determining whether an acquirer of financial services has engaged in unconscionable conduct.

Imbalance of bargaining power [4.200]

In relation to s 12CC(1) and (2)(a) of the ASIC Act, which refer to inequality of bargaining power, Allsop CJ in Paciocco v Australia and New Zealand Banking Group stated: The inclusion in para (a) in sub-ss (1) and (2) of inequality of bargaining power can be seen to be a recognition that in commerce there may arise circumstances of asymmetry of power; such asymmetries are sometimes ruthlessly exploited in a manner that may offend the commercial conscience: see for example ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [102]-[105] (Gordon J). The reality of that to business people is no more difficult to understand than is the difference between sharp practice and good faith, even when the latter is accompanied by hard bargaining. (That does not mean, however, that using one’s bargaining position is necessarily unconscionable, or even unfair.)207

Unreasonable conditions [4.205]

In relation to s 12CC(1) and (2)(b) of the ASIC Act which refers to unreasonable conditions not reasonably necessary to protect the legitimate interests of the supplier, in Goodridge v Macquarie Bank Ltd,208 Mr Goodridge entered into a Margin Lending Loan and Security Agreement (LSA) with Macquarie Bank. Clause 5 of the LSA provided that if at any time the total loan balance exceeded or was likely to exceed the market value of the equities acquired, the Bank could at its discretion require the Borrower to pay a further sum (“the margin call”), and that such sum was to be paid by 2.00 pm on the business day following the margin call. Clause 21 of the LSA provided that Macquarie Bank could assign, transfer or novate the Agreement to any person without the consent of the borrower. Subsequently, Macquarie Bank sold is margin loan book to Leveraged Equities.

207 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [286]. 208 Goodridge v Macquarie Bank Ltd [2010] FCA 67 (12 February 2010) at [201].

[4.210]

4 Unconscionable Conduct

205

Rares J found that in acquiring the margin loan from Macquarie Bank to buy shares to provide an income stream for retirement it was for a “long term personal objective”,209 and accordingly the LSA was a consumer contract for the purposes of s 12CB of the ASIC Act. Rares J also held that the acquirer of a margin loan, Leveraged Equities, required the applicant to comply with conditions that were not reasonably necessary to protect its legitimate interests: namely, first, it required him to pay money in accordance with a timetable and series of demands that were not valid and, secondly, it threatened, and then proceeded, to sell his property without a legitimate interest (on my findings above) that it was then entitled to protect. Leveraged Equities thus misused its power of sale unconscientiously without any right to do so.210

On appeal,211 the Full Federal Court took a different view. In allowing the appeal, Jacobson J (with whom Finkelstein and Stone JJ agreed) held: First, s 12CB applies only to financial services of a kind ordinarily acquired for personal, domestic or household use: see s 12CB(5). Mr Goodridge acknowledged when he entered into the LSA that the funds would be applied wholly or predominantly for business or investment purposes. His evidence that the funds were invested for the purpose of providing for his retirement was not relevant to the question of whether s 12CB was engaged. Second, absent some conduct on the part of Leveraged Equities or Macquarie which could be characterised as taking improper advantage of Mr Goodridge (which there was not), there is nothing unconscionable in a margin lender enforcing its legal rights to protect itself against a fall in the value of its security: Bacnet Pty Ltd v Capital Partners Pty Ltd [2010] FCAFC 36; (2010) 183 FCR 384 at [118]-[120].212

The Full Federal Court held that the novation was effected by the contract documents and that there was nothing improper about one party authorising the other party to novate the contract without any further involvement by the first party.

Exploitative pricing [4.210]

Section 12CC(1) and (2)(e) refer to the amount for which the recipient could have acquired identical financial services from another supplier. In PSAL Ltd v Kellas-Sharpe,213 Applegarth J was required to decide whether the capitalisation of interest over an 18 month period on a loan with a term of 2 months contravened s 12CC of the ASIC Act and s 51AC of the TPA. It was argued by the defendants that the provisions of the contract went beyond what was reasonably necessary to protect PSAL’s legitimate interests, because PSAL had been provided with substantial security for the loan. 209 Goodridge v Macquarie Bank Ltd [2010] FCA 67 (12 February 2010) at [210]-[211], citing Begbie v State Bank of New South Wales (1994) ATPR ¶41-288 at 41,498 (Drummond J). 210 Goodridge v Macquarie Bank Ltd [2010] FCA 67 at [207]. 211 Leveraged Equities Ltd v Goodridge (2011) 274 ALR 655. 212 Leveraged Equities Ltd v Goodridge (2011) 274 ALR 655 at [416]-[417]. 213 PSAL Ltd v Kellas-Sharpe [2012] QSC 31.

206

The Australian Consumer Law

[4.215]

Applegarth J was not persuaded that the 7.5% standard rate that applied when the loan went into default was an exorbitant rate, having regard to PSAL’s potential loss on a defaulting loan. An interest rate of 7.5% was consistent with commercial rates at the time and was not shown to be unreasonable considering the costs and losses that result from default.214 However, the election by the lender to capitalise the interest on a monthly basis was irreconcilable with what was right and reasonable.215 In Paciocco v Australia and New Zealand Banking Group,216 Allsop CJ stated that whether a fee is extravagant or exorbitant relative to the cost of the fee event: does not necessarily lead to a conclusion of statutory unconscionability … Their characterisation as the product of unconscionable conduct would depend upon the broader considerations of the statute. The question might be seen to be whether…the conduct was the imposition of an oppressive burden on a weaker party by the unconscientious use of power by a stronger party.217

The Full Federal Court confirmed the decision of the primary judge, Gordon J, that ANZ’s late payment fees were not unconscionable within the meaning of s 12CB of the ASIC Act. The court would not intervene solely on the basis that ANZ’s late payment fees were said to be too high unless there were other indicators that demonstrated “…exorbitant exercises of bargaining power that bespeak predation and taking advantage that contravene fair dealing and that may be unconscionable”.218 There was evidence that other banks charged similar fees and equivalent financial services were available from other financial institutions (banks and non-banks).219 There was choice available to ANZ’s customers to move to other financial institutions, the fees could not be seen as “a form of predation on the weak or poor”.220 It seems that a term of a contact imposing an exorbitant price of fee will not be characterised as statutory unconscionable conduct in isolation. The term will have to be considered in the light of the conduct that led to the formation of the contract, and whether the price or fee imposes an oppressive obligation on the other party.

Lack of good faith [4.215]

In relation to s 12CC(1) and (2)(l) of the ASIC Act, which refers to good faith, Allsop CJ in Paciocco v Australia and New Zealand Banking Group stated that the principle of good faith is: an obligation to act reasonably and with fair dealing having regard to the interests of the parties (which will, inevitably, at times conflict) and to the provisions, aims and purposes of the contract, objectively ascertained.221

214 PSAL Ltd v Kellas-Sharpe [2012] QSC 31 at [103]. 215 PSAL Ltd v Kellas-Sharpe [2012] QSC 31 at [115]. 216 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50. 217 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [341]-[342]. 218 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [335]. 219 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [343]. 220 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [345]. 221 Paciocco v Australia and New Zealand Banking Group[2015] FCAFC 50 at [288]-[289].

[4.215]

4 Unconscionable Conduct

207

The Full Federal Court held that ANZ’s late payment terms were not unjust. The court held: the terms were clear, intelligible, and openly disclosed. The practical effect of the terms was disclosed clearly: leaflets etc., as well as explanations by letter and telephone. There was no unfair pressure, undue influence or unfair tactics. The measures to bring the terms to the attention of customers was not said to be inadequate. There was no evidence of hardship on the part of these applicants. It was not proved that the ANZ inflicted hardship on others by the fees.222

222 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [360].

5

Unfair Contract Terms [5.05] INTRODUCTION ................................................................................................................ 210

[5.15] Unfair terms: Victorian legislation ................................................................... 213 [5.20] CONTRACTS AND TERMS EXEMPT FROM REVIEW .............................................. 214

[5.25] Term defining the main subject matter ........................................................... 214 [5.30] Term setting the upfront price ......................................................................... 215 [5.40] Terms expressly permitted as a matter of law .............................................. 217 [5.45] Contracts excluded ............................................................................................. 218 [5.50] OPERATIVE PROVISIONS RELATING TO UNFAIR TERMS ................................... 218 [5.55] FIRST REQUIREMENT: CONSUMER CONTRACT OR SMALL BUSINESS CONTRACT ......................................................................................................................... 219

[5.60] Consumer contract .............................................................................................. 219 [5.70] Small business contract ...................................................................................... 221 [5.90] SECOND REQUIREMENT: STANDARD FORM CONTRACT .................................. 223

[5.100] Rebuttable presumption .................................................................................. 225 [5.105] THIRD REQUIREMENT: UNFAIR TERM .................................................................... 225

[5.105] Meaning of unfair: four part test ................................................................... 225 [5.110] First part: the term itself .................................................................................. 226 [5.140] Second part: contextual considerations ........................................................ 234 [5.145] Third part: transparency .................................................................................. 234 [5.155] Fourth part: contract as a whole .................................................................... 237 [5.160] Grey list: examples of terms that may be unfair ........................................ 238 [5.165] TERMS PRESCRIBED BY REGULATION .................................................................... 239 [5.170] EFFECT OF A TERM BEING DECLARED TO BE UNFAIR ..................................... 240 [5.175] ACL – COMMONWEALTH ............................................................................................ 240 [5.180] ACL – STATES AND TERRITORIES .............................................................................. 241 [5.185] PUBLIC ENFORCEMENT ............................................................................................... 241 [5.190] PRIVATE REMEDIES ........................................................................................................ 242 [5.195] UNFAIR TERMS UNDER THE ASIC ACT .................................................................. 242

[5.200] Consumer contracts covered ........................................................................... 243 [5.205] Small business contracts covered ................................................................... 243 [5.210] Contracts excluded ........................................................................................... 243 [5.215] Terms excluded ................................................................................................. 243 [5.220] MEANING OF UNFAIR TERM ...................................................................................... 244

210

The Australian Consumer Law

[5.05]

[5.225] First part: the term itself .................................................................................. 245 [5.230] Second part: contextual considerations ........................................................ 246 [5.235] Third part: transparency .................................................................................. 246 [5.240] Fourth part: contract as a whole .................................................................... 246 [5.245] Grey list: examples of terms that may be unfair ........................................ 246

INTRODUCTION [5.05] The third general protection relates to unfair terms in standard form consumer contracts and small business contracts. These are regulated by Part 2-3 of the ACL. In contract theory, agreements are negotiated, and the terms settled by a process of bargaining between the parties. While this may occur in some instances, it is not a feature of many consumer transactions. Consumers either do not read the terms upon which they are supplied goods or services prior to contracting, or if they do read them, they will lack the power to bargain with the supplier about those terms. Generally, consumers are presented with standard form contracts on a “take-it-or-leave-it” basis. They are faced with the alternatives of either contracting on the supplier’s terms and conditions, or not contracting at all. The common law courts have traditionally not recognised unfairness in the terms of a contract as a basis for intervention, the underlying premise being that a party is free to enter into a binding contract on terms of his or her choice.1 Parties who freely conclude contracts are legally bound by their terms. This presumption of freedom of contract, and the voluntary entry into binding contracts overlooks the fact that many standard form contracts relate to essential goods or services, such as utilities, and that the consumer may have no bargaining power and little choice as regards the terms and conditions on offer.2 Typically, inequality of bargaining power will exist whenever there is only one or a small number of possible suppliers,3 or because consumers are unable to obtain the necessary information about alternative suppliers at a reasonable cost.4 Standard form consumer contracts are common place in the following areas: 1 See, eg, Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at 325 where Gleeson CJ McHugh, Gummow, Hayne and Heydon JJ stated: “to speak of ‘unconscionable conduct’ may, wrongly, suggest that sufficient foundation for the existence of the necessary ‘equity’ to interfere in relationships established by, for example, the law of contract, is supplied by an element of hardship or unfairness in the terms of the transaction in question, or in the manner of its performance”. 2 See, Robertson, “The Limits of Voluntariness in Contract” (2005) 29 Melbourne University Law Review 179 at 180-181; Paterson, “The Australian Unfair Contract Terms Law: the Rise of Substantive Unfairness as a Ground for Review of Standard Form Contracts” (2009) 33 Melbourne University Law Review 934 at 937-9; and Paterson, Unfair Contract Terms in Australia (Thomson Reuters, Sydney, 2012), Ch 1. 3 See Kornhauser, “Unconscionability in Standard Forms” (1976) 64 California Law Review 1151 for a consideration of how imperfect markets can lead to unfair contract terms. 4 See Leff, “Unconscionability and the Crowd – Consumers and the Common Law Tradition” (1970) 31 University of Pittsburgh Law Review 349 at 351 and Schwartz and Wilde, “Intervening in Markets on the Basis of Imperfect Information: A Legal and Economic Analysis” (1979) 127 University of Pennsylvania Law Review 630 at 682.

[5.10]

5 Unfair Contract Terms

211

• telephony services, internet access services, and computer softwares licences;5 • banking and finance services, including agreements for the supply of credit; • domestic building contracts; • gymnasium memberships; • motor vehicle contracts; • travel (airline tickets, car hire); and • utility service contracts (gas, electricity and water).6 Although specific terms of a contract may be disclosed, unsophisticated or uneducated consumers may not be capable of comprehending the meaning or effect of those terms. Consequently, mandatory disclosure may not result in consumers avoiding unfair terms or preventing suppliers relying on them. It is now generally accepted that there is a need for government intervention which prohibits certain types of unfair contract terms, while at the same time seeking to maximise individual freedom of contract. Unfair terms in contracts were previously regulated by Pt 2B of the Fair Trading Act 1999 (Vic) (FTA 1999 (Vic)) which took effect in 2003. Attempts by the Ministerial Council on Consumer Affairs (MCCA) to devise national legislation along the lines of the Victorian model stalled when the Regulatory Impact Statement (RIS) did not meet the required standard providing only anecdotal evidence of detriment from the use of unfair terms.7

[5.10] In 2008 the Productivity Commission (PC) recommended that unfair terms should be regulated by the ACL.8 The PC acknowledged that the regulation of unfair terms by the unconscionability provisions of the ACL was “costly, slow and uncertain”.9 Two principal rationales were advanced by the PC for such a scheme – one ethical and the other economic. The PC was of the view that such a scheme could be justified as an extension of ethical principles about fairness in contracts, the aim of the proposed law being to cover terms that appear to be manifestly

5 See Trackman, “The Boundaries of Contract Law in Cyberspace” (2009) International Business Law Journal 161; Clapperton and Corones, “Unfair Terms in “clickwrap” and Other Electronic Contracts” (2007) 35 Australian Business Law Review 152; and Paterson and Gadir, “Look at the Fine Print: Standard Form Contracts for Telecommunications Products and Consumer Protection Law in Australia” (2013) 37(1) University of Western Australia Law Review 45. 6 ACCC, A Guide to the Unfair Contract Terms Law (Canberra, 2010), p 4, [1.3]. 7 See Standing Committee of Officials of Consumer Affairs, “Unfair Contract Terms: A Discussion Paper” (2004); Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, p 149. 8 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, pp 168-9, Recommendation 7.1. 9 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, p 154.

212

The Australian Consumer Law

[5.10]

unfair.10 The scheme could also be justified on economic grounds, in that markets do not operate efficiently on the basis of sub-optimal risk assessments by consumers.11 The PC in its Review of Australia’s Consumer Policy Framework expressed the view that the aim of the proposed law regulating unfair terms was only to cover terms that are manifestly unfair.12 The Productivity Commission was cognisant of the fact that “[w]hatever their immediate benefits, barring unfair contract terms is likely to have some adverse knock-on impacts for consumers through higher prices (or lower quality goods and services),”13 and that regulatory action should only take place where net benefits are likely.14 According to the Minister who introduced the Bill into the House, the Hon Dr Craig Emerson MP: The law is not about the government telling business what to put into contracts. And it is not about undoing bad bargains and letting consumers walk away from poor choices. This reform is about making contracts clear in business-to-consumer transactions so that consumers can make an accurate assessment of the risks of signing a contract. And it is about ensuring that a business assesses its risk properly and does not use its stronger bargaining position to simply push all the risk away from itself.15

In 2015, the general protection against unfair terms was extended to small businesses by the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015 (Cth). The new law received Royal Assent on 12 November 2015 and takes effect 12 months after that date in order to allow businesses time to implement system changes and contract amendments to ensure compliance. The unfair terms prohibitions will only apply to small business contracts entered into or renewed, or terms of existing contracts that are varied, after 12 November 2016.16 It will not apply to small business contracts entered into before this date. The object of the extension of unfair contract term protections to small businesses is set out in the Decision Regulation Impact Statement: to promote fairness in contractual dealings with small businesses with regard to standard form contracts. This will reduce small business detriment and have positive impacts on the broader economy by increasing small business certainty and confidence, and providing for a more efficient allocation of risk. Small businesses, in dealing with other 10 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, pp 151 and 413-4. 11 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, pp 151 and 414-23. 12 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, pp 151 and 413-4. 13 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, p 155. 14 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, p 157. 15 The Hon Dr Craig Emerson MP, Second Reading Speech, House of Representatives, Hansard, 24 June 2009, p 6981 at 6983. 16 CCA, s 290A.

[5.15]

5 Unfair Contract Terms

213

businesses through standard form contracts, should have confidence that the contract they are offered is fair and reasonable and that the risks are allocated efficiently.17

It appears that the standard for establishing “unfairness” is a lower one than that for establishing “unconscionability”, although the approach to be adopted in relation to each has much in common. In Paciocco v Australia and New Zealand Banking Group, Allsop CJ observed: Although it can be accepted that unjustness and unfairness are of a lower moral or ethical standard than unconscionability … The characterisation of unjustness or unfairness is, of course, evaluative and a task to be carried out with a close attendance to the statutory provisions.18

Unfair terms: Victorian legislation [5.15] Unfair terms in contracts were first regulated in Australia by the inclusion of Pt 2B in the FTA 1999 (Vic) in 2003. Section 32Y of the FTA 1999 (Vic) provided that any unfair term in a consumer contract or any prescribed unfair term in a standard form contract was void. Section 32W of the FTA 1999 (Vic) provided: A term in a consumer contract is to be regarded as unfair if, contrary to the requirements of good faith and in all the circumstances, it causes a significant imbalance in the parties’ rights and obligations arising under the contract to the detriment of the consumer.

Section 32X of the FTA 1999 (Vic) provided considerations relevant to the conception of unfairness: Without limiting section 32W, in determining whether a term of a consumer contract is unfair, a court or the Tribunal may take into account, among other matters, whether the term was individually negotiated, whether the term is a prescribed unfair term and whether the term has the object or effect of– (a) permitting the supplier but not the consumer to avoid or limit performance of the contract; (b) permitting the supplier but not the consumer to terminate the contract; (c) penalising the consumer but not the supplier for a breach or termination of the contract; (d) permitting the supplier but not the consumer to vary the terms of the contract; (e) permitting the supplier but not the consumer to renew or not renew the contract; (f) permitting the supplier to determine the price without the right of the consumer to terminate the contract; (g) permitting the supplier unilaterally to vary the characteristics of the goods or services to be supplied under the contract; (h) permitting the supplier unilaterally to determine whether the contract had been breached or to interpret its meaning; (i) limiting the supplier’s vicarious liability for its agents; (j) permitting the supplier to assign the contract to the consumer’s detriment without the consumer’ consent; 17 Consumer Affairs Australia and New Zealand, Decision Regulation Impact Statement, Extending Unfair Contract Term Protections to Small Businesses (2015), p 11. 18 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [363]-[364].

214

The Australian Consumer Law

[5.20]

(k) limiting the consumer’s right to sue the supplier; (l) limiting the evidence the consumer can lead in proceedings on the contract; (m) imposing the evidential burden on the consumer in proceedings on the contract.

The statutory conception of unfairness was an evaluative standard to be understood by taking into account the relevant circumstances that Parliament identified in s 32X of the FTA 1999 (Vic) to assist in making the evaluative assessment.19 In Paciocco v Australia and New Zealand Banking Group, the Full Federal Court held that ANZ’s late payment terms were not unfair pursuant to ss 32W and 32X of the FTA 1999 (Vic). Allsop CJ stated: Considering the terms of s 32W of the FT Act, at the time of entry into the arrangements, did the provisions in question cause an imbalance in the parties’ rights and obligations to the detriment of the consumer? It is difficult to see why this would be so by reference to the matters in s 32X or otherwise. The provisions were clearly disclosed. In most instances, the fees could be avoided. No trickery took place. Although set by the bank in contracts of adhesion, the contracts were terminable at the will of the customer; and the fee could be avoided by the conduct of the customer that was not unreasonable – keeping to her or his contractual limits.20

Part 2B of the FTA 1999 (Vic) was repealed by the Fair Trading Amendment (Unfair Contract Terms) Act 2010 (Vic) which gave effect to the unfair terms provisions of the ACL as a law of Victoria. The FTA 1999 (Vic) was repealed by s 233 of the Australian Consumer Law and Fair Trading Act 2012 (Vic) (ACLFTA 2012 (Vic)).

CONTRACTS AND TERMS EXEMPT FROM REVIEW [5.20] Unfair contract terms in standard form consumer contracts and small business contracts are regulated by Pt 2-3 of the ACL. Before analysing s 23 of the ACL and the other operative provisions relating to unfair terms, the contracts and terms exempt from review will be considered. Section 26 provides: (1) Section 23 does not apply to a term of a consumer contract to the extent, but only to the extent, that the term: (a) defines the main subject matter of the contract; or (b) sets the upfront price payable under the contract; or (c) is a term required, or expressly permitted, by a law of the Commonwealth, a State or a Territory. (2) The upfront price payable under a consumer contract is the consideration that: (a) is provided, or is to be provided, for the supply, sale or grant under the contract; and (b) is disclosed at or before the time the contract is entered into; but does not include any other consideration that is contingent on the occurrence or non-occurrence of a particular event.

Term defining the main subject matter [5.25] As regards the meaning of the term “the main subject matter of the contract”, the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states: 19 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [355], and [363]-[364]. 20 Paciocco v Australia and New Zealand Banking Group [2015] FCAFC 50 at [358].

[5.30]

5 Unfair Contract Terms

215

The exclusion of terms that define the main subject matter of a consumer contract ensures that a party cannot challenge a term concerning the basis for the existence of the contract. Where a party has decided to purchase the goods, services, land, financial services or financial products that are the subject of the contract, that party cannot then challenge the fairness of a term relating to the main subject matter of the contract at a later stage, given that the party had a choice of whether or not to make the purchase on the basis of what was offered. The main subject matter of the contract may include the decision to purchase a particular type of good, service, financial service or financial product, or a particular piece of land. It may also encompass a term that is necessary to give effect to the supply or grant, or without which, the supply or grant could not occur.21

Section 26(1)(a) implies that a distinction can be drawn between terms that define the main subject matter of the contract and incidental or ancillary terms. If a term relates to the main subject matter it is excluded from consideration under s 23(1) of the ACL. If a term relates to incidental subject matter it may be assessed under s 23(1) of the ACL.

Term setting the upfront price [5.30] The Productivity Commission in its Review of Australia’s Consumer Policy Framework gave the following reasons for excluding terms setting the upfront price from the unfair terms law: The argument for exclusion rests on the fact that prices are clearly visible to consumers and, unlike many other terms, cannot legitimately be seen as surprises veiled by a complex contract. Unless there are major barriers to effective competition, consumers can elect to avoid contracts with unfair prices. And where there are such barriers, competition policy is the more appropriate vehicle for achieving efficient prices rather than the discretionary use of unfair contracts law to impose de facto price controls.22

As regards the meaning of the term “the upfront price”, the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states: The upfront price payable under a consumer contract is consideration that is: • provided, or is to be provided, for the supply, sale or grant under the contract; and • is disclosed at or before the time the contract is entered into, but does not include any other consideration that is contingent on the occurrence or non-occurrence of a particular event. Consideration includes any amount or thing provided as consideration for the supply of a good, service, financial service, financial product or a grant of land. It would also include any interest payable under a consumer contract. The exclusion of upfront price means that a term concerning the upfront price cannot be challenged on the basis that it is unfair. Having agreed to provide a particular amount of consideration when the contract was made, which was disclosed at or before the time the 21 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [5.59]-[5.61]. 22 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, pp 161-2.

216

The Australian Consumer Law

[5.35]

contract was entered into, a person cannot then argue that that consideration is unfair at a later time. The upfront price is a matter about which the person has a choice and, in many cases, may negotiate. The upfront price covers the cash price payable for a good, service, financial service, financial product or land at the time the contract is made. It also covers a future payment or a series of future payments. The definition also requires that the upfront price must be disclosed at or before the time the contract was entered into by the parties. In the case of most transactions this is reasonably straightforward, as a key pre-condition of the transaction occurring is an understanding of the price to be paid. A key consideration for a court in considering whether a future payment, or a series of future payments, forms the upfront price may be the transparency of the disclosure of such a payment, or the basis on which such payments may be determined, at or before the time the contract is made. In the context of non-financial services contracts, another relevant consideration is compliance with section 53C of the TPA (which commenced on 25 May 2009), which imposes specific obligations in relation to the disclosure of a single price in many cases. Other consideration (that is, further forms of consideration which are not part of the upfront price) under the consumer contract that is contingent on the occurrence or non-occurrence of a particular event, is excluded from the determination of the upfront price. Terms that require further payments levied as a consequence of something happening or not happening at some point in the duration of the contract are covered by the unfair contract terms provisions. Such payments are additional to the upfront price, and are not necessary for the provision of the basic supply, sale or grant under the contract.23

The exclusion of “any other consideration that is contingent on the occurrence or non-occurrence of a particular event” from the term “upfront price” would mean that the following provisions will be subject to scrutiny under the unfair terms provision of the ACL: • a term providing that additional amounts are payable in the event of default or untimely payment;24 • a term providing for early termination fees;25 • a term providing for capitalisation of interest;26 and • a term providing for a unilateral power to vary the upfront price payable under the contract.27

[5.35] A price escalation clause may be assessed for unfairness. It is one of the examples included in s 25 of the ACL, the non-exhaustive grey list of terms that may be unfair depending on the particular circumstances (see [5.160]).28 Such a 23 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [5.62]-[5.70]. 24 Andrews v Australian and New Zealand Banking Group Ltd (2011) 288 ALR 611. 25 See ASIC, “Early Termination Fees for Residential Loans: Unconscionable Fees and Unfair Contract Terms, Regulatory Guide 220” (2010). 26 PSAL Ltd v Kellas-Sharpe [2012] QSC 31. 27 Paterson, Unfair Contract Terms in Australia (Lawbook Co, Sydney, 2012), pp 47-8 [4.130]-[4.170]. 28 ACL, s 25(1)(f).

[5.40]

5 Unfair Contract Terms

217

clause may be unfair because it allows the price to increase without giving the consumer or small business the right to terminate the contract. Whether it is unfair in the circumstances will depend on the size of the increase. It may be that a small increase is not unfair. Regulation 6(2) of the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR) states: (2) In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate – (a) to the definition of the main subject matter of the contract, or (b) to the adequacy of the price or remuneration, as against the goods and services supplied in exchange.

In Office of Fair Trading v Abbey National plc,29 the issue was whether charges for unauthorised overdrafts (when a customer withdrew money without prior arrangement with the bank) fell within the reg 6(2) exemption or whether they were reviewable for unfairness. The Supreme Court refused to interpret the two limbs together so the price or remuneration in reg 6(2)(b) was limited to sums reflecting the “essential” price or remuneration.30 The Supreme Court also held that determining what constituted the price or remuneration was a “matter of objective interpretation by the court”.31 Thus, whether a term is the price is a matter for the court and how a hypothetical reasonable person would view the term, not how actual consumers understood the term. The Supreme Court concluded that the relevant charges were part of the price and did fall within the exclusion. The overdraft charges were an important part of the banks’ revenue stream.32 Accordingly, they were not reviewable for fairness. The difference in wording between reg 6(2)(b) of the UTCCR, and s 26(1)(b) of the ACL suggests that the latter exclusion is confined to the essential “upfront” price. Any other price or remuneration payable under the contract is reviewable for unfairness under s 23(1) of the ACL.

Terms expressly permitted as a matter of law [5.40] As regards the meaning of “terms expressly permitted as a matter of law”, the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states: The exclusion of terms “required, or expressly permitted, by a law of the Commonwealth or a State or Territory” ensures that a court is not required to determine the fairness of terms that are required to be included, or expressly permitted to be included, in consumer contracts as a matter of public policy. There are many examples of mandated consumer contracts or terms that are required to be used or are expressly permitted to be used in 29 Office of Fair Trading v Abbey National plc [2009] UKSC 6; [2010] 1 AC 696. 30 Office of Fair Trading v Abbey National plc [2009] UKSC 6, [2010] 1 AC 696 at [31] (Lord Walker, with whom Lord Phillips, Baroness Hale and Lord Neuberger agreed). 31 Office of Fair Trading v Abbey National plc [2009] UKSC 6, [2010] 1 AC 696 at [113]. 32 Office of Fair Trading v Abbey National plc [2009] UKSC 6, [2010] 1 AC 696 at [47] (Lord Walker) and [88] (Lord Phillips).

218

The Australian Consumer Law

[5.45]

order to ensure the validity of specific transactions, which apply in the laws of the Commonwealth, the States or the Territories.33

For example, s 139A of the CCA expressly allows for a term that limits or excludes liability for a failure to comply with the consumer guarantees by suppliers of recreational services under the ACL. There are equivalent provisions in some, but not all, of the State and Territory jurisdictions. See [15.280] -[15.290].

Contracts excluded [5.45] The following contracts are expressly excluded by s 28 of the ACL: • • • •

a contract of marine salvage or towage; or a charter party of a ship; or a contract for the carriage of goods by ship;34 or constitutions of a corporation, managed investment scheme or other kind of body.35

The ACL does not apply to unfair terms in contracts for financial services. “Financial services” are excluded from the ACL by s 131A of the CCA. Contracts for financial services are separately regulated by ss 12BF – 12BM of the ASIC Act.36 Insurance contracts regulated by the Insurance Contracts Act 1984 (Cth) are also exempt from the unfair terms provisions of the ACL. Section 15 of the Insurance Contracts Act 1984 (Cth) provides that a contact of insurance is not capable of being made the subject of relief under any other Commonwealth or State Act. Relief is defined to include relief in the form of judicial review of a contract on the ground that it is “harsh, oppressive, unconscionable, unjust, unfair or inequitable”.

OPERATIVE PROVISIONS RELATING TO UNFAIR TERMS [5.50] The principal operative provisions relating to unfair terms are s 23(1) and (2) of the ACL which provide: (1) A term of a consumer contract or small business contract is void if: (a) the term is unfair; and (b) the contract is a standard form contract. (2) The contract continues to bind the parties if it is capable of operating without the unfair term.

The supply is not required to be from a person “in trade or commerce”. Under the ACL (Cth) the supply must be by a corporation.37 Under the ACL (Application 33 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [5.71]. 34 Section 28(2) of the ACL provides that the reference to a contract for the carriage of goods by ship includes a reference to any contract covered by a sea carriage document within the meaning of the amended Hague Rules referred to in the Carriage of Goods by Sea Act 1991 (Cth), s 7(1). 35 Section 28(3) of the ACL states that “constitution” refers to a constitution within the meaning of Corporations Act 2001 (Cth), s 9. 36 See [5.195]-[5.245]. 37 CCA, s 131(1).

[5.60]

5 Unfair Contract Terms

219

Acts) the supply may be by a corporation or a natural person, partnership or other entity and there is no requirement that the supply be “in trade or commerce”. The three requirements that need to be satisfied are: • the contract must be a consumer contract or a small business contract; • the contract must be a standard form contract; and, • the contract must contain a term that is unfair.38 It seems that the time at which unfairness is to be assessed is the time at which the contract is formed.39 Each requirement will be considered in turn.

FIRST REQUIREMENT: CONSUMER CONTRACT OR SMALL BUSINESS CONTRACT [5.55] The first requirement that must be satisfied is that the contract at issue must be a “consumer contract” or a “small business contract”. Consumer contract [5.60] Section 23 was originally introduced as part of the ACL by the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2009 (Cth) and took effect on 1 July 2010. The unfair terms provisions of the ACL apply to contracts in which the supplier is a corporation from that date. The unfair terms provisions of the ACL (Application Acts) apply to contracts between suppliers (persons or corporations) within the jurisdiction or connected to the jurisdiction, and took effect on 1 January 2011. Section 23(3) provides: A consumer contract is a contract for: (a) a supply of goods or services; or (b) a sale or grant of an interest in land;

to an individual whose acquisition of the goods, services or interests is wholly or predominantly for personal, domestic or household use or consumption. Section 23(3) adopts a subjective approach and defines consumer contracts by reference to the purposes for which the goods or services in question were acquired. The definition in s 23(3) does not limit the goods or services that may be the subject of consumer contracts to things of a personal, domestic or household nature. The focus is on the purpose or reason of the individual who acquired the goods or services. Potentially, any goods or services or interests in land may be the subject of consumer contracts provided the subjective purpose of the acquirer is wholly or predominantly for personal, domestic or household use, and not for business purposes. If land is acquired as a personal investment it may be held to be acquired 38 See R V Miller, Australian Competition and Consumer Law Annotated (37th ed, Lawbook Co, Sydney, 2015), at [1.S2.23.20]-[1.S2.23.90]. 39 Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 (2 September 2015) at [58] (Judge Jarrett).

220

The Australian Consumer Law

[5.65]

for a business purpose.40 A standard form contract for a sale of land, house or unit, lease, or easement will be a “consumer contract” subject to the unfair terms provisions of the ACL provided that the subjective purpose of the acquirer is wholly or predominantly for personal, domestic or household use. A mortgage in relation to a domestic dwelling will also be a “consumer contract”; however, as a financial service it would be subject to the unfair terms provisions of the ASIC Act, rather than the ACL. The definition of “consumer contract” in s 23(3) may create uncertainty in some situations. First, the purpose of the consumer may not be known to a business supplier and so may make it difficult for the supplier to know which contracts are “consumer contracts”. For example, a contract for the supply of car hire services will be a “consumer contract” if they are acquired by the hirer for the purpose of personal holiday travel; but it will not be a “consumer contract” if the car hire services are acquired for the purpose of attending a business meeting.

[5.65] Another area of potential uncertainty is where the contract is to acquire goods or services for dual purposes. For example, furniture may be acquired by a sole trader for a home office, but the furniture may be used concurrently by the trader’s family for personal purposes. Section 4F(1)(b) of the CCA may be of assistance in this regard. Section 4F(1)(b) of the CCA provides that a person shall be deemed to have engaged in conduct for a particular purpose or a particular reason, if the person engaged or engages in the conduct for purposes that included or include that purpose or for reasons that included or include that reason and that purpose or reason was a substantial purpose or reason. This necessitates an enquiry into the subjective purpose or purposes of the individual who acquired the goods or services. It is clear from s 4F(1)(b) that even if the acquirer has a consumer purpose and a commercial purpose, it will still be a “consumer contract” if the consumer purpose was operative on the acquirer’s mind and was substantial among the operative ones. As regards the meaning of “substantial” in s 4F(b)(ii) of the TPA, Heerey J expressed the view in Monroe Topple & Associates v Institute of Chartered Accountants that it is used in the sense of considerable or large: Did the proscribed purpose, if it existed, loom large among the objects the corporation sought to achieve?41

Finally, it seems that the time for ascertaining purpose is the time when the contract was entered into, and that if the acquirer’s purpose in using the goods or services subsequently changes from a commercial purpose to a consumer one, the unfair terms regime will not apply. For example, a trader may purchase a mobile phone for business use, but subsequently give it to a member of the family for personal purposes. It will not be a consumer contract.

40 Leveraged Equities Ltd v Goodridge [2011] FCAFC 3 at [416]-[417] (Jacobson J with whom Finkelstein and Stone JJ agreed). 41 Monroe Topple & Associates v Institute of Chartered Accountants (2002) 122 FCR 110 at [97].

[5.75]

5 Unfair Contract Terms

221

The definition of “consumer” in s 3 of the ACL differs from the definition of a “consumer contract” in s 23(3) for the purposes of the unfair terms provisions. The definition in s 3 adopts an objective test that focuses on the uses to which the goods or services are ordinarily put.42 Attempts to circumvent the application of the unfair terms provisions of the ACL by requiring an individual to sign a declaration that the goods or services are being acquired for a business or investment purpose, when this is inconsistent with the individual acquirer’s true purpose should be carefully scrutinised. They may, themselves, be held to constitute unfair terms. Section 25(l) gives, as an example of a term that may be unfair, a term that limits, or has the effect of limiting, the evidence one party can adduce in proceedings relating to the contract. The supply of goods or services or the sale of an interest in land must be to an individual. The term “individual” is defined in the Acts Interpretation Act 1901 (Cth) to mean a natural person. Thus, unlike the general protections for misleading conduct and unconscionable conduct considered in Chapters 3 and 4 respectively, bodies corporate are precluded from relying on the general protection for unfair terms. However, the more egregious unfair terms in contracts between bodies corporate may be challenged under the unconscionable conduct provisions of the ACL. See [4.80] and [4.105].

Small business contract [5.70] Section 23 was extended to small business contracts by the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015 (Cth). The provisions apply to small business contracts entered into or amended or renewed after 12 November 2016. In the case of application to small businesses, one party to the contract must be a business within the definition contained in s 23(4) which provides: (4) A contract is a small business contract if: (a) the contract is for a supply of goods or services, or a sale or grant of an interest in land; and (b) at the time the contract is entered into, at least one party to the contract is a business that employs fewer than 20 persons; and (c) either of the following applies: (i) the upfront price payable under the contract does not exceed $300,000; (ii) the contract has a duration of more than 12 months and the upfront price payable under the contract does not exceed $1,000,000. (5) In counting the persons employed by a business for the purposes of paragraph (4)(b), a casual employee is not to be counted unless he or she is employed by the business on a regular and systematic basis.

A business

[5.75] The small business can be the supplier or the acquirer under the contract. No particular business entity is specified so that the business may be conducted by natural persons, a body corporate, a partnership, trust or joint venture. The 42 See [8.70]-[8.115].

222

The Australian Consumer Law

[5.80]

definition of the word “business” in s 2 of the ACL includes a not-for- profit business, but does not elaborate any further. It is necessary to consider whether the particular activity constitutes a business in the ordinary sense. It would include activities such as supplying goods or services for remuneration or buying and reselling goods. There must always be present some element of commerciality, in the sense of income production, but as to what is a sufficient degree of commerciality is a question of fact in each case.43 In Spriggs v Federal Commissioner of Taxation, the High Court stated: The existence of a business is a matter of fact and degree. It will depend on a number of indicia, which must be considered in combination and as a whole. No one factor is necessarily determinative. Relevant factors include, but are not limited to, the existence of a profit-making purpose, the scale of activities, the commercial character of the transactions, and whether the activities are systematic and organised, often described as whether the activities are carried out in a business-like manner.44 (citations omitted)

The word “business” is used in s 2A of the CCA to bind the Crown in right of the Commonwealth to the CCA (including the ACL) in so far as the Crown in right of the Commonwealth “carries on a business” (see [2.55]). The jurisprudence in construing the word “business” in that context may be applicable in construing the word “business” in the context of s 23 of the ACL. It has been held that the concept of “carrying on a business” involves an element of repetition and continuity, so that an isolated or “one-off” transaction will not amount to carrying on a business.45 In Hope v Bathurst City Council, Mason J stated: It is the words “carrying on” which imply the repetition of acts and activities which possess something of a permanent character.46

Section 23 of the ACL does not require that the business be “carried on”, so that the repetition of acts and activities does not become necessary in order to invoke the protection of s 23(1). Section 23(4)(b) requires that, at the time the contract is entered into, the small business protected must employ fewer than 20 persons. Many small businesses involve activities with an element of repetition and continuity, but it is possible to envisage a small business being established to perform an isolated or one-off transaction, for example, the sale of an investment property by the trustee of a family trust, or the renting of properties by a trust.47 That employs fewer than 20 persons

[5.80] In calculating persons employed, each full-time, part-time and casual employee constitutes one person. Section 23(5) of the ACL provides that only 43 Hope v Bathurst City Council (1980) 144 CLR 1 at 8 (Mason J, with whom Gibbs and Stephen JJ agreed). 44 Spriggs v Federal Commissioner of Taxation (2009) 239 CLR 1 at [59] (French CJ, Gummow, Heydon, Crennan, Kiefel and Bell JJ). 45 See, eg, JS McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 at 356 (Emmett J) applying Smith v Capewell (1979) 142 CLR 509 at 517; State of New South Wales v RT & YE Falls Investments Pty Ltd [2001] NSWSC 1027 at [78] (Palmer J); and Tycoon Holdings Ltd v Trencor Jetco Inc (1992) 34 FCR 31 at 38 (Wilcox J) in relation to s 5(1) of the TPA which extended to conduct by bodies corporate “carrying on business within Australia”. 46 Hope v Bathurst City Council (1980) 144 CLR 1 at 8 citing Smith v Anderson (1880) 15 Ch D 247 at 277-8. 47 Mould v Commissioner of State Revenue [2015] VSCA 285.

[5.90]

5 Unfair Contract Terms

223

casual employees who are employed on a regular and systematic basis are to be counted for the purposes of s 23(4)(b) of the ACL. Section 384(2) of the Fair Work Act 2009 (Cth) provides that a period of employment can include a period of casual employment if the employment was on a regular and systematic basis and during the period of service as a casual employee, the employee had a reasonable expectation of continuing employment by the employer on a regular and systematic basis.48 Employees who are engaged on a seasonal roster will not be included. Upfront price

[5.85] The contract entered into by the small business is limited by the upfront price of the contract. “Upfront price” is defined in s 26(2) of the ACL (see [5.20] and [5.30]). It includes all consideration provided under a contract at any time during the contract term so long as the consideration, or the basis on which it is to be determined, are disclosed before the contract is entered into. It does not include other consideration if it is “contingent”. For example, the upfront price in a contract for the sale of land would include the purchase price and any adjustments to the price for outgoings, but not any contingent payments which are additional to the upfront price. SECOND REQUIREMENT: STANDARD FORM CONTRACT [5.90] Section 23(1) only applies if the consumer contract or the small business contract at issue is a “standard form contract”. The Productivity Commission in its Review of Australia’s Consumer Policy Framework gave the following reasons for excluding negotiated contracts from the unfair terms law: Negotiated contracts, by their nature, require parties to explicitly consider and tailor the terms and conditions. Parties can seek to eliminate any terms seen as unfair in such contracts. Indeed, even apparent “standard-form” contracts can be negotiated contracts if parties routinely strike out or alter existing terms that they do not believe to be appropriate. Negotiation also typically occurs for more costly products and often will involve intermediaries because they have professional competence in interpreting the terms and conditions. In that context, parties to negotiated contracts, or their agents, are usually sufficiently sophisticated to ensure acceptable contract outcomes and can reasonably be expected to have their “eyes wide open”. The application of an unfair contracts law in this situation would undermine parties’ diligence in considering the full terms of the contract. Accordingly, it would only be appropriate for a court or tribunal to void negotiated terms in highly special circumstances.49

The term “standard form contract” is not exhaustively defined s 27(2) of the ACL. It merely provides that in deciding whether a contract is a standard form contract, a court may consider any matter that it thinks relevant, but must consider: (a) whether one of the parties has all or most of the bargaining power relating to the transaction; 48 Fair Work Act 2009 (Cth), s 384. 49 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, p 161.

224

The Australian Consumer Law

[5.95]

(b) whether the contract was prepared by one party before any discussion relating to the transaction occurred between the parties; (c) whether another party was, in effect, required either to accept or reject the terms of the contract (other than the terms referred to in s 26(1)) in the form in which they were presented; (d) whether another party was given an effective opportunity to negotiate the terms of the contract that were not the terms referred to in s 26(1); (e) whether the terms of the contract (other than the terms referred to in s 26(1)) take into account the specific characteristics of another party or the particular transaction; (f) any other matter prescribed by the regulations.

[5.95] Imbalance of bargaining power is also a factor that a court may consider in relation to statutory unconscionability under s 21 of the ACL.50 Apart from obvious cases where one party is suffering from a special disadvantage (such as where the buyer is elderly,51 or there is a lack of education and lack of assistance or explanation when assistance or explanation is necessary,52 or a lack of or limited comprehension of the English language53), s 27(2)(a) (imbalance of bargaining power) is likely to apply in circumstances where there is only one or a small number of suppliers, or because the transaction costs associated with searching for alternative suppliers are prohibitive. In ACCC v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd),54 it was held the patients who were subjected to high pressure selling techniques suffered from a significant imbalance of bargaining power. The ACCC published A Guide to the Unfair Contract Terms Law, which set out its views on the meaning of the law and the way that it will enforce compliance with the law.55 According to the Guide, whether a contract is, in fact, a standard form “is properly assessed on an individual contract-by-contract basis based on how each of the factors applies to the facts of the case”.56 This suggests that evidence of whether a particular consumer contract is frequently negotiated with consumers is not relevant to whether the specific contract at issue is a standard form contract. This may mean substantially similar contracts are sometimes caught by the unfair terms regime and sometimes not. In relation to s 27(2)(b), it would seem that the contract does not have to be physically prepared before discussion occurs. According to the ACCC Guide, standard form contracts may be made orally. 50 ACL, s 22(1)(a). See [4.100]. 51 Anthony v Vaclav [2009] VSC 357. 52 Blomley v Ryan (1956) 99 CLR 362 at 405, 415 (Kitto J). 53 ACCC v Dukemaster Pty Ltd (2009) ATPR ¶42-290. 54 ACCC v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd) [2015] FCA 368 at [947]. 55 ACCC, A Guide to the Unfair Contract Terms Law (Canberra, 2010). 56 ACCC, A Guide to the Unfair Contract Terms Law (Canberra, 2010), p 5 [1.4].

[5.105]

5 Unfair Contract Terms

225

In relation to s 27(2)(c), non-negotiable terms are also a factor that a court may consider in relation to statutory unconscionability under s 21 of the ACL.57 Section 27(2)(d) is likely to be construed to mean that the consumer must be given an effective opportunity to influence the substance of a term.58 It will not suffice to give the consumer the potential to ask the respondent to negotiate or vary a term of the contract, or the opportunity to seek legal advice in relation to a concluded agreement.59 In relation to s 27(2)(e), it is unclear to what extent the terms must take into account the specific characteristics of another party or the transaction. It may be possible to insert special conditions requested by another party into an otherwise standard form contract, and avoid falling within the category of “standard form contract” for the purposes of s 23(1)(b).

Rebuttable presumption [5.100]

Section 27(1) of the ACL provides that if a party to a proceeding alleges that a contract is a standard form contract, it is presumed to be a standard form contract, unless another party to the proceeding proves otherwise. The rationale for this presumption is that the claimant/consumer or small business has evidence of only one contract (their own), whereas the respondent/supplier is best placed to provide evidence regarding the nature of the contract it issues, and the way in which it deals with other consumers or small businesses, including whether negotiations are normally conducted.60

THIRD REQUIREMENT: UNFAIR TERM Meaning of unfair: four part test [5.105]

If the term at issue is not excluded as a core term, the next question to consider is whether it falls within the definition of “unfair”. The test of what is “unfair” is the same for consumers and small businesses. The test falls into four parts. The first part of the test requires the court to consider the term at issue itself.61 The second part of the test requires the court to consider contextual matters surrounding the formation of the contract containing the term.62 The third part of the test requires the court to consider whether the term was transparent.63 The fourth part of the test requires the court to consider the term at issue in the context 57 ACL, s 22(1)(j)(i). See [4.165]. 58 Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 (2 September 2015) at [46] (Judge Jarrett). 59 UK Housing Alliance (North West) Ltd v Francis [2010] EWCA Civ 117 (24 February 2010). 60 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [5.73]. 61 ACL, s 24(1). 62 ACL, s 24(2). 63 ACL, s 24(2)(a).

226

The Australian Consumer Law

[5.110]

of the contract as a whole.64 In determining whether each of the elements of unfairness is satisfied the court obtains guidance from the indicative “grey” list in s 25 of the ACL.

First part: the term itself [5.110]

Section 24(1) of the ACL provides that a term of a consumer contract or small business contract will be “unfair” if: (a) it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and (b) it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and (c) it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

Each element of unfairness focuses on the term itself and appears to preclude consideration of any additional matters such as, the circumstances surrounding its exercise, or the conduct of the parties during pre-contractual negotiations. In ACCC v Chrisco Hampers Australia Ltd65 (Chrisco case), the Federal Court had to consider whether the HeadStart term inserted by Chrisco Hampers Australia Ltd into its lay-by contracts with consumers was unfair within the meaning of s 24 of the ACL. The HeadStart term allowed Chrisco to continue to take payments by direct debit from the consumer’s bank account even after the consumer had made full payment for the lay-by order. The term would apply unless the consumer opted out of it. The money withdrawn from the consumer’s bank account would then be used for any future order made by the consumer. If the consumer did not place an order and requested a refund of the money paid, the money would be refunded without interest. Edelman J said: The legislative concept of “unfairness” in s 24, with elaboration through the three elements of unfairness, might be described as a guided form of open-ended legislation.66

First element: significant imbalance in parties’ rights and obligations

[5.115]

Under the first element, the onus is placed on the claimant to prove that on the balance of probabilities the term at issue would cause a significant imbalance in the parties’ rights and obligations arising under the contract.67 The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, provides little in the way of guidance as to the meaning of “significant”. It merely states that: “This will involve a factual determination of whether any such significant imbalance would exist”.68 It also

64 ACL, s 24(2)(b). 65 ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204. 66 ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204 at [40]. 67 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [5.24]. 68 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [5.23].

[5.115]

5 Unfair Contract Terms

227

states: “A lack of transparency in the terms of a consumer contract may be a strong indication of the existence of a significant imbalance in the rights and obligations of the parties under the contract”.69 According to its ordinary dictionary definition, “significant” as an adjective means “important” or “of consequence”.70 The Productivity Commission in its Review of Australia’s Consumer Policy Framework expressed the view that the aim of the proposed law regulating unfair terms was only to cover terms that are manifestly unfair.71 The Productivity Commission was cognisant of the fact that “[w]hatever their immediate benefits, barring unfair contract terms is likely to have some adverse knock-on impacts for consumers through higher prices (or lower quality goods and services)”,72 and that regulatory action should only take place where net benefits are likely.73 The Productivity Commission concluded: The application of any law regarding unfair contract terms should be designed so that the benefits for unfairly treated consumers are not offset by any incidental costs to consumers generally. In effect, this is nothing more than the requirement to consider the overall public interest in applying the law… Among other matters, a regulator (and any court) might be expected to take into account: • the extent of consumer detriment (realised or likely); • the degree to which the contract term reduced transactions costs in its current (and proposed) forms; • any effects (adverse or favourable) on risk allocation and prices; and • whether voiding (or changing) terms for groups of affected consumers could encourage inappropriate behaviour by some consumers to the ultimate detriment of consumers as a whole. In other words, the regulator would need to take account of “all the circumstances of the contract” and evidence of detriment.74

As regards the fourth bullet point, the Productivity Commission identifies the following inappropriate behaviour of some consumers: they may not be careful in using their purchases, conceal damage they have done to a rented asset, or seek to extract themselves from contracts that require businesses to commit significant upfront resources … Crucially, unlike businesses, consumers do not generally have a brand name or reputation to lose from such conduct. It is hard for suppliers to foresee all the forms that such conduct might take, hence the need for disclaimers that deal with unspecified contingencies. As a result, what appears to be 69 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [5.38]. 70 Macquarie Dictionary (4th ed 2005), p 1314. See also The Oxford English Dictionary (2nd ed Clarendon Press, Oxford, 1989), Vol XV, p 458. 71 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, pp 151 and 413-514. 72 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, p 155. 73 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, p 157. 74 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, pp 159-60.

228

The Australian Consumer Law

[5.120]

one-sided contracts may sometimes better protect the bulk of customers from the behaviour of the few, than balanced contracts.75

The requirement of a “significant imbalance” is also contained in the Unfair Term in Consumer Contracts Regulations 1994 (UK). Regulation 5(1) provides that a contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.

In Director-General of Fair Trading v First National Bank plc,76 Bingham LJ stated that the requirement of a significant imbalance is met if “a term is so weighted in favour of the supplier as to tilt the parties’ rights and obligations under the contract significantly in his favour. This may be the granting to the supplier of a beneficial option or discretion or power, or by imposing on the consumer of a disadvantageous burden or risk or duty”.77 In the Chrisco case, Edelman J proceeded on the basis that Lord Bingham’s definition was an appropriate meaning to be given the notion of “significant imbalance”.78 In relation to the unfair terms regime under the repealed ss 32W and 32X of the FTA 1999 (Vic), in Jetstar Airways Pty Ltd v Free,79 Cavanough J stated that the lack of individual negotiation of the contract between the supplier and the consumer was not relevant to whether the impugned term causes a significant imbalance in the parties’ rights and obligations under the contract.80

[5.120]

In the Chrisco case, Edelman J accepted that the lack of negotiation of the contracts between Chrisco and its customers was not relevant in considering whether the HeadStart term caused a significant imbalance in the parties’ rights and obligations.81 In relation to the first element, in the Chrisco case, Edelman J concluded: Ultimately, it suffices to say that the sums of money lost by Chrisco’s withdrawals from the consumer’saccount, without any obligation upon Chrisco to pay interest and with no discount for the consumer who subsequently chose to place an order, involved a significant detriment to the consumer. That detriment was not balanced by any substantial corresponding right that the consumer obtained against Chrisco. By itself, it is not necessarily determinative that there is no substantial right to a consumer, or duty upon Chrisco, that corresponds with the consumer’s obligations under the HeadStart

75 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, p 151. See Bebchuck and Posner, “One-Sided Contracts in Competitive Consumer Markets” (2006) 104 Michigan Law Review 827. 76 Director-General of Fair Trading v First National Bank plc [2002] 1 AC 481. 77 Director-General of Fair Trading v First National Bank plc [2002] 1 AC 481 at 481 [17]. 78 ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204 at [49]. See also ACCC v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd) [2015] FCA 368 at [950] (North J). 79 Jetstar Airways Pty Ltd v Free [2008] VSC 539. 80 Jetstar Airways Pty Ltd v Free [2008] VSC 539 at [112]. 81 ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204 at [50].

[5.120]

5 Unfair Contract Terms

229

term. The evaluative exercise involves consideration of the contract as a whole to determine whether there is a significant imbalance in the parties’ rights and obligations arising under the contract.82

In ACCC v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd),83 Advanced Medical Institute Pty Ltd (AMI) conducted a business promoting and supplying medication and services for the treatment of male sexual dysfunction. AMI was placed into voluntary administration on 22 December 2010, the day after the ACCC instituted proceedings against it. AMI continued to trade during its voluntary administration but in June 2011, sold the AMI business to NRM. Shortly afterwards, AMI was placed into voluntary liquidation. NRM conducted the AMI business following its acquisition in June 2011. The ACCC alleged that NRM’s contracts for the treatment of male sexual dysfunction contained an unfair term in relation to the termination of a contract. NRM patients were required to provide 30 days’ written notice to NRM to terminate the contract and were required to pay a number of fees including a fixed administrative fee of 15% of the original contract price. The ACCC alleged that each of the fees had the effect of penalising a consumer who gave notice of termination and therefore causing a significant imbalance in the parties’ rights under the contract. The court concluded: The NRM refund term required the patient to pay a 15% administration fee, a pro-rata fee for the expired portion of the treatment, a pro-rata fee for the 30-day notice period, and the cost of medication supplied or prepared for the patient. The term operated whether the reason for the termination was a change of mind very soon after the phone consultation, a severe adverse side effect, or where the medication proved ineffective. The term thus caused detriment to the patient, if relied upon, within the meaning of s 24(1)(c). It also caused a significant imbalance in the parties’ rights and obligations because it had the effect of binding patients to continue treatment in disadvantageous circumstances, or alternatively suffer a financial penalty.84

In summary, it appears that “significant” in s 24(1)(a) of the ACL means an imbalance of bargaining power that is “meaningful” or “of consequence” and “more than trivial”, such that it is deserving of the intervention of the court to avoid the realised or likely consumer detriment. Whether a particular term creates a “significant imbalance” will entail a factual inquiry taking into account a number of contextual factors including those identified by the Productivity Commission set out in [5.115]. As the Productivity Commission observes, while some contract terms, such as those imposing disproportionate penalties for a technical breach, are intrinsically unfair in all contexts, others will only be unfair in the case of inappropriate use.85 Section 24(2) of the ACL provides that in determining whether a term is unfair under s 24(1), the court may take into account such matters as it thinks relevant. The court is required to examine the term in the light of the other 82 ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204 at [69]-[70]. 83 ACCC v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd) [2015] FCA 368 (North J). 84 ACCC v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd) [2015] FCA 368 at [951]. 85 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, p 152.

230

The Australian Consumer Law

[5.125]

provisions of the contract (“the contract as a whole”), and to consider whether the detriment to the consumer arising from the term at issue is balanced by other terms in the contract which provide a “substantial corresponding right” in favour of the consumer or small business.86 Examples of terms creating a “significant imbalance”

[5.125]

The requirement of a “significant imbalance” was also contained in the Victorian definition of “unfair term” in s 32W of the FTA 1999 (Vic). In Director of Consumer Affairs Victoria v AAPT Ltd,87 Morris J found that the following terms in AAPT’s contract were one-sided and created a significant imbalance in the parties’ rights and obligations: Variations: We may vary any term of this Agreement at any time in writing. To the extent required by any applicable laws or determinations made by the Australian Communications Authority (ACA), we will notify you of any such variation.

Morris J found this term to be unfair because it permitted AAPT, but not the customer, to change the contract unilaterally. The term had the effect of permitting AAPT, but not the consumer, to avoid or limit the performance of the contract. Suspension: We reserve the right to suspend provision of Services to you, where charges owing to us or any amount owing under this clause remain outstanding after 60 days, unless we have received written notice from you disputing those charges in good faith. If we suspend or terminate the Services for unpaid charges or any other reason, subsequent reconnection may incur a reconnection fee. Morris J found that the second sentence of the term was unfair because went too far in providing that AAPT may charge a reconnection fee for “any other reason”. This could embrace a reason which did not involve any breach by the customer of its obligations under the contract. Liability to pay: Notwithstanding any suspension of the Services under this clause you shall remain liable for all charges due hereunder throughout the period of suspension (including without limitation all monthly access fees, and regardless of whether or not any SIM card has been disconnected from the Network) unless we in our sole discretion determine otherwise. Morris J found that Clause 9.2 was unfair because circumstances could arise where the service was suspended for a technical failure, and AAPT had a discretion as to whether or not to charge its customer during the period of suspension. Immediate termination: We may terminate this Agreement immediately by notice to you if: (a) you have breached this Agreement; (b) …; or (c) you change your address or billing contact details without notifying us in accordance with clause 7.4. 86 ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204 at [53] and [69]-[70]. 87 Director of Consumer Affairs Victoria v AAPT Ltd [2006] VCAT 1493. See also Director of Consumer Affairs Victoria v Craig Langley Pty Ltd (No 1 and No 2) [2008] VCAT 482 and [2008] VCAT 1332; and Director of Consumer Affairs Victoria v Trainstation Health Clubs Pty Ltd [2008] VCAT 2092.

[5.130]

5 Unfair Contract Terms

231

10.4 You remain liable for all charges payable under the Agreement in respect of Services up to the time of termination. Morris J found that these provisions potentially had broad application. A customer may have breached the Agreement in a manner that was inconsequential, but nevertheless faced the prospect of having the service terminated. Further, if the customer changed his or her address, this would also provide a ground for termination. Because these provisions were so broadly drawn, and one sided in their operation, they were unfair terms within the meaning of the FTA 1999 (Vic). Variations: To the extent permitted by law, AAPT may change a Supplier or its products, or vary our charges from time to time without notice to you. Otherwise, AAPT may vary these terms on 30 days written notice to you. Morris J found that this term was unfair because it caused a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer. For example, it would enable AAPT to reduce the number of calls that a person could make pursuant to a prepaid mobile phone service which the person had entered into in good faith.88 Second element: not reasonably necessary to protect legitimate interests

[5.130]

There are two aspects to the second element of the definition of “unfair” in s 24(1) of the ACL. First, it is necessary to establish that the respondent has a “legitimate interest”. Secondly, it is necessary to establish that the term in question was “reasonably necessary” to protect that interest. Section 24(4) provides that there is a rebuttable presumption that a term of a consumer contract is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term. The party who inserted the term and would be advantaged by it must prove that it is reasonably necessary to protect its legitimate interests. The reason for this is that the pertinent evidence is likely to be difficult for a consumer to obtain and relatively easier for the party who would advantaged by the term. Failure to adduce evidence that a term is reasonably necessary will result in the term being found to be not reasonably necessary. According to Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010: Where a claimant in proceedings has alleged that a term is unfair, it is for the respondent to establish that a term is reasonably necessary to protect its legitimate interests on the balance of probabilities. The respondent may introduce any evidence relevant to this element of the test. While it is ultimately a matter for the Court to determine whether a term is reasonably necessary to protect the legitimate interests of the respondent, the provision would require the respondent to establish, at the very least, that its legitimate interest is sufficiently compelling on the balance of probabilities to overcome any detriment caused to the consumer, or a class of consumers, and that therefore the term was “reasonably necessary”.89

88 Director of Consumer Affairs Victoria v AAPT Ltd [2006] VCAT 1493 at [49]-[54]. 89 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [5.27]-[5.28].

232

The Australian Consumer Law

[5.130]

The ACCC, in its Guide to the Unfair Contract Terms Law states: This limb requires that the party advantaged by the term provide evidence to the court to demonstrate why it is necessary for the contact to include the term. Such evidence might include material relating to the business’ costs and business structure, the need for the mitigation of risks or particular industry practices to the extent that such material is relevant.90

This element of the of the definition of “unfair” in s 24(1) of the ACL is similar to the statutory factors for determining unconscionability in s 22(1)(b) and (2)(b) of the ACL which provide that the court may have regard to whether, as a result of conduct engaged in by one party, the other party was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier.91 Whether a particular term is reasonably necessary to protect the legitimate interests of the supplier will entail a factual inquiry taking into account a number of contextual factors including the following: • the risk inherent in the transaction from the supplier’s point of view and whether the term in question provides a degree of protection to the supplier that is disproportionate to that risk; and • industry norms and whether they are necessary to protect the supplier’s interest having regard to the particular consumer’s risk profile.92 In Ferme v Kimberley Discovery Cruises Pty Ltd,93 Kimberley Discovery Cruises Pty Ltd (KDC) offered cruises from Wyndham to Derby in Western Australia. As part of the contract with some of the applicants KDC agreed to transfer them from Darwin to Wyndham at the commencement of the cruise, and from Derby to Broome at the conclusion of the cruise, so that there was a dispute between the parties as to whether the contract was for a “cruise”, or a “holiday tour and a cruise”. The terms and conditions contained a “cancellation clause” which provided that if there were an “unexpected event” such as a tropical cyclone, KDC was entitled to cancel the cruise and the passenger accepted that they (the passenger) would not be entitled to any compensation or a refund of the fare paid. KDC cancelled the cruise because of a tropical cyclone, and the applicants’s insurer exercised its right of subrogation to recover from KDC the amounts paid by the applicants for their cruise on the basis that the cancellation clause was void under s 23(1) of the ACL. KDC argued that it had a legitimate interest, namely, reputation in the market (its business goodwill) and the preservation of the financial position of KDC.94 The fares that KDC retained by reason of the cancellation clause provided the funds necessary to meet the costs associated with the preparations undertaken for the cruise. There was evidence in the form of receipts and invoices for food, crew wages and fuel, but no breakdown of costs incurred leading up to the commencement of the cruise. The Federal Circuit Court held that the respondent 90 ACCC, A Guide to the Unfair Contract Terms Law (Canberra, 2010), p 11. 91 See [4.105]. 92 See PSAL Ltd v Kellas-Sharpe [2012] QSC 31. In Kowalczuk v Accom Finance Pty Ltd (2008) 229 FLR 4, a term providing for an interest rate of 75% was not reasonably necessary to protect the legitimate interest of the mortgagee and unjust under the Contracts Review Act 1980 (NSW). 93 Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 at [72]. 94 Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 at [73].

[5.135]

5 Unfair Contract Terms

233

had not proved that the cancellation clause was reasonably necessary in order to protect the legitimate interests of KDC. Judge Jarrett observed: If there was evidence of that nature and if the forfeiture term provided for a “sliding scale” of the amount that would be retained by the respondent in the event that the respondent cancelled a cruise, it might be the case that such a term would be reasonably necessary.95

His Honour also observed that: retaining the entire fare is perhaps just as likely to cause a loss of goodwill and lack of repeat business. The respondent’s strong suggestion in the Terms & Conditions that all passengers obtain their own travel insurance, highlights, in my view, the unfairness of the clause.96

Third element: detriment if applied or relied on

[5.135]

Under the third element of the definition of “unfair” in s 24(1) of the ACL, it is necessary to satisfy the court that the term would cause detriment to a party if it were to be applied or relied on. The Productivity Commission in its Review of Australia’s Consumer Policy Framework considered two possible models for the introduction of an unfair terms law: an ex ante model and an ex post model.97 The ex ante model would give the regulator the capacity to take pre-emptive action against unfair terms that would cause future detriment, even where the evidence of detriment was unclear. The ex post model would only permit the regulator to initiate action after the consumer had suffered a detriment from an unfair term. The Productivity Commission was inclined to the view that the ex post model was the preferable option and that intervention should only be permitted if there was evidence of material detriment to consumers, individually or as a class.98 The Productivity Commission was concerned about the risk of regulatory overreach and concluded that the ex post model was “a prudent approach given the uncertainty about the severity of the problem”.99 Contrary to the Commission’s recommendation, the Bill adopted the ex ante model and provided that there would need to be a “substantial likelihood” of detriment for a term to be unfair; however, these words were removed from s 24 which, in its final form, only requires that the term “would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on”. There must be evidence of actual detriment; however, it is not necessary to prove that actual detriment has been caused. In relation to this element of s 24(1), the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states: 95 Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 at [80]. 96 Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 at [85]. 97 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, pp 165-8. 98 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, pp 167-168. 99 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, p 167.

234

The Australian Consumer Law

[5.140]

In this regard, a term does not need to be enforced in order to be unfair, although the possibility of such enforcement may impact on the decisions made by the party that would be disadvantaged by the term’s practical effect, to that party’s detriment. Detriment is not limited to financial detriment. This is designed to allow the Court to consider situations where there may be other forms of detriment that have affected or may affect the party disadvantaged by the practical effect of the term. Where it is found that a term is unfair and there is only future detriment would arise from the application of or reliance on that term, then the remedies available would likely be limited to a declaration that the term is an unfair term and an injunction preventing the party advantaged by it applying or relying on it, or purporting to do so. Any form of compensatory remedy would likely be limited to those situations where there is material or actual detriment proven.100

Financial detriment is a reference to financial loss or expenditure; non-financial detriment may include mental distress, delay or inconvenience. In Ferme v Kimberley Discovery Cruises Pty Ltd, the court found that the cancellation clause would cause detriment, in particular financial detriment, if it were to be relied on.101

Second part: contextual considerations [5.140]

While s 24(1) appears to require that the assessment as to whether a particular term is unfair is to be made without consideration of the surrounding circumstances, s 24(2) provides that in determining whether a term of a consumer contract or small business contract is unfair under s 24(1), a court may take into account “such matters as it thinks relevant”. This allows a court to consider the context in which the term was inserted or exercised, and may convert a term that is unobjectionable on its face into an unfair term. The Productivity Commission drew attention to the importance of considering procedural aspects in seeking to regulate unfair terms in its Report on the Consumer Policy Framework: the rationale for action principally rests on the unreasonable use of unfair terms, not their existence. This is because, perceptions of their inherent unfairness aside, dormant unfair terms often do not cause detriment to consumers.102

Relevant matters might include: • whether the consumer or small business had a choice and alternative suppliers were available; and • whether the term at issue was in common use in the industry concerned.

Third part: transparency [5.145]

The third part of the test of unfairness contained in s 24(2)(a) requires the court to consider the extent to which the term is transparent. Section 24(3) provides:

100 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [5.32]-[5.34]. 101 Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 at [89]. 102 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, p 152.

[5.145]

5 Unfair Contract Terms

235

A term is transparent if the term is: (a) expressed in reasonably plain language; and (b) legible; and (c) presented clearly; and (d) readily available to any party affected by the term.

Transparency is a procedural aspect of unfairness rather than a substantive aspect. It requires that an assessment be made as to whether a term has been sufficiently brought to the attention of the consumer. According to the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010: Transparency, on its own account, cannot overcome underlying unfairness in a contract term. Furthermore, the extent to which a term is not transparent is not, of itself, determinative of the unfairness of a term in a consumer contract and the nature and effect of the term will continue to be relevant.103

It appears that the principal focus in determining whether a term is unfair will be on its substantive content and whether it creates a significant imbalance in the parties’ rights and obligations. If so it is likely to be held to be unfair even if it has been brought to the attention of the consumer. Others argue that procedural fairness should be the determinative consideration, since consumers are unlikely to read standard form contracts.104 Transparency requires that consumers must be given reasonable notice of unusual terms. The issue of lack of transparency arose for consideration in ACCC v Chrisco Hampers Australia Ltd. The HeadStart term had several characteristics that reduced transparency. Edelman J stated: The considerations relevant to assess the extent of transparency of the HeadStart term involve whether it is expressed in reasonably plain language; legible; presented clearly; and readily available to the consumer.105

The HeadStart term lacked transparency in the following respects. First, its meaning was not plain. It was not possible for consumers to determine the amount that would be automatically deducted from the consumer’s account if the consumer failed to opt out, and it was unclear as to how the consumer could cancel the automatic payments under the HeadStart plan. Secondly, the presentation of the HeadStart term was unclear. The font size of the HeadStart term was very small. Other terms were emphasised by the use of bright colours and larger font sizes. Thirdly, there was no cross-referencing as between the HeadStart term and the opt-out provision. Edelman J observed: Another difficulty with the legibility, clarity and availability of the HeadStart term is that although the HeadStart term and the opt-out provision were opposite each other in the four pages of the catalogue there was no reference in either to the other. The opt-out box 103 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [5.39]. 104 See Pearson, “The Australian Unfair Contract Terms Law: the Rise of Substantive Unfairness as a Ground for Review of Standard Form Consumer Contracts” (2009) 33 Melbourne University Law Review 934 at 955. 105 ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204 at [75].

236

The Australian Consumer Law

[5.150]

to be ticked did not refer to the HeadStart term on the previous page nor did it explain what was involved in the HeadStart Plan. And the HeadStart term on the previous page did not refer to the possibility of opting out.106

Fourthly, the provision that the HeadStart plan was fully refundable was not contained in the terms and conditions at all; rather, it was contained in the opt-out box on the form that would be sent to Chrisco.107 Edelman J held: Overall, for the reasons I have expressed, and as an evaluative assessment of all the circumstances relevant to the HeadStart term including its transparency and the contract as a whole, the HeadStart term caused a significant imbalance in the parties’ rights and obligations arising under the contract.108

The Chrisco case demonstrates first, that lack of transparency can arise where terms are not expressed in “reasonably plain language”109 and the term and its effect cannot be understood in the context of the contract as a whole. If the impugned term raises questions, the answers to those questions must be “readily available” to the consumer elsewhere in the contract, or in another “contemporaneous document” or website.110 Secondly, the case demonstrates that a lack of transparency can arise from the order in which the terms appear in the contract and the visual lay-out of the document, including the font size of the term relative to other terms in the contract, and the use of colour, graphics, formatting and cross-referencing. Suppliers who include terms that are unusual and work to the disadvantage of the consumer in some way may need to actively assist consumers to understand their consequences if they are not to be held to lack transparency.

[5.150]

The issue or transparency arose under s 32W of the FTA 1999 (Vic) in Director of Consumer Affairs Victoria v Trainstation Health Clubs Pty Ltd.111 Clause 11 of a gym membership contract provided: Change of location of a club within 12 kilometres, or change of the name of a club, or change of the name of the operator, or change of ownership of the operator, or change of ownership of a club, does not absolve the customer, in any way at all, from honouring the terms of this contract.

In assessing whether Clause 11 was unfair for the purposes of s 32W of the FTA 1999 (Vic), Harbison J held: It is a term which in my view would surprise consumers. It is one which they would not expect. However, I can envisage that such a term might be perfectly fair if it was brought to a consumer’s attention prior to signing of a contract. It is true that the evidence of Hodges is that he did notice the clause at the time he signed a contract. However, I am deciding this question not in relation to any rights Hodges may have under his individual contract, but on the wording of the term within the context of the contract as a whole. I am entitled to take into account the position of the term in the contract. In particular, I can take into account the fact that it is given no prominence. It is 106 ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204 at [91]. 107 ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204 at [92]. 108 ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204 at [97]. 109 ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204 at [75]. 110 ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204 at [83]. 111 Director of Consumer Affairs Victoria v Trainstation Health Clubs Pty Ltd [2008] VCAT 2092.

[5.155]

5 Unfair Contract Terms

237

in the same typeface as all other terms. There is no evidence that the Respondent has employed any procedure to bring this requirement to the attention of the consumer. …in my view the concept of information imbalance can be applied to a situation where a term of significance, known to be potentially significant to a supplier, is not given due prominence in a contract so as to bring it to the consumer’s attention.112

However, procedural considerations such as drawing the consumer’s attention to a term in an open and transparent way prior to making the contract will not be sufficient to protect the other contracting party from a charge of unfairness. Substantive considerations must also be taken into account. A term may be substantively unfair if it is not balanced, and the supplier “uses it stronger bargaining position to simply push all the risk away from itself” on to the consumer. Edelman J in the Chrisco case left open the question “whether a lack of transparency could itself create an imbalance which does not otherwise exist”.113

Fourth part: contract as a whole [5.155]

The fourth part of the test of unfairness contained in s 24(2)(b) requires the court to consider the term in the context of the contract as a whole. Some contractual terms that appear to be unfair when viewed in isolation, might be considered to be fair in the context of the agreement as a whole: a harsh term may be necessary to ensure that the consumer obtains the goods or services at a lower price. The lower price is the trade-off for the harsh term.

The requirement to view the impugned term in the context of the contract as a whole was also a feature of the unfair terms regime under ss 32W and 32X of the FTA 1999 (Vic). In Free v Jetstar Airways Pty Ltd,114 the applicant purchased two Jetstar “Jet Saver” return tickets from Melbourne to Honolulu in May 2007 for a total cost of $874.98. One was booked in her name and the other in the name of her sister. In March, Mrs Free’s sister told her she was unable to travel as planned and Mrs Free then wished to take her niece instead. When Mrs Free called to request a name change she was informed that Jetstar only allowed a name change if the passenger paid a “change fee” of $75 per person (each way) plus the difference between the fare applicable on the date of purchase and the current fare. Mrs Free agreed to pay the additional sum of nearly $800 (including $150 “change fee” for flights to and from Honolulu and $600 as the difference between the cost of the Jet Saver ticket purchased for her sister and the cost of the same type of ticket in March when the name change was made) and subsequently brought an action claiming the “change fee” was unfair. Senior Member Vassie held: 112 Director of Consumer Affairs Victoria v Trainstation Health Clubs Pty Ltd [2008] VCAT 2092 at [145]-[148]. 113 ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204 at [74]. See Harder, “Problems in Interpreting the Unfair Contract Terms Provisions of the Australian Consumer Law” (2011) Australian Bar Review 306 at 317. 114 Free v Jetstar Airways Pty Ltd [2007] VCAT 1405.

238

The Australian Consumer Law

[5.160]

Accordingly, in my opinion, the terms in question, to the extent that they require payment of a fare difference when a name change is requested, cause a significant imbalance, to the detriment of purchasers from Jetstar, in the rights and obligations of the parties under the contract of sale, are “unfair” within the meaning of that word in Part 2B of the Act, and so are void by virtue of section 32Y(1). On the other hand I see nothing unfair in Jetstar requiring payment of a “change fee” to compensate it for the administrative work involved in effecting a change in the booking, whether it be a change of flight date, change of flight time or change of passenger name. There was no evidence of how the “change fee” of $75.00 per flight segment was arrived at but there does not seem to be anything obviously unreasonable about the figure. By virtue of section 32Y(3) the contract will otherwise be binding if it is capable of existing without an unfair term.115

This finding was overturned on appeal.116 Cavanough J held that when the contract was looked at as a whole, the term was not unfair. The consumer had purchased two less expensive and less flexible tickets: the trade-off for the cheap fare was that the flight and passenger details could not be changed without a fee being paid. However, the mere fact that the contract contains other terms that are favourable to the acquirer of the goods or services does not preclude a finding a no refund provision is unfair.117 It • • •

is submitted that the following matters will be relevant in applying s 24(2)(b): the purpose of the term which is alleged to be unfair; the consequences of failing to enforce it; and whether the term is necessarily related to the consumer achieving some other benefit under the contract.

Grey list: examples of terms that may be unfair [5.160]

Section 25 provides non-exhaustive examples of the kinds of terms that may, depending on the particular circumstances, be unfair (the grey list). The opening words of s 25 are “without limiting s 24”. Thus, whether the terms in the grey list are unfair will need to be tested by reference to the three limbs of s 24 and the surrounding circumstances of the particular case. The purpose of the grey list is to provide statutory guidance as to the terms that may be of concern; it does not create a presumption that those terms are unfair.118 The following examples are provided: (a) a term that permits, or has the effect of permitting, one party (but not another party) to avoid or limit performance of the contract;

115 Free v Jetstar Airways Pty Ltd [2007] VCAT 1405 [36]-[41]. 116 Jetstar Airways Pty Ltd v Free [2008] VSC 539. 117 See Kucharski v Air Pacific Ltd [2011] NSWCTTT 555 (28 November 2011). The applicant was forced to cancel “Saver fare” airline tickets purchased online one day after purchase because he was unable to obtain travel insurance. The online terms, which provided that the tickets were non-refundable and non-transferable, were not prominently displayed and were not included in the printed terms and conditions. Accordingly, they were not transparent within the meaning of s 60ZE(3) of the Fair Trading Amendment (Unfair Contract Terms) Act 2010 (NSW). The term was held to be void in accordance with s 60AD, and the applicant was entitled to a full refund. 118 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [5.44].

[5.165]

5 Unfair Contract Terms

239

(b) a term that permits, or has the effect of permitting, one party (but not another party) to terminate the contract; (c) a term that penalises, or has the effect of penalising, one party (but not another party) for a breach or termination of the contract; (d) a term that permits, or has the effect of permitting, one party (but not another party) to vary the terms of the contract; (e) a term that permits, or has the effect of permitting, one party (but not another party) to renew or not renew the contract; (f) a term that permits, or has the effect of permitting, one party to vary the upfront price payable under the contract without the right of another party to terminate the contract; (g) a term that permits, or has the effect of permitting, one party unilaterally to vary the characteristics of the goods or services to be supplied, or the interest in land to be sold or granted, under the contract; (h) a term that permits, or has the effect of permitting, one party unilaterally to determine whether the contract has been breached or to interpret its meaning; (i) a term that limits, or has the effect of limiting, one party’s vicarious liability for its agents; (j) a term that permits, or has the effect of permitting, one party to assign the contract to the detriment of another party without that other party’s consent; (k) a term that limits, or has the effect of limiting, one party’s right to sue another party; (l) a term that limits, or has the effect of limiting, the evidence one party can adduce in proceedings relating to the contract; (m) a term that imposes, or has the effect of imposing, the evidential burden on one party in proceedings relating to the contract; (n) a term of a kind, or a term that has an effect of a kind, prescribed by the regulations.

What the terms have in common is that they give unilateral rights to one party and no rights to the other party in relation to matters such as varying, terminating and assigning the contract. The circumstances in which each of these examples may be unfair within the meaning of s 24 of the ACL are considered by the ACCC in its Guide to the Unfair Contract Terms Law.119

TERMS PRESCRIBED BY REGULATION [5.165]

The ACL provides that certain terms that are, in all the circumstances unfair, may be prescribed by regulation. The regulation-making power rests with the Australian Government Minister, who would prescribe terms in accordance with the national consumer law amendment process set out in the Intergovernmental Agreement.120

Section 25(2) provides: Before the Governor-General makes a regulation for the purposes of subsection (1)(n) prescribing a kind of term, or a kind of effect that a term has, the Minister must take into consideration: (a) the detriment that a term of that kind would cause to consumers; and (b) the impact on business generally of prescribing that kind of term or effect; and 119 ACCC, A Guide to the Unfair Contract Terms Law (Canberra, 2010), pp 15-22. 120 See [1.140].

240

The Australian Consumer Law

[5.170]

(c) the public interest.

EFFECT OF A TERM BEING DECLARED TO BE UNFAIR [5.170]

Only a court can determine whether a term in a standard form contract is unfair. Proceedings can be commenced in the Federal Court of Australia in relation to the ACL at a Commonwealth level after 1 July 2010. Proceedings can be commenced in Victoria and New South Wales after 1 July 2010, and in the remaining State and Territory courts under the State or Territory legislation giving effect to the ACL as a law of the enacting State of Territory after 1 January 2011. The mere fact that a term is void under s 23 is not a contravention of the ACL.121

ACL – COMMONWEALTH [5.175]

Section 131 of the CCA provides that the ACL only applies to the conduct of corporations, or in relation to contraventions of Chs 2, 3 and 4 by corporations.

The ACL will apply to the conduct of a corporation, a supplier of goods or services, or granting an interest in land, where the conduct constitutes applying or relying on, or purporting to apply or rely on, a term of a consumer contract that has been declared under s 250 of the ACL to be an unfair term. This follows from a consideration of s 15(a) of the ACL which provides that “conduct” consisting merely of the voiding of an unfair term under s 23(1) will not constitute a contravention of the ACL. The effect of this provision, in relation to unfair terms is that the inclusion of an unfair term in a standard form consumer contract, is not a contravention of the ACL. Furthermore, the declaration of a term to be unfair pursuant to s 250 is not a contravention of the ACL. There is no “conduct” and no “contravention” for the purposes of bringing an action for damages under s 236 of the ACL. It is only if a person applies or relies on an unfair term after it is declared to be unfair under s 250, that the injured person may seek a compensation order under s 237(1)(a)(ii) which provides: (1) A court may: (a) on application of a person (the injured person) who has suffered, or is likely to suffer, loss or damage because of the conduct of another person that: … (ii) constitutes applying or relying on, or purporting to apply or rely on, a term of a consumer contract that has been declared under section 250 to be an unfair term (b) on the application of the regulator made on behalf of one or more such injured persons; make such order or orders as the court thinks appropriate against the person who engaged in the conduct, or a person involved in the conduct.

In terms of the overlap between the ACL and the ACL (Application Acts), an unfair term can be challenged under the ACL if it has been inserted by a corporation, as supplier, into a standard for contract with an individual, or an individual, as supplier, if s 6(3) of the CCA applies, and the contract was for, or relates to, postal, telegraphic or telephonic services, or radio or television broadcasts. 121 ACL, s 15.

[5.185]

5 Unfair Contract Terms

241

ACL – STATES AND TERRITORIES [5.180]

An unfair term can be challenged under the ACL of the States and Territories where it has been inserted by a person (body corporate or individual) into a standard form contract with an individual. The Fair Trading Amendment (Unfair Contract Terms) Act 2010 (Vic) was passed by the Parliament of Victoria on 27 May 2010. It aligned the provisions of the with the Commonwealth unfair terms provisions. It came into operation as a law of the State of Victoria on 1 July 2010. The Fair Trading Amendment (Unfair Contract Terms) Act 2010 (Vic) contains transitional provisions similar to those in the ACL relating to contracts containing unfair terms. The Fair Trading Amendment (Unfair Contract Terms) Act 2010 (NSW) was passed by the Parliament of New South Wales on 23 June 2010. It inserted into the Fair Trading Act 1987 (NSW) a new Pt 5G which aligned its provisions with the Commonwealth unfair terms provisions. It came into operation as a law of the State of New South Wales on 1 July 2010. From 1 January 2011, the regulator for each State or Territory will be able to apply to the relevant court or tribunal for a declaration that a term in a consumer contract is unfair, for an injunction against the relevant trader that incorporates the term in a consumer contract and for a compensation order for any loss or damage suffered.

PUBLIC ENFORCEMENT [5.185]

Section 250(1) of the ACL provides that a regulator may apply to the court to declare that a term of a standard form contract is an unfair term. At the Commonwealth level proceedings may be brought in the Federal Court by the ACCC seeking:

• a declaration that a term is unfair;122 • an injunction;123 • a compensation claim on behalf of a party suffering loss;124 and • an order to redress loss or damage to a non-party consumer.125 A term in a contract that is declared to be unfair is void. As regards the severance of unfair terms see [14.30]. No penalties apply at the time a term is declared to be unfair. The types of orders that can be made under ss 237 and 239 are set out in s 243 of the ACL. The regulators in the States and Territories can apply to the appropriate State and Territory tribunals and courts for the same remedial orders. If a term of a consumer contract is declared to be unfair and the supplier subsequently relies upon or applies a term declared to be unfair, and the declared term causes a class of persons who are not parties to the consumer contract to suffer 122 ACL, s 250. 123 ACL, s 232. 124 ACL, s 237. 125 ACL, s 239.

242

The Australian Consumer Law

[5.190]

loss or damage, the regulator may apply for such order or orders (other than an award of damages) as the court thinks appropriate.126 Conduct constituted by applying or relying on, or purporting to apply or rely on, a term of a consumer contract that has been declared under s 250 to be an unfair term does not give rise to criminal liability.

PRIVATE REMEDIES [5.190]

The following remedial options are available to a private litigant:

• a declaration that the term is unfair;127 • an injunction preventing the use of the term;128 and • a compensation order for any loss suffered.129 Damages under s 236 of the ACL are not available for the reasons considered in relation to compensation orders at [14.225]. There may, however, be other conduct, such as misleading conduct in relation to the insertion or exercise of the unfair term that gives rise to an action for damages under s 236 of the ACL. It is only if a person applies or relies on an unfair term after it is declared to be unfair under s 250 of the ACL, that the injured person may seek a compensation order under s 237(1)(a)(ii) of the ACL. A consumer may be able to obtain a refund if there has been a total failure of consideration. There will be no total failure if a consumer has received a substantial part of the benefit expected under the contract.130 The time limit for applying for a compensation order under s 237 is within six years of the declaration.131

UNFAIR TERMS UNDER THE ASIC ACT [5.195]

The principal operative provisions are s 12BF(1) and (2) of the ASIC Act which provide: (1) A term of a consumer contract or small business contract is void if: (a) the term is unfair; and (b) the contract is a standard form contract; and (c) the contract is: (i) a financial product; or (ii) a contract for the supply, or possible supply, of services that are financial services.

126 ACL, s 239(1). 127 ACL, s 250. 128 ACL, s 232. 129 ACL, s 237. 130 Baltic Shipping Company v Dillon (1993) 176 CLR 344 at 350 (Mason CJ) applied in Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 at [112] (Judge Jarrett). 131 ACL, s 237(3).

[5.215]

5 Unfair Contract Terms

243

(2) The contract continues to bind the parties if it is capable of operating without the unfair term.

Consumer contracts covered [5.200]

Section 12BF(3) of the ASIC Act provides that a “consumer contract” is a contract where at least one of the parties is an individual whose acquisition of what is supplied is wholly or predominantly an acquisition for personal, domestic or household use or consumption. Some examples include contracts for banking services, loans or credit card contracts. The terms “financial product” and “financial services” are considered at [3.265][3.280]. Section 12BAA(7)(k) expressly provides that a credit facility (within the meaning of the regulations) is a financial product. The law commenced on 1 July 2010. Thus, it will apply to: • new contracts made on or after 1 July 2010; • contracts made before 1 July 2010 that are renewed; • the terms of contracts made before 1 July 2010, that are varied after 1 July 2010.

Small business contracts covered [5.205]

A “small business contract” is defined in s 12BF of the ASIC Act:

(4) A contract is a small business contract if: (a) at the time the contract is entered into, at least one party to the contract is a business that employs fewer than 20 persons; and (b) either of the following applies: (i) the upfront price payable under the contract does not exceed $300,000; (ii) the contract has a duration of more than 12 months and the upfront price payable under the contract does not exceed $1,000,000. (5) In counting the persons employed by a business for the purposes of paragraph (4)(a), a casual employee is not to be counted unless he or she is employed by the business on a regular and systematic basis. (6) For the purposes of subsection (4) and despite subsection 12BI(3), in working out the upfront price payable under a contract under which credit is or is to be provided, disregard any interest payable under the contract.

Contracts excluded [5.210]

Section 12BL of the ASIC Act provides that the unfair terms provisions do not apply to a consumer contract that is the constitution of a company, managed investment scheme or other kind of body. The unfair contract terms provisions do not cover insurance contracts regulated under the Insurance Contracts Act 1984 (Cth).

Terms excluded [5.215]

The provisions do not apply to all of the terms of the contracts covered. Section 12BI of the ASIC Act provides that s 12BF does not apply to: • terms that define the main subject matter of the contract; or

244

The Australian Consumer Law

[5.220]

• set the upfront price payable under the contract; or • are required or expressly permitted by a law of the Commonwealth, State or Territory. Section 12BI(2) of the ASIC Act provides that the “upfront price” is the consideration that is provided for the supply under the contract, and is disclosed at or before the time the contract was entered into, and does not include any other consideration that is contingent on the occurrence or non-occurrence of a particular event, such as default on a loan.132 ASIC provides the following example: the up-front price of a mortgage includes the amount borrowed and the interest payable and any fees disclosed at the time the contract is entered into, but does not include contingent fees, such as default fees. As a result, principal and interest cannot be challenged under the unfair contract terms provisions.133

Section 12BI(3) of the ASIC Act provides that the consideration for the provision of credit includes the total amount of principal owed under the contract which is included in the “upfront price”. The interest payable and fees charged will also be included in the “upfront price” if they are disclosed at the time of entry into the contract. Thus, lenders will have an incentive to disclose interest and fees to borrowers prior to entry into the contract since it means that they cannot be challenged as unfair contract terms provisions. However, contingent fees payable in the event of default will be able to be challenged.

MEANING OF UNFAIR TERM [5.220]

The same four part test of “unfair” considered at [5.105]-[5.155] in relation to the ACL applies in relation to the ASIC Act. The first part of the test requires the court to consider the term at issue itself.134 The second part of the test requires the court to consider contextual matters including the formation of the contract containing the term.135 The third part of the test requires the court to consider whether the term was transparent.136 The fourth part of the test requires the court to consider the term at issue in the context of the contract as a whole.137 In determining whether each of the elements of unfairness is satisfied the court may obtain guidance from the indicative “grey” list in s 12BH(1) of the ASIC Act. Section 12BG(1) of the provides that a term will be unfair if: (a) it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and (b) it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and 132 See the discussion at [5.30]. 133 See ASIC, Australian Consumer Law – Unfair terms, available at http://www.asic.gov.au/asic/ asic.nsf/byheadline/Unfair-contract-terms-law?openDocument. 134 ASIC Act, s 12BG(1). 135 ASIC Act, s 12BG(2). 136 ACL, s 12BG(2)(a). 137 ACL, s 12BG(2)(b).

[5.225]

5 Unfair Contract Terms

245

(c) it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

Thus, for example, in relation to the provision of a credit facility, lenders have a legitimate interest in seeking to recover their reasonable costs of borrowing and having the loan re-paid; however, they are not entitled to push all the risks on to the borrower. Section 12BG(2) provides in determining whether a consumer contract is unfair under s 12BG(1) a court may consider any relevant matter, but a court must consider: (a) (b) the extent to which the term is transparent; (b) (c) the contract as a whole.

Section 12BG(3) provides: A term is transparent if the term is: (a) expressed in reasonably plain language; and (b) legible; and (c) presented clearly; and (d) readily available to any party affected by the term.

First part: the term itself [5.225]

The first part of the definition of “unfair” in s 12BG contains three

elements. The first element is that the term would cause a “significant imbalance” in the parties’ contractual rights and obligations. The claimant is required to prove the existence of such an imbalance on the balance of probabilities. In ACCC v CLA Trading Pty Ltd,138 Gilmour J stated that in order to determine whether there is a “significant imbalance” it was “... useful to access the impact of an impuned term on the parties’ rights and obligations by comparing the effect of the contract involving that term and the effect it would have without it”. The second element is that the term is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term. Section 12BG(4) of the ASIC Act contains a reversal of the onus of proof. It provides that a term of a consumer contract is presumed not to be reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term. For example, in relation to the provision of a credit facility the onus is on the lender to prove that the use of the term is reasonably necessary to protect its legitimate interests on the balance of probabilities. The third element requires the claimant to prove that detriment would be caused if the term were to be applied or relied upon. It is not necessary to prove that actual damage has been caused. Detriment is not limited to financial detriment. Other forms of detriment include delay or distress suffered by the consumer if the term is relied upon. 138 ACCC v CLA Trading Pty Ltd [2016] FCA 377 at [66].

246

The Australian Consumer Law

[5.230]

Second part: contextual considerations [5.230]

While s 12BG(1) appears to require that the assessment as to whether a particular term is unfair is to be made without consideration of the surrounding circumstances, s 12BG(2) provides that in determining whether a term of a consumer contract is unfair under s 12BG(1), a court may take into account “such matters that it thinks relevant”. This allows a court to consider the context in which the term was exercised, and may convert a term that is unobjectionable on its face into an unfair term.

Third part: transparency [5.235]

The third part of the test of unfairness contained in s 12BG(2)(b) requires the court to consider the extent to which the term is transparent. Section 12BG(3) provides: A term is transparent if the term is: (a) (b) (c) (d)

expressed in reasonably plain language; and legible; and presented clearly; and readily available to any party affected by the term.

Fourth part: contract as a whole [5.240]

The fourth part of the test of unfairness contained in s 12BG(2)(c) requires the court to consider the term in the context of the contract as a whole. Some contractual terms that appear to be unfair when viewed in isolation, might be considered to be fair in the context of the agreement as a whole: a harsh term may be necessary to ensure that the consumer obtains the goods or services at a lower price. The lower price is the trade-off for the harsh term.

Grey list: examples of terms that may be unfair [5.245]

Section 12BH(1) of the provides a non-exhaustive examples of the kinds of terms that may, depending on the circumstances, be unfair: (a) a term that permits, or has the effect of permitting, one party (but not another party) to avoid or limit performance of the contract; (b) a term that permits, or has the effect of permitting, one party (but not another party) to terminate the contract; (c) a term that penalises, or has the effect of penalising, one party (but not another party) for a breach or termination of the contract; (d) a term that permits, or has the effect of permitting, one party (but not another party) to vary the terms of the contract; (e) a term that permits, or has the effect of permitting, one party (but not another party) to renew or not renew the contract; (f) a term that permits, or has the effect of permitting, one party to vary the upfront price payable under the contract without the right of another party to terminate the contract; (g) a term that permits, or has the effect of permitting, one party unilaterally to vary financial services to be supplied under the contract; (h) a term that permits, or has the effect of permitting, one party unilaterally to determine whether the contract has been breached or to interpret its meaning;

[5.245]

5 Unfair Contract Terms

247

(i) a term that limits, or has the effect of limiting, one party’s vicarious liability for its agents; (j) a term that permits, or has the effect of permitting, one party to assign the contract to the detriment of another party without that other party’s consent; (k) a term that limits, or has the effect of limiting, one party’s right to sue another party; (l) a term that limits, or has the effect of limiting, the evidence one party can adduce in proceedings relating to the contract; (m) a term that imposes, or has the effect of imposing, the evidential burden on one party in proceedings relating to the contract; (n) a term of a kind, or a term that has an effect of a kind, prescribed by the regulations.

The ASIC Act provides for the prescription of certain terms by regulation that are, in all the circumstances unfair. Section 12BH(2) provides: Before the Governor General makes a regulation for the purposes of paragraph (1)(n) prescribing a kind of term, or a kind of effect that a term has, the Minister must take into consideration: (a) the detriment that a term of that kind would cause to consumers; and (b) the impact on business generally of prescribing that kind of term or effect; and (c) the public interest.

Section 12BF provides that an unfair term is void, but the contract continues to bind the parties if it is capable of operating without the unfair term.

6

Specific False or Misleading Representations [6.05] INTRODUCTION ................................................................................................................ 251 [6.10] FALSE OR MISLEADING REPRESENTATIONS ........................................................... 252

[6.10] [6.15] [6.20] [6.25] [6.30] [6.35] [6.40]

Civil liability ........................................................................................................ Making a representation .................................................................................... False ....................................................................................................................... Misleading ............................................................................................................ In connection with .............................................................................................. Particular .............................................................................................................. In trade or commerce .........................................................................................

252 253 254 255 256 257 258

[6.45] STANDARD, QUALITY, VALUE, GRADE, COMPOSITION – GOODS .................. 258

[6.50] Premium claims ................................................................................................... 260 [6.55] STANDARD, QUALITY, VALUE OR GRADE – SERVICES ....................................... 262 [6.60] REPRESENTING THAT GOODS ARE NEW ................................................................. 263 [6.65] REPRESENTING THAT A PARTICULAR PERSON HAS AGREED TO ACQUIRE GOODS OR SERVICES ....................................................................................................... 264 [6.70] TESTIMONIALS – GOODS OR SERVICES .................................................................... 264

[6.75] Expert testimonials ............................................................................................. 265 [6.80] Consumer testimonials ...................................................................................... 265 [6.85] Celebrity testimonials ......................................................................................... 266 [6.90] SPONSORSHIP, APPROVAL, PERFORMANCE CHARACTERISTICS – GOODS AND SERVICES ................................................................................................................... 267

[6.95] Performance characteristics: environmental claims ...................................... 268 [6.100] Performance characteristics: health benefits ................................................ 269 [6.105] Performance characteristics: product safety ................................................. 270 [6.110] Performance characteristics: consumer privacy and data security .......... 272 [6.115] SPONSORSHIP, APPROVAL, OR AFFILIATION – PERSONS ................................. 272 [6.125] PRICE – GOODS OR SERVICES .................................................................................... 275

[6.130] Use of the word “free” in relation to price .................................................. 276 [6.140] Advertised price not the total price: “drip pricing” .................................. 278 [6.145] Discount or rebate ............................................................................................ 280 [6.150] Comparative price advertising ....................................................................... 280 [6.155] Reference pricing or two-price advertising .................................................. 281

250

The Australian Consumer Law

[6.160] REPAIRS AND SPARE PARTS – GOODS ..................................................................... 283 [6.165] PLACE OF ORIGIN .......................................................................................................... 284

[6.165] Goods .................................................................................................................. 284 [6.170] Food labelling .................................................................................................... 286 [6.175] NEED – GOODS OR SERVICES ..................................................................................... 287 [6.180] EXISTENCE, EXCLUSION OR EFFECT OF ANY CONDITION, WARRANTY, GUARANTEE, RIGHT OR REMEDY ............................................................................ 288

[6.185] Misrepresenting the existence of rights or benefits .................................... 290 [6.190] REQUIREMENT TO PAY FOR A CONTRACTUAL RIGHT: EXTENDED WARRANTIES ................................................................................................................... 291

[6.195] What is an extended warranty? ..................................................................... 292 [6.200] Concerns raised by extended warranties ..................................................... 292 [6.205] Extended warranties: guarantee of acceptable quality .............................. 292 [6.210] Information at the point-of-sale ..................................................................... 294 [6.215] Criminal liability ............................................................................................... 296 [6.220] ASIC ACT: FALSE OR MISLEADING REPRESENTATIONS ................................... 297

[6.230] Extended warranties: financial services ........................................................ 299 [6.235] Extended warranties: incidental products .................................................... 299 [6.240] Extended warranties: insurance products .................................................... 300 [6.245] Extended warranties: contravention .............................................................. 300 [6.250] FALSE OR MISLEADING REPRESENTATIONS – SALE OF LAND ...................... 301

[6.250] Civil liability ...................................................................................................... 301 [6.255] Criminal liability ............................................................................................... 302 [6.260] ASIC ACT: FALSE OR MISLEADING REPRESENTATIONS – SALE OF LAND . 303 [6.265] MISLEADING CONDUCT – PERSONS SEEKING EMPLOYMENT ...................... 304

[6.265] Civil liability ...................................................................................................... 304 [6.270] Criminal liability ............................................................................................... 306 [6.275] MISLEADING CONDUCT CONCERNING THE NATURE OF GOODS AND SERVICES ............................................................................................................................ 307

[6.275] Civil liability ...................................................................................................... 307 [6.280] Criminal liability ............................................................................................... 309 [6.285] ASIC ACT: MISLEADING CONDUCT CONCERNING THE NATURE OF FINANCIAL SERVICES ................................................................................................... 309 [6.290] MISLEADING REPRESENTATIONS ABOUT CERTAIN BUSINESS ACTIVITIES . 309

[6.290] Civil liability ...................................................................................................... 309 [6.295] Criminal liability ............................................................................................... 312 [6.300] EXEMPTION FOR INFORMATION PROVIDERS ...................................................... 312

[6.305] ASIC Act ............................................................................................................. 313

[6.05]

6 Specific False or Misleading Representations

251

INTRODUCTION [6.05] The ACL provides two levels of protection. The general protections against misleading conduct, unconscionable conduct and the imposition of unfair terms in standard form consumer contracts are intended to create general standards or norms of conduct that must be complied with in trade or commerce. These general standards are strengthened by more specific protections directed at particular conduct that is likely to give rise to consumer detriment. Section 18 of the ACL is a general provision dealing with misleading conduct and only gives rise to civil liability. Part 3-1 of the ACL prohibits various kinds of specific false or misleading conduct and unfair business practices, all of which give rise to criminal as well as civil liability. In relation to civil liability, proceedings under one or more of the remedy provisions in Pt VI of the CCA are brought by a private litigant and the civil standard of proof applies. In relation to criminal liability, Div 2 of Pt VC was inserted into the TPA. It established a separate consumer protection regime which replicated the provisions in Pt V, Div 1 of the TPA but gave effect to the Criminal Code Act 1995 (Cth). Thus, there were separate civil and criminal regimes contained in Pt V and Pt VC of the TPA respectively. In accordance with the requirements of the Criminal Code, Pt VC sought to maintain the statutory and judicial interpretation of Pt V Div 1, but redrafted the provisions to clearly identify any fault elements applicable to each offence, and prescribed a maximum penalty for contravention of each offence. Proceedings under s 79 of the Act were brought on behalf of the ACCC by an informant and the criminal standard of proof applied. This dichotomy has been retained under the ACL with civil liability the subject of Ch 3 of the ACL and criminal liability the subject of Ch 4 of the ACL. However, under the ACL, the ACCC and the State and Territory regulators (the ACL regulators) now have the power to bring civil proceedings for the imposition of civil pecuniary penalties and have a number of new administrative powers.1 This chapter considers the civil and criminal liability arising from specific false or misleading representations. This liability is not limited to dealings with consumers but applies also to dealings with other businesses. Table 6.1 Civil and criminal provision relating to false, misleading and unfair trading practices Provision

False or misleading representations about goods or services False or misleading representations about sale etc of land False or misleading conduct relating to employment Misleading conduct as to the nature etc of goods Misleading conduct as to the nature etc of services

1 These enforcement powers are the subject of Chapter 13.

Civil liability (Ch 3) 29 30 31 33 34

Criminal liability (Ch 4) 151 152 153 155 156

252

The Australian Consumer Law

Provision

False or misleading representations about certain businesses Offering rebates, gifts, prizes etc Bait advertising Wrongly accepting payment Unsolicited cards etc Assertion of right to payment for unsolicited goods or services Assertion of right to payment for unauthorised entries or advertisements Participation in pyramid schemes Multiple pricing Single price to be specified in certain circumstances Referral selling Harassment and coercion

[6.10]

Civil liability (Ch 3) 37 32 35 36 39 40

Criminal liability (Ch 4) 159 154 157 158 161 162

43

163

44 47 48 49 50

164 165 166 167 168

FALSE OR MISLEADING REPRESENTATIONS Civil liability [6.10] Section 18(1) of the ACL is a general prohibition directed at “conduct”. As explained at [3.20], while in the majority of cases the “conduct” at issue will give rise to a representation of some kind, it has been recognised that the word “conduct” extends beyond representations. Section 29(1), on the other hand, is specifically confined to the making of false or misleading representations.2 Section 29(1) provides: A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services: (a) make a false or misleading representation that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use; or (b) make a false or misleading representation that services are of a particular standard, quality, value or grade; or (c) make a false or misleading representation that goods are new; or (d) make a false or misleading representation that a particular person has agreed to acquire goods or services; or (e) make a false or misleading representation that purports to be a testimonial by any person relating to goods or services; or (f) make a false or misleading representation concerning: (i) a testimonial by any person; or (ii) a representation that purports to be such a testimonial; relating to goods or services; or 2 See R V Miller, Australian Competition and Consumer Law Annotated (37th ed, Lawbook Co, Sydney, 2015), at [1.S2.29.10]-[1.S2.29.135].

[6.15]

6 Specific False or Misleading Representations

253

(g) make a false or misleading representation that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits; or (h) make a false or misleading representation that the person making the representation has a sponsorship, approval or affiliation; or (i) make a false or misleading representation with respect to the price of goods or services; or (j) make a false or misleading representation concerning the availability of facilities for the repair of goods or of spare parts for goods; or (k) make a false or misleading representation concerning the place of origin of goods; or (l) make a false or misleading representation concerning the need for any goods or services; or (m) make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (including a guarantee under Division 1 of Part 3-2); or (n) make a false or misleading representation concerning a requirement to pay for a contractual right that: (i) is wholly or partly equivalent to any condition, warranty, guarantee, right or remedy (including a guarantee under Division 1 of Part 3-2); and (ii) a person has under a law of the Commonwealth, a State or a Territory (other than an unwritten law).

This prohibition does not substantively change compared to s 53 of the TPA and the State and Territory equivalents in their Fair Trading Acts (FTA); however, it is expanded to: • prohibit both false or misleading representations;3 • include additional prohibitions in s 29(1)(e) and (f) relating to representations that are testimonials and representations about testimonials;4 and • include an additional prohibition in s 29(1)(e) relating to representations concerning a requirement to pay for a contractual right that is wholly or partly equivalent to any condition, warranty, right, or remedy including a guarantee under Div 1 of Pt 3-2.

Making a representation [6.15] As for s 18 of the ACL, a representation can be made to identified individuals, or to members of a class or section of the public.5 It may be made expressly, such as a statement contained in an advertisement, or impliedly, for example, by putting goods on display. In Given v C V Holland (Holdings) Pty Ltd,6 there was a representation as to quality even though there was no verbal representation. Placing the car on display was sufficient to establish the requisite representation. 3 In relation to s 29(1)(a) – (h), s 53 of the TPA only prohibited false representations. 4 These are based on s 14 of the FTA 1999 prior to its amendment by the ACLFTA 2010 (Vic). 5 See [3.75]–[3.90]. 6 Given v C V Holland (Holdings) Pty Ltd (1977) 29 FLR 212 at 216; Eva v Southern Motors Box Hill Pty Ltd (1977) ATPR ¶40-029 at 17,385-17,386 (Franki J).

254

The Australian Consumer Law

[6.20]

Also, in common with s 18 of the ACL, innocently passing on of information supplied by another will not be regarded as making a representation, so long as it is not adopted or endorsed.7 In Gardam v George Wills & Co Ltd (No 1),8 French J stated: The innocent carriage of a false representation from one person to another in circumstances where the carrier is and is seen to be a mere conduit, does not involve him in making that representation. Nobody would expect that the postman who bears a misleading message in a postal article has any concern about its content or is any sense adopting it. The same is true of the messenger boy or the courier service. When, however, a representation is conveyed in circumstances in which the carrier would be regarded by the relevant section of the public as adopting it, then he makes that representation.9

In common with s 18 of the ACL, promises, predictions and opinions may amount to representations.10 In some circumstances, silence can give rise to an implied representation that there was nothing material that needed to be disclosed to the representee.11

False [6.20] Section 53 of the TPA proscribed specific representations in relation to goods and services, some for being false,12 some for being false or misleading,13 and others being about qualities the goods or services did not have. Section 29 of the ACL has been drafted to remove this distinction and applies to false or misleading representations.14 However, in relation to supply of goods and services, s 29(1) imposes liability for false representations on the supplier who is in the best position to know the characteristics of those goods and services. There is no disclosure obligation placed on the supplier but if the supplier discloses information in relation to a particular transaction for the supply of goods or services it must be accurate. The term “false” in relation to s 53 of the TPA was construed to mean “contrary to fact”, and did not depend on the knowledge of the person making the representation. In Given v Holland (Holdings) Pty Ltd, the representation consisted of an odometer reading of a motor vehicle displayed for sale in the defendant’s second-hand car yard. The odometer showed a mileage of 23,700 when, in fact, the vehicle had travelled approximately 69,012 miles. Franki J held in relation to TPAs 53(a): I am satisfied that, if a representation is in fact not correct, it comes within the words of the section, even if it is not false to the knowledge of the person making the 7 See [3.40]–[3.50]. 8 Gardam v George Wills & Co Ltd (No 1) (1988) ATPR ¶40-884. 9 Gardam v George Wills & Co Ltd (No 1) (1988) ATPR ¶40-884 at 49,581. 10 See [3.135]–[3.150]. 11 See [3.100]–[3.125]. 12 TPA, s 53(b). 13 TPA, s 53(ea). 14 Second Explanatory Memorandum, at [6.13].

[6.25]

6 Specific False or Misleading Representations

255

representation, and even if the person making the representation is a servant of the company of insufficient significance in the company for his knowledge, according to the ordinary principles of the Common Law, to be deemed to be the knowledge of the company.15

His Honour concluded that the display of the incorrect odometer reading constituted a false representation that the vehicle was of a particular quality.16

Misleading [6.25] The test for determining whether representations in relation to goods or services are “misleading” for the purposes of s 29(1)ACL is the same as that adopted for determining whether conduct is misleading for the purposes of s 18(1) of the ACL.17 Whether a representation directed at identified persons is misleading will be dictated by the circumstances of each particular case, including the state of knowledge of the person to whom the representation is directed. The test is: would a reasonable person in the position of the representee, taking into account what they knew, have been misled by the representation.18 Where a representation is directed at a segment of the public, the relevant test for determining whether the representation is misleading is whether “ordinary” or “reasonable” persons of the segment of the public to whom the conduct is directed are likely to be misled or deceived.19 When deciding whether an advertisement is misleading for the purposes of s 29(1) the first step should always be to isolate some criterion or criteria of a representative member of the target audience to whom it is directed. This will involve considering such matters as their age, geographical location, sophistication, unusual predilections (if any) and familiarity with the subject. Generally speaking, higher standards of accuracy are expected in connection with advertisements directed towards unsophisticated or impressionable audiences. As a result, an advertisement which may be misleading when directed towards one audience may not be so were it directed towards another. Whether an advertisement is misleading is determined by reference to its effect on “reasonable” members of the audience, rather than on those whose assumptions or reactions are “extreme or fanciful”. As a result, it will not contravene s 29(1) if a 15 Given v C V Holland (Holdings) Pty Ltd (1977) ATPR ¶40-029 at 17,386. Franki J placed reliance on the High Court’s interpretation of “false” as meaning “contrary to fact” in s 234(d) of the Customs Act 1901 (Cth) in Sternberg v The Queen (1953) 8 CLR 646 and Davidson v Watson (1953) 28 ALJ 63 at 64. 16 Given v C V Holland (Holdings) Pty Ltd (1977) ATPR ¶40-029 at 17,387. 17 See the discussion at [3.60]–[3.165]. 18 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [50]. See [3.75]. 19 Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 85 [103] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ); Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106 at [37] (Wilcox, Bennett and Graham JJ); ACCC v Telstra Corporation Ltd (2007) ATPR ¶42-203 at [14]-[15] (Gordon J); and Energizer Australia Pty Ltd v Remingtom Products Australia Pty Ltd (2008) ATPR ¶42-219 at [16] (Moore J).

256

The Australian Consumer Law

[6.30]

reasonable member of the audience would not be misled, even though it did mislead a person whose reactions are extreme. As with s 18 of the ACL, for contraventions of s 29(1) there is no requirement for intent or a “guilty mind”.20 However, “intention” has a role to play in the drawing of inferences as regards the effect, or likely effect, of the conduct on a reasonable member of the target audience. The High Court has held where there is a finding of intention to deceive, the court may more readily infer that the intention has been or in all probability will be, effective.21 Section 18(1) also overlaps with the following provisions of the ACL: • s 30 – false or misleading representations about the sale of land or grant of an interest in land; • s 31 – misleading conduct in relation to persons seeking employment as to matters relating to employment; • s 33 – misleading conduct in relation to the nature of goods; • s 34 – misleading conduct in relation to the nature of services; and • s 37 – misleading representations about certain business activities.

In connection with [6.30] Conduct relating to s 29 of the ACL must occur “in connection with” the supply of goods or services or the promotion of the supply of goods or services. There is no indication as to how close the connection needs to be. In Monroe Topple v The Institute of Chartered Accountants in Australia,22 Lindgren J, observed in relation to the same expression which was used in the former TPA, s 51AC of the while potentially broad, “bear[s] a meaning dictated by legislative context, purpose or object”.23 His Honour concluded that the expression “in connection with” in s 51AC required that the conduct “accompany”, “go with” or “be involved in” the supply of goods or services.24 The purpose and policy underlying s 29 would suggest a broad construction so that any connection; however, it seems that there must be a direct link, rather than an indirect link, to satisfy this requirement. 20 See Given v Holland (Holdings) Pty Ltd (1977) ATPR ¶40-029 at 17,386 (Franki J); Darwin Bakery Pty Ltd v Sully (1981) ATPR ¶40-230 at 43,102 (Full Court); Gardam v George Wills & Co Ltd (No 1) (1988) ATPR ¶40-884 at 49,580 (French J). 21 Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at [33] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ); and ACCC v TPG Internet Pty Ltd (2013) 304 ALR 189 at 198 [55] (French CJ, Crennan, Bell and Keane JJ) (citations omitted). See the discussion at [3.70]. 22 Monroe Topple v The Institute of Chartered Accountants in Australia (2001) ATPR (Digest) ¶46-212. 23 Monroe Topple v The Institute of Chartered Accountants in Australia (2001) ATPR (Digest) ¶46-212 at [252] referring to Hatfield v Health Insurance Commission (1987) 15 FCR 487 at 491 (Davies J); Our Town FM Pty Ltd v Australian Broadcasting Tribunal (1987) 16 FCR 465 at 479-80 (Wilcox J); Burswood Management Ltd v Attorney-General (Cth) (1990) 23 FCR 144 at 146 (Lockhart, Wilcox and Hill JJ); Claremont Petroleum NL v Cummings (1992) 110 ALR 239 at 280 (Wilcox J); Minister for Immigration & Multicultural Affairs v Mohammad (2000) 101 FCR 434 at 443-4 (Burchett J). 24 Monroe Topple v The Institute of Chartered Accountants in Australia (2001) ATPR (Digest) ¶46-212 at [260].

[6.35]

6 Specific False or Misleading Representations

257

In Charben Haulage Pty Ltd v Environmental & Earth Sciences Pty Ltd,25 the respondent environmental consultants were engaged by Caltex to estimate the contamination of two plots of land on which a petrol station had been operated. The plots were being prepared for sale by Caltex. The consultants’ reports contained a number of deficiencies. The reports were communicated to prospective purchasers, including the applicant. The applicant brought an action against the consultants for a breach of s 53A(1) of the TPA for misleading representations in the report. Wilcox J held that even though the consultants knew that the allotments were being prepared for sale by its client, the consultants were not themselves “involved in” the sale, and accordingly, the report was not made “in connection with the sale or grant of land”.26

Particular [6.35] The term “particular” is used in ACL, s 29(1)(a) and (b) which are concerned with false or misleading representations that goods or services are of a “particular” standard, quality, value etc. This has been given its ordinary meaning of “indicated” or “certain” rather than some precise or generally recognised standard. In Gardam v George Wills & Co Ltd (No 1),27 the defendant was charged with contravening s 53(a)TPA for falsely representing that children’s nightdresses were of a particular standard, namely that they were “Styled to Reduce Fire Danger”. Children’s nightdresses must comply with the Consumer Product Safety Standard for Children’s Nightclothes. Nightdresses that are labelled “Styled to Reduce Fire Danger” must be of a form-fitting style. The defendant’s nightdresses were flowing garments and did not comply with the design necessary to support the label. The issue in this case was the meaning of “particular” in the expression “particular standard” in s 53(a)TPA. There were two possible interpretations. Under a narrow interpretation it could refer to some precise or generally recognised standard, such as a Consumer Product Safety Standard prescribed under s 65C of the TPA, or Standards Australia. Under a broad interpretation, the word “particular” should be given its ordinary meaning, namely “indicated” or “certain”, rather than a precise or generally recognised standard. The court held that the word “particular” should be given its ordinary meaning; namely, some criterion by which fire danger can be assessed and that garments in question meet that criterion. French J concluded: Having regard to the long-established and central importance of close fitting design as a criterion of reduced fire danger it is not possible, in my opinion, to describe this garment as “Styled to Reduce Fire Danger”. I am satisfied that the representation conveyed by the labels attached to the five subject garments was false.28 25 Charben Haulage Pty Ltd v Environmental & Earth Sciences Pty Ltd (2004) ATPR (Digest) ¶46-252 (Wilcox J). 26 Charben Haulage Pty Ltd v Environmental & Earth Sciences Pty Ltd (2004) ATPR (Digest) ¶46-252 at [190]. 27 Gardam v George Wills & Co Ltd (No 1) (1988) ATPR ¶40-884 at 49,577- 480 (French J). 28 Gardam v George Wills & Co Ltd (No 1) (1988) ATPR ¶40-884 at 49,577-49,580.

258

The Australian Consumer Law

[6.40]

In trade or commerce [6.40] Conduct relating to ss 29, 30, 33, 34 and 37 of the ACL must occur “in trade or commerce”. “Trade or commerce” is defined in s 2 of the ACL and considered at [2.75]–[2.105]. Conduct relating to s 31ACL is not required to occur “in trade or commerce”. STANDARD, QUALITY, VALUE, GRADE, COMPOSITION – GOODS [6.45] Section 29(1)(a) prohibits false or misleading representations that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous. The equivalent provision of the was s 53(a) and the jurisprudence in relation to the former TPA, s 53(a) will apply in relation to s 29(1)(a).29 The Second Explanatory Memorandum states: A representation that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use could cover, for example and without limitation: • representations about the nature of the goods, which could include: – the way in which the goods were manufactured, including specific methods or processes; or – the materials from which the goods were manufactured; or – the correspondence of the actual goods, their contents or the way in which those goods were made with a description of those goods, their contents or the way in which they were made; • representations about the standard, quality or grade of the goods, which could include: – the suitability of the goods for the uses to which they might reasonably be put; or – the purity, strength, cleanliness, fineness (or otherwise) of the goods, or any other standard, quality or grade by which the goods may be assessed or compared; • representations about the value of the goods, which could include: – the price of the goods; or – the cost of the contents of the goods; or – the cost of the process by which the goods were manufactured or distributed; or – the market value of the goods; • representations about the style of the goods, which could include: – the design or the designer of the goods; or – the accuracy of a reproduction of other goods; • representations about the model of the goods, which could include whether the goods match the characteristics of a particular make or model of the goods; 29 See ACCC v Audi Australia Pty Ltd (2007) ATPR ¶42-211 (Gordon J); ACCC v Cadbury Schweppes Pty Ltd (2004) ATPR ¶42-001 (Ryan J); ACCC v Nissan Motor Co (Aust) Pty Ltd (1998) ATPR ¶41-660 (von Doussa J); TPC v Vales Wines Co Pty Ltd (1996) ATPR ¶41-480 (O’Loughlin J); TPC v Golden Australia Paper Manufacturers Pty Ltd (1995) ATPR ¶41-370 (Lee J); TPC v Pacific Dunlop Ltd (1994 ATPR ¶41-307 (Jenkinson J); O’Bryen v Coles Myer Ltd (1993) ATPR ¶41-209 (Keely J); Crocodile Marketing Ltd v Grifith Vintners Pty Ltd (1989) 28 NSWLR 539 (Cole J); Siddons Pty Ltd v Stanley Works Pty Ltd (1990) ATPR ¶41-044 (Jenkinson J); Gardam v George Wills & Co Ltd (No 1) (1988) ATPR ¶40-884 (French J) and Barton v Croner Trading Pty Ltd (1984) ATPR¶40-470 (Bowen CJ, Beaumont and Wilcox JJ).

[6.45]

6 Specific False or Misleading Representations

259

• representations about the previous history or use of the goods, including: – the origin and age of the goods; or – the previous ownership of the goods; or – the historical uses or associations of the goods either in a specific context or by specified persons.30

False or misleading representations that goods comply with a particular standard of the Standards Association of Australia have been held to amount to a contravention of s 53(a) of the TPA.31 The following cases clarify some of the key terms and phrases used in ACLs 29(1)(a). In Eva v Southern Motors Box Hill Pty Ltd,32 the defendant contravened s 53(a) by falsely representing that the goods were of a particular standard. The goods in question were a car described as “ex-GMH executive car” when in fact, it was an ex-rental car. The court held that the representation was untrue as to the positive representation (it was not an ex-GMH executive car); and also untrue as to its negative content (it was not an ex-rental car). It gave rise to the inference that the car was well maintained and responsibly used which was false. In Given v C V Holland (Holdings) Pty Ltd,33 the defendant falsely represented that a motor vehicle had travelled 23,700 miles when, in fact, it was established that the vehicle had travelled approximately 69,012 miles. The defendant argued that the word “quality” in s 53(a) should be construed by reference to the expression “merchantable quality”. The court adopted the Shorter Oxford Dictionary definition of the word “quality”, namely an “attribute or special feature” rather than “merchantable quality”. In ACCC v Cadbury Schweppes Pty Ltd,34 the respondent manufactured and sold two flavoured cordials in a manner which suggested that it contained fruit extracts when it did not. The label depicted real fruit and bore the words “banana mango” in large type and the words “flavoured cordial” underneath in considerably smaller type. Based on the overall impression of the pictures, packaging and labelling, the court held that these representations contravened ss 52, 53(a) and 55 of the TPA. Ryan J held that the representation on the label had to be tested objectively by reference to its likely effect on the target audience at whom it was directed, namely a broad range of consumers for whom real fruit was likely to be a material consideration. His Honour concluded that on the basis of the overall impression of 30 Second Explanatory Memorandum, at [6.109]. 31 In Hartnell v Sharp (1975) ATPR ¶40-003, the Sharp Corporation represented that its microwave ovens were approved by the Standards Association of Australia when, in fact, they had not been so tested and approved. In Given v Snuffa Pty Ltd and Quinn (1978) ATPR ¶40-083 the court imposed a fine on a company which falsely claimed that its fire extinguishers complied with a standard of the Standards Association of Australia. 32 Eva v Southern Motors Box Hill Pty Ltd (1977) ATPR ¶40-026 at 17,355 (Smithers J). 33 Given v C V Holland (Holdings) Pty Ltd (1977) 29 FLR 212 at 216; Eva v Southern Motors Box Hill Pty Ltd (1977) ATPR ¶40-029 at 17,385-17,386 (Franki J). 34 ACCC v Cadbury Schweppes Pty Ltd (2004) ATPR ¶42-001 at [28]-[34] (Ryan J). See also Crocodile Marketing Ltd v Griffith Vintners Pty Ltd (1989) 28 NSWLR 539 where a wine producer made false representations contrary to s 53(a) of the TPA about the alcohol content of wines it sold to the applicant for export.

260

The Australian Consumer Law

[6.50]

the packaging and labelling, that they were capable of conveying to a significant body of reasonable consumers in the target audience that the product contained real fruit. In Colgate-Palmolive Pty Ltd v Rexona Pty Ltd,35 Rexona entered the toothpaste market with the introduction of Aim toothpaste. It launched an advertising campaign on television and in magazines which claimed a breakthrough in the fight against tooth decay. A new ingredient, Citraden, was claimed to be 50-90% more effective than other toothpastes in slowing down the growth of plaque between brushings. Other toothpastes containing fluoride only removed plaque during brushing, whereas, it was claimed, Aim slowed the regrowth of plaque between brushings. Colgate sought an interlocutory injunction against Rexona alleging breaches of ss 52, 53(a), (b), (c) and 55 of the TPA. Lockhart J granted interlocutory relief since there was no scientific basis for the positive performance claim that Citraden was more effective in preventing re-growth of plaque. His Honour concluded: “that until such time as performance claims made in advertising have been scientifically substantiated by tests and the results of the tests have been published, they should not be made.”36

Premium claims [6.50] Premium or credence claims involve a representation of a premium or special quality that claims to distinguish one product from another. It may be difficult for consumers to verify these claims. Premium claims are a current priority enforcement area for the ACCC.37 According to the ACCC: Premium claims may suggest a product is safer (“non-toxic”), offers a moral or social benefit (“free range eggs”) or a nutritional benefit (“fat free”). The benefit may also be ’green’ or environmental (“100% recyclable”) or therapeutic (“the fastest pain reliever”). A premium claim may also promote a product as being of a perceived quality (“Swiss chocolate” or “Belgian beer”).Claims that give the impression that a product, or one of its attributes, has some kind of added benefit when compared to similar products and services can be made as long as the claims are not misleading and can be substantiated.38

Food labelling premium claims may contravene s 29(1)(a) of the ACL, if they make a false or misleading representation that goods have a particular quality or a particular history. They may also contravene s 33 of the ACL which prohibits conduct liable to mislead the public as to the nature or characteristics of goods. It should be noted, however, that the nature or characteristics of goods refers to their “internal constitution or utility rather than the manner of their creation”.39 While there may be some scope for overlap this will not always be the case. 35 Colgate-Palmolive Pty Ltd v Rexona Pty Ltd (1981) ATPR ¶40-242 (Lockhart J). 36 Colgate-Palmolive Pty Ltd v Rexona Pty Ltd (1981) ATPR ¶40-242 at 43,191. 37 See ACCC Compliance and Enforcement Policy (February 2015), p 4. 38 ACCC, “False or Misleading Statements”, at http://www.accc.gov.au/business/advertisingpromoting-your-business/false-or-misleading-statements. 39 ACCC v Turi Foods Pty Ltd (No 4) (2013) ATPR ¶42-448 at [127] (Tracey J).

[6.50]

6 Specific False or Misleading Representations

261

The ACCC has been particularly active in relation to claims involving the use of the term “free range” in connection with food products.40 In ACCC v Turi Foods Pty Ltd (No 4) it was held that a representation that chickens were “free to roam in large barns” was held to contravene ss 52 and 53(a) of the TPA (the TPA equivalents of ss 18 and 29(1)(a) of the ACL), because the representation was likely to mislead consumers as to the circumstances in which the chickens had been raised or grown by falsely representing that the chickens had a particular history of being raised or grown in barns in which they were “free to roam”.41 However, the “free to roam” representation did not relate to the inherent qualities of the chickens and so they did not contravene s 55 of the TPA (the TPA equivalent of s 33 of the ACL).42 Tracey J observed: There was … no evidence to link those circumstances with any inherent quality such as taste or fat content of any processed chickens which were marketed by producers or processors.43

In ACCC v Pirovic Enterprises Pty Ltd (No 2),44 Pirovic admitted that it had infringed ss 18, 29(1)(a) and 33 of the ACL by marketing as “free range” eggs produced by hens that were farmed in conditions that allowed the hens to live in large barns and roam freely on green pastures during the day, returning indoors at night, when this was not the case. Pirovic’s labels complied with the labelling guide produced by the industry body, the Australian Egg Corporation Ltd (AECL). Pirovic’s farms had an “A” level accreditation for free range egg production, and the NSW Food Authority had deemed the AECL scheme to be compliant with the Primary Industries Standing Committee’s Model Code of Practice for the Welfare of Animals – Domestic Poultry. This, however, was not the test to be applied for the purposes of ss 18, 29(1)(a) and 33 of the ACL. Pirovic admitted that the labels were misleading and amounted to a contravention of s 18 because the message they conveyed to a reasonable member of the target audience did not comply with the conditions in which the laying hens were kept. Pirovic also admitted that the conduct amounted to a contravention of s 29(1)(a) because it was likely to mislead the public as to the quality and history of the eggs supplied, and a contravention of s 33 because it was likely to mislead the public as to the nature and characteristics of its eggs.45 40 In October 2015 the ACCC released its “ACCC Enforcement Guidance – Free Range Hen Egg Claims”, at http://www.accc.gov.au/system/files/1029_Free%20range%20Eggs%20guidelines_ FA.pdf. 41 ACCC v Turi Foods Pty Ltd (No 4) (2013) ATPR ¶42-448 at [114]. 42 ACCC v Turi Foods Pty Ltd (No 4) (2013) ATPR ¶42-448 at [129]. 43 ACCC v Turi Foods Pty Ltd (No 4) (2013) ATPR ¶42-448 at [128]. 44 ACCC v Pirovic Enterprises Pty Ltd (No 2) (2014) ATPR ¶42-483 (Flick J). 45 See ACCC v R L Adams Pty Ltd (trading as Darling Downs Fresh Eggs) [2015] FCA 1016 where Edelman J imposed a penalty of $250,000 for labelling eggs as “free range” and “free to roam” when in fact the hens had been continuously confined in two barns that could only be opened with roller doors. The hens never had access to the outdoors. In ACCC v Pepe’s Ducks Ltd (2013) ATPR ¶42-441, a penalty of $375,000 was imposed on the respondent for making representations that ducks had spent a substantial amount of their time outdoors where they were able to forage for food.

262

The Australian Consumer Law

[6.55]

On 2 September 2015, the ACCC accepted court enforceable undertakings from P&M Quality Smallgoods Pty Ltd (trading as Primo Smallgoods, George Weston Foods Pty Ltd (trading as KR Castlemaine) and Pastoral Pork Company Pty Ltd (trading as Otway Pork) for use of the term “free range” in connection with the promotion and labelling of pork products, when they were not able to move about freely in an open paddock.46 Other premium claims include use of the term “fresh”, “organic”, “not tested on animals” and place of origin claims. In ACCC v Coles Supermarkets Australia Pty Ltd,47 the respondent supplied bread through its supermarkets. The bread was partially baked and frozen off-site by a supplier and “finished” at its in-house bakeries in its supermarkets. The bread was promoted as being “Baked Today, sold Today” and in some cases “Freshly Baked In-Store”. The court found that the “Baked Today, sold Today” and “Freshly Baked In-Store” claims made by Coles amounted to a misleading representation that the partially baked bread had been baked on the day of sale or baked in a fresh process using fresh and not frozen product.

STANDARD, QUALITY, VALUE OR GRADE – SERVICES [6.55] False or misleading representations that services comply with a particular standard, quality, value or grade would amount to a contravention of s 29(1)(b) of the ACL. The equivalent provision of the TPA was s 53(aa) and the jurisprudence in relation to s 53(aa) will apply in relation to s 29(1)(b). The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states: A representation that services are of a particular standard, quality, value or grade could cover, for example and without limitation • representations about the nature of the services, which could include: • the way in which the services are, have been or might be undertaken, including specific methods or processes; or • the persons who will or might undertake the services and whether those persons have undertaken the services previously; or • the correspondence of the actual services or the way in which those services are undertaken with a description of those services; • representations about the standard, quality or grade of the goods, which could include: – the suitability of the services for the purposes to which they are to be put or the matter to which they relate; or – the qualifications and previous experience of the persons who will undertake the services; or – the amount of work to be undertaken as part of the supply of the services and the relationship of that work with the cost of the services.48 46 The undertaking is available on the ACCC’s website at http://registers.accc.gov.au/content/ index.phtml/itemId/1188920. 47 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 634 (Gordon J). 48 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.114].

[6.60]

6 Specific False or Misleading Representations

263

In ACCC v Optell Pty Ltd,49 the promoters of a register and purchasing guide made representations that the register was being compiled under the terms of various Federal, State, and Local Government purchasing policies and was affiliated with the Government. It was held that the conduct breached s 53(aa) of the TPA because it falsely inferred some form of government affiliation. Since the services were not “Government services” they were not of the represented standard or quality. In Kiley v Lysfar Pty Ltd,50 prosecutions were brought pursuant to ss 79 and 163 of the TPA for breaches of s 53(aa) against the promoters who advertised a tennis tournament representing that two players, Lendl and McEnroe, would be playing against each other on all three nights of a proposed tournament, when in fact they would only be playing against each other on one night. Lysfar was convicted of each of the 27 offences with which it was charged and a total fine of $4,600 was imposed.

REPRESENTING THAT GOODS ARE NEW [6.60] False or misleading representations that goods which are in fact not new, are new, are prohibited by s 29(1)(c) of the ACL. The equivalent provision of the TPA was s 53(b) and the jurisprudence in relation to s 53(b) will apply in relation to s 29(1)(c). In Annand and Thompson Pty Ltd v TPC,51 a consumer bought a Jeep from the appellant company. The order form described the vehicle as “new”. The Jeep was assembled and registered in January 1975 and at the date of purchase was at least two years and nine months old. This case was brought under s 52 rather than s 53(b) of the TPA. The Full Court of the Federal Court held that misleading or deceptive conduct by the company contrary to s 52 had not been established on the balance of probabilities where a 1975 Jeep motor vehicle was described as being new, even though it was two years old. In the context the trade meaning of “new” was not relevant. The order form contained the following: “Description of goods: New/Demo/Used”. The words “Demo” and “Used” had been crossed out. The test was: how would a reasonable member of target audience construe the order form? In the circumstances of the case, the court held that the word “new” was being used in contra distinction to “used” or “second-hand”.52 However, in relation to a second 1975 Jeep, the year of manufacture was described as 1977 on the receipt from the insurance company and this statement was sufficient to render the appellant’s conduct misleading.

49 ACCC v Optell Pty Ltd (1998) ATPR ¶41-640 (O’Loughlin J). 50 Kiley v Lysfar Pty Ltd (1985) ATPR ¶40-614 (Neaves J). 51 Annand and Thompson Pty Ltd v TPC (1979) ATPR ¶40-116. See also Henderson v Bowden Ford Pty Ltd (1979) ATPR ¶40-129 (Fisher J) and Hollis v ABE Copiers Pty Ltd (1979) ATPR ¶40-115 (Lockhart J). 52 Annand and Thompson Pty Ltd v TPC (1979) ATPR ¶40-116 at 18,266-18,272 (Franki J).

264

The Australian Consumer Law

[6.65]

REPRESENTING THAT A PARTICULAR PERSON HAS AGREED TO ACQUIRE GOODS OR SERVICES [6.65] False or misleading representations that a particular person has agreed to acquire goods or services are prohibited by s 29(1)(d). The equivalent provision of the TPA was s 53(b). The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states: A representation that a particular person has agreed to acquire the goods or services could cover, for example and without limitation: • that another person has, may or will acquire the goods or services; or • that that other person has, may or will acquire the goods or services for a particular price or at a particular time; or • that that other person has, may or will acquire a specific form of the goods or services.53

TESTIMONIALS – GOODS OR SERVICES [6.70] Section 29(1)(e) of the ACL prohibits false or misleading representations in trade or commerce that purport to be a testimonial by any person relating to goods or services; or concerning a testimonial by any person relating to goods or services (fictitious testimonials). Section 29(1)(f) of the ACL prohibits false or misleading representations concerning genuine testimonials relating to goods or services. There were no equivalent provisions under the TPA although the giving of false testimonials was capable of constituting misleading conduct under s 52 of the TPA and specific misleading conduct under s 53(a) that goods were of a particular standard, quality or grade, or that goods or services had sponsorship, approval or performance characteristics under s 53(c). Consumers may rely on the opinions of the endorsers in making their purchasing decisions, so testimonials must not be false or misleading. In relation to ACL, s 29(1)(e) and (f), the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states: Paragraphs 29(1)(e) and (f) apply to representations whether or not the testimonial was genuine or not, for example where a genuine testimonial is misrepresented or misquoted or where a fictitious testimonial was published. False or misleading testimonials are not specifically listed as types of false or misleading representations in the section 53 of the TPA.54

For false representations concerning testimonials, there is a presumption in proceedings that representation is misleading (but not false) unless evidence is adduced to the contrary. Section 29(2) provides that there is a rebuttable presumption that representations concerning a testimonial as described in s 29(1)(e) and (f) are misleading. Failure to 53 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.115]. 54 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.121].

[6.80]

6 Specific False or Misleading Representations

265

adduce evidence to the contrary when it is alleged that a person has made a false or misleading representation concerning a testimonial will result in the representation being found to be misleading. This recognises the potential difficulty faced by consumers in obtaining information about the basis for the testimonial. This onus is evidentiary in nature. The representor does not have to prove that the representation is not misleading: he or she must adduce evidence about the validity of the representation. In other words, the representor must present evidence to support the accuracy of the underlying representations conveyed to consumers. The evidence is likely to be easily available to the representor, but not to the consumer. Adducing such evidence does not provide the accused with a defence to any allegation that the representation is false or misleading: it merely discharges the onus on them. A person can discharge the evidentiary onus and still be found to have made a misleading representation. The evidence must be sufficient to displace the presumption that that the representation was false or misleading. Testimonials fall into three broad categories: expert testimonials, consumer testimonials and celebrity testimonials.

Expert testimonials [6.75] Where a person who provides a testimonial is claimed to be an expert, directly or indirectly, the representor must provide evidence of the qualifications sufficient to give them the represented expertise. In order to qualify as an expert the person must have “specialised knowledge” by reason of “training, study or experience”.55 An expert’s testimonial would need to be supported by an examination of, or the testing of, the goods or services as extensively as other experts in the field would regard as appropriate to support the conclusions contained in the testimonial. Consumer testimonials [6.80] Where the testimonials are in the nature of stories by consumers who are claimed to have used the product, and they are wholly or partly fabricated, they will contravene ACL, ss 18 and 29(1)(e) and (f).56 Where the person who provides the testimonial is claimed to be a consumer of the goods or services, the endorser’s experience must be representative of what other consumers may expect to achieve. In order to satisfy the onus in s 29(2), the representor must be able to substantiate this, or clearly disclose the limited applicability of the endorser’s experience. In Volunteer Eco Students Abroad Pty Ltd v Reach Out Volunteers Pty Ltd,57 the applicant (VESA) complained about certain testimonials made by past consumers on the respondent’s (REV’s) website or Facebook page. The respondent conducted a business as a supplier of ecotourism programs. Those testimonials were in the following terms: (a) “One of the biggest eye opening experiences of my life. The satisfaction of knowing that you have made a difference in the lives of others, is truly remarkable. I still can’t believe that I 55 See Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305 at [85] (Heydon JA) and Hancock v East Coast Timber Products Pty Ltd [2011] NSWCA 11 at [82] and [83] (Beazley JA). 56 IDP Education Ltd v Lejburg Pty Ltd [2015] VSC 650 (24 November 2015) at [66]-[67]. 57 Volunteer Eco Students Abroad Pty Ltd v Reach Out Volunteers Pty Ltd [2013] FCA 731.

266

The Australian Consumer Law

[6.85]

firstly had the opportunity to work with some of the happiest kids in the world. But that I also did hands on work with wildlife, still makes me smile. Ps Giraffes are the best”: Matt Cork (b) “This was the best thing I have ever done. I want to go back tomorrow! I will certainly be back next year!”: Sara Bordina (c) “I had the most amazing time in South Africa. I really enjoyed the two weeks. It was a lot more hands on than I had expected. I would highly recommend this program to anyone”: James Shaw

The applicant conceded that these testimonial were false and accordingly Griffiths J found that they contravened s 29(1)(e) and (f) of the ACL.58 In ACCC v A Whistle & Co (1979) Pty Ltd,59 the Federal Court ordered the franchisor of the Electrodry Carpet Cleaning business to pay penalties of $215,000 for being involved in the publication of fabricated testimonials that purported to be genuine testimonials on the internet. Yates J found that Electrodry posted, and induced its franchisees to publish fabricated testimonials from customers about the quality of its carpet cleaning services.

Celebrity testimonials [6.85] Where the person who provides the testimonial is claimed to be a celebrity, the representor must be able to substantiate that the celebrity was a bona fide user of the product. For example, in ACCC v Advanced Medical Institute Pty Ltd (No 3),60 the ACCC instituted legal proceedings against Advanced Medical Institute Pty Ltd (AMI) in relation to the advertising and promotion of a nasal spray form of treatment for erectile dysfunction and premature ejaculation. The ACCC alleged that the representations in the advertisement, which appeared in newspapers published in major Australian capital cities having the headlines: “TV Star’s amazing CONFESSION!” and featured Mr Turpie, were fictitious. The ACCC granted Mr Turpie partial immunity for his involvement in the alleged conduct in return for his co-operation. The ACCC also instituted legal proceedings against AMI for causing the advertisement to be published; and Mr Philip Somerset of Colby Media for being knowingly concerned in the preparation and publication of the advertisement on behalf of AMI. Lindgren J held that the contraventions of s 52 of the TPA had been established and that Mr Somerset who knew of the falsity of the advertisement, was liable as an accessory.

58 Volunteer Eco Students Abroad Pty Ltd v Reach Out Volunteers Pty Ltd [2013] FCA 731 at [466]. 59 ACCC v A Whistle & Co (1979) Pty Ltd [2015] FCA 1447. 60 ACCC v Advanced Medical Institute Pty Ltd (No 3) (2007) ATPR ¶42-269 (Lindgren J).

[6.90]

6 Specific False or Misleading Representations

267

SPONSORSHIP, APPROVAL, PERFORMANCE CHARACTERISTICS – GOODS AND SERVICES [6.90] False or misleading representations that goods or services have sponsorship, approval, performance characteristics, accessories, specific uses or benefits, are prohibited by ACL, s 29(1)(g). The equivalent provision of the former TPA was s 53(c) and the jurisprudence in relation to s 53(c) will apply in relation to s 29(1)(g).61 The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states: A representation that the goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits could cover, for example and without limitation: • representations that the goods or services are, in some way, sponsored by another person or entity. This could include persons or entities not engaged in trade or commerce, such as charities, religious institutions, educational institutions, professional and trades bodies and governments. • representations that a person or other entity has approved of the goods or services, including representations that such an approval is a formal or informal endorsement, certification or other indication of approval made by a person or entity. This could include persons or entities not engaged in trade or commerce. • representations that the goods or services will or could: – reach specified or non-specified performance standards or levels in their use or provision; or – deliver specified or non-specified benefits or enhancements in the use of other goods or the undertaking of other services; or – with respect to goods, last for specified or non-specified periods of time or a specified or non-specified number of uses, and with respect to services, be provided or undertaken for a specified or unspecified period of time or a specified or unspecified number of times; or – tolerate specified or non-specified physical circumstances (including, for example, pressures or stresses) in their use or undertaking; • representations that the goods or services come with other accessories, including the provision of additional goods or services either generally or in the event that certain things occur; • representations that the goods or services have particular uses either generally or in addition to those for which they are to be or have been supplied; 61 See ACCC v Excite Mobile Pty Ltd (2013) ATPR ¶42-437 (Mansfield J); ACCC v Harvey Norman Holdings Ltd (2011) ATPR ¶42-384 (Collier J); ACCC v GM Holden Ltd [2008] FCA 1428 (18 September 2008); CPA Australia Ltd v Dunn (2007) ATPR ¶42-205 (Weinberg J); Osgaig Pty Ltd v Ajisen (Melbourne)Pty Ltd (2004) ATPR ¶42-036 (Weinberg J); ACCC v Chen (2003) ATPR ¶41-948 (Sackville J); ACCC v Wizard Mortgage Corp Ltd (2002) ATPR ¶41-903 (Merkel J); Mark Foys Pty Ltd v TVSN (Pacific) Ltd (2001) ATPR ¶41-795 (Beaumont, Tamberlin and Emmett JJ); ACCC v Giraffe World Australia Pty Ltd (No 2) (1999) ATPR ¶41-718 (Lindgren J); Glendale Chemical Products Pty Ltd v ACCC (1999) ATPR ¶41-672 (Wilcox, Tamberlin and Sackville JJ); ACCC v Optell Pty Ltd (1998) ATPR ¶41-640 (O’Loughlin J); Dillon v Chin; Dillon Kingly Commodities (Qld) Pty Ltd (1988) ATPR ¶40-899 (Pincus J); and Larmer v Power Machinery Pty Ltd (1977) ATPR ¶40-021.

268

The Australian Consumer Law

[6.95]

• representations that the goods or services will provide the person acquiring them or other persons with benefits.62

In some cases there will be a clear contravention of s 29(1)(g) when sponsorship, approval or affiliation is claimed but does not exist. For example, in Larmer v Power Machinery Pty Ltd,63 a claim was made that electric welding machines were approved by the State Electricity Commission. The machines did not have any such approval and even though it was not necessary to obtain such approval a fine was imposed. In ACCC v Reebok Australia Pty Ltd,64 Reebok made a premium claim by representing on its Easy Tone shoe boxes and promotional material that wearing Easy Tone shoes would tone and strengthen muscles by, or up to, a specific percentage compared to that which would result from wearing a traditional walking shoe. The Federal Court found that Reebok had no reasonable grounds for making these representations and that Reebok had contravened ss 18, 29(1)(g) and 33 of the ACL.

Performance characteristics – environmental claims [6.95] False or misleading environmental claims may contravene s 29(1)(g). In 2011, the ACCC published its guide, “Green Marketing and the Australian Consumer Law”.65 In relation to environmental claims, the ACCC states: Those most relevant to environmental claims are: • Sponsorship – this connotes some form of backing by another party. The unauthorised use of a trademark may breach this provision. • Approval – this provision is mainly used when a business claims to have approval from a government agency or licensing board for its products, when no such approval has been given. • Performance characteristics – companies should not falsely claim that their goods or services have certain capabilities or effects they do not have. • Benefits – companies should not claim that a particular good or service has certain environmental benefits if these claims cannot be substantiated.66

The “Green Marketing Guide” provides interpretations by the ACCC through definitions and illustrative examples. General environmental claims such as “green”, “environmentally friendly”, or “environmentally safe”, and “energy efficient”, “recyclable”, “carbon neutral”, “renewable” or “green energy” may be problematic.67 62 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.116]. 63 Larmer v Power Machinery Pty Ltd (1977) ATPR ¶40-021. 64 ACCC v Reebok Australia Pty Ltd [2015] FCA 83 (McKerracher J). 65 ACCC, “Green Marketing and the Australian Consumer Law” (2011), at http://www.accc.gov.au/ system/files/Green%20marketing%20and%20the%20ACL.pdf. 66 ACCC, “Green Marketing and the Australian Consumer Law” (2011), p 5. 67 ACCC, “Green Marketing and the Australian Consumer Law” (2011), pp 12-14.

[6.100]

6 Specific False or Misleading Representations

269

For example, any claim that a product is “green” needs to be based upon a whole of life assessment. In ACCC v GM Holden Ltd,68 GM Holden, trading as Saab Australia, published newspaper and magazine advertisements across Australia promoting the Saab range of motor vehicles. The advertisements, under the headline statement “Grrrrrreen”, contained the words and phrases, “Grrrrrreen”, “Every Saab is green. With carbon emissions neutral across the entire Saab range” and “Shift to Neutral”. This claim was based on a representation that in the first year following the purchase of a Saab motor vehicle, GM Holden would plant, on behalf of the purchaser, 17 native trees which would offset the carbon dioxide emissions for the life of that motor vehicle. By consent, Siopis J declared that GM Holden contravened ss 52 and 53(c) of the TPA because the carbon dioxide emissions from any Saab motor vehicle would not be neutral over the life of that motor vehicle, and the planting of 17 native trees would only provide a carbon dioxide emission offset for a single year’s operation of the motor vehicle.

Performance characteristics: health benefits [6.100]

Representations about the superior effectiveness of medical products or treatments are of significant concern to the ACCC. Those responsible for advertisements that contain safety claims must be able to substantiate the safety claim and must carefully qualify the level of safety or any significant risks. A health or safety claim may constitute a representation that the claim is based on competent and reliable scientific evidence. If there is no significant scientific or medical knowledge supporting the claim and it cannot be substantiated, the claim is likely to be misleading.

In June 2011 the ACCC, the Cancer Council of Australia and the Therapeutic Goods Administration issued a joint media release urging Australian women not to rely on unproven commercial breast imaging technologies to detect breast cancer.69 Since 2011, the ACCC has vigorously pursued misleading claims in relation to these technologies. In ACCC v Safe Breast Imaging Pty Ltd,70 the respondent conducted a breast imaging business using a device known as a multi-frequency electrical impedance mammograph (MEM device). The respondent made a number of representations, including a representation that the MEM device could be used for assessing whether a customer was at risk from breast cancer and the level of that risk (the risk of cancer representation), and that imaging with the MEM device was a substitute for a breast cancer screening mammogram, such as ultrasound and magnetic resonance imaging (the substitute for mammography representation). Barker J found that the risk of cancer representation in the promotional materials “conveyed the representation that the MEM device could provide an adequate

68 ACCC v GM Holden Ltd [2008] FCA 1428 (18 September 2008). 69 See the TGA website at http://www.tga.gov.au/alert/breast-screening-devices. 70 ACCC v Safe Breast Imaging Pty Ltd (2014) ATPR ¶42-464 (Barker J).

270

The Australian Consumer Law

[6.105]

scientific basis for assessing whether a customer was at risk from breast cancer and if so, the level of such risk”.71 As regards the substitute for mammography representation Barker J held: In my view, the overall effect of the promotional materials was that the advertising created the erroneous impression that Safe Breast Imaging could provide a comparable service to mammography, but without the negative limitations of mammography. In my view, a reasonable hypothetical consumer would be led to believe that Safe Breast Imaging’s breast imaging is comparable to mammography, but without the limitations associated with mammography, and that they could choose to have that service as a substitute for mammography.72

A similar claim was made in ACCC v Breast Check Pty Ltd.73 Breast Check published promotional pamphlets that made a number of representations that its thermography devices for conducting breast imaging could provide an adequate scientific basis for assessing whether a customer was at risk from breast cancer and the level of that risk. The ACCC also alleged that Breast Check represented that there was an adequate scientific basis for using the thermography devices as a substitute for mammography. It was held that Breast Check had contravened s 53(c) of the TPA and s 29(1)(g) of the ACL. Barker J found: In the context of a representation of a medical nature … it would be entirely reasonable for a consumer to conclude that, where a service of a medical nature is being provided, there would be scientific medical evidence of a sufficient quality to support the use of the equipment used to provide such a service and that the use of breast imaging devices would not be promoted in a way as to be contrary to the state of scientific medical knowledge.74

Breast Check was ordered to pay a penalty of $75,000, and Dr Boyd who was knowingly concerned in the preparation of the pamphlets was ordered to pay $25,000.75

Performance characteristics: product safety [6.105]

Section 29(1)(g)ACL has a role to play in the area of product safety where goods do not have the performance characteristics advertised or as claimed on their labels. The equivalent provision of the TPA was s 53(c)

In Hampic Pty Ltd v Adams,76 Mason P and Davies AJA of the New South Wales Court of Appeal in a joint judgment held that a warning in relation to a cleaning product was inadequate and misleading in contravention of s 52 of the TPA in that it did not suggest the seriousness of the potential consequences with prolonged use. Even though the respondent cleaner had not seen the label, the requirement of causation in s 82 of the TPA was satisfied. Direct reliance was not necessary.77 71 ACCC v Safe Breast Imaging Pty Ltd (2014) ATPR ¶42-464 at [68]. 72 ACCC v Safe Breast Imaging Pty Ltd (2014) ATPR ¶42-464 at [83]. 73 ACCC v Breast Check Pty Ltd (2014) ATPR ¶42-479. 74 ACCC v Breast Check Pty Ltd (2014) ATPR ¶42-479 at [141]. 75 ACCC v Breast Check Pty Ltd (No 2) [2014] FCA 1068. 76 Hampic Pty Ltd v Adams (2000) ATPR ¶41-737. 77 Hampic Pty Ltd v Adams (2000) ATPR ¶41-737 at [35].

[6.105]

6 Specific False or Misleading Representations

271

Section 29(1)(g) of the ACL has a role to play in the area of representations concerning the product safety of goods. Whether product safety labelling representations constitute “performance characteristics” was considered in ACCC v Glendale Chemical Products Pty Ltd.78 Glendale packaged and sold caustic soda cleaning products with a label that stated the product was corrosive and contact with eyes and skin should be avoided. It failed to mention the dangers of using hot water to dissolve caustic soda. The ACCC unsuccessfully argued at first instance that the label represented that the product was safe to use and that this was a performance characteristic for the purposes of s 53(c) of the TPA.79 On appeal, the Full Federal Court did not need to decide the issue having regard to the conclusions reached on other aspects of the case, but expressed reservations about the whether the trial Judge’s ruling was correct.80 In ACCC v Woolworths Ltd,81 Woolworths offered for sale a house brand Select Drain cleaner for use in a domestic environment to unblock drains. It was sold in bottles that appeared to have a child resistant cap. The top of the cap read “Close tightly while pushing down turn”. There were two arrows directing an anti-clockwise motion for opening the bottle and a clockwise motion for closing the bottle. On a number of occasions caps came off bottles causing serious physical injuries that were reported to Woolworths, but Woolworths continued to sell the house brand Select Drain cleaner after becoming aware of the potential safety hazards. The house brand Select Drain cleaner was eventually withdrawn from sale and Woolworths initiated a voluntary recall, but not before further injuries resulted caused by caps leaking or coming off. The court held that the text and directions on the cap contravened ss 18, 29(1)(a) and 29(1)(g), and 33 of the ACL by making false or misleading representations that the Select Drain cleaner was of a particular standard or quality and had certain performance characteristics. The instructions on the cap represented that it could only be opened by the application of downward pressure to the cap while turning it, when in fact the cap did not lock securely and could be opened without downward pressure while turning it.82 It was held that Woolworths also contravened ss 18 and 33 by deliberately remaining silent about the safety hazard after serious injuries had been reported to it, and that by continuing to sell it Woolworths’ silence was liable to mislead the public as to its suitability for its purpose.83 Silence in such circumstances can also give rise to a breach of the mandatory reporting requirements contained in s 131 of the ACL.84 Thus, there is scope for overlap between ss 18, 29(1)(g) and 33 of the ACL and Pt 3-5, Div 1 of the ACL which contains a statutory product liability regime under 78 ACCC v Glendale Chemical Products Pty Ltd (1998) ATPR ¶41-632. 79 ACCC v Glendale Chemical Products Pty Ltd (1998) ATPR ¶41-632 at 40,973 (Emmett J). 80 Glendale Chemical Products Pty Ltd v ACCC (1999) ATPR ¶41-672 at 42, 597 (Wilcox, Tamberlin and Sackville JJ). 81 ACCC v Woolworths Ltd [2016] FCA 44 (Edelman J). 82 ACCC v Woolworths Ltd [2016] FCA 44 at [102]. 83 ACCC v Woolworths Ltd [2016] FCA 44 at [103]. 84 See [11.215]–[11.225].

272

The Australian Consumer Law

[6.110]

which consumers who suffer physical injury or death arising from a safety defect in a manufacturer’s goods may recover that loss or damage from the manufacturer.85 However, s 137C of the CCA provides that a person is not entitled to recover damages under s 236 of the ACL for a contravention of ss 18 and 29(1)(g) of the ACL and “the loss or damage is, or results from, death or personal injury”.

Performance characteristics: consumer privacy and data security [6.110]

Section 29(1)(g) may have a role to play in the area of misleading consumer privacy and data security claims where goods and services are acquired online and suppliers represent that that they have in place security systems to protect sensitive customer data. If the supplier fails to use readily available security devices to limit wireless access, or fails to use strong passwords, firewalls and security patches, and a hacker illegally obtains access to consumers’ credit card details, the representations may contravene ACL, ss 18 and 29(1)(g) because services do not have the claimed performance characteristics. In the United States it has been held that the Federal Trade Commission is able to use the deceptive and unfair provisions of s 5(a) of the Federal Trade Commission Act to regulate misleading consumer privacy and data security practices.86

SPONSORSHIP, APPROVAL, OR AFFILIATION – PERSONS [6.115]

False or misleading representations that the person has a sponsorship, approval, or affiliation are prohibited by s 29(1)(h). Section 53(d) of the TPA prohibited a corporation representing that it had a sponsorship, approval, or affiliation it did not have, and the jurisprudence in relation to s 53(d) will apply in relation to ACL, s 29(1)(h).87

The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states: A representation that the person making the representation has sponsorship, approval or affiliation could cover, for example and without limitation: • representations that the person is, in some way, sponsored by, approved of or affiliated with another person or entity. This could include persons or entities not engaged in trade or commerce, such as charities, religious institutions, educational institutions, professional and trades bodies and governments. • representations that a person or other entity has sponsored, approved of or extend an affiliation to the person, including representations that such an approval is a formal or 85 See Chapter 12. 86 C Skeath, “Third Circuit Upholds FTC’s Data Security Authority in FTC v Wyndham” (2015) The National Law Review 1. 87 See ACCC v Chen (2003) ATPR ¶41-948 (Sackville J); Mark Foys Pty Ltd v TVSN (Pacific) Ltd (2001) ATPR ¶41-795 (Beaumont, Tamberlin and Emmett JJ); Australian Home Loans Ltd (t/as Aussie Home Loans) v Phillips (1998) ATPR ¶41-626 (Lehane J); ACI Australia Ltd v Glamour Glaze Pty Ltd (1988) ATPR ¶40-868 (Lockhart J); Shoshana Pty Ltd v 10th Cantanae Pty Ltd (1988) ATPR ¶40-833 (Wilcox and Pincus JJ, Gummow J dissenting); Apple Computer Inc v Computer Edge Pty Ltd (1984) 1 FCR 549 (Fox, Lockhart, Sheppard JJ); McDonald’s System of Australia Pty Ltd v McWilliam’s Wines Pty Ltd (1979) ATPR ¶40-140, and Weitmann v Katies Ltd (1977) ATPR ¶40-041.

[6.120]

6 Specific False or Misleading Representations

273

informal endorsement, certification, qualification or other indication of approval made by a person or entity. This could include persons or entities not engaged in trade or commerce.88

The words “sponsorship” and “approval” were considered by Franki J in McDonald’s System of Australia Pty Ltd v McWilliam’s Wines Pty Ltd.89 His Honour confirmed the meaning he had previously attributed to the word “sponsorship” in Weitmann v Katies Ltd,90 as suggesting “something more along the lines of a certification trade mark”. Such a mark indicates that a person competent to do so certifies the quality, accuracy, or other characteristics of goods or services of other persons.91 His Honour treated the word “approved” as indicating some authoritative or formal commendation.92 In that case, Franki J was not satisfied that the evidence established that the respondent had represented that its wine had the sponsorship of the applicant for the purposes of s 53(c). As regards the word “approval”, Franki J held that the most appropriate meanings were: to confirm authoritatively; to sanction; to pronounce to be good; commend. Franki J stated: The only form of approval which might be said to be represented in the advertisement would be some form of acceptance by the applicant of the use of the name “Big Mac” in relation to the goods but this is not in my opinion sufficient to be a representation that that wine has an approval which it did not have.93

As regards the word “affiliation” in s 53(d), Franki J again referred to the Oxford Dictionary which defined the word to mean: Adoption; the act of taking a son. Adoption, by society, of subordinate branches; union of branches to a supreme or central organisation.

Franki J stated: I consider that the type of “affiliation” to which s 53(d) of the Act refers is akin to “sponsorship” or “approval”. “Affiliation” seems to require a positive link.94

His Honour was unable to conclude that the advertisement contained a representation that the respondent had any affiliation with the applicant. In Shoshana Pty Ltd v 10th Cantanae Pty Ltd,95 the respondents published an advertisement promoting Blaupunkt Video Recorders. It depicted a young woman in bed holding a cat and watching the screen of a television set on which appeared a picture of another woman apparently grimacing or screaming. Close by was a remote control device. The caption across the advertisement read: “Sue Smith just took control of her video recorder.” Sue Smith was found to be a prominent

[6.120]

88 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.117]. 89 McDonald’s System of Australia Pty Ltd v McWilliam’s Wines Pty Ltd (1979) ATPR ¶40-140. 90 Weitmann v Katies Ltd (1977) ATPR ¶40-041. 91 See Trademarks Act 1995 (Cth), Pt XI. 92 McDonald’s System of Australia Pty Ltd v McWilliam’s Wines Pty Ltd (1979) ATPR ¶40-140 at 18,521. 93 McDonald’s System of Australia Pty Ltd v McWilliam’s Wines Pty Ltd (1979) ATPR ¶40-140 at 18,521-2. 94 McDonald’s System of Australia Pty Ltd v McWilliam’s Wines Pty Ltd (1979) ATPR ¶40-140 at 18,522. 95 Shoshana Pty Ltd v 10th Cantanae Pty Ltd (1988) 18 FCR 285.

274

The Australian Consumer Law

[6.120]

and extremely well-known national television personality, but the woman featured in the advertisement as being in control of her video was not Sue Smith. The trial judge, Burchett J, held that the claim based on s 53(d) had been established. On appeal the Full Federal Court held that since the woman depicted in the advertisement as being in control of her video recorder merely bore some resemblance to the respondent, and there was no misrepresentation that the respondent endorsed, or was otherwise associated with, the Blaupunkt Video Recorder, Burchett J was in error in holding that the s 53(d) claim was established.96 Pincus J stated: The finding that the advertisements represented that the particular brand of video had the “sponsorship” of the second respondent is not able to be supported. Sponsorship, in a commercial context, conveys that a commercial or other organisation or persons stands behind, and perhaps, wholly or partly finances some activity – for example, a sporting event or a television show. No-one would think the model depicted to be a sponsor of the Blaupunkt videos.97

Gummow J queried whether Franki J placed too narrow a meaning on the words “sponsorship” and “approval” in Weitmann v Katies Ltd and McDonald’s System of McDonald’s System of Australia Pty Ltd v McWilliam’s Wine Pty Ltd.98 Gummow J held that the trial judge was in error in holding that the respondents had made out their claims based on s 53(d). In Apple Computer Inc v Computer Edge Pty Ltd,99 the appellants made, sold and distributed Apple computers. Computer Edge imported into Australia from Taiwan Wombat computers, which were similar to Apple computers, using Apple software. The Wombat computers were prominently labelled with the word “Wombat”. Computer Edge advertised Wombat computers as compatible with Apple software programs and also supplied Apple software manuals to purchasers of Wombat computers. The trial judge found that no contraventions of ss 52, 53(c), (d) and 55 of the TPA had been made out. The Full Court of the Federal Court allowed an appeal. Lockhart J (with whom Sheppard J agreed) found that the conduct was misleading or deceptive or likely to mislead or deceive within the meaning of s 52. The conduct also constituted, in contravention of s 53(c), an untrue representation that the Wombat computer was approved by Apple and, in contravention of s 53(d), an untrue representation that Computer Edge was approved by, or had an affiliation with, Apple. Lockhart J observed: In my opinion the conduct of the first respondent, in supplying the two manuals to purchasers in association with the supply of Wombat computers, is misleading or deceptive conduct or conduct likely to mislead or deceive within the meaning of s 52. It 96 Shoshana Pty Ltd v 10th Cantanae Pty Ltd (1988) ATPR ¶40-833 (Wilcox and Pincus JJ, Gummow J dissenting). 97 Shoshana Pty Ltd v 10th Cantanae Pty Ltd (1988) ATPR ¶40-833 at 48,989. 98 Shoshana Pty Ltd v 10th Cantanae Pty Ltd (1988) ATPR ¶40-833 at 49,003. 99 Apple Computer Inc v Computer Edge Pty Ltd (1984) 1 FCR 549.

[6.125]

6 Specific False or Misleading Representations

275

also constitutes an untrue representation that the Wombat computer is approved by the manufacturer or supplier of the Apple II computer (s 53(c)) and an untrue representation that the first respondent is approved by, or has an affiliation with, the manufacturer or supplier of the Apple II computer (s 53(d)). A person who is supplied by the first respondent with either manual in association with a Wombat computer would, in my opinion, believe that there was some association or affiliation, in trade or commerce, between the manufacturer or supplier of the Wombat computer and the manufacturer of the Apple II computer whether by licence, franchise or otherwise; or that the Wombat computer is sold by, or with the licence or approval of, the manufacturer or supplier of the Apple II computer; or that the manufacturer or supplier of the Apple II computer had put its stamp of approval upon the sale or supply of the Wombat computer or Wombat software.100

This type of false or misleading representation lends itself to the use of the ACCC’s new power to issue infringement notices. On 21 September 2010, the ACCC issued an infringement notice because it had reasonable grounds to believe that ACA Constructions Pty Ltd had falsely claimed on its website it was a member of the Master Builders Association and the Housing Industry Association.101

PRICE – GOODS OR SERVICES [6.125]

False or misleading representations with respect to the price for goods or services are prohibited by ACL, s 29(1)(i). The equivalent provision of the TPA was s 53(e) and the jurisprudence in relation to s 53(e) will apply in relation to s 29(1)(i).102 The term “price” is defined in s 2 of the ACL to mean the amount paid or payable (including any charge of any description) for the acquisition of goods or services. For example, this would catch a false or misleading representation in relation to a delivery charge. Section 29(1)(i) must be read in conjunction with: • s 32 – offering rebates, gifts and prizes; s 35 – bait advertising; • s 47 – multiple pricing; and • s 48 – single price to be specified in certain circumstances. The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states in relation to s 29(1)(i): A representation with respect to the price of goods or service could cover, for example and without limitation: • a representation that the goods or services:

100 Apple Computer Inc v Computer Edge Pty Ltd (1984) 1 FCR 549 at 587. 101 Release # NR 214/10 Issued 6th October 2010, at http://www.accc.gov.au/content/index.phtml/ itemId/950373/fromItemId/621575. 102 See ACCC v Prouds Jewellers Pty Ltd (2008) ATPR ¶42-217 (Moore J). On appeal, ACCC v Prouds Jewellers Pty Ltd (2008) ATPR 42-268 (Black CJ, Ryan and Gordon JJ); ACCC v Audi Australia Pty Ltd (2007) ATPR ¶ 42-211 (Gordon J); Walker, Commissioner for Fair Trading v Rugs a Million Pty Ltd [2006] WASC 127 (Simmonds J); TPC v Cue Design Pty Ltd (1996) ATPR ¶41-475 (O’Loughlin J); ACCC v Allans Music Group Pty Ltd [2002] FCA 1552 (Tamberlin J); ACCC v Wizard Mortgage Corp Ltd (2002) ATPR ¶41-903 (Merkel J); ACCC v Dell Computers Pty Ltd (2003) ATPR ¶ 41-910 (Branson J).

276

The Australian Consumer Law

[6.130]

– will be supplied for a particular price or at a particular discount; or – may be paid for in a particular way or at a particular time or times.103

In relation to representations about price, particular words and phrases can be problematic. Industry jargon can be a source of misleading conduct. Particular words and phrases that are used every day by some industry sectors may have an entirely different meaning for ordinary consumers. Whether a word or phrase is misleading is to be tested by its effect on a reasonable consumer in the target audience, not its industry meaning.

Use of the word “free” in relation to price [6.130]

In TPC v Optus Communications Pty Ltd, Tamberlin J stated: “[t]he word ‘free’ has a particularly strong attraction and unless adequately qualified, where necessary, it can readily produce a wrong understanding”.104

The word “free” generally means that which is given without consideration in the form of a charge or payment and as a gift.105 In Fraser v NRMA Holdings Ltd, Gummow J held that an offer of “free shares” in a prospectus would “engender in the reader the notion that the shares may be acquired without any significant loss or outgoing to the offeree who accepts them”.106 However, it is important to look at the word “free” in context. For example, in context, the word “free” or “$0” may not amount to a “free” representation. In ACCC v Telstra Corporation Ltd,107 Telstra placed various advertisements using the expression “$0*” and “$0 upfront” to promote the sale of handsets and mobile telephone services in newspapers and brochures. The ACCC contended that each statement that the handsets were available for $0 was virtually indistinguishable from a description of those handsets as free and that the principles established by judicial decision in relation to the description of products as “free” were accordingly applicable to cases concerning “$0” promotions. Gyles J did not accept the ACCC’s contention. His Honour accepted that the offer of something for $0 could be seen as the equivalent of a free offer, in the sense obtaining the handset “without having to outlay money”, but this was not how a reasonable member of the target audience would construe the Telstra offer. The court held: a reasonable reader of the class concerned would understand that the offer was only made in connection with the supply of telephony and would inevitably involve signing up with Telstra for that purpose. It would be known that Telstra’s primary business is telephony, not providing mobile phones. The presence of the asterisk and the words 103 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.118]. 104 TPC v Optus Communications Pty Ltd (1996) 64 FCR 326. 105 Fraser v NRMA Holdings Ltd (1994) 52 FCR 1 at 27 (Gummow J). 106 Fraser v NRMA Holdings Ltd (1994) 52 FCR 1 at 27-28. The Full Federal Court endorsed the reasoning of Gummow J in Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 (Black CJ, von Doussa and Cooper JJ). 107 ACCC v Telstra Corporation Ltd (2004) 208 ALR 459.

[6.130]

6 Specific False or Misleading Representations

277

adjacent “Telstra Mobile $20 (or other amount) Member Plan for 24 months” would underline that reading. It is not necessary for that purpose to go to the fine print at the bottom.108

The New Zealand Court of Appeal provided useful insights on how to determine whether goods are offered free of charge in Commerce Commission v Adair.109 The New Zealand Commerce Commission initiated proceedings when Adair ran a “buy one mountain bike, get one free” campaign. It claimed that the promotion contravened s 13(g) of the Fair Trading Act 1986 (NZ) (equivalent to s 29(1)(i) of the ACL). Before the campaign, the mountain bike in question was selling for between $449 and $599, with most selling for $449 cash or $499 on terms. During the campaign, customers wishing to take advantage of the free promotion were charged $599. However, customers who didn’t want the free bike were still able to negotiate a lower price. The Commerce Commission prosecuted the retailer for making misleading representations about the price of goods, claiming that the “free” bike was not in fact free. The retailer was convicted in the District Court under s 13(g) of the Fair Trading Act 1986 (NZ). The District Court found there was a usual price charged for Ridgehoppers before the campaign that was at least $100 less than the price charged during the campaign. The High Court disagreed with this finding and quashed the conviction. The Commerce Commission asked the Court of Appeal to consider two questions of law: • whether it was misleading to offer a free bicycle when the price asked for the Ridgehopper was more than was usually charged before the promotion; and • whether it was misleading to offer a free bicycle when a Ridgehopper was available for less to customers who didn’t take up the offer. The Court of Appeal answered “yes” to both the questions and reinstated the convictions. In relation to the first question McKay J held: The question turns on the meaning conveyed in the advertisements by the word “free”. It cannot carry its ordinary meaning of goods supplied free of charge, as the customer is required to give consideration and is then entitled to receive two bikes. The obvious meaning is that a second bike is to be supplied without any additional consideration. If the customer is required to pay one price in order to receive two bikes, but can pay a lesser price if he chooses to take only one, it is impossible to say that the second bike is free. The difference in price amounts to an additional consideration paid to obtain the second bike.110

In relation to the second question McKay J held: the question whether the second bike is “free” is to be measured by whether any consideration has to be given in addition to the usual price of the first bike. On the basis of his finding that there was a usual price, the District Court Judge was correct in finding that the advertisement was misleading … The evidence was clear and unchallenged that some three quarters of the sales of 162 “Ridgehopper” bikes sold in the seven weeks preceding the promotion were sold at a 108 ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 at [53]. 109 Commerce Commission v Adair (1995) 5 NZBLC 99-361. 110 Commerce Commission v Adair (1995) 5 NZBLC 99-361 at 103,942.

278

The Australian Consumer Law

[6.135]

price of $449. The prices charged for the remainder were largely explained as being sales on terms or with additional accessories. The conclusion is inescapable that the usual price for a cash sale without accessories was $449. The word “usual” does not mean invariable. It is certainly satisfied by the overwhelming preponderance of sales at $449 where the sale was for cash and without accessories.111

In ACCC v Hillside (Australia New Media) Pty Ltd (t/as Bet365),112 Beach J found that Bet365’s Australian and United Kingdom companies, Hillside (Australia New Media) and Hillside (Shared Services) engaged in misleading conduct concerning promotions relating to “Free Bets” for new customers as part of an internet advertising campaign. The dominant message contained in the promotional offer on its homepage (www.bet365.com.au) stated “$200 FREE BETS FOR NEW CUSTOMERS”. However, there were important conditions that qualified the dominant message, including that the customer had to pay a deposit and risk that deposit before being entitled to make a “free” bet and that the customer had to risk the value of their deposit and the amount of the “free” bet three times prior to making a withdrawal. These conditions were not displayed on the webpage containing the promotional offer. Beach J found that the digital pathway to the terms and conditions was “complicated and problematic”.113

[6.135]

The court held: First, in relation to s 29(1)(m), there was a false or misleading representation concerning “the effect of any condition” (my emphasis). Given the dominant message and the relegation and downplaying of the terms and conditions, there was a false or misleading representation as to the existence, alternatively the ambit and significance, of the terms and conditions. Second, in relation to s 29(1)(i), saying something is for “free” amounts to a statement of a $0 price. In my view, there was a false or misleading representation with respect to price given the dominant and misleading message of “free”. Third, in relation to s 29(1)(b), the concept of “value” would be affected by something being for “free” with or without associated terms and conditions. By the dominant message of “free” and the downplaying, to say the least, of the terms and conditions, the cumulative effect amounted to a false or misleading representation concerning “value”.114

Advertised price not the total price: “drip pricing” [6.140]

Where the advertised price is not the total price this is likely to mislead prospective purchasers. Suppliers of goods and services must ensure that the total price is adequately disclosed at the outset of the transaction. Where the total price is not disclosed at the outset the practice is sometimes referred to as “drip pricing” because the price is “dripped” to consumers in stages as the transaction progresses. Since 2014 the ACCC has been active in investigating drip pricing in relation to online booking platforms; see [7.170]. On 12 October 2015 the ACCC accepted a s 87BCCA undertaking from Vacaciones eDreams SL in relation to claims on its three platforms, eDreams Website, Mobile site and Application. The platforms made part price representations by displaying a

111 Commerce Commission v Adair (1995) 5 NZBLC 99-361 at 103,942. 112 ACCC v Hillside (Australia New Media) Pty Ltd (t/as Bet365) [2015] FCA 1007. 113 ACCC v Hillside (Australia New Media) Pty Ltd (t/as Bet365) [2015] FCA 1007 at [101]. 114 ACCC v Hillside (Australia New Media)Pty Ltd (t/as Bet365) [2015] FCA 1007 at [105].

[6.140]

6 Specific False or Misleading Representations

279

headline price which did not include two mandatory fees – a service fee and a payment fee. eDreams acknowledged that in relation to its Mobile site and Application its conduct contravened ss 18 and 29(1)(i) of the ACL, and in relation to its website its conduct contravened s 48 of the ACL. In ACCC v Jetstar Airways Pty Ltd,115 the Federal Court found that Jetstar Airways Pty Ltd (Jetstar) and Virgin Australia Airlines Pty Ltd contravened ss 18 and 29(1)(i) of the ACL by making false and misleading representations about the price of particular advertised airfares promoted on their respective websites. Jetstar and Virgin had advertised and promoted airfares at a prominent headline price without adequately disclosing that potential customers would be required to pay a booking and service fee if they paid for flights using debit and credit cards. The booking and service fee was only disclosed to consumers once they had moved through a number of stages in the booking process. In May 2013, the Jetstar booking process did not disclose the existence and quantum of the booking and service fee until consumers reached the final payment stage.116 In September 2013, Jetstar amended its website in response to discussions with the ACCC and brought forward in the booking process disclosures of the existence and quantum of the booking and service fee.117 Customers who booked flights in 2014 were presented with a series of links which referred to “Important Information” and disclosed the booking and service fee. Nevertheless, the ACCC alleged that the website disclosures were in adequate and continued to be false and misleading. Foster J found that the impugned conduct was not the same as advertising in print and radio and television broadcasts, and that the relevant target audience was not the public at large as the ACCC contended, but a narrower class consisting of members of the public who had internet access and possessed some level of knowledge and experience in navigating the internet and using online booking services, including an understanding of the use of hyperlinks to navigate particular websites.118 This finding was crucial to his Honour’s ultimate finding that, while in the case of Jetstar the website representations in May 2013 were misleading and contrary to ss 18 and 29(1)(i),119 the disclosures made in 2014 were adequate and not false or misleading.120 In ACCC v Spreets Pty Ltd,121 the respondent advertised the price of a tandem skydive and two course lunch as being “only $375” and “just $375” when in fact consumers were required to pay an extra $25 fee to redeem the voucher. The advertisement was held to contravene ACL, ss 18 and 29(1)(i) and a penalty of $220,000 was imposed. 115 ACCC v Jetstar Airways Pty Ltd [2015] FCA 1263. 116 ACCC v Jetstar Airways Pty Ltd [2015] FCA 1263 at [179]. 117 ACCC v Jetstar Airways Pty Ltd [2015] FCA 1263 at [185]. 118 ACCC v Jetstar Airways Pty Ltd [2015] FCA 1263 at [168]. 119 ACCC v Jetstar Airways Pty Ltd [2015] FCA 1263 at [181]. 120 ACCC v Jetstar Airways Pty Ltd [2015] FCA 1263 at [186]. 121 ACCC v Spreets Pty Ltd [2015] FCA 382 (Collier J).

280

The Australian Consumer Law

[6.145]

Discount or rebate [6.145]

Where a supplier represents that a discount or rebate will be provided, the supplier must fulfil the representation. In ACCC v Origin Energy Ltd,122 Origin Energy made representations on its website in relation to the supply of electricity and natural gas under the Daily Saver Energy Plan, that consumers would receive a discount off energy usage charges up to 16% for electricity and up to 12% off energy usage charges for gas. The court held that the representations were false because the rates used to calculate usage charges under the Daily Saver Energy Plan to which the discount would then be applied were higher than the rates under the standard retail contract. Consumers would have received a smaller discount than that represented. The court found that Origin Energy’s conduct contravened ss 18, 29(1)(g) and 29(1)(i) of the ACL and a penalty of $325,000 was imposed.

Similarly, in ACCC v AGL South Australia Pty Ltd,123 AGL SA represented that consumers who commenced a discounted electricity plan would be charged at a discount off the rates that applied under its standard retail contract. Consumers under the discounted electricity plan initially received the represented discount; however, AGL subsequently increased the rates so that these consumers were paying higher rates than consumers who were supplied under AGL SA’s standard retail contract. The court found that AGL SA’s conduct contravened ss 18, 29(1)(g) and 29(1)(i) of the ACL. A penalty of $700,000 was imposed and AGL SA was ordered to offer refunds to those consumers who paid more under their energy plan than they would have done if they had been on AGL SA’s standard retail contract. In summary, words and phrases such as “rebate” and “discount” should only be used when there is evidence to support their use. The ACCC may issue a substantiation notice requiring, for example, the maker of a representation that goods are discounted by 50% to substantiate that the price has in fact been reduced by 50% off the previous price which should have applied for a reasonable period before the discount offer commenced.

Comparative price advertising [6.150]

Comparative advertising can be a very powerful form of persuading or influencing consumers. In Gillette Australia Pty Ltd v Energizer Australia Pty Ltd,124 Heerey J stated: “There is no basis in the Act for regarding comparative advertising as an inherently disreputable form of commercial conduct, to be viewed with suspicion by the courts”.125 However, suppliers of goods and services who have recourse to this mode of advertising would be well advised to take special care because the more comparisons they employ “the more potential there is for error (and half truths)”.126 122 ACCC v Origin Energy Ltd [2015] FCA 55 (White J). 123 ACCC v AGL South Australia Pty Ltd [2015] FCA 399 (White J). 124 Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (2002) 193 ALR 629. 125 Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (2002) 193 ALR 629 at 633-634. 126 Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (2002) 193 ALR 629 at 634.

[6.155]

6 Specific False or Misleading Representations

281

In Gillette Australia Pty Ltd v Energizer Australia Pty Ltd, Gillette compared the performance of one of its “Duracell” batteries with the performance of one of those manufactured by Energizer. The advertisement stated that the Gillette Duracell Alkaline battery lasts three times longer than the Eveready Super Heavy Duty battery. The advertisement did not reveal that the Eveready Super Heavy Duty battery was a non-alkaline battery and that there was a substantial price differential between Duracell and the Eveready Super Heavy Duty battery. Energizer commenced proceedings seeking an injunction to restrain further publication of the advertisements on the grounds that by failing to reveal the substantial price difference consumers would be misled in comparing the value of the two. Energizer succeeded at first instance and an injunction was granted. Counsel for Energizer submitted that comparative advertising predicates that the comparison is between like products. If the products are not alike, then, unless the differentiating elements are sufficiently identified, the comparison will be unfair because it will mislead. In the context of the present case, to compare products without mentioning the price was not to make a full comparison and was thus unfair. The Full Court rejected this argument. Heerey J observed: Its textual base is the heading of Div 1 of Pt V, “Unfair practices”. But to use general notions of unfairness, which bring to mind the concept of unconscionable conduct appearing elsewhere in the TPA, is to put an unwarranted gloss on the plain words of provisions of Pt V such as ss 52(1) and 53(a). Provided the factual assertions are not untrue, or misleading half-truths, an advertiser can lawfully compare a particular aspect of its product or service favourably with the same aspect of a competitor’s product or service. … A consumer, informed by the advertisement (correctly, it must be assumed for present purposes) that the Duracell battery lasts three times longer than the Eveready Super Heavy Duty battery, can make his or her decision at the point of sale whether the extra power of the Duracell is worth the higher price. I do not see how it could be said that such a consumer has been misled or deceived. Indeed, it would be inconsistent with the policy and objectives of the TPA to restrict a trader from publicising, truthfully, a feature of its product which is superior to the same feature of a competitor’s product. If consumers buy more of a better product then the cost of producing that product can be spread over more items, [635] thus resulting in lower consumer prices (at least this will be so in a competitive market, of the kind that exists in the present case). The competitor will have the incentive to provide products of equal quality, or further reduce prices, or both.127

Reference pricing or two-price advertising [6.155]

Reference pricing or two price advertising is a common device used by suppliers of goods and services because consumers are attracted by the idea that they are paying less for them than they otherwise would. See [1.20].

127 Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (2002) 193 ALR 629 at 634-635. See also Telstra Corporation Ltd v Singtel Optus Pty Ltd (2007) ATPR ¶42-159 at 47,095 (Gray J) and Energizer Australia Pty Ltd v Remington Products Australia Pty Ltd (2008) ATPR ¶42-219 (Moore J).

282

The Australian Consumer Law

[6.155]

In ACCC v Prouds Jewellers Pty Ltd,128 the ACCC claimed that Prouds’ discount advertising of certain jewellery items in its mass distribution catalogues published to coincide with Valentine’s Day and Mother’s Day in 2006 contravened the TPA. The advertising was in the form of price comparisons such as “Was $199/Now $99.50” and the ACCC alleged that the “was” price suggested in a misleading way that the items had been offered for sale at that price immediately before the sale period (the advertised price representations). Prouds’ defence in relation to the advertised price representations was that it was unnecessary for an item to have been offered for sale at the “was” price immediately before the catalogue was published, so long as it had been offered at the “was” price at some point in the past. At first instance Moore J rejected Prouds’ defence and held that Prouds engaged in misleading conduct in relation to the advertised price representations. It was necessary to consider the context in which the “was” price appeared. The “was” price did not appear in isolation, but appeared in juxtaposition with the “now” price. His Honour held: The message conveyed to consumers by the “was” price in this context was that the item, immediately before the sale, would have been offered for sale and purchased for the “was” price… It was misleading to identify in the catalogue a “was” price which did not represent the price at which an item had been offered for sale and would have been purchased by the hypothetical consumer immediately before the sale commenced.129

The Full Federal Court dismissed an appeal and endorsed the primary judge’s approach.130 In ACCC v Jewellery Group Pty Ltd,131 the respondent operated jewellery businesses under the name Zamel’s. It published a catalogue which showed advertisements with higher prices that were struck through with a line and next to them other lower prices were indicated as the “sale” prices. Another catalogue contained “was/now” pricing. The ACCC alleged that since Zamel’s had never sold the items at the higher strike through prices or the “was” prices, it falsely represented that by buying at the sale prices the consumer would be saving the difference between the strike through or was price and the current price. The respondent argued that the target audience consisted of both consumers who were aware of the discount culture the jewellery trade and who would have taken the different prices as the starting point for the negotiation of discounts. These members of the “aware” class would not have been misled as to the extent of the saving to be made. Lander J accepted that the relevant class would have consisted of both persons who were aware and persons who were unaware of the manner in which Zamel’s and 128 ACCC v Prouds Jewellers Pty Ltd (2008) ATPR ¶42-217 (Moore J). On appeal, ACCC v Prouds Jewellers Pty Ltd (2008) ATPR ¶42-268 (Black CJ, Ryan and Gordon JJ). For other cases concerning two-price advertising see: TPC v Cue Design Pty Ltd (1996) ATPR ¶41-475 (O’Loughlin J); ACCC v Allans Music Group Pty Ltd [2002] FCA 1552 (Tamberlin J); and Walker, Commissioner for Fair Trading v Rugs a Million Pty Ltd [2006] WASC 127 (Simmonds J). 129 ACCC v Prouds Jewellers Pty Ltd (2008) ATPR ¶42-217 at [66]. 130 ACCC v Prouds Jewellers Pty Ltd (2008) ATPR ¶42-268 at [63]. 131 ACCC v Jewellery Group Pty Ltd (2012) ATPR ¶42-411.

[6.160]

6 Specific False or Misleading Representations

283

other retailers advertised jewellery.132 His Honour focussed on the unaware members of the class. The unaware consumers would not have understood the strike through price or “was” price to be an “offer” that was negotiable. Lander J concluded that the unaware consumers would understand the catalogues to mean that they would save the amount between the two prices and that the savings representation was false.133 This type of false or misleading representation lends itself to the use of the ACCC’s power to issue infringement notices. On 22 December 2010, the ACCC issued four infringement notices against Dodo Australia Pty Ltd totalling $26,400 in respect of an advertising campaign promoting its Unlimited ADSL2+ broadband plan. The advertisements represented that customers could purchase the broadband service alone for $39.90. In fact, the consumers could only purchase that plan if they also purchased a home telephone plan which was an additional $29.90 per month. The ACCC considered that the representation contravened s 53(e) of the TPA. On 12 May 2011, the ACCC issued 27 infringement notices ($6,600 for each notice) against SingTel Optus Pty Ltd totalling $178,200 in respect of an advertising campaign for its “Max Cap” plans. These advertisements represented that a consumer could purchase these plans and expect to pay a maximum specified amount per month, when in fact the specified amount was the minimum the consumer would pay each month. The ACCC considered that the representation contravened s 53(e) of the TPA.

REPAIRS AND SPARE PARTS – GOODS [6.160]

False or misleading representations with respect to the availability of facilities for the repair of goods or of spare parts for goods are prohibited by s 29(1)(j). The equivalent provision of the was s 53(ea). The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states: A representation concerning the availability of facilities for the repair of goods or of spare parts for goods could cover, for example and without limitation, a representation that spare parts, or specific spare parts, will be available when no such parts are available or a representation that there are facilities for the repair of the goods which are not, in fact, available.134

132 ACCC v Jewellery Group Pty Ltd (2012) ATPR ¶42-411 at [36] adopting the reasoning of Mansfield J in ACCC v Ascot Four Pty Ltd (2008) 250 ALR 467 which was approved by the Full Federal Court in Ascot Four Pty Ltd v ACCC (2009) 176 FCR 106. 133 ACCC v Jewellery Group Pty Ltd (2012) ATPR ¶42-411 at [38] and [152]. The decision was upheld by the Full Federal Court in Jewellery Group Pty Ltd v ACCC [2013] FCAFC 144. For the penalty decision see ACCC v Jewellery Group Pty Ltd (No 2) (2013) ATPR ¶42-440. 134 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.111].

284

The Australian Consumer Law

[6.165]

PLACE OF ORIGIN Goods [6.165]

Many food products, such as wine and cheese, are packaged and promoted on the basis that they emanate from a particular place which has a reputation for producing high quality products because of its climate or soil characteristics. Consumers are prepared to pay a premium for such goods. False or misleading representations concerning the place of origin of goods are prohibited by ACL, s 29(1)(k). The equivalent provision of the TPA was s 53(eb). The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states: A representation concerning the place of origin of goods could cover, for example and without limitation: • a representation that goods were manufactured in a particular place; or • a representation that the contents of the goods came from a particular place; or • a representation that the goods were “made in”, the “product of” or “grown in” a particular place.135

A place of origin representation is any labelling, packaging, logo or advertising that makes a statement or claim about the particular place from which the goods originated. “Country of origin” claims are a subset of “place of origin” claims. The country of origin provisions set out in Ch 5, Pt 5-3 of the ACL provide a series of defences concerning the use of particular claims on the labels of goods. If goods satisfy these defences a person is deemed by s 255 of the ACL not to have engaged in misleading or deceptive conduct, or of having made a false or misleading representation under ss 18, 29(1)(a), 29(1)(k), 151(1)(a) or 151(1)(k) of the ACL. In ACCC v Marksun Australia Pty Ltd,136 the respondent operated a business over the internet of selling woollen boots described as “Ugg Boots from Australia” when in fact they were manufactured in China. The respondent also made use of the Australian Made Logo. This was held to be part of a deliberate marketing strategy in contravention of ss 18 and 29(1)(k) of the ACL and a pecuniary penalty of $330,000 was imposed for the Made in Australia conduct and $100,000 for use of the Australian Made Logo conduct. Gilmour J observed that the conduct resulted not just in consumer detriment, but also harmed competitors who sold genuine Australian made boots.137 In construing the phrase “place of origin”, Gummow J in Netcomm (Australia) Pty Ltd v Dataplex Pty Ltd,138 focused on the word “origin” which according to the Oxford English Dictionary, refers to a source or cause of the existence of goods: 135 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.112]. 136 ACCC v Marksun Australia Pty Ltd (2011) ATPR ¶42-363. 137 ACCC v Marksun Australia Pty Ltd (2011) ATPR ¶42-363 at [107]. 138 Netcomm (Australia) Pty Ltd v Dataplex Pty Ltd (1988) ATPR ¶40-883.

[6.165]

6 Specific False or Misleading Representations

285

The concept of “place of origin” will present difficulties where sophisticated articles derive their value and character as articles of commerce by various circumstances involving design and manufacture. There is then more likely to be a complex of intergers constituting the origin of those articles.139

By way of background, it is necessary to consider some of the tests adopted in the early case law. Prior to December 1994, an “essential character” test was used to determine whether a product could be labelled “Made in Australia”. For example, in Thorpe v CA Imports Pty Ltd,140 the defendant manufactured toy koalas from casings supplied from Korea. The toy koalas were marketed with a label bearing the words “Made in Australia”. The prosecutor alleged that CA Imports were selling toys that falsely represented that the goods were made in Australia, in breach of s 53(eb). There were three essential steps in the process of manufacture of the koalas. The first essential step was the cutting and sewing of the material to form the casing. The second essential step was the filling of the casing. The third step was the further sewing and checking procedures. Only the first of these was carried out in Korea, but Sheppard J held that this was the step which transformed the material used into the essential shape and appearance of a koala. Sheppard J concluded that the koalas were not correctly described as having been made in Australia. The appropriate description would rather be, “Designed and finished in Australia using casings (or skins) made in Korea”. Toy koalas were again at issue in TPC v QDSV Holdings Pty Ltd (trading as Bush Friends Australia).141 All the materials, except the koala’s filling, were overseas materials. A Chinese firm produced, cut and sewed the koala pieces together, leaving the head and torso separate, before sending the pieces to Australia. The eyes and noses were made in Hong Kong or Taiwan. In Australia the noses and eyes were attached to the casings, filling was inserted, and the heads and torsos sewn together. The koalas were labelled “Made in Australia” together with the qualification that “the major component of the manufacturing costs is in Australian labour and material. In order to maintain the highest quality and value, some elements have been purchased abroad”. The TPC sought an injunction restraining QDSV’s alleged misleading or deceptive labelling in breach of ss 52 and 53(eb) of the TPA. Davies J applied the distinction drawn by Gummow J in Netcomm (Australia) Pty Ltd v Dataplex Pty Ltd,142 between “Made in Australia” and “Built in Australia”. According to that distinction, “Made in Australia” makes a representation as to the place of origin and a statement which concerns the steps and procedures which preceded and resulted in the formation or composition of the goods. On the other hand, the words “Built in Australia” do not relate to the origin in the sense of design and manufacture, but rather to the putting together of separate parts. 139 Netcomm (Australia) Pty Ltd v Dataplex Pty Ltd (1988) ATPR ¶40-883 at 49,568. 140 Thorpe v CA Imports Pty Ltd (1990) ATPR ¶40-996. 141 TPC v QDSV Holdings Pty Ltd (trading as Bush Friends Australia) (1995) ATPR ¶41-371. 142 Netcomm (Australia) Pty Ltd v Dataplex Pty Ltd (1988) ATPR ¶40-883.

286

The Australian Consumer Law

[6.170]

Accordingly, Davies J concluded that the words “Made in Australia”, in the print size in which they appeared on the label, were misleading. Only some of the manufacturing process, in the sense explained by Gummow J in Netcomm, occurred in Australia. A significant part of the manufacturing process occurred in China, and most of the components were imported. The Government introduced Pt V, Div 1AA of the TPA to provide objective criteria governing the use of “made in Australia” claims. The defences in Pt V, Div 1AA of the TPA have been adopted in Pt 5-3 of the ACL with some modifications and additions. The defences are considered at [13.405]–[13.430]. On 15 April 2014 the ACCC released its guidance on “Country of Origin Claims and the Australian Consumer Law”.143

Food labelling [6.170]

Country of origin labelling for food is regulated through the Australia New Zealand Food Standards Code (the Food Standards Code) administered by Food Standards Australia New Zealand. The Government announced on 25 July 2015 that it proposed to introduce a new food labelling law for many foods such as fresh produce and processed food products offered for retail sale in Australia to take effect in mid 2016.144 The proposed new labelling laws will be regulated through a mandatory information standard under the ACL rather than under the Food Standards Code. The new mandatory labels will include a kangaroo in a triangle logo to indicate that the food was made, produced or grown in Australia, and a bar chart indicating the proportion of Australian ingredients by weight. On 19 August 2014, the ACCC terminated its investigation into conduct by Maggie Beer Products Pty Ltd, a leading producer of gourmet food products, following the giving of a court enforceable undertaking pursuant to s 87B of the CCA. Maggie Beer Products made a representation on certain “Maggie Beer” branded products through the use of the Maggie Beer logo, the words “Maggie Beer A Barossa Food Tradition”, and the words “Maggie Beer Products, 2 Keith Street Tanunda South Australia 5352” that the products were made in Tanunda, the Barossa Valley, or South Australia when in fact they were made by third parties in Victoria and Queensland. Maggie Beer Products acknowledged that its conduct was likely to have contravened ss 18 and 29(1)(k) of the ACL. In relation to its investigation the Chairman of the ACCC stated: Consumers are often willing to pay premium prices for local products and businesses are following consumer demand by stocking local goods. Protecting the integrity of credence claims made about food products is a priority enforcement area for the ACCC, The Barossa Valley is a nationally recognised premium food and wine destination, and businesses in that region use place of origin claims to promote or distinguish their product from others in the market. Misleading representations about the origin of

143 See https://www.accc.gov.au/media-release/accc-launches-guidance-on-country-of-origin-lab elling-for-businesses. 144 Information about the proposal is available at http://www.industry.gov.au/industry/ IndustrySectors/FoodManufacturingIndustry/Pages/Proposed-reforms-to-country-of-origin-foodlabels-overview.aspx.

[6.175]

6 Specific False or Misleading Representations

287

products to capitalise on this demand undermines the integrity of credence claims which are relied on by consumers and, equally important, can harm competing producers whose products are made locally.145

This case illustrates the dilemma faced by suppliers of food products who wish to register a trade mark that incorporates a place of origin, and the business later expands beyond the place of origin. If they continue to use the trade mark that contains the place name in relation to products produced outside the original place of origin, they are likely to contravene ss 18 and 29(1)(k) of the ACL; if they cease using the trade mark, they may then lose the value of the goodwill they have developed in the brand.

NEED – GOODS OR SERVICES [6.175]

False or misleading representations with respect to the “need” for any goods or services are prohibited by s 29(1)(l). The equivalent provision of the former TPA was s 53(f). The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states: A representation concerning the need for any goods or services could cover, for example and without limitation: • a representation that the goods or services are necessary in particular circumstances or at all; or • a representation that the goods and services are required in the light of a specific event or as a consequence of specific circumstances; or • a representation that a failure to provide the goods or services will result in specific things occurring or not occurring.146

A distinction can be drawn between advertisements stating a “need” as a self-evident expression of opinion (eg, “You need X deodorant”), where consumers are normally able to judge for themselves, and misleading statements about the need for particular goods or services requiring the exercise of judgment or specialist expertise, where consumers are not able to judge for themselves (eg, “You need new brake pads”). In Dawson v Motor Tyre Service Pty Ltd,147 the defendant was prosecuted for an alleged contravention of s 53(f)TPA. The owner of a motor vehicle took the vehicle to the defendant to have the wheels balanced to correct a vibration problem. One of the defendant’s mechanics, Dufall, advised that it was pointless having the wheels balanced until some work was done on the front assembly. The owner was subsequently advised by another mechanic that the quoted repair work was unnecessary. The prosecution was dismissed on the evidence. 145 ACCC Media Release 211/14 (19 August 2014) at https://www.accc.gov.au/media-release/maggiebeer-products-acknowledges-labelling-likely-to-be-misleading. See also the ACCC’s investigation into Carlton United Breweries Ltd regarding its “Byron Bay Pale Lager” at https:// www.accc.gov.au/media-release/accc-acts-on-beer-labelling. 146 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.119]. 147 Dawson v Motor Tyre Service Pty Ltd (1981) ATPR ¶40-223.

288

The Australian Consumer Law

[6.180]

Fisher J held that the “need” for the work was a matter of judgment and in the circumstances of the case was not capable of positive proof beyond a reasonable doubt. In order to succeed, “the prosecutor must discharge the onus of establishing to the relevant degree of certainty that the fact that the work was not needed was the only judgment or opinion which could be reasonably held”.148 Contraventions of TPA, s 53(f)/ACL, s 29(1)(l) were established in ACCC v Safety Compliance Pty Ltd (in liq) (No 2).149 Safety Compliance falsely represented to consumers that it was affiliated with, or actually was, a workplace health and safety agency. Safety Compliance also falsely represented that workplace safety laws required businesses to maintain workplace wall charts and first aid kits of the same nature as those sold by Safety Compliance when in fact the laws did not.

EXISTENCE, EXCLUSION OR EFFECT OF ANY CONDITION, WARRANTY, GUARANTEE, RIGHT OR REMEDY [6.180]

False or misleading representations in trade or commerce concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy are prohibited by ACL, s 29(1)(m). The equivalent provision of the TPA was s 53(g) and the jurisprudence in relation to s 53(g) will apply in relation to s 29(1)(m).150

Failing to honour a condition, warranty, or guarantee, without more, will not contravene s 29(1)(m). In Hollis v ABE Copiers Pty Ltd,151 the guarantee was contained in a letter which stated that the defendant would, after one year, buy back the machine for 70% of the original purchase price of $3,995. The complaint of the informant was that the guarantee was not honoured. Lockhart J held that by declining to honour a guarantee, the defendant had not made a false or misleading statement concerning the effect of a guarantee contrary to s 53(g) of the TPA. The editor of the ATPR suggests that the finding appears to turn on the distinction made by the House of Lords in British Airways Board v Taylor,152 between a promise as to future action and a statement as to existing fact, which was adopted by Franki J in Thomson v Mastertouch TV Service,153 in relation to s 59 of the TPA. In order to be actionable it would be necessary to prove that at the time the representation was made the respondent had no intention of honouring the guarantee, or did not believe that the guarantee would be satisfied (see [3.145]). Section 29(1)(m) includes a specific reference to guarantees under Pt 3-2, Div 1 of the ACL to ensure the prohibition covers representations about statutory guarantees provided by the ACL. 148 Dawson v Motor Tyre Service Pty Ltd (1981) ATPR ¶40-223 at 43,024. 149 ACCC v Safety Compliance Pty Ltd (in liq) (No 2) [2015] FCA 1469. 150 See ACCC v Excite Mobile Pty Ltd (2013) ATPR ¶42-437 (Mansfield J); ACCC v Harvey Norman Holdings Ltd [2011] FCA 1407 (Collier J); ACCC v Original Mama’s Pizza & Ribs Pty Ltd (2008) ATPR ¶42-236 (Madgwick J); ACCC v Bio Enviro Plan Pty Ltd (2003) ATPR ¶41-963 (R D Nicholson J); ACCC v Goldy Motors Pty Ltd (2001) ATPR ¶41-801 (Carr J); ACCC v Nationwide News Pty Ltd (1996) ATPR ¶41-519 (Heerey J); Hollis v ABE Copiers Pty Ltd (1979) 41 FLR 141 (Lockhart J); and Thomson v Mastertouch TV Service (1977) ATPR ¶40-027 (Franki J). 151 Hollis v ABE Copiers Pty Ltd (1979) 41 FLR 141. 152 British Airways Board v Taylor (1976) 1 WLR 13. 153 Thomson v Mastertouch TV Service (1977) ATPR ¶40-027.

[6.180]

6 Specific False or Misleading Representations

289

The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states: This could cover representations made by a person (generally a trader) to a person (generally a consumer as defined in s 3 of the ACL) that a condition, warranty, guarantee, right or remedy, including the statutory guarantees provided by the ACL: • does or does not exist with respect to the goods or services, either at all or in specified circumstances; or • may or may not be excluded with respect to the goods or services, either at all or in specified circumstances; or • may or may not have a particular effect with respect to the goods or services, either at all or in specified circumstances.154

Section 64 of the ACL provides that a term of a contract that purports to exclude, restrict or modify: (a) the application of all or any of the consumer guarantee provisions, or (b) the exercise of a right conferred by the consumer guarantee provisions, or (c) any liability of a person for a failure to comply with a consumer guarantee that applies to a supply goods or services is void.

This prohibition on contracting out applies to both suppliers and manufacturers. Where the consumer guarantees are not met, for example, goods are not of acceptable quality, or do not comply with the description, the consumer has a right to choose whether to seek a remedy from either the supplier or the manufacturer. If the consumer elects to seek a remedy from the supplier, the supplier cannot direct the consumer to the manufacturer and insist the consumer first claim under the manufacturer’s warranty. Such conduct may contravene ss 18(1) and 29(1)(m) of the ACL. The combined effect of the guarantees created by ACL, Pt 3-2, s 64 and s 29(1)(m) is that “no refund” signs in stores or online will contravene the ACL where they, in effect, misrepresent the remedies available to a dissatisfied consumer of goods or services; see, for example, ACCC v Chopra.155 In this case, Mr Chopra, who represented that consumers who purchased goods through the website http:// www.electronicbazaar.com.au were not entitled to a refund, replacement or repair in relation to those goods, was found to have contravened ss 18 and 29(1)(m) of the ACL. A penalty of $60,000 was imposed on Mr Chopra. Similarly, in ACCC v Valve Corporation (No 3),156 representations in Steam Subscriber Agreements (SSA) that Steam fees were not “refundable in whole or part” were held to contravene ss 18(1) and 29(1)(m) of the ACL because pursuant to ss 259(3) and 263(4) consumers were entitled to elect to have a refund for a major failure to comply with that guarantee of acceptable quality in s 54 of the ACL in relation to goods. Edelman J rejected a submission by Valve that the message conveyed to a reasonable consumer was that while as a matter of contract a consumer could not 154 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.127]. 155 ACCC v Chopra [2015] FCA 539 (11 May 2015). 156 ACCC v Valve Corporation (No 3) [2016] FCA 196.

290

The Australian Consumer Law

[6.185]

claim a refund, the consumer might be able to obtain a refund under the ACL regime. His Honour held that the message conveyed by the SSA to a reasonable consumer was that the Steam fees were not “refundable in whole or part” under any circumstances.157 Thus, if liability is to be avoided, an exclusion clause must clearly state that the consumers rights under the ACL are not affected by it and these rights continue notwithstanding the clause; failure to do this could result in ACL, s 29(1)(m) being contravened. However, retailers are not obliged to provide a refund if the consumer has damaged the goods by abnormal use or because the consumer has had a change of mind and no longer wants the goods even though they are not defective in any way.

Misrepresenting the existence of rights or benefits [6.185]

An incorrect statement about rights or benefits to be conferred under a contract may contravene s 29(1)(m) of the ACL. In ACCC v Harvey Norman Holdings Ltd,158 the impression given was that the goods advertised were available at Harvey Norman Stores generally. In fact, there was a condition in small print in the catalogues generally on the last page and never on the front page that the offers in them were only being made by a single store in each State or Territory. The website also had a condition that the offers appearing on it were only being made by one store in Australia. This condition contradicted the main impression. Collier J held that the promotion contravened s 53(g) of the TPA, and in relation to conduct that occurred after 1 January 2011, s 29(1)(m) of the ACL. In imposing a penalty of $750,000, Collier J described the promotion as: an expensive, misleading and calculated campaign of sizeable proportions, characterised by blatant and deliberate disregard of the truth, cynical strategies to capitalise on contemporary sporting events (in the case of the 3D Conduct) and the contemptuous manipulation of the expectations of ordinary consumers in respect of so-called “fine print” (in relation to the Catalogues). The conduct of HNHL appeared intended to reach as many Australian consumers as possible, in all parts of the country, through such diverse media as internet, newspaper and letterbox drop. In relation to both types of conduct, the evidence before the Court is that HNHL knew of the deceptive nature but did nothing to correct it.159

Firms sometime engage in sales tactics that mislead consumers as to whether they have entered into a binding legal contract. In ACCC v Energy Australia Pty Ltd,160 Energy Australia Pty Ltd engaged Bright Choice Australia Pty Ltd as its agent in conducting a telemarketing campaign for the purpose attracting new customers to its electricity and gas plans. During those calls, Bright Choice stated that the consumers were not being signed up to an energy agreement and that they would be sent information to enable them to decide whether to sign up to a new energy agreement with Energy Australia. In fact, they were recorded by Bright Choice as 157 ACCC v Valve Corporation (No 3) [2016] FCA 196 at [241]. 158 ACCC v Harvey Norman Holdings Ltd (2011) ATPR ¶42-384 (Collier J). 159 ACCC v Harvey Norman Holdings Ltd [2011] FCA 1407 at [45]. 160 ACCC v Energy Australia Pty Ltd [2015] FCA 274.

[6.190]

6 Specific False or Misleading Representations

291

having agreed to enter into a new energy agreement, and Energy Australia sent them a “Welcome Pack” containing a contract to acquire electricity and/or gas from Energy Australia. Gordon J held that Energy Australia, through its agent, Bright Choice, had made false or misleading representations concerning the existence or effect of a condition in contravention of ACL, s 29(1)(m). A penalty of $1 million was imposed on Energy Australia, and a penalty of $100,000 was imposed on Bright Choice.161 In ACCC v Chrisco Hampers Australia Ltd,162 Chrisco’s terms and conditions included a statement that “your order cannot be cancelled once it is fully paid for”. The court held that the representation was false and contravened s 29(1)(m) of the ACL because the agreements were lay-by agreements and s 97(1) of the ACL permits a consumer to terminate a lay-by agreement at any time before the goods to which the agreement relates are delivered to the consumer under the agreement.163

REQUIREMENT TO PAY FOR A CONTRACTUAL RIGHT: EXTENDED WARRANTIES [6.190]

False or misleading representations in trade or commerce concerning a requirement to pay for a contractual right that: (i) is wholly or partly equivalent to any condition, warranty, guarantee, right or remedy (including a guarantee under Div 1 of Pt 3-2); and (ii) a person has under a law of the Commonwealth, a State or a Territory (other than an unwritten law) will contravene s 29(1)(n) of the ACL. There was no equivalent provision under the TPA. The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states: This could cover representations made by a person (generally a trader) to a person (generally a consumer as defined in s 3 of the ACL) that a condition, warranty, guarantee, right or remedy, including the statutory guarantees provided by the ACL must be paid for, either at all or in specified circumstances.164

This prohibition was inserted into the ACL primarily to deal with a problem identified by CCAAC and NEIAT in relation to extended warranties. Section 151(1)(n) of the ACL creates an offence of strict liability in relation to the same conduct covered by s 29(1)(n). Extended warranties are widely offered by retailers and many consumers purchase them even though most consumers rarely use them.165 While most retailers do not exert unfair influence on consumers to purchase an extended warranty, some consumers fail to understand their statutory rights, and may be pressured into 161 ACCC v Energy Australia Pty Ltd [2015] FCA 274 at [68]. 162 ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204. 163 ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204 at [158]. 164 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.129]. 165 CHOICE 2008, Extended Warranties Project, Final Report, Community Research, p 16.

292

The Australian Consumer Law

[6.195]

buying an extended warranty by comments by the salesperson about the cost of repair. Any such misleading conduct or unconscionable conduct associated with the supply of an extended warranty will be regulated by the general prohibitions in relation to such conduct.166

What is an “extended warranty”? [6.195]

In its Report to the Minister, CCAAC defined an extended warranty as:

an agreement offered by a retailer, manufacturer or third party to cover against the risk that the product will develop faults during the term of the warranty. Consumers are required to enter into a contract separate from the contract of sale for the product, and to pay a separate price for the warranty. Generally, the warranty is acquired at the point of sale soon after the purchase of the underlying product. Extended warranties are offered for a wide range of products, including whitegoods, electrical and electronic goods, furniture and motor vehicles. The level of cover varies, but they would normally cover the repair of the underlying product, and may also provide for its replacement in certain circumstances.167

Concerns raised by extended warranties [6.200]

The NEIAT study identified a number of issues of concern for consumers in relation to extended warranties including: • uncertainty regarding the identity of the extended warranty provider and the scope of coverage in relation to the exclusions, restrictions and additional charges; • lack of opportunity to understand the precise details of the extended warranty at the point of sale; • failure to provide comprehensive or essential coverage; and • failure to provide information about the price of an extended warranty until the point of sale, which was a source of confusion for consumers when making decisions as to the value of purchasing an extended warranty.168

CCAAC concluded: Extended warranties are, in part, often marketed to provide “peace of mind” to consumers over and above statutory implied terms and the manufacturer/importer’s voluntary warranty. However, the evidence presented to CCAAC suggests that extended warranties may not be justified in some cases. This is especially the case when retailers and manufacturer/importers are required to remedy faults or replace goods under the existing statutory regime.169

Extended warranties: guarantee of acceptable quality [6.205] An extended warranty is a “contractual right” for the purposes of ACL, s 29(1)(n). In deciding whether an extended warranty is “wholly or partly” 166 See Chapters 3 and 4 respectively. 167 CCAAC Review of Statutory Implied Conditions and Warranties (2009) p 79 at http://www.ccaac.gov.au. 168 NEIAT, National Baseline Study for Statutory Warranties and Refunds, Research Paper No 2 October 2009, p 48 http://www.archive.treasury.gov.au/documents/1666/PDF/National_Baseline_Study_ Warranties_and_Refunds.pdf. 169 Finding 8.1, CCAAC Review of Statutory Implied Conditions and Warranties (2009) p 79 at http://www.ccaac.gov.au.

[6.205]

6 Specific False or Misleading Representations

293

equivalent to the guarantee of acceptable quality, it is first necessary to consider the nature of the guarantee of acceptable quality in relation to the particular goods the subject of the extended warranty. It is then necessary to consider whether the extended warranty “wholly or partly” overlaps with the guarantee of acceptable quality in time or scope. Under the consumer guarantee provisions of the ACL, goods must be of acceptable quality which means that they must be durable. The exact nature of the statutory guarantee of acceptable quality that applies to particular goods is not prescribed. The duration and scope of the guarantee of acceptable quality can only be determined by reference to the features of the goods themselves and the circumstances of the sale (such as the price and description of the goods). The concept of “durability” involves a qualitative analysis of the reasonable expectation of the ordinary useful life of the goods in question.170 As regards the scope of the guarantee of acceptable quality, it only extends to cover defects (including latent defects) that were present in the goods at the time of supply. It is not an absolute guarantee in the sense that it covers any failure arising such as a failure arising from normal wear and tear. For example, if a telecommunications service provider were to offer a handset and a call plan for two years, and separately offered an extended warranty to repair or replace the handset in the event of a defect occurring in the first 12 months, it is likely to contravene ss 29(1)(n) and 151(1)(n) of the ACL. In such circumstances a reasonable consumer would expect the handset to be free of defects for the length of the plan, so that the guarantee of acceptable quality would last for at least the length of the plan. The telecommunications service provider would have made a false or misleading representation concerning a requirement to pay for a contractual right that is wholly or partly equivalent to the guarantee of acceptable quality under Div 1 of Pt 3-2. To take another example, a reasonable consumer paying $3,000 for a refrigerator would expect it to last for more than two years. The life expectancy of a fridge freezer has been held to be at least 10 years.171 If it were to develop a fault after one year, the consumer could obtain a remedy from the supplier under the ACL. If, prior to purchase, a supplier were to recommend that the consumer should acquire a three-year extended warranty in relation to the refrigerator, the supplier would be making a false or misleading representation concerning a requirement to pay for a contractual right that was “wholly or partly” equivalent to a guarantee under Div 1 of Pt 3-2, contrary to s 29(1)(n). The supplier would breach s 29(1)(n) if the cover provided by the extended warranty in relation to the refrigerator had any overlap with the cover provided by the consumer guarantee of acceptable quality, even if some of the cover was wider in scope. Under this interpretation, the rights provided by the extended warranty must be entirely additional to the statutory guarantees. In other words, the extended warranty would need to take effect after 10 years when the statutory 170 See [8.250]. 171 See C v FP Ltd & LVM Ltd [2009] NZDispT 34 (2 July 2009) and F v SC Ltd NZDispt 94 (3 November 2009).

294

The Australian Consumer Law

[6.210]

guarantee of acceptable quality had expired. An extended warranty that commenced eight years after purchase would be “partly” covered by the statutory guarantee of acceptable quality and would also contravene s 29(1)(n). An extended warranty for three years provides no additional protection to that already available under the ACL, and is “wholly” within that protection. The recommendation is misleading, and would constitute an offence under s 151(1)(n) of the ACL, unless the extended warranty provided some additional feature not available the consumer under Div 1 of Pt 3-2. As regards the scope of the extended warranty, it would provide additional protection if the statutory guarantees regime under Div 1 of Pt 3-2 does not apply, for example, the goods were acquired at an auction, or the purchaser was not a “consumer” within the ACL, s 3 definition because the purchaser acquired them for re-sale. As an example, in Director of Consumer Affairs Victoria v The Good Guys Discount Warehouses (Australia) Pty Ltd,172 the extended warranty provided benefits that were additional to the consumer guarantees and related remedies in the ACL, including cover for breakdowns caused by general wear and tear; automatic replacement for products under $250; and “no lemon” cover, which provided that if the same part in a product required repairing more than twice the product would be replaced on the third breakdown.173 The scope of the extended warranty would be outside the scope of the guarantee of acceptable quality if the goods develop faults arising from normal wear and tear. Whilst a guarantee of acceptable quality only relates to the state of goods when they are delivered, an extended warranty may provide additional protection against defects occurring beyond the date of delivery. This is, in effect, a promise that the goods will perform trouble-free during the period of the extended warranty extending to cover all defects – latent defects existing at the time of delivery, new defects occurring as a result of events occurring after the date of delivery, and normal wear and tear. Section 29(1)(n) creates compliance difficulties for suppliers of extended warranties as the duration of the guarantee of acceptable quality applies and the scope of cover provided by it will vary depending on the age, make, price and other factors relating to the particular goods sold. In some circumstances it may be difficult for a supplier to ensure that the extended warranties supplied is entirely in addition to the scope of the guarantee of acceptable quality.

Information at the point-of-sale [6.210]

Lack of awareness on the part of consumers as to their rights under the consumer guarantees regime is an ongoing problem. In 2011, Australian State and Territory Governments commissioned Sweeney Research to conduct a national baseline study to gather evidence about business and consumer awareness of consumer protection laws. The survey revealed that a majority of respondents

172 Director of Consumer Affairs Victoria v The Good Guys Discount Warehouses (Australia) Pty Ltd [2016] FCA 22. 173 Director of Consumer Affairs Victoria v The Good Guys Discount Warehouses (Australia) Pty Ltd [2016] FCA 22 at [35].

[6.210]

6 Specific False or Misleading Representations

295

(90%) were aware of the existence of consumer protection laws.174 However, there was only limited awareness of specific consumer protection laws. Only 7% of respondents were aware of the FTAs and only 6% were aware of the TPA.175 A majority of respondents (59%) could not name any specific consumer protection law.176 The ACL regulators have developed the following point-of-sale sign to give consumers clear information about their rights under the consumer guarantees regime: Australian Consumer Law Refunds and returns We are not required to provide a refund or replacement if you change your mind But you can choose a refund or exchange if an item has a major problem. This is when the item: • has a problem that would have stopped someone from buying the item if they had known about it • is unsafe • is significantly different from the sample or description • doesn’t do what we said it would, or what you asked for, and can’t easily be fixed. Alternatively, you can keep the item and we will compensate you for any drop in value. If the problem is not major, we will repair the item within a reasonable time. If it is not repaired in a reasonable time you can choose a refund or replacement. Please keep your proof of purchase – eg your receipt.177

The sign has a two-fold purpose: first, to make it easier for consumers and businesses to resolve disputes; and second, to inform consumers about their rights at the time of purchase so that they can decide whether the additional rights provided by any extended warranty provided by the retailer represent value for money. Retailers are encouraged to display the sign, but are not obliged to do so. Retailers need to take great care when speaking to consumers about their legal rights under the consumer guarantees regime and as to whether they will have a remedy if the product purchased proves to be defective. In Director of Consumer Affairs Victoria v The Good Guys Discount Warehouses (Australia) Pty Ltd,178 the Director of Consumer Affairs Victoria (CAV) alleged that the respondent had breached ss 18 and 29(1)(l) and (m) of the ACL by engaging in misleading conduct in relation to the promotion of extended warranties for its goods. CAV sent inspectors to a number of the respondent’s stores and they posed as consumers interested in purchasing a television. CAV alleged that certain statements that were 174 Australian Government, Australian Consumer Survey 2011 (June 2011) p www.consumerlaw.gov.au/files/2015/09/Australian_Consumer_Survey_Report.pdf Australian Consumer Survey 2011).

11, http:// (hereafter

175 Australian Consumer Survey 2011, p 12. 176 Australian Consumer Survey 2011, p 12. 177 See ACCC Refunds and Returns (Media release, 17 June 2011), at http://www.accc.gov.au/ publications/refunds-returns. 178 Director of Consumer Affairs Victoria v The Good Guys Discount Warehouses (Australia) Pty Ltd [2016] FCA 22.

296

The Australian Consumer Law

[6.215]

made by the sales staff were misleading. CAV also alleged that the respondent engaged in misleading conduct by silence in that the sales staff had failed to say that: (a) the Good Guys, as the supplier, may, in some circumstances, have a legal obligation to provide a refund or to repair or replace a television; (b) if the television fails completely, the customer would have a choice to seek either a refund or a replacement from The Good Guys; (c) the consumer guarantee and remedies provisions in the ACL and ACL (Vic) may provide a customer with a remedy if their television breaks down either within or after 12 months of the purchase.179

The court rejected CAV’s allegations. Moshinsky J provided the following summary of his reasons: Each store visit needs to be considered separately. In each case, it is necessary to consider the conversation as a whole. In several cases, the words used in the conversation (both in the questions and the answers) were vague and general, making it difficult to conclude that the statement was an inaccurate description of the position of the customer if, for example, his or her television broke down after 12 months and the customer had not purchased the extended warranty. In some cases, the focus of the discussion (both the questions and the answers) was on the practice in relation to warranties and dealing with problems rather than with rights and remedies. This makes it difficult to conclude that the failure of the salesperson or staff member to refer to the consumer guarantees and related remedies in the Australian Consumer Law was misleading or deceptive or likely to mislead or deceive. In all cases, the statements and omissions relied on by the Director formed part of a course of conduct which included The Good Guys making available in the store their extended warranty brochure. This provided a description of the consumer guarantees and related remedies in the Australian Consumer Law.180

Retailers do not have a duty to advise consumers of their legal rights and remedies under the consumer guarantees regime. If they wish to provide advice, a safe option would be to make available the ACL regulators’ point-of-sale sign. If they wish to provide more specific advice they need to take great care that it is complete and accurate.

Criminal liability [6.215]

Section 151ACL creates a criminal offence that replicates ACL, s 29. It mirrors s 75AZC of the TPA. The maximum fine payable for a contravention of s 151 of the ACL is $1.1 million for a body corporate and $220,000 for any other person. The offence in s 151 is one of strict liability so that it is not necessary to consider the intent of the person committing the offence. According to the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, The strict liability nature of this offence reflects the potential for widespread detriment, both financially for individual consumers and for its effect on the market and consumer

179 Director of Consumer Affairs Victoria v The Good Guys Discount Warehouses (Australia) Pty Ltd [2016] FCA 22 at [153]. 180 Director of Consumer Affairs Victoria v The Good Guys Discount Warehouses (Australia) Pty Ltd [2016] FCA 22 at [7].

[6.220]

6 Specific False or Misleading Representations

297

confidence more generally, that can be caused by a person that breaches this provision, whether or not he or she intended to engage in the contravention.181

Part 4-6 of the ACL provides defences applicable to criminal proceedings of: • a reasonable mistake of fact;182 • where the contravention was caused by the act or default of another person or an accident or cause beyond the person’s control, and where the person took reasonable precautions and exercised due diligence to avoid the contravention;183 and • where an advertiser publishes an advertisement in the ordinary course of business and does not know and had no reason to suspect the advertisement amounted to a contravention.184

ASIC ACT: FALSE OR MISLEADING REPRESENTATIONS [6.220]

Section 12DB of the ASIC Act mirrors s 29 of the ACL with respect to financial products and services. The jurisprudence in relation to the interpretation of s 29 of the ACL is likely to be applied in relation to s 12DB of the ASIC Act. Section 12DB provides: (1) A person must not, in trade or commerce, in connection with the supply or possible supply of financial services, or in connection with the promotion by any means of the supply or use of financial services: (a) make a false or misleading representation that services are of a particular standard, quality, value or grade; or (b) make a false or misleading representation that a particular person has agreed to acquire services; or (c) make a false or misleading representation that purports to be a testimonial by any person relating to services; or (d) make a false or misleading representation concerning: (i) a testimonial by any person; or (ii) a representation that purports to be such a testimonial; relating to services; or (e) make a false or misleading representation that services have sponsorship, approval, performance characteristics, uses or benefits; or (f) make a false or misleading representation that the person making the representation has a sponsorship, approval or affiliation; or (g) make a false or misleading representation with respect to the price of services; or (h) make a false or misleading representation concerning the need for any services; or (i) make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (including an implied warranty under section 12ED); or (j) make a false or misleading representation concerning a requirement to pay for a contractual right that:

181 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.131]. 182 See [13.115]. 183 See [13.120]. 184 See [13.125].

298

The Australian Consumer Law

[6.225]

(i) is wholly or partly equivalent to any condition, warranty, guarantee, right or remedy (including an implied warranty under section 12ED); and (ii) a person has under a law of the Commonwealth, a State or a Territory (other than an unwritten law). Note Failure to comply with this subsection is an offence (see section 12GB). (1A) For the purposes of applying subsection (1) in relation to a proceeding concerning a representation of a kind referred to in paragraph (1)(c) or (d), the representation is taken to be misleading unless evidence is adduced to the contrary. (1B) To avoid doubt, subsection (1A) does not: (a) have the effect that, merely because such evidence to the contrary is adduced, the representation is not misleading; or (b) have the effect of placing on any person an onus of proving that the representation is not misleading.

[6.225]

The terms “financial product” and “financial service” are considered at [3.265]–[3.280]. ASIC may issue an infringement notice where there are reasonable grounds to believe that there has been a contravention of the ASIC Act such as those dealing with false or misleading representations.185 For example, ASIC issued two infringement notices in relation to s 12DB contraventions arising from two misleading advertisements by AAMI promoting car insurance, one online and one on television. According to the ASIC media release, The television and online advertisements included the headline claim ’AAMI FLEXIPREMIUMS COULD SAVE YOU AN AVERAGE OF $357 OFF YOUR NEW POLICY’ and a verbal representation stating ’Switch your car insurance and AAMI Flexi- Premiums could save you an average of $357 off your new policy.’ ASIC was concerned that the representations were false or misleading because they: • were likely to give the impression that savings could be achieved by consumers if they switched their car insurance from their current insurer to AAMI. In fact, the specified savings were based on a comparison between different AAMI premiums with different levels of excess chosen, rather than between a competitor’s product and AAMI’s product. • did not adequately convey that AAMI customers would need to choose the maximum level of excess in preference to the minimum level of excess to achieve the specified dollar savings. Based on AAMI’s analysis of a sample of their own customers, AAMI was aware that most customers did not choose the maximum excess. Although AAMI included fine print within the advertisements to explain how the savings could be achieved, ASIC considered these to be ineffective having regard to the relative size of font, density of text, and compelling visual and other messages.186

Similarly, ASIC issued three infringement notices in relation to s 12DB contraventions arising from three misleading advertisements promoting home loan products. According to the ASIC media release, 185 ASIC Act, s 12GXA. 186 ASIC Media Release (6 March 2015), at http://www.asic.gov.au/about-asic/media-centre/find-amedia-release/2015-releases/15-046mr-aami-pays-20-400-penalty-for-misleading-car-insuranceadvertising/.

[6.235]

6 Specific False or Misleading Representations

299

ASIC was concerned the company could have misled consumers into thinking that if they borrowed with Equanimity, they would be helped to repay their home loan in a reduced timeframe without incurring further debt.187

Extended warranties: financial services [6.230]

The promotion and supply of extended warranties can give rise to contraventions of s 12DB(1)(i) and (j) of the ASIC Act. Extended warranties fall into three broad types, and depending on the category, may constitute a “financial product”. A person who provides extended warranties that are financial products, and who accepts the risk as an insurer, or acts as an agent on behalf of an insurer, will need to hold an Australian Financial Services (AFS) licence, or be an authorised representative of an AFS licensee.188 The supply of extended warranties that are financial products will not be subject to the consumer guarantees regime in Pt 3-2, Div 1 of the ACL. Section 131A of the CCA provides that despite s 131, the ACL as a law of the Commonwealth does not apply to the supply or possible supply of financial services. Financial services are separately regulated under the ASIC Act.

Extended warranties: incidental products [6.235]

Another form of extended warranty is one entered into by a consumer with a retailer, distributor or dealer at the same time, or soon after, the goods the subject of the extended warranty are acquired. The retailer, distributor or dealer as warranty provider agrees for a term (the warranty period) to repair or replace the goods in the event of defects in, or the failure of, the goods during the warranty period. This is not a contract of insurance, but may fall within the definition of a financial product as a facility for managing financial risk. However, it will benefit from the “incidental product” exemption in s 763E of the Corporations Act 2001 (Cth) if it is merely incidental to the sale of goods contract. Section 763E(1) of the Corporations Act 2001 provides: If: (a) something (the incidental product) that, but for this section, would be a financial product because of this Subdivision is: (i) an incidental component of a facility that also has other components; or (ii) a facility that is incidental to one or more other facilities; and (b) it is reasonable to assume that the main purpose of: (i) if subparagraph (a)(i) applies–the facility referred to in that subparagraph, when considered as a whole; or (ii) if subparagraph (a)(ii) applies–the incidental product, and the other facilities referred to in that subparagraph, when considered as a whole; is not a financial product purpose;

187 ASIC Media Release (4 March 2015), at http://www.asic.gov.au/about-asic/media-centre/find-amedia-release/2015-releases/15-043mr-equanimity-penalised-for-misleading-ads/. 188 See Frequently asked questions about financial services regulation, ASIC, QFS 35, Do I Need an AFS Licence to Issue or Distribute Extended Motor Vehicle Warranties? (2003), at http://www.asic.gov.au/ asic/asic.nsf/ASIC+FSR+FAQ+DisplayW?ReadForm&unid=60FC94CE1C462677CA256 D810018AB72.

300

The Australian Consumer Law

[6.240]

the incidental product is not a financial product because of this Subdivision (however, it may still be a financial product because of Subdivision C). (2) In this section: “financial product purpose” means a purpose of: (a) making a financial investment; or (b) managing financial risk; or (c) making non-cash payments.

There are no mandatory disclosure requirements to assist the consumer to make an informed decision about whether to acquire an extended warranty. However, this type of extended warranty will be a service and the consumer guarantees that apply to consumer services will apply to it.

Extended warranties: insurance products [6.240]

A third broad type of extended warranty is a form of insurance contract sold by the retailer or dealer as an agent or intermediary on behalf of an insurer. This type of extended warranty is a financial product under the Corporations Act 2001 (Cth). It is a product through which consumers manage financial risk pursuant to ss 763A and 763C, or a general insurance product pursuant to s 764A(1)(d) of the Corporations Act 2001. The insurer will require an AFS licence, and the retailer, as the insurer’s authorised representative, will be required to provide a Financial Services Guide to assist the consumer in making an informed decision about whether to acquire the extended warranty, including a Product Disclosure Statement which will set out the terms and conditions of the extended warranty together with information about its features, benefits and risks. The “incidental product” exemption in s 763E of the Corporations Act 2001 will not apply.

Extended warranties: contravention In ACCC v Fisher & Paykel Customer Services Pty Ltd,189 Fisher & Paykel and Domestic & General sent letters to consumers who had purchased a Fisher & Paykel appliance inviting them to purchase an extended warranty. The letters contained a number of statements, including:

[6.245]

Your Fisher & Paykel [appliance] is now a year old, which means that you have 12 months remaining – after that your appliance won’t be protected against repair costs.

This was the first case taken by the ACCC alleging false or misleading representations regarding consumer guarantees in the context of businesses offering extended warranties. The proceedings were brought by the ACCC under the ASIC Act pursuant to a delegation from the ASIC, as the extended warranty in this case was a financial product under the ASIC Act. The provisions of the ACL dealing with misleading or deceptive conduct and false or misleading representations do not apply to the supply or possible supply of services that are financial services, or of financial products: s 131A of the CCA. The court held that in sending the extended warranty letters to consumers F & P Customer Services and Domestic & General contravened ss 12DA and 12DB(1)(h) and (i) of the ASIC Act. 189 ACCC v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393.

[6.250]

6 Specific False or Misleading Representations

301

FALSE OR MISLEADING REPRESENTATIONS – SALE OF LAND Civil liability [6.250]

Section 30(1) of the ACL, is more specific than s 18 and provides:

A person must not, in trade or commerce, in connection with the sale or grant, or the possible sale or grant, of an interest in land or in connection with the promotion by any means of the sale or grant of an interest in land: (a) make a false or misleading representation that the person making the representation has a sponsorship, approval or affiliation; or (b) make a false or misleading representation concerning the nature of the interest in the land; or (c) make a false or misleading representation concerning the price payable for the land; or (d) make a false or misleading representation concerning the location of the land; or (e) make a false or misleading representation concerning the characteristics of the land; or (f) make a false or misleading representation concerning the use to which the land is capable of being put or may lawfully be put; or (g) make a false or misleading representation concerning the existence or availability of facilities associated with the land.

This prohibition does not substantively change compared to s 53A of the TPA and the jurisprudence in relation to s 53A will apply in relation to s 30 of the ACL.190 However, the prohibition of offering gifts and prizes or other free items in s 53A(1)(c) of the TPA has been moved to s 32(1)(c) and (d) of the ACL. The application of s 30 is not limited to false or misleading representations involving consumers as defined in s 3 of the ACL. An “interest” in land is defined in s 2 of the ACL to mean: (a) a legal or equitable estate or interest in the land; or (b) a right of occupancy of the land, or of a building or part of a building erected on the land, arising by virtue of the holding of shares, or by virtue of a contract to purchase shares, in an incorporated company that owns the land or building; or (c) a right, power or privilege over, or in connection with, the land.

Section 30(2) makes clear that the other provisions of Pt 2-1 or Pt 3-1 also apply in relation to the supply or acquisition, or possible supply or acquisition of interests in land. The most likely sections which may be applicable to misleading conduct in relation to the supply or acquisition of an interest in land are ACL, ss 18 and 29.191 These 190 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.147]. See ACCC v Gary Peer & Associates Pty Ltd (2005) 142 FCR 506 (Sundberg J); Charben Haulage Pty Ltd v Environmental & Earth Sciences Pty Ltd (2004) ATPR (Digest) ¶46-252 (Wilcox J); Bowler v Hilda Pty Ltd (1998) ATPR ¶41-625 (Cooper J); Benlist Pty Ltd v Olivetti Australia Pty Ltd (1990) ATPR ¶41-043 (Burchett J); Phillip & Anton Homes Pty Ltd v Commonwealth (1988) ATPR ¶40-838 (Fox and Pincus JJ, Morling J dissenting); Keen Mar Corp Pty Ltd Labrador Park Shopping Centre Pty Ltd (1988) ATPR ¶40-853 (Pincus J); and Elders Trustee and Executor Company Ltd v E G Reeves Pty Ltd (1987) ATPR (Digest) ¶46,030 (Gummow J). 191 See Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 (Reeves J).

302

The Australian Consumer Law

[6.255]

sections may well be applicable as a result of the extended definitions to the words “goods” and “services” in s 2 of the ACL. The word “goods” is defined to include “minerals, trees and crops, whether on, under or attached to land or not”. The word “services” is defined to include “any rights (including rights in relation to, and interests in, real … property) that are, or are to be provided, granted or conferred in trade or commerce”. However, s 30 recognises that dealings associated with land are neither goods nor services, so that a separate provision prohibiting false or misleading representations in relation to land is necessary. The focus of s 30 of the ACL is on the sale or grant of “interests” in land, and not on the buildings affixed to the land. For example, if a purchaser makes it known during pre-contractual negotiations that a particular freehold or leasehold interest is being acquired for a particular purpose, such as grazing cattle, and there are restrictions imposed in relation to the interest in the land, for example, the property does not have water rights under the Water Acts or is subject to vegetation management restrictions, or an easement is necessary to obtain access to a major road, there will be a contravention of s 30(1)(e), (f) or (g) of the ACL. For example, in ACCC v Gary Peer & Associates,192 Mr Joske, who worked for the respondent, a real estate agent, was retained to auction a property. Mr Joske inspected the property and told the vendors that the respondent had acted as agents on the sale of the next door property which had sold for $741,000 in May 2003, and that the vendors could expect a similar price for their property because the land was the same size. In the weeks leading to the auction, the respondent placed newspaper advertisements for the property, initially stating “PRICE GUIDE $600,000 Plus Buyers Should Inspect”, and later stating “PRICE GUIDE $650,000 Plus Buyers Should Inspect”. On 27 August 2003, the vendors received an offer from a prospective purchaser of $750,000. At the auction, the highest bid was $781,000, but as the vendors set their reserve price at $830,000 the property was not sold. The question that arose was whether the underestimated price representation was misleading and contravened s 53A(1)(b) of the TPA, now s 30(1)(c) of the ACL. Sundberg J held that the price guide fell within the term “price payable” and that it was not necessary to construe the term narrowly to mean a price that a person is obliged or will or may become obliged to pay. Mr Joske believed or held the opinion that the property was likely to sell for at least $750,000, so the price guide representation was false or misleading.193

Criminal liability [6.255]

Section 152 creates a separate criminal offence that replicates s 30. It mirrors s 75AZD of the TPA. The maximum fine payable for a contravention of s 152 of the ACL is $1.1 million for a body corporate and $220,000 for any other person. The offence in s 152 is one of strict liability so that it is not necessary to consider the intent of the person committing the offence.

192 ACCC v Gary Peer & Associates (2005) 142 FCR 506. 193 ACCC v Gary Peer & Associates (2005) 142 FCR 506 at [89] and [101]-[102].

[6.260]

6 Specific False or Misleading Representations

303

According to the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, The strict liability nature of this offence reflects the potential for widespread detriment, both financially for individual consumers and for its effect on the market and consumer confidence more generally, that can be caused by a person that breaches this provision, whether or not he or she intended to engage in the contravention.194

Part 4-6 of the ACL provides defences applicable to criminal proceedings of: • a reasonable mistake of fact;195 • where the contravention was caused by the act or default of another person or an accident or cause beyond the person’s control, and where the person took reasonable precautions and exercised due diligence to avoid the contravention;196 and where an advertiser publishes an advertisement in the ordinary course of business and does not know and had no reason to suspect the advertisement amounted to a contravention.197

ASIC ACT: FALSE OR MISLEADING REPRESENTATIONS – SALE OF LAND [6.260]

Section 12DC of the ASIC Act mirrors s 30 of the ACL with respect to financial products and services. Section 12DC provides: (1) A person must not, in trade or commerce, in connection with the sale or grant, or the possible sale or grant, of a financial product that consists of, or includes, an interest in land, or in connection with the promotion by any means of a financial product that consists of, or includes, an interest in land: (a) represent that the person has a sponsorship, approval or affiliation it does not have; or (b) make a false or misleading representation concerning the nature of the interest in the land, the price payable for the financial product, the location of the land, the characteristics of the land, the use to which the land is capable of being put or may lawfully be put or the existence or availability of facilities associated with the land. Note Failure to comply with this subsection is an offence (see section 12GB). (1A) An offence under subsection 12GB(1) relating to subsection (1) of this section is an offence of strict liability. Note For strict liability, see section 6.1 of the Criminal Code. (2A) A person contravenes this subsection if: (a) a person uses physical force or undue harassment or coercion; and

194 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.154]. 195 See [13.115]. 196 See [13.120]. 197 See [13.125].

304

The Australian Consumer Law

[6.265]

(b) the person uses such force, harassment or coercion in connection with the sale or grant, or the possible sale or grant, of a financial product mentioned in subsection (1), or the payment for such a financial product. Note Failure to comply with this subsection is an offence (see section 12GB). (2C) For the purposes of the application of the Criminal Code in relation to an offence under subsection 12GB(1), strict liability applies to paragraph (2A)(b) of this section. Note For strict liability, see section 6.1 of the Criminal Code. (2D) Nothing in this section is to be taken as implying that other provisions in this Subdivision do not apply in relation to the supply or acquisition, or the possible supply or acquisition, of a financial product mentioned in subsection (1). (3) In this section: interest, in relation to land, means: (a) a legal or equitable estate or interest in the land; or (b) a right of occupancy of the land, or of a building or part of a building erected on the land, arising by virtue of the holding of shares, or by virtue of a contract to purchase shares, in an incorporated company that owns the land or building; or (c) a right, power or privilege over, or in connection with, the land.

MISLEADING CONDUCT – PERSONS SEEKING EMPLOYMENT Civil liability [6.265]

Section 31 of the ACL provides:

A person must not, in relation to employment that is to be, or may be, offered by the person or by another person, engage in conduct that is liable to mislead persons seeking the employment as to: (a) the availability, nature, terms or conditions of the employment; or (b) any other matter relating to the employment.

The application of s 31 is not limited to conduct involving a “consumer” as defined in s 3 of the ACL. This prohibition does not substantively change compared to s 53B of the TPA.198 Section 53B of the was inserted into the in 1988 because representations in relation to employment are not necessarily made “in trade or commerce”,199 but rather “in respect of trade or commerce”, so that ss 18 and 29 of the ACL, which are

198 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.163]. 199 See Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 604-605 (Mason CJ, Deane, Dawson and Gaudron JJ); applied in Martin v Tasmania Development and Resources (1999) ATPR (Digest) ¶46-193 at 52,376-7 (Heerey J).

[6.265]

6 Specific False or Misleading Representations

305

concerned with conduct “in trade or commerce”, would not apply.200 The jurisprudence in relation to s 53B of the TPA will apply in relation to s 31 of the ACL.201 In O’Neill v Medical Benefits Fund of Australia Ltd,202 a prospective employee succeeded in relation to the making of a representation that his new position was for the “long haul” and would be at least as secure as his current position. In Haros v Linfox Australia Pty Ltd,203 Haros relied upon s 53B of the TPA in a claim that he was misled by the failure of Linfox to inform him that there were other employees of Linfox already employed to perform the work for which he was engaged. Tracey J found that Linfox was genuine in its desire to employ a business manager and that while Mr Haros made numerous complaints during his period of employment by Linfox, he did not complain about having insufficient work to do.204 In ACCC v Zanok Technologies Pty Ltd,205 Zanok placed employment advertisements on various websites including MyCareer, Seek and Gumtree, offering jobs in the Australian IT industry, when in fact Zanok was not offering job opportunities but rather “IT training” for which applicants (many of whom the ACCC alleges were on bridging or temporary residency visas) were required to pay up to $4,700. Edmonds J declared that Zanok engaged in conduct that was misleading or deceptive contrary to s 52(1) of the TPA (now ACL, s 18(1)) and engaged in conduct that was liable to mislead persons seeking employment contrary to s 53B of the TPA (now ACL, s 31).206 During pre-contractual negotiations for employment contracts, statements or representations may be made that are not reflected in the final written contract. In Keays v J P Morgan Administrative Services Australia Ltd,207 Mr Keays argued that he relied on misrepresentations that differed from the terms of his employment contract. Buchanan J held that the whole of the respondent’s conduct must be taken into account in deciding whether the respondent engaged in misleading conduct including: • there were direct negotiations about the terms on which Mr Keays would leave Deutsche and move to JPM; • those negotiations dealt expressly with the levels of immediate and ongoing reward for Mr Keays’ services; 200 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.18]. 201 Haros v Linfox Australia Pty Ltd [2011] FCA 699 (Tracey J); Keays v J P Morgan Administrative Services Australia Ltd [2011] FCA 358 (Buchanan J); ACCC v Zanok Technologies Pty Ltd [2009] FCA 1124 (Edmonds J); O’Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455 (Carr, Moore and Marshall JJ); and Wilde v Menville Pty Ltd (1981) ATPR ¶40-195 (Smithers J). 202 O’Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455 (Carr, Moore and Marshall JJ). 203 Haros v Linfox Australia Pty Ltd [2011] FCA 699 (Tracey J). 204 Haros v Linfox Australia Pty Ltd [2011] FCA 699 at [94]. Upheld on appeal, Haros v Linfox Australia Pty Ltd [2012] FCAFC 699 at [49]-[50] (Gray, Marshall and Bromberg JJ). 205 ACCC v Zanok Technologies Pty Ltd [2009] FCA 1124. 206 ACCC v Zanok Technologies Pty Ltd [2009] FCA 1124 at [28]. 207 Keays v J P Morgan Administrative Services Australia Ltd [2011] FCA 358 (13 April 2011).

306

The Australian Consumer Law

[6.270]

• the terms negotiated, and other terms, were reduced to writing and presented to Mr Keays formally; • those terms were countersigned by Mr Keays by way of acceptance; and • the terms thus concluded dealt expressly with rights (and obligations) in relation to termination of Mr Keays’ employment, including JPM’s (and Mr Keays’) right to terminate it.208 In concluding that the conduct as a whole was not misleading Buchanan J cited209 the following passage from the High Court’s judgment in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd: It should not be overlooked that to sign a document known and intended to affect legal relations is an act which itself ordinarily conveys a representation to a reasonable reader of the document. The representation is that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents, as Latham CJ put it, whatever they might be. That representation is even stronger where the signature appears below a perfectly legible written request to read the document before signing it.210

Where the conduct at issue involves allegedly misleading pre-contractual representations and the applicant signs a written contract with an express term that negates the pre-contractual representation, the contract may be evidence of non-reliance on the misleading pre-contractual representation.

Criminal liability [6.270]

Section 153 creates a separate criminal offence that replicates s 31ACL. It mirrors s 75AZE of the TPA. The maximum fine payable for a contravention of s 153 of the ACL is $1.1 million for a body corporate and $220,000 for any other person. The offence in s 153 is one of strict liability so that it is not necessary to consider the intent of the person committing the offence. Part 4-6 of the ACL provides defences applicable to criminal proceedings of: • a reasonable mistake of fact;211

• where the contravention was caused by the act or default of another person or an accident or cause beyond the person’s control, and where the person took reasonable precautions and exercised due diligence to avoid the contravention;212 and • where an advertiser publishes an advertisement in the ordinary course of business and does not know and had no reason to suspect the advertisement amounted to a contravention.213 208 Keays v J P Morgan Administrative Services Australia Ltd [2011] FCA 358 at [86]. 209 Keays v J P Morgan Administrative Services Australia Ltd [2011] FCA 358 at [87]. 210 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [45]. 211 See [13.115]. 212 See [13.120]. 213 See [13.125].

[6.275]

6 Specific False or Misleading Representations

307

MISLEADING CONDUCT CONCERNING THE NATURE OF GOODS AND SERVICES Civil liability [6.275]

Section 33 of the ACL provides:

A person must not, in trade or commerce, engage in conduct that is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose or the quantity of any goods.

The equivalent provision of the TPA was s 55. There is scope for overlap between ss 18, 29(1)(a) and 33 of the ACL.214 Section 34 provides: A person must not, in trade or commerce, engage in conduct that is liable to mislead the public as to the nature, the characteristics, the suitability for their purpose or the quantity of any services.

The application of ss 33 and 34 are not limited to conduct involving a “consumer” as defined in s 3 of the ACL. The equivalent provisions of the TPA were ss 55 and s 55A and the jurisprudence in relation to ss 55 and 55A will apply in relation to ss 33 and 34 of the ACL.215 Unlike s 18 and other provisions dealing with misleading conduct, ss 33 and 34 apply to conduct that is “liable to mislead the public” rather than “likely to mislead”. The term “liable to mislead” is narrower than “likely to mislead” in s 52 of the TPA and s 18 of the ACL.216 In TPC v J & R Enterprises Pty Ltd,217 O’Loughlin J applied the views of Davies and Spender JJ in Westpac Banking Corporation v Northern Metals Pty Ltd,218 who, in their joint judgment, said that “[o]f sections 52 and 55A the former has the wider scope”.219 His Honour concluded that a court would find that conduct was “likely to mislead” more readily than it would find that conduct was “liable to mislead”.220 A breach of ss 33 or 34 of the ACL is to be tested by reference not to whether the conduct is liable to mislead “the public” as a whole or the world at large, but whether the conduct must involve a general segment of the community that is 214 See, eg, ACCC v Reebok Australia Pty Ltd [2015] FCA 83 (McKerracher J); ACCC v R L Adams Pty Ltd [2015] FCA 1016 (Edelman J); and ACCC v Pirovic Enterprises Pty Ltd (No 2) (2014) ATPR ¶42-483 (Flick J). 215 In relation to s 55 see ACCC v Audi Australia Pty Ltd (2007) ATPR ¶ 42-211 (Gordon J); ACCC v Cadbury Schweppes Pty Ltd (2004) ATPR ¶42-001 (Ryan J); and TPC v Golden Australia Paper Manufacturers Pty Ltd (1995) ATPR ¶41-370 (Lee J). 216 Westpac Banking Corporation v Northern Meals Pty Ltd (1989) ATPR ¶40-953 at 50,413 (Davies and Spender JJ); at 50,410 (Northrop J); and ACCC v Singtel Optus Pty Ltd [2010] FCA 1177 at [40] (Perram J). 217 TPC v J & R Enterprises Pty Ltd (1991) 99 ALR 325. 218 Westpac Banking Corporation v Northern Metals Pty Ltd (1989) ATPR ¶40-953. 219 Westpac Banking Corporation v Northern Metals Pty Ltd (1989) ATPR ¶40-953 at 50,413. 220 TPC v J & R Enterprises Pty Ltd (1991) 99 ALR 325 at [87].

308

The Australian Consumer Law

[6.275]

sufficiently large.221 In ACCC v Singtel Optus Pty Ltd,222 Optus conducted a “Think Bigger” and “Supersonic” advertising campaign for the supply of broadband data services. The campaign had recourse to five different media: newspapers, television, the internet, billboards and flyers. The basic feature of these advertisements was a headline advertising the existence of two distinct usage allowances – one peak; one off-peak. Each headline statement was qualified by a small print disclaimer which stated: “Speed limited once peak data exceeded”. The primary judge, Perram J, held that the 11 advertisements infringed not only s 52 of the TPA, but also s 55A of the TPA which prohibited conduct liable to mislead the public as to “the quantity of any services”. Optus had not sufficiently disclosed that the service would be speed limited once a consumer exceeded their peak data allowance and in some cases would not be able to use the total allowance. This was confirmed on appeal by the Full Federal Court although the pecuniary penalty imposed was reduced from $5.26 million to $3.61 million.223 In ACCC v Apple Pty Ltd,224 the ACCC alleged that Apple’s promotion of the “iPad with WiFi + 4G” was misleading because it represented to Australian consumers that the product “iPad with WiFi + 4G” could, with a SIM card, connect to a 4G mobile data network in Australia, when this was not the case. The ACCC alleged that Apple’s conduct contravened ss 18, 29(1)(a), 29(1)(g) and 33 of the ACL. It was conceded that the use of the product designator “iPad with WiFi + 4G” contravened s 33 because it represented that the new iPad cellular model could connect to the Telstra LTE mobile data network when this was not the case. The word “characteristic” in s 33 included the operational capacity of the goods. In ACCC v Turi Foods Pty Ltd (No 4),225 the ACCC brought proceedings against Baiada Poultry Pty Ltd and Bartter Enterprises Pty Ltd which supplied chickens nationally under the Steggles brand, Turi Foods which supplied La Ionica brand meat chickens in New South Wales and Victoria and the Australian Chicken Meat Federation Inc. The ACCC alleged that Baiada Poultry and Bartter Enterprises made false or misleading claims in print advertising and product packaging, that Steggles meat chickens are raised in barns with substantial space available allowing them to roam freely. Tracey J held: In the context of s 55 the nature and characteristics of goods are to be identified by reference to their internal constitution or utility rather than the manner of their creation. Section 55 will thus be contravened, for example, if it is represented that 35% of liquid in a container is fruit juice when the truth is that juice comprised only 17% of the contents.226

221 TPC v J & R Enterprises Pty Ltd (1991) 99 ALR 325 at [87]; and Shahid v Australian College of Dermatologists (2008) 168 FCR 46 at [206] (Jessup J). 222 ACCC v Singtel Optus Pty Ltd [2010] FCA 1177. 223 Singtel Optus Pty Ltd v ACCC [2012] FCAFC 20 (7 March 2012 (Keane CJ, Finn and Gilmour JJ). 224 ACCC v Apple Pty Ltd (2012) ATPR ¶42-404 (Bromberg J). 225 ACCC v Turi Foods Pty Ltd (No 4) (2013) ATPR ¶42-448. 226 ACCC v Turi Foods Pty Ltd (No 4) (2013) ATPR ¶42-448 at [127].

[6.290]

6 Specific False or Misleading Representations

309

Since the “free to roam” representations did not relate to the inherent qualities of the chickens, but rather to the circumstances in which the chickens were raised, the ACCC’s allegation of a contravention of s 55 was not made out.

Criminal liability [6.280]

Section 155 creates a separate criminal offence that replicates s 33 ACL. It mirrors s 75AZH of the TPA. Section 156ACL creates a separate criminal offence that replicates s 34. It mirrors s 75AZI of the TPA. The maximum fine payable for a contravention of ss 155 or 156 of the ACL is $1.1 million for a body corporate and $220,000 for any other person. The offences in ss 155 and 156 are ones of strict liability so that it is not necessary to consider the intent of the person committing the offence.

Part 4-6 of the ACL provides defences applicable to criminal proceedings of: • a reasonable mistake of fact;227 • where the contravention was caused by the act or default of another person or an accident or cause beyond the person’s control, and where the person took reasonable precautions and exercised due diligence to avoid the contravention;228 and • where an advertiser publishes an advertisement in the ordinary course of business and does not know and had no reason to suspect the advertisement amounted to a contravention.229

ASIC ACT: MISLEADING CONDUCT CONCERNING THE NATURE OF FINANCIAL SERVICES [6.285]

Section 12DF of the ASIC Act mirrors s 33 of the ACL with respect to financial services. Section 12DF provides: (1) A person must not, in trade or commerce, engage in conduct that is liable to mislead the public as to the nature, the characteristics, the suitability for their purpose or the quantity of any financial services. Note Failure to comply with this subsection is an offence (see section 12GB). (2) An offence under subsection 12GB(1) relating to subsection (1) of this section is an offence of strict liability.

MISLEADING REPRESENTATIONS ABOUT CERTAIN BUSINESS ACTIVITIES Civil liability [6.290]

Section 37 of the ACL contains two prohibitions: it prohibits false or misleading representations about business activities generally; and, more specifically, about business activities conducted from home.

227 See [13.115]. 228 See [13.120]. 229 See [13.125].

310

The Australian Consumer Law

[6.290]

Section 37(1) provides: (1) A person must not, in trade or commerce, make a representation that: (a) is false or misleading in a material particular; and (b) concerns the profitability, risk or any other material aspect of any business activity that the person has represented as one that can be, or can be to a considerable extent, carried on at or from a person’s place of residence.

Section 37(2) provides: (2) A person must not, in trade or commerce, make a representation that: (a) is false or misleading in a material particular; and (b) concerns the profitability, risk or any other material aspect of any business activity: (i) that the person invites (whether by advertisement or otherwise) other persons to engage or participate in, or to offer or apply to engage or participate in; and (ii) that requires the performance of work by other persons, or the investment of money by other persons and the performance by them of work associated with the investment.

The application of s 37 not limited to conduct involving a “consumer” as defined in s 3 of the ACL. Section 37 replaces s 59 of the TPA and the jurisprudence relating to the concepts in s 59 would also be relevant to the same concepts in s 37.230 According to the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, Section 37 recognises that a general prohibition on the making of certain false or misleading representations in connection with the supply or possible supply of goods or services does not necessarily cover representations regarding the profitability, risk or other aspects of particular types of business activity, such as home-based businesses or those that require a person to invest either personal effort or money into a business (such as a franchising arrangement).231

As we have seen s 31 of the ACL is confined to misleading conduct in relation to an employment opportunity, whereas s 37 would extend to catch commission arrangements whereby a person acts as an agent, and is therefore not “employed”. The business activities covered by s 37(2) need not be home-based and include franchise arrangements. For example, in ACCC v Murray,232 the defendant was the director of Will Writers Guild Pty Ltd (WWG). The business involved the provision of “will kits”, consisting of forms and explanatory material, but also the provision of assistance to franchisees or licensees. It was an essential element of the way the business was to be run that the licensee would be present when the customer prepared and signed the will. Legislation in each State relevant to this case (that is to say, in every State except Queensland) prohibited the carrying on of legal 230 Second Explanatory Memorandum, at [6.249]. See ACCC v Bio Enviro Plan Pty Ltd (2003) ATPR ¶41-963 (RD Nicholson J); ACCC v Grant [2000] FCA 1564 (Mansfield J); TPC v Farrow (1990) ATPR ¶41-018 (von Doussa J); Jones v Glen Houn Holdings Pty Ltd (1985) ATPR ¶40-604 (Neaves J); Crossan v Commons (1985) ATPR ¶40-542 (Muirhead J); and Wilde v Menville Pty Ltd (1981) ATPR ¶40-195 (Smithers J). 231 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.248]. 232 ACCC v Murray (2002) 121 FCR 428 (Heerey J).

[6.290]

6 Specific False or Misleading Representations

311

practice by persons not qualified to practise as legal practitioners in that State. None of the franchisees were so qualified and so could not lawfully conduct the business. Heerey J concluded that the business sold was not one that could be lawfully carried on and that accordingly Mr Murray had contravened s 59(2) of the TPA.233 Representations as to profitability or sales turnover will generally involve representations as to future matters within the meaning of s 4 of the ACL.234 In that case, the evidentiary burden of proof is on the corporation making the representation to prove that it has reasonable grounds for making the representation – for example, records of previous year’s profits or sales turnover figures – or the representation shall be taken to be misleading. In ACCC v Halkalia Pty Ltd (No 2),235 the ACCC brought proceedings against the respondent, which was one of three companies established by Laurence Hann to operate the Heartlink business. The Heartlink business used volunteers to manufacture and package household goods on the understanding that profits would be channelled to charities. Those responsible for transporting the products from warehouses to retail outlets would be paid. Advertisements were placed in newspapers to purchase regional distribution rights to Heartlink products. Distributors who paid $10,000 for the distribution rights were promised potential earnings of $800- $1,000 for 3-4 days per week. Tracey J held that the test of liability under s 59 of the TPA (now ACL, s 37) is objective by reference to their effect on the ordinary or reasonable reader of the advertisements.236 The advertisements contained a representation that there was a reasonable basis for the promised potential earnings which did not exist. Accordingly, the corporate respondents contravened ss 52 and 59(2) of the TPA. In ACCC v South East Melbourne Cleaning Pty Ltd (in liq) (formerly known as Coverall Cleaning Concepts South East Melbourne Pty Ltd),237 Coverall was the franchisor of a professional cleaning services franchise system operating in Victoria. Coverall made representations to a prospective franchisee Mr Eliaser, that if he purchased a franchise at a cost of $28,150, Coverall could provide him with work that would generate a minimum of $4,000 in revenue per month. Coverall adduced no evidence as to the existence of reasonable grounds for making the representations, so that s 4(1) and (2) of the ACL operated to deem the representations to be misleading and contrary to ss 18 and 37(2) of the ACL.238 233 ACCC v Murray (2002) 121 FCR 428 at 448-9. 234 See [3.135]. 235 ACCC v Halkalia Pty Ltd (No 2) (2012) ATPR ¶42-399. 236 ACCC v Halkalia Pty Ltd (No 2) (2012) ATPR ¶42-399 at [67] citing ACCC v Dukemaster Pty Ltd [2009] FCA 682 at [10]. 237 ACCC v South East Melbourne Cleaning Pty Ltd (in liq) (formerly known as Coverall Cleaning Concepts South East Melbourne Pty Ltd) [2015] FCA 25 (Murphy J). 238 ACCC v South East Melbourne Cleaning Pty Ltd (in liq) (formerly known as Coverall Cleaning Concepts South East Melbourne Pty Ltd) [2015] FCA 25 at [94] and [102].

312

The Australian Consumer Law

[6.295]

Criminal liability [6.295]

Section 159 of the ACL creates a separate criminal offence that replicates s 37. It mirrors s 75AZM of the TPA. The maximum fine payable for a contravention of s 159 of the ACL is $1.1 million for a body corporate and $220,000 for any other person. The offence in s 159 is one of strict liability so that it is not necessary to consider the intent of the person committing the offence. Part 4-6 of the ACL provides defences applicable to criminal proceedings of: • a reasonable mistake of fact;239

• where the contravention was caused by the act or default of another person or an accident or cause beyond the person’s control, and where the person took reasonable precautions and exercised due diligence to avoid the contravention;240 and • where an advertiser publishes an advertisement in the ordinary course of business and does not know and had no reason to suspect the advertisement amounted to a contravention.241

EXEMPTION FOR INFORMATION PROVIDERS [6.300]

An aspect of strict liability is that any newspaper which publishes, or television or radio station which broadcasts, a false or misleading advertisement has engaged in misleading conduct.242 It was for this reason that s 65A was inserted into the TPA. Section 38 of the ACL replaces s 65A(1)(a) and (b) of the TPA and operates in the same way as those provisions. It provides that ACL, ss 29, 30, 33, 34 and 37 do not apply where the information provider made the publication in the course of carrying on a business, or, in the case of a radio or television broadcaster, the publication was made radio or television broadcast.243 Section 38 provides: (1) Sections 29, 30, 33, 34 and 37 do not apply to a publication of matter by an information provider if: (a) in any case – the information provider made the publication in the course of carrying on a business of providing information; or (b) if the information provider is the Australian Broadcasting Corporation, the Special Broadcasting Service Corporation or the holder of a licence granted under the Broadcasting Services Act 1992 – the publication was by way of a radio or television broadcast by the information provider.

The defence does not apply to: 239 See [13.115]. 240 See [13.120]. 241 See [13.125]. 242 Australian Ocean Line Pty Ltd v West Australian Newspapers Ltd (1983) 47 ALR 497 and Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 55 ALR 25. 243 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.259].

[6.305]

6 Specific False or Misleading Representations

313

• a publication of an advertisement;244 • a publication in connection with the supply, or promotion of the supply, of goods or services by the information provider;245 or • a publication in connection with the sale or grant, or promotion of the sale or grant of an interest in land, by the information provider.246 Section 251 of the ACL creates a special defence to protect publishers from liability in situations where they were unaware that an advertisement they published contravened the ACL and they had no reason to suspect that it did so. See Chapter 13. Section 38(3) and (4) reflect the High Court’s interpretation of s 65A in ACCC v Channel Seven Brisbane Pty Ltd.247 Section 160 of the ACL states that information providers are also exempt from the related criminal offences provisions in ss 151, 152, 155, 156 and 159 of the ACL.248

ASIC Act [6.305]

Section 12DN of the ASIC Act excludes information providers in relation to publications made by these providers in the course of carrying on a business of providing information concerning financial products and services.

244 ACL, s 38(2). 245 ACL, s 38(3). 246 ACL, s 38(4). 247 ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305. See the discussion at [3.245]. 248 See [13.105].

7

Specific Unfair Sales Techniques [7.05] INTRODUCTION ................................................................................................................ 316 [7.10] OFFERING REBATES, GIFTS AND PRIZES .................................................................. 317

[7.10] Civil liability ........................................................................................................ 317 [7.15] Meaning of free ................................................................................................... 319 [7.20] Exemptions ........................................................................................................... 320 [7.25] Criminal liability ................................................................................................. 320 [7.30] ASIC ACT: OFFERING REBATES, GIFTS AND PRIZES ............................................. 320 [7.35] BAIT ADVERTISING .......................................................................................................... 322

[7.35] Civil liability ........................................................................................................ 322 [7.40] Criminal liability ................................................................................................. 323 [7.45] ASIC ACT: BAIT ADVERTISING ..................................................................................... 324 [7.50] WRONGLY ACCEPTING PAYMENT .............................................................................. 324

[7.50] Civil liability ........................................................................................................ 324 [7.55] Criminal liability ................................................................................................. 327 [7.60] ASIC ACT: WRONGLY ACCEPTING PAYMENT ......................................................... 327 [7.65] UNSOLICITED CREDIT AND DEBIT CARDS ............................................................. 328

[7.65] Civil liability ........................................................................................................ 328 [7.70] Criminal liability ................................................................................................. 329 [7.75] ASIC ACT: UNSOLICITED CREDIT AND DEBIT CARDS ........................................ 329 [7.80] ASSERTION OF RIGHT TO PAYMENT FOR UNSOLICITED GOODS OR SERVICES .............................................................................................................................. 329

[7.80] Civil liability ........................................................................................................ 329 [7.90] Criminal liability ................................................................................................. 332 [7.95] Liability of recipient of unsolicited goods ..................................................... 333 [7.100] ASSERTION OF RIGHT TO PAYMENT FOR UNAUTHORISED ENTRIES OR ADVERTISEMENTS .......................................................................................................... 334

[7.100] Civil liability ...................................................................................................... 334 [7.105] Criminal liability ............................................................................................... 336 [7.110] ASIC ACT: UNAUTHORISED ADVERTISEMENTS .................................................. 336 [7.115] PYRAMID SELLING ......................................................................................................... 337

[7.115] Civil liability ...................................................................................................... 337 [7.120] Meaning of pyramid scheme .......................................................................... 337

316

The Australian Consumer Law

[7.125] [7.130] [7.135] [7.140]

Meaning of entirely or substantially ............................................................. Meaning of in relation to ................................................................................. Pyramid schemes: extraterritorial operation ................................................ Criminal liability ...............................................................................................

[7.05]

339 339 341 342

[7.145] ASIC ACT: PYRAMID SELLING .................................................................................... 342 [7.150] MULTIPLE PRICING ........................................................................................................ 343

[7.155] Retraction of prices ........................................................................................... 344 [7.160] Criminal liability ............................................................................................... 344 [7.165] COMPONENT PRICING ................................................................................................. 345

[7.170] [7.175] [7.180] [7.185]

“Drip pricing” ................................................................................................... Non-quantifiable charges ................................................................................. Optional charges ............................................................................................... In a prominent way ..........................................................................................

346 347 348 349

[7.190] Criminal liability ............................................................................................... 349 [7.195] REFERRAL SELLING ....................................................................................................... 350

[7.195] Civil liability ...................................................................................................... 350 [7.200] Criminal liability ............................................................................................... 352 [7.205] ASIC ACT: REFERRAL SELLING .................................................................................. 353 [7.210] HARASSMENT AND COERCION ................................................................................ 353

[7.210] Civil liability ...................................................................................................... 353 [7.220] Criminal liability ............................................................................................... 355 [7.225] ASIC ACT: HARASSMENT OR COERCION ............................................................... 356

INTRODUCTION [7.05] In addition to the specific protections for false or misleading representations considered in Chapter 6 provides specific protections for sales techniques that are regarded as being inherently unfair and liable to cause consumer detriment in most circumstances. These are: • s 32 – offering rebates, gifts and prizes; • s 35 – bait advertising; • s 36 – wrongly accepting payment; • s 39 – unsolicited cards; • s 40 – assertion of right to payment for unsolicited goods or services, or unauthorised entries or advertisements; • s 41 – liability of recipient of unsolicited goods; and, • s 44 – pyramid selling. Some of these prohibitions only apply to dealings with a “consumer” as defined in s 3 of the ACL; others apply to both consumers and businesses. It also considers the corresponding criminal offences in Ch 4 of the ACL. As with the specific forms of false or misleading representations considered in Chapter 6, these unfair business

[7.10]

7 Specific Unfair Sales Techniques

317

practices and sales techniques may also contravene one or more of the general prohibitions, especially the prohibition of misleading or deceptive conduct in s 18 of the ACL.1 The consumer protection provisions of the ASIC Act contain specific prohibitions in relation to these inherently unfair sales techniques where they relate to the promotion and supply of financial products and services. These will also be discussed briefly in this chapter.

OFFERING REBATES, GIFTS AND PRIZES Civil liability [7.10] Section 32 of the ACL provides that when a corporation promotes goods or services, rebates, gifts or prizes must not be offered as part of the promotion if the corporation does not intend to provide them as offered. Section 32(1) provides: (1) A person must not, in trade or commerce, offer any rebate, gift, prize or other free item with the intention of not providing it, or of not providing it as offered, in connection with: (a) the supply or possible supply of goods or services; or (b) the promotion by any means of the supply or use of goods or services; or (c) the sale or grant, or the possible sale or grant, of an interest in land; or (d) the promotion by any means of the sale or grant of an interest in land.

Section 32(2) states a person must not provide rebates, gifts, prizes or other free items offered: • within the time specified in the offer, or • if no time is specified, within a reasonable time. As regards s 32(2), the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states: The specified time requirement requires that if an offer is made, subject to clearly stated terms of delivery, the person making the offer will not be forced to meet a shorter timeframe than that which had been stated. Similarly, the reasonable time requirement also requires that consumers are not subject to unreasonably long delays – for example, where a cash-back offer is made but it takes two years to receive the money. Where no time is specified, the determination of a “reasonable time” is a subjective assessment, which will include consideration of such issues as the nature of the gifts and prizes offered and any representations or inferences made about their availability.2

The equivalent provision of the former TPA was s 54, and the jurisprudence surrounding the concepts in s 54 of the TPA is relevant to the same concepts as s 32 of the ACL.3 The application of s 32 is not limited to conduct involving a consumer as defined in s 3 of the ACL. 1 See Chapter 3. 2 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.176]. 3 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.180]. See ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 (Gyles J); ACCC v

318

The Australian Consumer Law

[7.10]

One of the elements of the prohibition created by s 32 is the intention of not providing the rebate, gift, prize or other free item, or of not providing it as offered. In ACCC v Nationwide News Pty Ltd,4 Heerey J held that this necessarily imports a mental element. As regards the nature of the intention that must be proved, Heerey J held: What has to be proved is the actual intention of the defendant, just as “purpose” in s 45D means “the operative subjective purpose of those engaging in the relevant conduct”: Tillmans Butcheries Pty Ltd v Australian Meat Industry Employees’ Union (1979) 42 FLR 331 at 348 per Deane J.5

The ACCC commenced proceedings against Nationwide News Pty Ltd (Nationwide) and Smartcom Telecommunications following a mobile phone promotion in a Sydney newspaper. In the promotion, readers were offered a “free mobile phone for every reader”, while instructing readers “Don’t miss Monday’s Telegraph Mirror”. The ACCC alleged that when readers bought the newspaper on Monday and read the details of the offer, they found it was limited to 5,000 Sydney readers and that, in order to obtain their “free” mobile phone, they had to enter into a 15-month contract with Smartcom Telecommunications for access to the Vodafone network at a total cost of more than $2,000. Charges based on contraventions of TPA, ss 53(e), 53(g) and 54 were dismissed. Heerey J held that the charges in relation to , s 54 failed because the requisite intention had not been established: The offer would not convey the literal meaning that there were immediately available in some warehouse 1.3 million mobile phones, that being the readership of the Daily Telegraph Mirror. Obviously enough “every reader” meant every reader who applied for a phone. Nationwide in fact had the intention of providing a phone for every such reader. Nationwide believed on reasonable grounds that such intention could be carried out – as in fact it was. But in the case of the offer “as offered” was on the terms which would appear in the Daily Telegraph Mirror of 1 August, which included a term that the offer was restricted to the first 5,000 qualifying respondents.6

The charge in relation to , s 53(e) failed because a person who took up the offer would acquire title to a mobile phone and would not have to pay any money for it. The money a person would have to pay related to telephony services. However, the charge based on a contravention of s 53(g), making a false representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy – s 29(1)(m) of the ACL – was made out. The newspaper advertisements did not involve a false representation as to the existence of conditions. A reasonable consumer would appreciate that a promotion of this kind would be the subject of some conditions, and the words “Don’t miss Nationwide News Pty Ltd (1996) ATPR ¶41-519 (Heerey J); on appeal, Nationwide News Pty Ltd v ACCC (1996) 71 FCR 215 (Lindgren J with whom Spender and Lehane JJ agreed); and TPC v Calderton Corporation Pty Ltd (1994) ATPR ¶ 41-306 (Neaves J). 4 ACCC v Nationwide News Pty Ltd (1996) ATPR ¶41-519. 5 ACCC v Nationwide News Pty Ltd (1996) ATPR ¶41-519 at 42,496. 6 ACCC v Nationwide News Pty Ltd (1996) ATPR ¶41-519 at 42,496-7.

[7.15]

7 Specific Unfair Sales Techniques

319

Monday’s Telegraph Mirror” conveyed the meaning that a person wishing to take up the offer would be advised of the conditions in that issue of the paper.7 However, the newspaper advertisements did involve a false representation as to the effect of conditions. In order to get a supposedly “free” mobile phone a person would have to pay $344.95 immediately and become committed for a further $1,950. Herrey J concluded: These charges are not concerned with any representations as to price in the sense already discussed in relation to the Group I informations. The heavy emphasis on the phones being “free” would convey the impression that, whatever the conditions were, they would not be inconsistent with that basic promise or, as the particulars state, would not be conditions relating to charges or payments. But in truth the conditions meant that a person would have to part with a substantial sum of money (albeit not as a “price”) before he or she could get a phone. The true effect of the conditions were thus misrepresented.8

This construction of the advertisement was confirmed on appeal by the Full Federal Court.9

Meaning of free [7.15] Section 32(1) of the ACL prohibits offering a “free item with the intention of not providing it”. The courts have recognised that the use of the word “free” in an advertisement is a powerful magnet and that great care needs to be taken in its use in order to avoid a contravention of s 32(1), or any misleading conduct contrary to ss 18 or 29(m) of the ACL. However, each case turns on its own facts, as the following cases demonstrate. In Nationwide News Pty Ltd v ACCC,10 in order to obtain their “free” mobile phone, purchasers had to enter into a 15-month contract with Smartcom Telecommunications for access to the Vodafone network at a total cost of more than $2,000. In that case Lindgren J held that the word “free” meant “free of charge” or outlay of money and observed: Any respect in which goods or services offered as “free” may not be free should be prominently and clearly spelled out so that the magnetism of the word “free” is appropriately qualified. In my opinion, this did not occur in the present case. An offer to a newspaper reader of a “free” mobile phone without any reference to conditions is, in my view, an offer to cause the reader to become the owner of such a phone without his or her first having to outlay money or to undertake to do so.11

7 ACCC v Nationwide News Pty Ltd (1996) ATPR ¶41-519 at 42,494. 8 ACCC v Nationwide News Pty Ltd (1996) ATPR ¶41-519 at 42,494 [41]. 9 Nationwide News Pty Ltd v ACCC (1996) 71 FCR 215 (Lindgren J with whom Spender and Lehane JJ agreed). 10 Nationwide News Pty Ltd v ACCC (1996) 71 FCR 215. 11 Nationwide News Pty Ltd v ACCC (1996) 71 FCR 215 at 228.

320

The Australian Consumer Law

[7.20]

Exemptions [7.20] Section 32(3) provides that the requirement to supply within the specified or reasonable time does not apply where the reason the supplier could not supply was beyond their control, provided the supplier has taken reasonable precautions and exercised due diligence to avoid the failure to supply. Section 32(4) permits a person to accept a different prize, rebate or other free item if he or she agrees to do so. This avoids the situation where a trader is put in an impossible position of being required to supply something it has genuinely tried to provide but cannot, even where an appropriate substitute is available. It allows the trader to offer something in place of the prize that cannot be supplied. The person is not obliged to accept the different item if he or she wishes to retain other rights to compensation he or she may have. If a person accepts the substitute item then the trader should still provide it within a reasonable time. Section 32(4) provides (4) Subsection (2) does not apply to an offer that the person makes to another person if: (a) the person offers to the other person a different rebate, gift, prize or other free item as a replacement; and (b) the other person agrees to receive the different rebate, gift, prize or other free item.

Criminal liability [7.25] Section 154 of the ACL creates a separate criminal offence that replicates s 32. It mirrors s 75AZG of the former TPA. The offence in s 154 is one of strict liability so that it is not necessary to consider the intent of the person committing the offence. Part 4-6 of the ACL provides defences applicable to criminal proceedings of: • a reasonable mistake of fact;12 • where the contravention was caused by the act or default of another person or an accident or cause beyond the person’s control, and where the person took reasonable precautions and exercised due diligence to avoid the contravention;13 and • where an advertiser publishes an advertisement in the ordinary course of business and does not know and had no reason to suspect the advertisement amounted to a contravention.14

ASIC ACT: OFFERING REBATES, GIFTS AND PRIZES [7.30] Section 12DE of the ASIC Act mirrors s 32 of the ACL with respect to the offering of rebates, gifts, prizes or other free items in relation to the promotion, supply or possible supply of financial services, or in relation to the sale or promotion of a financial product that consists of or includes an interest in land, where the person intends not to provide it, or not to provide it as offered. The 12 See [13.115]. 13 See [13.120]. 14 See [13.125].

[7.30]

7 Specific Unfair Sales Techniques

321

jurisprudence in relation to the interpretation of s 32 of the ACL is likely to be applied in relation to s 12DE of the ASIC Act. ASIC may issue an infringement notice where there are reasonable grounds to believe that there has been a contravention of the ASIC Act such as those dealing with false or misleading representations.15 The infringement notice penalties for a contravention of s 12DE of the ASIC Act are $10,200 for a corporation and $2,040 for an individual. ASIC is active in regulating misleading promotions that offer gifts or other free items where the person intends not to provide it, or not to provide it as offered. For example, ASIC issued infringement notices totalling $40,800 in relation to potentially misleading advertisements by Ubank. According to the ASIC media release, The misleading representations were made in an advertising campaign that promoted an offer of a $2,014 EFTPOS gift card for consumers who obtained a home loan with UBank. The advertisements with headline statements, including “The BEST $2014 EVER” and “Own $2014” appeared in newspapers, radio and online from late December 2013 to early March 2014 and in digital screens on escalators from late January 2014 to February 2014. ASIC was concerned that some details of UBank’s offer were not disclosed in some of the advertisements and, in others, were not disclosed in a clear and prominent manner. These included: • a minimum loan amount of $350,000 • a requirement to use an electronic settlement process (known as FASTRefi) for refinanced loans • all documents to be provided within five days, and • a cap on the number of consumers eligible to receive the offer.16

Similarly, Your Super Accountant paid a $2,040 infringement notice penalty after making potentially misleading statements about the cost of setting up a self-managed superannuation fund (SMSF) using Your Super Accountant’s administration services. ASIC’s concerns related to statements that appeared on the Your Super Accountant website in January 2014. The representations on the website homepage were that fund set up was free. ASIC was concerned that although advertised as free, the administration services were only free if 20% of the annual administration fee was paid in advance. ASIC was also concerned that fund set up using a corporate trustee was not free under any circumstance.17 Finally, SuperHelp Australia Pty Ltd (SuperHelp) paid a $10,200 infringement notice penalty after making potentially misleading statements about the cost of setting up a self-managed superannuation fund (SMSF) using SuperHelp’s administration services. ASIC’s concerns related to an advertisement that SuperHelp placed in the Australian Financial Review’s Smart Investor Magazine. The representations were that fund set up was free and that pension fund set up was 15 ASIC Act, s 12GXA. 16 ASIC Media Release (17 September 2014), at http://www.asic.gov.au/about-asic/media-centre/finda-media-release/2014-releases/14-235mr-nab-pays-40-800-penalty-for-misleading-ubankadvertisements. 17 ASIC Media Release (12 August 2014), at http://www.asic.gov.au/about-asic/media-centre/find-amedia-release/2014-releases/14-195mr-your-super-accountant-pays-infringement-notice-in-relationto-free-smsf-set-up-claims.

322

The Australian Consumer Law

[7.35]

free, subject to “*conditions”. No conditions were disclosed in the advertisement. ASIC was concerned that although advertised as free, the fund set up was only free if half the annual administration fee was paid in advance, and the pension fund setup was not free under any circumstance for investors under 60 years of age.18

BAIT ADVERTISING Civil liability [7.35] Section 35 of the ACL prohibits the practice referred to as “bait advertising”. Bait advertising has been defined to mean: An alluring but insincere offer to sell a product or service that the advertiser in truth does not intend or want to sell. The essence of such a scheme is to switch the customer from the advertised product to a product that the advertiser actually wants to sell, usually at a higher price or on a basis more advantageous to the advertiser.19

Section 35 of the ACL deals with the practice of bait advertising in two ways. Section 35(1) prohibits bait advertising itself and s 35(2) prohibits conduct post-advertising, namely, failing to offer goods or services for supply at a specified price. Section 35(1) provides: (1) A person must not, in trade or commerce, advertise goods or services for supply at a specified price if: (a) there are reasonable grounds for believing that the person will not be able to offer for supply those goods or services at that price for a period that is, and in quantities that are, reasonable, having regard to: (i) the nature of the market in which the person carries on business; and (ii) the nature of the advertisement; and (b) the person is aware or ought reasonably to be aware of those grounds.

Liability depends on actual or constructive knowledge. If a person had reasonable grounds, or ought to be aware of reasonable grounds to expect that the person would not be able to comply with the advertisement, it will contravene s 35(1). Secondly, it casts an obligation on persons who, having advertised goods or services at a specified price, are to supply those goods or services at that price for a reasonable period, and in reasonable quantities. Section 35(2) provides: (2) A person who, in trade or commerce, advertises goods or services for supply at a specified price must offer such goods or services for supply at that price for a period that is, and in quantities that are, reasonable having regard to: (a) the nature of the market in which the person carries on business; and (b) the nature of the advertisement.

Liability for a contravention of s 35(1) depends upon the defendant’s knowledge at the time of the advertising. Section 35(2), on the other hand, creates an absolute liability and places a positive obligation on the advertiser to offer the goods or services for supply. 18 ASIC Media Release (18 March 2014), at http://www.asic.gov.au/about-asic/media-centre/find-amedia-release/2014-releases/14-051mr-superhelp-australia-pty-ltd-pays-infringement-notice-inrelation-to-free-smsf-fund-setup-claims. 19 Kintner, A Primer on the Law of Deceptive Practices (2nd ed), p 228.

[7.40]

7 Specific Unfair Sales Techniques

323

What is “reasonable” will depend on the type of product on special and the length of the sale. Evidence of the amount of stock that has been sold in previous sales would provide objective evidence of the amount of stock that might be necessary for a subsequent sale. If the supplier is uncertain about the amount of stock that might be required and stock is limited the advertisement should reflect this. The equivalent provision of the former TPA was s 56, and the jurisprudence surrounding the concepts in s 56 is relevant to the same concepts s 35 of the ACL.20 The application of s 35 is not limited to conduct involving a consumer as defined in s 3 of the ACL. The concept of “supply” is defined in s 2 of the ACL.21 An essential element in order to establish a contravention of s 35 is that the person has advertised goods or services “at a specified price”. The term “price” is defined in s 2 of the ACL.22 In the context of the definition of the practice of resale price maintenance provisions of the CCA,23 it has been held that in order to be a “specified price” it is not necessary for the price to be a specific figure. In TPC v Mobil Oil Australia Ltd,24 Toohey J stated: the Federal Court has construed the notion of specified price to include a price not specified in precise terms but within a range of a particular figure or otherwise having an element of approximation. Equally, I would suggest, a price may be specified by reference to some standard well known to the parties, from which a price may be ascertained.25

On 7 June 2011, the ACCC issued six infringement notices totalling $39,600 against six Harvey Norman franchisees26 because it had reasonable grounds to believe the franchisees had engaged in bait advertising in contravention of s 56(2) of the former TPA by advertising a camera in a catalogue when they were unable to supply the product to consumers.

Criminal liability [7.40] Section 157 creates a separate criminal offence that replicates s 35. It mirrors s 75AZJ of the former TPA. The offence in s 157 is one of strict liability so that it is not necessary to consider the intent of the person committing the offence. Part 4-6 of the ACL provides defences applicable to criminal proceedings of: • a reasonable mistake of fact;27 20 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.219]. See Wallace v Walplan Pty Ltd (1985) 8 FCR 14 (Pincus J); Wallace v Brodribb (1985) 5 FCR 315 (Spender J); and Reardon v Morley Ford Pty Ltd (1980) 49 FLR 401 (Smithers J). 21 See [8.160]–[8.165]. 22 See [8.75]. 23 CCA, ss 96(3) and (4). 24 TPC v Mobil Oil Australia Ltd (1984) 3 FCR 168. 25 TPC v Mobil Oil Australia Ltd (1984) 3 FCR 168 at 183. 26 Release # NR 090/11, issued 7 June 2011, at http://www.accc.gov.au/media-release/six-harveynorman-franchisees-pay-for-not-stocking-cameras. 27 See [13.115].

324

The Australian Consumer Law

[7.45]

• where the contravention was caused by the act or default of another person or an accident or cause beyond the person’s control, and where the person took reasonable precautions and exercised due diligence to avoid the contravention;28 and • where an advertiser publishes an advertisement in the ordinary course of business and does not know and had no reason to suspect the advertisement amounted to a contravention.29

ASIC ACT: BAIT ADVERTISING [7.45] Section 12DG of the ASIC Act mirrors s 35 of the ACL with respect to bait advertising. Section 12DG provides: (1) A person must not, in trade or commerce, advertise financial services for supply at a specified price, if there are reasonable grounds, of which the person is aware or ought reasonably to be aware, for believing that the person will not be able to offer for supply those services at that price: (a) for a period that is; and (b) in quantities that are; reasonable having regard to the nature of the market in which the person carries on business and the nature of the advertisement. Note Failure to comply with this subsection is an offence (see section 12GB). (2) A person that has, in trade or commerce, advertised financial services for supply at a specified price must offer such services for supply at that price: (a) for a period that is; and (b) in quantities that are; reasonable having regard to the nature of the market in which the person carries on business and the nature of the advertisement. Note Failure to comply with this subsection is an offence (see section 12GB).

WRONGLY ACCEPTING PAYMENT Civil liability [7.50] Section 36 prohibits a corporation from accepting payment for goods or services where the corporation does not intend to supply the goods or services, or intends to supply materially different goods or services. The application of s 36 is not limited to transactions involving a “consumer” as defined in s 3 of the ACL. Section 36 provides: (1) A person must not, in trade or commerce, accept payment or other consideration for goods or services if, at the time of the acceptance, the person intends not to supply the goods or services. 28 See [13.120]. 29 See [13.125].

[7.50]

7 Specific Unfair Sales Techniques

325

(2) A person must not, in trade or commerce, accept payment or other consideration for goods or services if, at the time of the acceptance, the person intends to supply goods or services materially different from the goods or services in respect of which the payment or other consideration is accepted. (3) A person must not, in trade or commerce, accept payment or other consideration for goods or services if, at the time of the acceptance: (a) there are reasonable grounds for believing that the person will not be able to supply the goods or services: (i) within the period specified by or on behalf of the person at or before the time the payment or other consideration was accepted; or (ii) if no period is specified at or before that time–within a reasonable time; and (b) the person is aware or ought reasonably to be aware of those grounds.

Section 36(1) and (2) are based on s 58(a) of the former TPA. The ACL does not specifically define some of the concepts used in s 36; however, the jurisprudence developed in relation to s 58 is relevant to those undefined concepts.30 There are two elements that need to be satisfied in order to make out a contravention of s 36(1) and (2): • the acceptance of payment; and • the requisite intent or knowledge at the time of the acceptance of the payment.31 Section 36(3) is based on s 58(b) of the former TPA and does not involve intention, but rather, objective standards of reasonableness. In ACCC v Commercial & General Publications Pty Ltd, Heerey J observed: the critical element of s 58(b) is not that the defendant accepts payment without a reasonable belief that it will be able to supply services. Rather, the prosecutor has to establish, objectively as at the time of acceptance of payment, facts and circumstances which constitute reasonable grounds for believing that the defendant will not be able to supply the services. The relevant belief is not the defendant’s belief. The defendant may not in fact be aware of the facts and circumstances constituting the reasonable grounds; it is sufficient if it ought reasonably be aware of them.32

In ACCC v EDirect Pty Ltd,33 the respondent sold mobile phone services to customers by telemarketing. It admitted there were reasonable grounds, of which it was aware or ought to have been reasonably aware, for believing that it would not be able to provide mobile telecommunication services because it knew, or ought to have reasonably known, that network coverage was not available at the home addresses or local communities of each of those customers. By so doing it had engaged in conduct in contravention of s 58(b) of the TPA. 30 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.236]. See ACCC v EDirect Pty Ltd [2008] FCA 65 (Reeves J); CCP Australian Airships Ltd v Primus Telecommunications Pty Ltd [2004] VSCA 232 (Nettle JA, with whom Batt JA and Vincent JA agreed); ACCC v Chubb Security Australia Pty Ltd (2004) ATPR ¶42-041 (Bennett J); ACCC v Commercial & General Publications Pty Ltd (2002) ATPR (Digest) ¶46-222 (Heerey J); Barton v Westpac Banking Corp (1983) 150 ALR 397 (Sheppard J); Dawson v World Travel Headquarters Pty Ltd (1981) 53 FLR 455 (Fisher J); and Swan v Downes (1978) 34 FLR 36 (Franki J). 31 See ACCC v EDirect Pty Ltd [2008] FCA 65 at [28]; Barton v Westpac Banking Corp (1983) 76 FLR 101; (1983) 150 ALR 397 at 409; and Swan v Downes (1978) 34 FLR 36 at [46]. 32 ACCC v Commercial & General Publications Pty Ltd (2002) ATPR (Digest) ¶46-222 at [213]. 33 ACCC v EDirect Pty Ltd [2008] FCA 65.

326

The Australian Consumer Law

[7.50]

Section 36(7) provides that the intent or knowledge-based requirements in ss 36(1), (2), (3) and (4) apply whether or not full consideration has been paid. Where the supplier and the customer are at cross-purposes – for example, because the customer is relying on an out-of-date brochure but the supplier mistakenly assumes that the customer is reliant on the corporation’s current brochure – it is not clear whether a contravention of s 36 has occurred. Section 36 includes an additional provision not found in s 58 of the TPA, which requires suppliers to provide goods or services for which payment has been accepted, within the time specified, or if no time is specified, within a reasonable time.34 Section 36(4) provides: (4) A person who, in trade or commerce, accepts payment or other consideration for goods or services must supply all the goods or services: (a) within the period specified by or on behalf of the person at or before the time the payment or other consideration was accepted; or (b) if no period is specified at or before that time–within a reasonable time.

In relation to s 36(4)(b), where no time is specified, the determination of a “reasonable time” is a subjective assessment which will include consideration of such issues as the nature of the goods or services and any representations or inferences made about their availability.35 Two defences are available for a contravention of s 36(4): (5) Subsection (4) does not apply if: (a) the person’s failure to supply all the goods or services within the period, or within a reasonable time, was due to the act or omission of another person, or to some other cause beyond the person’s control; and (b) the person took reasonable precautions and exercised due diligence to avoid the failure. (6) Subsection (4) does not apply if: (a) the person offers to supply different goods or services as a replacement to the person (the customer) to whom the original supply was to be made; and (b) the customer agrees to receive the different goods or services.

The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, provides the following guidance as to the meaning of these defences: Subsection 36(6) of the ACL also permits a person to accept a different good or service if he or she agrees to do so. This avoids the situation where a trader is put in an impossible position of being required to supply something it has genuinely tried to provide but cannot, even where an appropriate substitute is available. It allows the trader to offer something in place of the good or service that cannot be supplied. The person is not obliged to accept the different good or service if he or she wishes to retain other rights to compensation that he or she may have. If a person accepts the substitute good or service then the trader should still provide it within a reasonable time.36 34 This is based on s 19 of the FTA 1999 (Vic). 35 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.232]. 36 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.234].

[7.60]

7 Specific Unfair Sales Techniques

327

Criminal liability [7.55] Section 158 creates a separate criminal offence that replicates s 36. It mirrors s 75AZL of the TPA. The offence in s 158 is one of strict liability so that it is not necessary to consider the intent of the person committing the offence. In ACCC v Chubb Security Australia Pty Ltd,37 the ACCC brought proceedings against Chubb Security Australia Pty Ltd (Chubb) for 12 contraventions of s 58(b) and 12 contraventions of s 75AZL(3) of the TPA. It alleged that at the time of entering into a number of contracts for the provision of mobile patrol security services, the security officers assigned were already unable to perform all of their contracted services within the time allocated or the run. Based on Chubb’s systems and records Bennett J held that there were reasonable grounds for believing that the new clients could not be supplied by Chubb with the services contracted for. Part 4-6 of the ACL provides defences applicable to criminal proceedings of: • a reasonable mistake of fact;38 • where the contravention was caused by the act or default of another person or an accident or cause beyond the person’s control, and where the person took reasonable precautions and exercised due diligence to avoid the contravention;39 and • where an advertiser publishes an advertisement in the ordinary course of business and does not know and had no reason to suspect the advertisement amounted to a contravention.40

ASIC ACT: WRONGLY ACCEPTING PAYMENT [7.60] Section 12DI of the ASIC Act mirrors s 36 of the ACL with respect to wrongly accepting payment. Section 12DI provides: (1) A person contravenes this subsection if: (a) the person, in trade or commerce, accepts payment or other consideration for financial services; and (b) at the time of acceptance, the person intends: (i) not to supply the financial services; or (ii) to supply financial services materially different from the financial services in respect of which the payment or other consideration is accepted. Note Failure to comply with this subsection is an offence (see section 12GB). (2) For the purposes of the application of the Criminal Code in relation to an offence under subsection 12GB(1), strict liability applies to paragraph (1)(a) of this section. (3) A person contravenes this subsection if: (a) the person, in trade or commerce, accepts payment or other consideration for financial services; and 37 ACCC v Chubb Security Australia Pty Ltd (2004) ATPR ¶42-041. 38 See [13.115]. 39 See [13.120]. 40 See [13.125].

328

The Australian Consumer Law

[7.65]

(b) at the time of acceptance, there are reasonable grounds for believing that the person will not be able to supply the financial services within the period specified by the person or, if no period is specified, within a reasonable time. Note Failure to comply with this subsection is an offence (see section 12GB). (4) An offence under subsection 12GB(1) relating to subsection (3) of this section is an offence of strict liability.

UNSOLICITED CREDIT AND DEBIT CARDS Civil liability [7.65] Section 39 provides: (1) A person must not send a credit card or a debit card, or an article that may be used as a credit card and a debit card, to another person except: (a) pursuant to a written request by the person who will be under a liability to the person who issued the card or article in respect of the use of the card or article; or (b) in renewal or replacement of, or in substitution for: (i) a card or article of the same kind previously sent to the other person pursuant to a written request by the person who was under a liability, to the person who issued the card previously so sent, in respect of the use of that card; or (ii) a card or article of the same kind previously sent to the other person and used for a purpose for which it was intended to be used. (2) Subsection (1) does not apply unless the card or article is sent by or on behalf of the person who issued it. (3) A person must not take any action that enables another person who has a credit card to use the card as a debit card, except in accordance with the other person’s written request. (4) A person must not take any action that enables another person who has a debit card to use the card as a credit card, except in accordance with the other person’s written request. (5) A credit card is an article that is one or more of the following: (a) an article of a kind commonly known as a credit card; (b) a similar article intended for use in obtaining cash, goods or services on credit; (c) an article of a kind that persons carrying on business commonly issue to their customers, or prospective customers, for use in obtaining goods or services from those persons on credit; and includes an article that may be used as an article referred to in paragraph (a), (b) or (c). (6) A debit card is: (a) an article intended for use by a person in obtaining access to an account that is held by the person for the purpose of withdrawing or depositing cash or obtaining goods or services; or (b) an article that may be used as an article referred to in paragraph (a).

Section 39 is based on s 63A of the former TPA, and the jurisprudence surrounding the concepts in s 63A of the TPA is relevant to the same concepts s 39 of the ACL.41 41 Second Explanatory Memorandum, at [6.269].

[7.80]

7 Specific Unfair Sales Techniques

329

The application of s 39 is not limited to conduct involving a “consumer” as defined in s 3 of the ACL. The terms “credit card” and “debit card” are defined in ACL, s 39(5) and (6) respectively.

Criminal liability [7.70] Section 161 creates a separate criminal offence that replicates s 39. It mirrors s 75AZP of the TPA. The offence in s 161 is one of strict liability so that it is not necessary to consider the intent of the person committing the offence. Part 4-6 of the ACL provides defences applicable to criminal proceedings of: • a reasonable mistake of fact;42 • where the contravention was caused by the act or default of another person or an accident or cause beyond the person’s control, and where the person took reasonable precautions and exercised due diligence to avoid the contravention;43 and • where an advertiser publishes an advertisement in the ordinary course of business and does not know and had no reason to suspect the advertisement amounted to a contravention.44

ASIC ACT: UNSOLICITED CREDIT AND DEBIT CARDS [7.75] Section 12DL of the ASIC Act mirrors s 39 of the ACL with respect to the sending of unsolicited credit and debit cards. ASSERTION OF RIGHT TO PAYMENT FOR UNSOLICITED GOODS OR SERVICES Civil liability [7.80] Section 40 of the ACL deals with a practice known as “false billing” which is directed at small businesses and individual consumers, whereby unsolicited goods are sent to consumers (or businesses) and payment for them is subsequently demanded even though the recipient has not contracted to buy them, nor has accepted them. Section 40 provides: (1) A person must not, in trade or commerce, assert a right to payment from another person for unsolicited goods unless the person has reasonable cause to believe that there is a right to the payment. (2) A person must not, in trade or commerce, assert a right to payment from another person for unsolicited services unless the person has reasonable cause to believe that there is a right to the payment. (3) A person must not, in trade or commerce, send to another person an invoice or other document that: (a) states the amount of a payment, or sets out the charge, for supplying unsolicited goods or unsolicited services; and 42 See [13.115]. 43 See [13.120]. 44 See [13.125].

330

The Australian Consumer Law

[7.80]

(b) does not contain a warning statement that complies with the requirements set out in the regulations; unless the person has reasonable cause to believe that there is a right to the payment or charge. (4) In a proceeding against a person in relation to a contravention of this section, the person bears the onus of proving that the person had reasonable cause to believe that there was a right to the payment or charge.

Section 40 is based on s 64(5) and (7) of the former TPA, and the jurisprudence surrounding the concepts in s 64 of the TPA is relevant to the same concepts s 40 of the ACL.45 According to the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, Section 64 of the TPA currently provides a broad prohibition on demanding payment for any goods or services unless a corporation believes it has a right to that payment. These broad prohibitions apply to advertisements – in Rizzo v Fitzgerald (1988) 19 FCR 175, a person who sent invoices to a business for advertisements in a magazine which the business did not order was found guilty under subs 64(2A). However, s 64 also provides a slightly different prohibition in respect of directory entries alone – that is, that a corporation shall not assert a right to payment, unless it has reason to believe that the person has authorised the making of the entry (as opposed to merely a belief that the corporation has a right to payment).46

The application of s 40 is not limited to conduct involving a “consumer” as defined in s 3 of the ACL. The term “unsolicited goods” is defined in ACL, s 2(1) to mean “goods sent to a person without any request made by the person or on his or her behalf”. The term “unsolicited services” is defined in s 2(1) to mean: “services supplied to a person without any request made by the person or on his or her behalf”. In au.Domain Administration Ltd v Domain Names Australia, Finkelstein J observed:47 “Unsolicited services” are confined to services which have been supplied in the past, but the definition of “services” includes those services which may be supplied in the future. Such an inconsistency cannot be allowed. The inconsistency can only sensibly be avoided by either: (1) importing into the meaning of “unsolicited services” that part of the definition of “services” that is otherwise consistent with the meaning of “unsolicited services”; or (2) not incorporating the meaning of “services” into the definition of “unsolicited services” at all on the basis that there is a contrary intention to its incorporation.

It was unnecessary for Finkelstein J to resolve which approach is correct. 45 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.282]. See au.Domain Administration Ltd v Domain Names Australia (2004) 207 ALR 521 (Finkelstein J); Bauer v Power Pacific International Media Pty Ltd [2007] FCA 349 (Collier J); ACCC v Optell Pty Ltd (1998) ATPR ¶41-640 (O’Loughlin J); Rizzo v Fitzgerald (1988) 19 FCR 175 and Wells v John R Lewis (International) Pty Ltd (1975) 25 FLR 194 (Spicer CJ, Dunphy and Smithers JJ). 46 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [23.151]. 47 au.Domain Administration Ltd v Domain Names Australia (2004) 207 ALR 521 at [54].

[7.85]

7 Specific Unfair Sales Techniques

331

[7.85] The term “asserting a right to payment” is defined broadly in s 10 of the ACL to deem certain conduct, such as taking steps to demand payment or to collect a debt, to be asserting a right to payment. Section 10 provides: (1) A person is taken to assert a right to payment from another person if the person: (a) makes a demand for the payment or asserts a present or prospective right to the payment; or (b) threatens to bring any legal proceedings with a view to obtaining the payment; or (c) places or causes to be placed the name of the other person on a list of defaulters or debtors, or threatens to do so, with a view to obtaining the payment; or (d) invokes or causes to be invoked any other collection procedure, or threatens to do so, with a view to obtaining the payment; or (e) sends any invoice or other document that: (i) states the amount of the payment; or (ii) sets out the price of unsolicited goods or unsolicited services; or (iii) sets out the charge for placing, in a publication, an entry or advertisement; and does not contain a statement, to the effect that the document is not an assertion of a right to a payment, that complies with any requirements prescribed by the regulations. (2) For the purposes of this section, an invoice or other document purporting to have been sent by or on behalf of a person is taken to have been sent by that person unless the contrary is established.

The equivalent provision in the former TPA was s 64(5)(e) which provided that for the purposes of the section “a corporation shall be taken to assert a right to a payment from a person for unsolicited … services … if the corporation … (e) sends any invoice or other document stating the amount of the payment or setting out the price of the … services … and not stating as prominently (or more prominently) that no claim is made to the payment, or to payment of the price … as the case may be.” In au.Domain Administration Ltd v Domain Names Australia, Finkelstein J had to decide whether notices inviting the recipients to register for particular domain names fell within the term “invoice or other document”. Finkelstein J held that they could not be described as “invoices”: Most dictionaries define an invoice as a written account of the particulars of goods sold or sent to a purchaser, consignee, etc or of services provided together with the value or price or charge being specified. The notices contain no such statements. That said, each notice might be described as a document which states the amount to be paid for a particular service but which does not expressly state that no claim is being made for payment of that amount. On this basis, and by reason of the deeming provision, the notice might be taken to be an assertion of a right to payment. I note that DNA says (with some justification) that this cannot be the intended effect of s 64(5)(e) because it would, for example, result in every advertising brochure that specified the price of goods or services as constituting an assertion of a right to payment. Accordingly, DNA says that the word “document” in s 64(5)(e) should be read down as meaning a document in the nature of an invoice or demand for payment.48 48 au.Domain Administration Ltd v Domain Names Australia (2004) 207 ALR 521 at [49].

332

The Australian Consumer Law

[7.90]

Finkelstein J was not required to resolve this issue; however, it seems that the better view is that the term “document” is to be read down as meaning a document in the nature of an invoice or demand for payment. Section 10 of the ACL provides for a presumption that a person asserts a right to payment, amongst other things, if they send an invoice or other document that seeks payment without complying with requirements prescribed in the regulations. Sections 40(3) and 43(2) of the ACL prohibit a person from sending an invoice or other document to others seeking payment for unsolicited goods, services or unauthorised entries or advertisements, without either having a reasonable cause to believe they have a right to be paid or complying with the requirements prescribed in the regulations. Regulation 77 of the ACL Amendment Regulations49 prescribes requirements for invoices that, if complied with, would allow a person to avoid the presumption in s 10 of the ACL, that they have asserted a right to payment. Regulation 78 of the ACL Amendment Regulations50 provides recipients of requests for payment for unsolicited goods, services or unauthorised entries or advertisements with information that limits the scope for confusion on the part of the recipient of a document about whether they have an obligation to pay the provider of the document money in response to a purported assertion of a right to payment. Regulations 77 and 78 require any requests for payment for unsolicited goods, services or unauthorised entries or advertisements to include the text “This is not a bill. You are not required to pay any money.” This text also needs to be the most prominent text in the document. Section 12DM of the ASIC Act replicates s 40 of the ACL in relation to financial products and services.

Criminal liability [7.90] Section 162 creates a separate criminal offence that replicates s 40. It mirrors s 75AZQ of the TPA. The offence in s 162 is one of strict liability so that it is not necessary to consider the intent of the person committing the offence. According to the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, The strict liability nature of this offence reflects the potential for widespread detriment, both financially for individual consumers and for its effect on the market and consumer confidence more generally, that can be caused by a person that breaches this provision, whether or not he or she intended to engage in the contravention.51

Part 4-6 of the ACL provides defences applicable to criminal proceedings of: 49 Available at http://www.comlaw.gov.au/Details/F2010L03014. 50 Available at http://www.comlaw.gov.au/Details/F2010L03014. 51 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.285].

[7.95]

7 Specific Unfair Sales Techniques

333

• a reasonable mistake of fact;52 • where the contravention was caused by the act or default of another person or an accident or cause beyond the person’s control, and where the person took reasonable precautions and exercised due diligence to avoid the contravention;53 and • where an advertiser publishes an advertisement in the ordinary course of business and does not know and had no reason to suspect the advertisement amounted to a contravention.54

Liability of recipient of unsolicited goods [7.95] A person who receives unsolicited goods is not liable to pay for them, and is not liable for any loss or damage to them unless the recipient wilfully or unlawfully damages the goods. Section 41 of the ACL provides: (1) If a person, in trade or commerce, supplies unsolicited goods to another person, the other person: (a) is not liable to make any payment for the goods; and (b) is not liable for loss of or damage to the goods, other than loss or damage resulting from the other person doing a wilful and unlawful act in relation to the goods during the recovery period. (2) If a person sends, in trade or commerce, unsolicited goods to another person: (a) neither the sender nor any person claiming under the sender is entitled, after the end of the recovery period, to take action for the recovery of the goods from the other person; and (b) at the end of the recovery period, the goods become, by force of this section, the property of the other person freed and discharged from all liens and charges of any description. (3) However, subsection (2) does not apply to or in relation to unsolicited goods sent to a person if: (a) the person has, at any time during the recovery period, unreasonably refused to permit the sender or the owner of the goods to take possession of the goods; or (b) the sender or the owner of the goods has within the recovery period taken possession of the goods; or (c) the goods were received by the person in circumstances in which the person knew, or might reasonably be expected to have known, that the goods were not intended for him or her. (4) The recovery period is whichever of the following periods ends first: (a) the period of 3 months starting on the day after the day on which the person received the goods; (b) if the person who receives the unsolicited goods gives notice with respect to the goods to the supplier or sender in accordance with subsection (5)–the period of one month starting on the day after the day on which the notice is given. (5) A notice under subsection (4)(b): (a) must be in writing; and 52 See [13.115]. 53 See [13.120]. 54 See [13.125].

334

The Australian Consumer Law

[7.100]

(b) must state the name and address of the person who received the goods; and (c) must state the address at which possession may be taken of the goods, if it is not the address of the person; and (d) must contain a statement to the effect that the goods are unsolicited goods.

A person is not liable to make any payment for unsolicited services, or for loss or damage arising as a result of the supply of such services. The equivalent provision of the former TPA was, s 65, and the jurisprudence surrounding the concepts in s 65 of the TPA is relevant to the same concepts s 41 of the ACL.55 Section 42 provides: If a person, in trade or commerce, supplies unsolicited services to another person, the other person: (a) is not liable to make any payment for the services; and (b) is not liable for loss or damage as a result of the supply of the services.

The ACCC provided the following example of how s 65(2) of the TPA governing ownership would apply to a consumer receiving unsolicited goods: in winter a nurseryman delivers parcels containing small trees to a number of homes in a particular suburb. Persons who inquire about the trees are told they are offered on a trial basis for inspection and planting. The nurseryman refuses to collect the trees. A month later, the persons involved receive invoices for the trees. Those persons that do not pay during the following fortnight are told that formal collection efforts including small claims court may commence. Any effort which the nurseryman makes to collect payment for the unsolicited trees will breach the Act. The Act also allows each of the persons involved to immediately write to the nurseryman stating that the goods are not wanted and that they are available for collection at that person’s address or another specified location. Once the recipient gives this notice to the nurseryman the trees will become the recipient’s property unless the nurseryman collects them within one month. Even where no written notice is given, unsolicited goods will usually become the property of the recipient after three months. Once the goods belong to the recipient, he or she can deal with them with no further obligation to the original supplier.56

Sections 41 and 42 do not create substantive prohibitions; rather they create rules about ownership and liability. If they are not complied with, a cause of action will arise for breach of s 40 of the ACL. Section 12DMA of the ASIC Act provides that a person is not liable to make any payment for unsolicited financial products or unsolicited financial services, and is not liable for loss or damage as a result of the supply of the financial products.

ASSERTION OF RIGHT TO PAYMENT FOR UNAUTHORISED ENTRIES OR ADVERTISEMENTS Civil liability [7.100]

Acting on their own initiative, a person may advise a consumer or business that their name has been entered in a business directory, and send an

55 See Jacazlow Pty Ltd v Amberley Autos Pty Ltd (1992) ATPR ¶41-177 (Fullagar J, with whom Marks and Hedigan JJ agreed). 56 ACCC, Advertising and Selling (1997), pp 47-8.

[7.100]

7 Specific Unfair Sales Techniques

335

invoice for this unsolicited service. The person engaging in this practice does so in the hope that the unsolicited service will be paid for, without question, in the normal course of the recipient’s business. Section 43 provides: (1) A person must not assert a right to payment from another person of a charge for placing, in a publication, an entry or advertisement relating to: (a) the other person; or (b) the other person’s profession, business, trade or occupation; unless the person knows, or has reasonable cause to believe, that the other person authorised the placing of the entry or advertisement. (2) A person must not send to another person an invoice or other document that: (a) states the amount of a payment, or sets out the charge, for placing, in a publication, an entry or advertisement relating to: (i) the other person; or (ii) the other person’s profession, business, trade or occupation; and (b) does not contain a warning statement that complies with the requirements set out in the regulations; unless the person knows, or has reasonable cause to believe, that the other person authorised the placing of the entry or advertisement.

The term “asserting a right to payment” is defined broadly in s 10 of the ACL to deem certain conduct, such making a demand for payment or threatening to bring legal proceedings to collect a debt, to be asserting a right to payment. The word “advertisement” is not defined in the ACL. Section 43(1) and (2) will not apply if the person asserting their right to payment knows, or has reasonable cause to believe, that the other person authorised the placing of the entry or advertisement. Section 43(3)(a) of the ACL provides an exemption from the provisions dealing with asserting a right to payment for entries or advertisements for the publisher of a publication with an audited circulation of 10,000 copies or more per week, as confirmed by the most recent audit of the publication by a body specified in the regulations. Regulation 79 of the ACL Amendment Regulations57 specifies that the Audit Bureau of Circulations as the relevant body for s 43(3)(a) of the ACL. Section 43(3)(d) provides an exemption from the provisions dealing with asserting a right to payment for unauthorised entries and advertisements for a person specified in the regulations. Regulation 80 of the ACL Amendment Regulations58 exempts: (a) large proprietary companies, (b) a subsidiary of a large proprietary company, (c) listed corporations and 57 Available at: http://www.comlaw.gov.au/Details/F2010L03014. 58 Available at: http://www.comlaw.gov.au/Details/F2010L03014.

336

The Australian Consumer Law

[7.105]

(d) a subsidiary of a large proprietary company, provided they have not been found guilty of an offence under s 162 of the ACL, which prohibits asserting a right to payment for goods or services. According to the Attachment to the Explanatory Statement accompanying the ACL Amendment Regulations,59 the exemptions are provided on the basis that such entities have strong reputational disincentives from engaging in conduct that would otherwise be covered by s 43(3) of the ACL. Section 43(6) provides that the onus is on the person asserting the right to payment to prove that he or she knew, or had reasonable cause to believe, that the other person authorised the placing of the entry or advertisement. Section 43 is based on s 64 of the TPA. Section 43 is based on s 64(3) and (4) of the TPA, and the jurisprudence surrounding the concepts in s 64 of the TPA is relevant to the same concepts s 43 of the ACL.60 Section 12DMB(1) and (2) of the ASIC Act replicates s 43(1) and (2) of the ACL in relation to financial products and services.

Criminal liability [7.105]

Section 163 creates a separate criminal offence that replicates s 43. It mirrors s 75AZQ of the TPA. The offence in s 163 is one of strict liability so that it is not necessary to consider the intent of the person committing the offence. Part 4-6 of the ACL provides defences applicable to criminal proceedings of: • a reasonable mistake of fact;61

• where the contravention was caused by the act or default of another person or an accident or cause beyond the person’s control, and where the person took reasonable precautions and exercised due diligence to avoid the contravention;62 and • where an advertiser publishes an advertisement in the ordinary course of business and does not know and had no reason to suspect the advertisement amounted to a contravention.63

ASIC ACT: UNAUTHORISED ADVERTISEMENTS [7.110]

Section 12DMB of the ASIC Act mirrors s 43 of the ACL with respect to the assertion of a right to payment for unauthorised advertisements for financial products or financial services.

59 Available at: http://www.comlaw.gov.au/Details/F2010L03014. 60 ACCC v Commercial & General Publications Pty Ltd (2002) ATPR (Digest) ¶46-222 (Heerey J); ACCC v Optell Pty Ltd (1998) ATPR ¶41-640 (O’Loughlin J); Kennan v Monahan [1991] Qd R 401 (McPherson J, with whom Demack and Williams JJ agreed); and Rizzo v Fitzgerald (1988) 19 FCR 175 (Pincus J). 61 See [13.115]. 62 See [13.120]. 63 See [13.125].

[7.120]

7 Specific Unfair Sales Techniques

337

PYRAMID SELLING Civil liability [7.115]

Pyramid selling is a form of a multi-level marketing scheme which is similar to referral selling in that they both hold out the prospect of future benefits in order to induce a person to participate in the scheme. In Australian Communications Network Pty Ltd v ACCC,64 the Full Court held: The real vice inherent in pyramid selling schemes appears to be that the rewards held out are substantially for recruiting others, who in turn get their rewards substantially for recruiting still more members, and so on. If there is no underlying genuine economic activity the scheme must ultimately collapse and many people will have been induced to pay money for nothing. We see the purpose of the legislation as directed at proscribing schemes where the real or substantial rewards held out are to be derived substantially from the recruitment of new participants, as distinct from rewards for genuine sales of goods or services.65

Section 44 of the ACL provides: (1) A person must not participate in a pyramid scheme. (2) A person must not induce, or attempt to induce, another person to participate in a pyramid scheme. (3) To participate in a pyramid scheme is: (a) to establish or promote the scheme (whether alone or together with another person); or (b) to take part in the scheme in any capacity (whether or not as an employee or agent of a person who establishes or promotes the scheme, or who otherwise takes part in the scheme).

Section 44(1) and (2) are based on s 65AAC(1) and (2) of the TPA respectively. They separately prohibit participating in a pyramid scheme, and inducing or attempting to induce another person to participate in a pyramid scheme. The jurisprudence surrounding the concepts in ss 65AAC, 65AAD and 65AAE of the former TPA is also relevant to ss 44, 45 and 46 of the ACL.66

Meaning of “pyramid scheme” [7.120]

Section 45 of the ACL defines a pyramid scheme as:

(1) A pyramid scheme is a scheme with both of the following characteristics: (a) to take part in the scheme, some or all new participants must provide, to another participant or participants in the scheme, either of the following (a participation payment): (i) a financial or non-financial benefit to, or for the benefit of, the other participant or participants; 64 Australian Communications Network Pty Ltd v ACCC (2005) 146 FCR 413 (Heerey, Merkel and Siposis JJ). 65 Australian Communications Network Pty Ltd v ACCC (2005) 146 FCR 413 at 426 [46]. 66 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.333]. See ACCC v Jutsen (No 3) (2011) 206 FCR 264 (Nicholas J); ACCC v Wordplay Services Pty Ltd (2004) 210 ALR 562 (Finn J); upheld on appeal, Wordplay Services Pty Ltd v ACCC (2005) 143 FCR 345 (Ryan and Kiefel JJ (with whom Tamberlin J agreed); Australian Communications Network Pty Ltd v ACCC (2005) 146 FCR 413 (Heerey, Merkel and Siposis JJ).

338

The Australian Consumer Law

[7.120]

(ii) a financial or non-financial benefit partly to, or for the benefit of, the other participant or participants and partly to, or for the benefit of, other persons; (b) the participation payments are entirely or substantially induced by the prospect held out to new participants that they will be entitled, in relation to the introduction to the scheme of further new participants, to be provided with either of the following (a recruitment payment): (i) a financial or non-financial benefit to, or for the benefit of, new participants; (ii) a financial or non-financial benefit partly to, or for the benefit of, new participants and partly to, or for the benefit of, other persons.

Section 45 is based on s 65AAD of the former TPA. The word “scheme” is not defined in the ACL. In ACCC v Wordplay Services Pty Ltd,67 Finn J in relation to s 66AAD of the TPA applied the meaning given to the word by Mason J in Australian Softwood Forests Pty Ltd v Attorney General(NSW); Ex rel Corporate Affairs Commission,68 namely “some programme, or plan of action”. In ACCC v Jutsen (No 3), Nicholas J referred to the Macquarie Dictionary definition of the word “scheme” which is “a plan or design to be followed”.69 His Honour was satisfied that TVI Express System was a “scheme” because it required prospective members to pay a membership fee to other participants in the scheme if they were to take part in it. It contains three elements: a participation payment; a recruitment payment; and a requirement of inducement. Section 45(1)(a) provides that participants make a payment (participation payment); and s 45(1)(b) provides that the participation payment is entirely or substantially induced by the prospect held out to new participants that they will be entitled to a payment (recruitment payment) “in relation to” the introduction to the scheme of further new participants. In ACCC v Lyoness Pty Ltd,70 the ACCC brought proceedings against Lyoness in respect of alleged breaches of s 44 of the ACL. Lyoness operated a website which offered consumers a range of different shopping opportunities and discounts in relation to goods and services purchased from Loyalty Merchants by becoming Members or Premium Members of the scheme. Loyalty Merchants were retailers and service providers who had agreed with Lyoness to promote their products on its website and to provide discounts to Members. The ACCC alleged that the only way a consumer could become a Member or Premium Member was by making a down-payment, which it characterised as a “participation payment” to join a pyramid scheme. Flick J found that even if there was a “participation payment” that fell within s 45(1)(a), any “recruitment payment” was not a payment in relation to the introduction to the scheme of further new participants as required by s 45(1)(b): On the facts of the present case, the mere introduction of a new Member did not result in the existing Member receiving any benefit. Any entitlement to receive a benefit was occasioned – not by the introduction of the new Member – but from the pursuit of 67 ACCC v Wordplay Services Pty Ltd (2004) 210 ALR 562. 68 Australian Softwood Forests Pty Ltd v Attorney General(NSW); Ex rel Corporate Affairs Commission (1981) 148 CLR 121 at 129. 69 ACCC v Jutsen (No 3) (2011) 206 FCR 264 at [102]. 70 ACCC v Lyoness Pty Ltd [2015] FCA 1129.

[7.130]

7 Specific Unfair Sales Techniques

339

shopping activity by that new (Direct) Member or Members and the shopping activities of (Indirect) Members who, in turn, may have been introduced by such new Members.71

Flick J concluded that the ACCC failed to discharge its onus of making good the allegation that a person could become a Member in Australia only by making a “Down Payment”: Although many people did in fact become Members in that manner, no conclusion can safely be drawn that making a “Down Payment” was the “only” way in which a person could become a Member in Australia prior to April 2012. It is not to the point, with respect, for the Commission to contend that there was no evidence “the other way”.72

Meaning of “entirely or substantially” [7.125]

The words “entirely or substantially” have been held to mean “the predominant inducement”. In ACCC v Wordplay Services Pty Ltd, Finn J considered the word “substantially” in relation to s 66AAD of the former TPA and said that it must be considered in its context and is coloured by the proximity of the word “entirely”. His Honour stated: The use of the composite formula in s 65AAD recognises that there may be a number of inducements to make a participation payment, and if such be the case, their relative significance must be considered. A participation payment could, for example, be induced substantially by the s 65AAD “prospect” held out while another and lesser inducement was the use or enjoyment of the goods or services being provided. Where multiple prospects are held out, if a particular prospect is to be characterised as the substantial inducement, it must be the predominant inducement …73

Meaning of “in relation to” [7.130]

A critical element of the definition of a pyramid selling scheme in s 45, is the scope of the words “in relation to” in s 45(1)(b) of the ACL and the precise nature of the link between the participation payment and the recruitment payment. It is not sufficient that there is an indirect link between the two payments; there must be a material connection between the two payments in the sense that the inducement for making the participation payment must be the prospect of consideration or reward for the introduction of further new participants. In Australian Communications Network Pty Ltd v ACCC,74 the ACCC instituted proceedings against Australian Communications Network Pty Ltd (ACN) alleging that ACN participated in a pyramid selling scheme. ACN provided retail telecommunications services and adopted a multi-level marketing structure. It resold Telstra and Optus fixed and mobile phone services through networks of independent representatives (IRs). An IR paid $499 to ACN to join the scheme (a “participation payment”) which was used by ACN to cover marketing expenses. ACN provided four different forms of remuneration for IRs: 71 ACCC v Lyoness Pty Ltd [2015] FCA 1129 at [156]. 72 ACCC v Lyoness Pty Ltd [2015] FCA 1129 at [130]. 73 ACCC v Wordplay Services Pty Ltd (2004) 210 ALR 562 at [110]. 74 Australian Communications Network Pty Ltd v ACCC (2005) 146 FCR 413 (Heerey, Merkel and Siposis JJ).

340

The Australian Consumer Law

[7.130]

• personal commissions on the revenue received by ACN from telecommunications customers introduced by an IR; • bonus promotional payments for signing up a minimum number of customers; • customer acquisition bonuses (CABs) for assisting “downstream IRs” to introduce new customers; and • residual override commissions on revenue received by ACN from customers introduced by “downstream IRs”. IRs could create “organisations” by sponsoring new IRs referred to as “downstream IRs”. The trial judge, Selway J, held that the bonus promotional payments and residual override commissions were “recruitment payments” as they were bonuses received as a consequence of introducing new IRs. In allowing the appeal the Full Court held: In the present case, there is not present the requisite relationship between the payments in question (CABs and residual override commissions) and the introduction of further new IRs. The receipt of any payments by IRs is dependent on the activities of IRs themselves, and/or of the IRs downstream of them signing up customers for ACN and those customers acquiring ACN’s telephone services. If an IR does no more than recruit other IRs there is no entitlement to any payment. The quantum of remuneration essentially turns on the volume of customers’ business with ACN regardless of whether those customers have been signed up by an IR or a downstream IR.75

Leave to appeal to the High Court of Australia was refused on 2 June 2006.76 In deciding whether participation payments were induced by a prospect of recruitment payments being made “in relation to” the introduction to the scheme of further new participants for purposes of s 45(1)(b), it is necessary to consider ACL, s 46. Section 46 provides: (1) To decide, for the purpose of this Schedule, whether a scheme that involves the marketing of goods or services (or both) is a pyramid scheme, a court must have regard to the following matters in working out whether participation payments under the scheme are entirely or substantially induced by the prospect held out to new participants of entitlement to recruitment payments: (a) whether the participation payments bear a reasonable relationship to the value of the goods or services that participants are entitled to be supplied with under the scheme (as assessed, if appropriate, by reference to the price of comparable goods or services available elsewhere); (b) the emphasis given in the promotion of the scheme to the entitlement of participants to the supply of goods or services by comparison with the emphasis given to their entitlement to recruitment payments. (2) Subsection (1) does not limit the matters to which the court may have regard in working out whether participation payments are entirely or substantially induced by the prospect held out to new participants of entitlement to recruitment payments.

Section 46(1)(a) focuses on the participation payments. In applying s 46(1)(a) it will be necessary to determine first the value of the goods or services that participants are entitled to under the scheme, and then whether the participation payments bore 75 Australian Communications Network Pty Ltd v ACCC (2005) 146 FCR 413 at 426 [48]. 76 ACCC v Australian Communications Network Pty Ltd [2006] HCA Trans 265.

[7.135]

7 Specific Unfair Sales Techniques

341

a “reasonable relationship” to the value of the goods or services. In ACCC v Jutsen (No 3), those who wished to participate in the scheme were required to pay an up-front membership fee of $330. A person who paid the fee received a “travel certificate” and the opportunity to receive commission payments for recruiting new members. Nicholas J found that the travel certificates were of little or no value since the scheme was “operated in a way that makes it extremely difficult, if not impossible, for people to redeem their travel certificate for the purpose of taking such a holiday”.77 Section 46(1)(b) focuses on the recruitment payments and whether the emphasis in the promotion of the scheme was given to the entitlement to receive recruitment payments as opposed to earning money through the volume of business transacted in terms of selling goods or services. In some cases this may be relatively clear cut. In ACCC v Jutsen (No 3) Nicholas J found that the respondents placed “great emphasis” in the promotion of the scheme on the ability of a member to earn income from the recruitment of new members, rather than on earning income from the sale of goods or services.78

Pyramid schemes: extraterritorial operation [7.135]

The pyramid selling provisions of the ACL can have extra-territorial operation. In Wordplay Services Pty Ltd v ACCC,79 the ACCC commenced proceedings against Wordplay for participating in an online pyramid selling scheme in contravention of TPA, s 65AAC(1) and against its sole director, Mr Kennedy, as an accessory pursuant to TPA, s 75B. Wordplay provided administrative and IT support to the scheme, which was hosted by a company in the British Virgin Islands.80 Two corporations involved in the scheme were registered in Australia.81 Even though many of the consumers affected by the scheme were outside Australia, the fact that Wordplay operated the scheme from Australia was sufficient to bring it within the ambit of the TPA. At first instance, the scheme was held to be an illegal pyramid selling scheme, and Mr Kennedy was liable as an accessory.82 The appeal concerned the application of the TPA outside Australia and whether the objects of the TPA were limited to protecting Australian consumers. Ryan and Kiefel JJ (with whom Tamberlin J agreed) held that so long as there is conduct amounting to participation in Australia, there was no reason to limit its protection to Australian consumers: In our view s 65AAC(1) is to be taken to say that, so long as a scheme exists, wherever it be carried out, and a corporation is doing things in Australia which amount to participation in it, a contravention will be established. It is irrelevant where the scheme is carried out. It follows that even if the scheme is effected in another country, there is no 77 ACCC v Jutsen (No 3) (2011) 206 FCR 264 at [114]. 78 ACCC v Jutsen (No 3) (2011) 206 FCR 264 at [116]. 79 Wordplay Services Pty Ltd v ACCC (2005) 143 FCR 345. 80 Wordplay Services Pty Ltd v ACCC (2005) 143 FCR 345 at [2]. 81 Wordplay Services Pty Ltd v ACCC (2005) 143 FCR 345 at [4]. 82 ACCC v Wordplay Services Pty Ltd (2004) 210 ALR 562 (Finn J).

342

The Australian Consumer Law

[7.140]

trespass by s 65AAC(1) into the jurisdiction of another country. The conduct proscribed is not that of a corporation in that country. It also follows that an intention to the contrary of any common law or statutory implication that the elements of the scheme be carried out in Australia is established.

The objects section should not be taken to limit the operation of s 65AAC(1) to Australian consumers, contrary to the broad operation which that sub-section is clearly intended to have. His Honour the primary Judge held, correctly in our respectful view, that the Commonwealth has an obvious interest in the conduct of corporations in Australia. There would seem to be no reason to restrict it to effects upon Australian consumers.83 The application of ss 44, 45 and 46 of the ACL are not limited to conduct involving a consumer as defined in s 3 of the ACL.

Criminal liability [7.140]

Section 164 creates a separate criminal offence that replicates s 44(1) and (2) of the ACL. It mirrors s 75AZO of the former TPA. The offence in s 164 is one of strict liability so that it is not necessary to consider the intent of the person committing the offence. According to the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010: The strict liability nature of this offence reflects the potential for widespread detriment, both financially for individual consumers and for its effect on the market and consumer confidence more generally, that can be caused by a person that breaches this provision, whether or not he or she intended to engage in the contravention.84

Part 4-6 of the ACL provides defences applicable to criminal proceedings of: • a reasonable mistake of fact;85 • where the contravention was caused by the act or default of another person or an accident or cause beyond the person’s control, and where the person took reasonable precautions and exercised due diligence to avoid the contravention;86 and • where an advertiser publishes an advertisement in the ordinary course of business and does not know and had no reason to suspect the advertisement amounted to a contravention.87

ASIC ACT: PYRAMID SELLING [7.145]

Section 12DK of the ASIC Act mirrors ss 44 and 45 of the ACL with respect to pyramid selling trading schemes involving the supply of financial products.

83 Wordplay Services Pty Ltd v ACCC (2005) 143 FCR 345 at [24]-[25]. 84 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.336]. 85 See [13.115]. 86 See [13.120]. 87 See [13.125].

[7.150]

7 Specific Unfair Sales Techniques

343

Trading scheme is defined in s 12DK(5) and (6): (5) For the purposes of this section, a scheme is a trading scheme to which this section applies if the scheme includes the following elements: (a) financial products are to be provided by the person promoting the scheme (the promoter) or, in the case of a scheme promoted by 2 or more persons acting in concert (the promoters), are to be provided by one or more of those persons; and (b) the financial products so provided are to be supplied to or for other persons under transactions arranged or effected by persons who participate in the scheme (each of whom is in this section referred to as a participant), being persons not all of whom are promoters. (6) For the purposes of subsection (5): (a) a scheme is taken to include the element referred to in paragraph (5)(b) whether a participant who is not a promoter acts in relation to a transaction referred to in that paragraph in the capacity of an employee or agent of the promoter or of one of the promoters or in any other capacity; and (b) a scheme includes any arrangements made in connection with the carrying on of a business, whether those arrangements are made or recorded wholly or partly in writing or not; and (c) a reference to the provision of a financial product by a person includes a reference to the provision of a financial product under arrangements to which that person is a party.

MULTIPLE PRICING [7.150]

Multiple pricing occurs where goods have more than one displayed price and the goods are supplied for a price that is not the lower, or not the lowest, of the displayed prices. Section 47(1) prohibits a person from supplying goods, in trade or commerce, if: (a) the goods have more than one displayed price; and (b) the supply takes place for a price that is not the lower, or lowest, of the displayed prices. There was no equivalent provision in the TPA. Section 47 of the ACL is similar to s 40 of the FTA 1987 (NSW). The inclusion of this provision in the ACL was agreed to by MCCA on 4 December 2009. The term “displayed price” is defined in s 47(2): (2) A displayed price for goods is a price for the goods, or any representation that may reasonably be inferred to be a representation of a price for the goods: (a) that is annexed or affixed to, or is written, printed, stamped or located on, or otherwise applied to, the goods or any covering, label, reel or thing used in connection with the goods; or (b) that is used in connection with the goods or anything on which the goods are mounted for display or exposed for supply; or (c) that is determined on the basis of anything encoded on or in relation to the goods; or (d) that is published in relation to the goods in a catalogue available to the public if: (i) a time is specified in the catalogue as the time after which the goods will not be sold at that price and that time has not passed; or

344

The Australian Consumer Law

[7.155]

(ii) in any other case–the catalogue may reasonably be regarded as not out-of-date; or (e) that is in any other way represented in a manner from which it may reasonably be inferred that the price or representation is applicable to the goods; and includes such a price or representation that is partly obscured by another such price or representation that is written, stamped or located partly over that price or representation.

Section 47(4) defines when a price or representation is not a displayed price: (4) Despite subsection (2), a price or representation is not a displayed price for goods (a) the price or representation is wholly obscured by another such price representation that is written, stamped or located wholly over that price representation; or (b) the price or representation: (i) is expressed as a price per unit of mass, volume, length or other unit measure; and

if: or or

of

(ii) is presented as an alternative means of expressing the price for supply of the goods that is a displayed price for the goods; or (c) the price or representation is expressed as an amount in a currency other than Australian currency; or (d) the price or representation is expressed in a way that is unlikely to be interpreted as an amount of Australian currency.

Retraction of prices [7.155]

Section 47(1) does not affect a person’s right to withdraw an item from sale where a pricing error has occurred, or to retract a price; however, if a pricing error in an advertisement or catalogue is retracted the publication of the retraction must be equivalent to the original catalogue or advertisement where the pricing error occurred.88

The application of s 47 of the ACL is not limited to conduct involving a consumer as defined in s 3 of the ACL.

Criminal liability [7.160]

Section 165 creates a separate criminal offence that replicates s 47(1) of the ACL. The offence in s 165 is one of strict liability so that it is not necessary to consider the intent of the person committing the offence. According to the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, The strict liability nature of this offence reflects the potential for widespread detriment, both financially for individual consumers and for its effect on the market and consumer confidence more generally, that can be caused by a person that breaches this provision, whether or not he or she intended to engage in the contravention.89

Part 4-6 of the ACL provides defences applicable to criminal proceedings of: 88 ACL, s 47(5). 89 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.351].

[7.165]

7 Specific Unfair Sales Techniques

345

• a reasonable mistake of fact;90 • where the contravention was caused by the act or default of another person or an accident or cause beyond the person’s control, and where the person took reasonable precautions and exercised due diligence to avoid the contravention;91 and • where an advertiser publishes an advertisement in the ordinary course of business and does not know and had no reason to suspect the advertisement amounted to a contravention.92

COMPONENT PRICING [7.165]

Section 48 of the ACL contains two prohibitions. The first prohibition is contained in s 48(1), which provides: (1) A person must not, in trade or commerce, in connection with: (a) the supply, or possible supply, to another person of goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption; or (b) the promotion by any means of the supply to another person, or of the use by another person, of goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption; make a representation with respect to an amount that, if paid, would constitute a part of the consideration for the supply of the goods or services unless the person also specifies, in a prominent way and as a single figure, the single price for the goods or services.

Section 48(2) provides an exception to the general requirement that all components must be included in a single price. It provides: (2) A person is not required to include, in the single price for goods, a charge that is payable in relation to sending the goods from the supplier to the other person.

The second prohibition is contained in s 48(3) which provides: (3) However, if: (a) the person does not include in the single price a charge that is payable in relation to sending the goods from the supplier to the other person; and (b) the person knows, at the time of the representation, the minimum amount of a charge in relation to sending the goods from the supplier to the other person that must be paid by the other person; the person must not make the representation referred to in subsection (1) unless the person also specifies that minimum amount.

Section 48 is based on s 53C of the former TPA and the jurisprudence surrounding the concepts in s 53C of the TPA is also relevant to s 48 of the ACL.93 90 See [13.115]. 91 See [13.120]. 92 See [13.125]. 93 Second Explanatory Memorandum, at [6.357]. See ACCC v Gourmet Goody’s Family Restaurant Pty Ltd [2010] FCA 1216 (Jagot J); ACCC v Dell Computers Pty Ltd (2002) ATPR ¶41-878 (Jacobson J); on appeal ACCC v Dell Computers Pty Ltd (2003) ATPR ¶41-910 (Branson and Stone JJ, Emmett J dissenting).

346

The Australian Consumer Law

[7.170]

Section 48 of the ACL gives statutory effect to the decision of Jacobson J in ACCC v Dell Computers Pty Ltd.94 The ACCC commenced proceedings against Dell for a contravention of s 53C in connection with advertisements that had a prominent display or statement of the price for its computers, and reference elsewhere in the advertisement to an additional delivery charge. The delivery charge was obligatory, as Dell did not have traditional retail outlets from which the purchaser could collect the goods. Jacobson J held that for there to have been a contravention of TPA, s 53C, the delivery charge would have had to form part of the consideration for the purchase of the goods. The advertisements did not contravene s 53C because the delivery charge was a separate charge for a separate service and not part of the purchase price. This finding was confirmed on appeal by the Full Federal Court.95 Section 53C was introduced in response to complaints about pricing in the airline industry where airlines adopted the practice of prominently displaying the ticket price of a flight, but omitted the other taxes, landing fees and fuel surcharges that had to be paid by the consumer. Similarly, new motor vehicles were sometimes advertised with a price that excluded various charges, such as taxes and “dealer” charges. This form of partial price representation, or “component pricing,” as it is sometimes called, prevents consumers from comparing like with like in making purchasing decisions. Its purpose is to make transactions transparent so that consumers can make informed decisions in line with the policy objectives of the ACL.96 The prohibition in s 48(1) only applies to “goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption”. It does not apply if the price representation is made “exclusively to a body corporate”.97 A supplier is only required to quote a single price in relation to transactions which are directed, wholly or in part, at consumers. Subsection 48(7) defines “single price” as: (7) The single price is the minimum quantifiable consideration for the supply of the goods or services at the time of the representation, including each of the following amounts (if any) that is quantifiable at that time: (a) a charge of any description payable to the person making the representation by another person (other than a charge that is payable at the option of the other person)…

“Drip pricing” [7.170]

“Drip pricing” is a form of component pricing under which a headline price is advertised at the beginning of an online purchasing process and additional fees and charges are incrementally disclosed, resulting in the consumer paying a higher price than the advertised headline price; see [6.140]. For example, in ACCC v

94 ACCC v Dell Computers Pty Ltd (2002) ATPR ¶41-878. 95 ACCC v Dell Computers Pty Ltd (2003) ATPR ¶41-910 (Branson and Stone JJ, Emmett J dissenting). 96 See [1.10]–[1.20]. 97 ACL, s 48(4).

[7.175]

7 Specific Unfair Sales Techniques

347

AirAsia Berhad Company,98 Air Asia Berhad, for a period of 10 months, did not display on its website some airfare prices inclusive of all taxes, duties, fees and other mandatory charges in a prominent way and as a single figure. AirAsia published fares offered to consumers (“the Fare Amounts”) supplying air travel services for flights between airports at the following locations: for flights departing from airports inside Australia (at Melbourne, Perth and the Gold Coast) additional charges payable by the consumer included those imposed under the Passenger Movement Charge Act 1978 (Cth) and a fuel surcharge. For flights departing from airports outside Australia, additional taxes, fees, surcharges and other charges were payable by the consumer. Tracey J said in relation to conduct proscribed by s 48 of the ACL: I accept that it is necessary to have regard to the entire booking process and to the fact that, having completed it, a consumer would have become aware of the full price to be paid before committing him or herself to a purchase. It is also relevant that, on Page 2, the potential customer was advised that the fares there quoted excluded taxes and fees. These considerations do not, however, weigh heavily in mitigation. The principal vice to which s 48 is directed is the seductive effect of a quoted price which is lower than the actual amount which the consumer will have to pay in order to receive the relevant service. Unless the full price is prominently displayed the consumer may well be attracted to a transaction which he or she would not otherwise have found to be appealing and grudgingly pay the additional imposts rather than go to the trouble of withdrawing from the transaction and looking elsewhere. The company which is seeking to attract business in contravention of s 48 will also obtain an advantage over competitors who are compliant. The relevant errant conduct continued over many months and had the potential to influence thousands of bookings.99

Non-quantifiable charges [7.175]

The single price means the minimum total price that can be quantified or calculated at the time of making the representation. A charge is not quantifiable if, at the time of the representation, it cannot be converted into a dollar amount.

The term “supply” is defined is defined in s 2 of the ACL to include the lease, hire or hire-purchase of goods.100 The use of the term “supply” in ACL, s 48(1) means that the section encompasses the lease and hire of goods. Such arrangements may be problematic where the final price includes quantifiable and non-quantifiable charges. In such circumstances a supplier is required to state the quantifiable charges as a single figure and advise consumers that not all components are included. The ACCC provides the following example: A rental car business offers a particular luxury car for hire at $74 per day. The business also charges a $1 surcharge for each kilometre that the customer drives, which is then added to the daily rate. The complete surcharge cannot be quantified at the time of advertising because it cannot be known how many kilometres the customer will drive. 98 ACCC v AirAsia Berhad Company [2012] FCA 1413. 99 ACCC v AirAsia Berhad Company [2012] FCA 1413 at [31]. 100 See [8.160]–[8.165].

348

The Australian Consumer Law

[7.180]

This could be advertised as: $74/day + $1/kilometre surcharge.101

According to the Second Explanatory Memorandum, “[t]he term ‘minimum quantifiable consideration’ is not intended to preclude negotiation of a lower price between the customer and the corporation making the representation.”102 The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, provides the following example: Example 6.2 A motor vehicle dealer may advertise the price of a vehicle as $32,990. However a customer may negotiate with the dealer to pay only $31,500. The representation of $32,990 would not be in breach of the provision provided that it includes all elements of the price that are quantifiable at the time of making the representation. The fact that a lower price has been negotiated and a subsequent representation about that lower price has been made to the consumer does not cause the dealer’s earlier representation to be in breach.103

Optional charges [7.180]

It is not necessary to include in the single price any charge that is optional. Optional charges are additional charges that a consumer chooses to pay. The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, provides the following examples: Example 6.3 Where a consumer can only purchase a service by using a credit card, and a compulsory surcharge is imposed for the use of a credit card, that charge should be included in the single price; but Example 6.4 Where a consumer can purchase a service through means other than a credit card, and those other means do not attract a compulsory surcharge, the credit card surcharge does not need to be included in the single price.104

Section 48(7)(a) provides the following example of an optional charge that does not need to be included in the single price: A person advertises lounge suites for sale. Persons have the option of paying for fabric protection. The fabric protection charge does not form part of the single price because of the exception in paragraph (a).

101 ACCC, News for Business Component Price Advertising (2009), p 2. 102 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.369]. 103 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.369]. 104 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.370].

[7.190]

7 Specific Unfair Sales Techniques

349

Section 48(1) does not prohibit the use of component pricing; however, where component pricing is used a supplier must prominently display a single price figure that the consumer will be required to pay in order to obtain the goods or services. The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, provides the following example: Example 6.1 A person could continue to represent prices as: • $299 + $29.90 GST for a total price of $328.90; or • $79 + $35 taxes fees and charges for a total price of $114.105

In a prominent way [7.185]

Section 48(5) provides that for the purposes of ACL, s 48(1) a corporation is taken not to have specified a single price for the goods or services in a prominent way unless the single figure price is at least as prominent as the most prominent of the component parts.

Criminal liability [7.190]

Section 166 creates a separate criminal offence that replicates s 48 of the ACL. The offence in s 166 is one of strict liability so that it is not necessary to consider the intent of the person committing the offence. According to the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, The strict liability nature of this offence reflects the potential for widespread detriment, both financially for individual consumers and for its effect on the market and consumer confidence more generally, that can be caused by a person that breaches this provision, whether or not he or she intended to engage in the contravention.106

Part 4-6 of the ACL provides defences applicable to criminal proceedings of: • a reasonable mistake of fact;107 • where the contravention was caused by the act or default of another person or an accident or cause beyond the person’s control, and where the person took reasonable precautions and exercised due diligence to avoid the contravention;108 and • where an advertiser publishes an advertisement in the ordinary course of business and does not know and had no reason to suspect the advertisement amounted to a contravention.109 105 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.358]. 106 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.377]. 107 See [13.115]. 108 See [13.120]. 109 See [13.125].

350

The Australian Consumer Law

[7.195]

REFERRAL SELLING Civil liability [7.195]

Referral selling is prohibited because any benefit flowing to the consumer is contingent on an event occurring after the sale. Section 49 of the ACL provides: A person must not, in trade or commerce, induce a consumer to acquire goods or services by representing that the consumer will, after the contract for the acquisition of the goods or services is made, receive a rebate, commission or other benefit in return for: (a) giving the person the names of prospective customers; or (b) otherwise assisting the person to supply goods or services to other consumers; if receipt of the rebate, commission or other benefit is contingent on an event occurring after that contract is made.

Section 49 is limited to dealings with consumers. The term “consumer” is defined in s 3 of the ACL. Section 49 is based on s 57 of the former TPA, and the jurisprudence surrounding the concepts in s 57 of the is also relevant to s 49 of the ACL.110 The prohibition in s 49 only applies to inducements to sign up for the goods or services. If the contract is completed (and there have been no prior representations that a rebate, commission or other benefit will apply) the supplier may, without contravening s 49, offer a rebate to the original purchaser for others who are induced or persuaded to buy the product by the original purchaser. In ACCC v Lyoness Pty Ltd,111 the ACCC alleged that the scheme operated by Lyoness contravened s 49.112 Flick J held that the phrase appearing in s 49 that a consumer “will receive a rebate, commission or other benefit in return for” giving the names of prospective customer should be construed in a manner comparable to the phrase in s 45 of the ACL, namely “in relation to the introduction to the scheme of further new participants”.113 His Honour observed: Although the decision of the Full Court in Australian Communications Network was a decision in respect to “pyramid selling”, it is respectfully further considered that their Honours’ insistence upon the need for “the real or substantial rewards held out … to be derived substantially from the recruitment of new participants, as distinct from rewards for genuine sales of goods or services” ([2005] FCAFC 221 at [46], (2005) 146 FCR at 425) applies equally to both ss 45 and 49.114

In this case, the rewards did not derive substantially from recruiting new members, but rather for making genuine sales of goods and services. 110 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.385]. See ACCC v Bio Enviro Plan Pty Ltd (2003) ATPR ¶41-963 (R D Nicholson J); and ACCC v Giraffe World Australia (No 2) (1999) ATPR ¶41-718 (Lindgren J). 111 ACCC v Lyoness Pty Ltd [2015] FCA 1129. 112 See [7.120]. 113 ACCC v Lyoness Pty Ltd [2015] FCA 1129 at [84]. 114 ACCC v Lyoness Pty Ltd [2015] FCA 1129 at [84].

[7.195]

7 Specific Unfair Sales Techniques

351

In order to avoid infringing s 49, it is essential that any scheme be operated in two separate stages. Potential members of a scheme must not be induced to make a payment to acquire goods or services on the basis of a promise of receiving a rebate, commission, or other benefit in return for introducing other participants recruited by them. In ACCC v Giraffe World Australia Pty Ltd,115 Giraffe World (GW) was the distributor of a mat or mattress able to be connected to an electricity supply. Giraffe World claimed that when connected to a source of electricity, the mat emitted negative ions which would benefit the health of a person who slept on it. The cash price for the mat was $2,900 and a further $350 was payable as an application and membership fee in the Giraffe Club (GC) and the right to be considered for participation in the Grow Rich Scheme (GRS). Participants in the GRS were promised commission on sales made by Giraffe World to persons introduced by the member, and on sales made to persons whose introduction to Giraffe World could be traced to the member. As at 3 April 1999, 4,656 people had bought the mat, joined the Giraffe Club and joined the Grow Rich Scheme. According to Lindgren J, the evil at which s 57 is directed is: … that a person might be induced to buy goods or services by an expectation that he or she will subsequently receive a rebate, commission or other benefit (after this, simply “commission”) for assisting the supplier to supply its goods, or services, to other consumers, when there is no assurance that the commission will in fact be received because receipt of its is subject to a contingency. The contingency is something over and above the rendering of the assistance or the doing of any other act by the consumer alone. An illustration given in s 57 itself is the giving to the supplier of the names of prospective customers. If a commission were to become payable by reason of nothing more than the giving of the names, the section would not be contravened. In such a case, the earning of the commission would not be contingent on the occurrence of an event which was both later than the acquisition by the consumer and distinct from the giving of the names itself. But, as the respondents’ submissions correctly recognise, the typical arrangement would provide for receipt of the commission to be contingent on acquisition of goods or services by one or more of the prospective customers who names had been supplied.116

The words “that contract” in s 57 referred to the contract entered into by the original consumer for the acquisition of goods or services, not the contract entered into subsequently by one of the prospective consumers whose name has been provided by the original consumer. Lindgren J held: In sum, the expression “that contract” in s 57 refers back to the “contract” expressly referred to in the section, that is, the contract for the acquisition of goods or services made by the original consumer. There will be a contravention of s 57 by GW if GW induced a consumer to acquire any one or more of the Mat, the GC membership rights or the GRS membership rights, by representing that the consumer would, after that contract was made, receive commissions in return for assisting GW to sell any one or more of the Mat

115 ACCC v Giraffe World Australia Pty Ltd (1999) ATPR ¶41-718. 116 ACCC v Giraffe World Australia Pty Ltd (1999) ATPR ¶41-718 at 43,288.

352

The Australian Consumer Law

[7.200]

and those rights to other consumers, if receipt of the commission was contingent on those other consumers’ actually doing one or more of buying the Mat, joining the GC or joining the GRS.117

Lindgren J held that s 57 did not require that the representation concerning a consumer to be made on the giving of names of prospective customers should be the sole or dominant inducement operating on the consumer’s mind. While a case where the individual was not induced at all by the holding out of the prospect of earning commission would not be caught by s 57, I do not think that section requires that the representation described in it should be the sole or even the dominant inducement operating on the consumer’s mind. In my view, it suffices that it be a “real” or “significant” inducement. The section is intended to compel corporations to ensure that they do not encourage consumers to acquire goods or services for a certain price while thinking that the “true price” will ultimately prove to be less, because of commissions to be received, when there is no certainty that they will be received at all because their receipt is contingent on the occurrence of later events outside the consumer’s control. It would be consonant with this objective to understand the notion of “induce” in the section in the manner that I have indicated, and it would be discordant with it to understand it as activated only where the prospect of receiving commissions was the sole or dominant inducement.118

Criminal liability [7.200]

Section 167 creates a separate criminal offence that replicates s 49 of the ACL. It mirrors s 75AZK of the TPA. The offence in s 167 is one of strict liability so that it is not necessary to consider the intent of the person committing the offence. According to the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, The strict liability nature of this offence reflects the potential for widespread detriment, both financially for individual consumers and for its effect on the market and consumer confidence more generally, that can be caused by a person that breaches this provision, whether or not he or she intended to engage in the contravention.119

Part 4-6 of the ACL provides defences applicable to criminal proceedings of: • a reasonable mistake of fact;120 • where the contravention was caused by the act or default of another person or an accident or cause beyond the person’s control, and where the person took reasonable precautions and exercised due diligence to avoid the contravention;121 and 117 ACCC v Giraffe World Australia Pty Ltd (1999) ATPR ¶41-718 at 43,288. 118 ACCC v Giraffe World Australia Pty Ltd (1999) ATPR ¶41-718 at 43,288-9. 119 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.387]. 120 See [13.115]. 121 See [13.120].

[7.210]

7 Specific Unfair Sales Techniques

353

• where an advertiser publishes an advertisement in the ordinary course of business and does not know and had no reason to suspect the advertisement amounted to a contravention.122

ASIC ACT: REFERRAL SELLING [7.205]

Section 12DH of the ASIC Act mirrors s 49 of the ACL with respect to the referral selling of financial products. Section 12DH provides: (1) A person must not, in trade or commerce, induce a consumer to acquire financial services by representing that the consumer will, after the contract to acquire the services is made, receive a rebate, commission or other benefit in return for: (a) giving the person the names of prospective customers; or (b) otherwise assisting the person to supply financial services to other consumers; if receipt of the rebate, commission or other benefit is contingent on an event occurring after that contract is made. Note Failure to comply with this subsection is an offence (see section 12GB). (2) An offence under subsection 12GB(1) relating to subsection (1) of this section is an offence of strict liability.

HARASSMENT AND COERCION Civil liability [7.210]

Section 50 of the ACL prohibits a corporation from using physical force, undue harassment or coercion in connection with the supply, possible supply and sale of goods or services by a consumer. The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states that: “[t]his provision sets a norm of conduct in which the use of physical force, undue harassment or coercion is deemed to be unacceptable.”123

Section 50 provides: (1) A person must not use physical force, or undue harassment or coercion, in connection with: (a) the supply or possible supply of goods or services; or (b) the payment for goods or services; or (c) the sale or grant, or the possible sale or grant, of an interest in land; or (d) the payment for an interest in land. (2) Subsections (1)(c) and (d) do not affect the application of any other provision of Part 2-1 or this Part in relation to the supply or acquisition, or the possible supply or acquisition, of interests in land.

In relation to s 50 it should be noted that the physical force, harassment or coercion must be in connection with the supply of goods or services to a consumer. It does 122 See [13.125]. 123 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.394].

354

The Australian Consumer Law

[7.215]

not have to be applied directly to the consumer. Thus, the section will apply if the consumer’s spouse is harassed at work, or at home while the consumer is at work. Section 50 is based on s 60 of the former TPA, and the jurisprudence surrounding the concepts in s 60 of the is TPA also relevant to s 50 of the ACL.124 There is no definition of “undue harassment or coercion” in the ACL. It is unclear whether the adjective “undue” qualifies “coercion” as well as “harassment”. In ACCC v Maritime Union of Australia,125 Hill J explained the terms to mean: persistent disturbance or torment. In the case of a person employed to recover money owing to others … it can extend to cases where there are frequent unwelcome approaches requesting payment of a debt. However, such unwelcome approaches would not constitute undue harassment, at least where the demands made are legitimate and reasonably made. On the other hand where the frequency, nature or content of such communications is such that they are calculated to intimidate or demoralise, tire out or exhaust a debtor, rather than merely convey the demand for recovery, the conduct will constitute undue harassment. … “Coercion” on the other hand carries with it the connotation of force or compulsion or threats of force or compulsion negating choice or freedom to act: see Hodges v Webb [1920] 2 Ch 70 at 85-7 per Peterson J. A person may be coerced by another to do something or refrain from doing something, that is to say the former is constrained or restrained from doing something or made to do something by force or threat of force or other compulsion. Whether or not repetition is involved in the concept of harassment, and it usually will be, it is not in the concept of coercion. It is clear that the word “undue” suggests that what is done must, having regard to the circumstances in which the conduct occurs, extend beyond that which is acceptable or reasonable. It thus adds, as French J observes at paragraph 48 in McCaskey, “an extra layer of evaluation”. The word “undue”, when used in relation to harassment, ensures that conduct which amounts to harassment will only amount to a contravention of the section where what is done goes beyond the normal limits which, in the circumstances, society would regard as acceptable or reasonable and not excessive or disproportionate.126

In ACCC v Excite Mobile Pty Ltd,127 Mansfield J cited these passages from ACCC v Maritime Union of Australia and observed that while Hill J had taken the view that “undue” was only used in relation to “harassment”, French J in ACCC v McCaskey,128 had taken the view that “undue” applied to both the concepts of harassment and coercion.129 Mansfield J concluded that the measure of coercion required is “something significantly beyond legitimate and reasonable demands”.130

[7.215]

124 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, [6.396]. See ACCC v Davis [2003] FCA 1227 (Lee J); ACCC v Esanda Finance Corporation Ltd [2003] FCA 1225 (Lee J); ACCC v Capalaba Pty Ltd (2004) ATPR ¶41-976 (Lee J); ACCC v Maritime Union of Australia at (2001) 114 FCR 472 (Hill J); ACCC v McCaskey (2000) 104 FCR 8 (French J); and Campbell v Metway Leasing Ltd (1998) ATPR ¶41-630 (McInerney J). 125 ACCC v Maritime Union of Australia at (2001) 114 FCR 472. 126 ACCC v Maritime Union of Australia at (2001) 114 FCR 472 at [62]-[64]. 127 ACCC v Excite Mobile Pty Ltd [2013] FCA 350. 128 ACCC v McCaskey (2000) 183 ALR 159 at [51]. 129 ACCC v Excite Mobile Pty Ltd [2013] FCA 350 at [160]-[161]. 130 ACCC v Excite Mobile Pty Ltd [2013] FCA 350 at [209].

[7.220]

7 Specific Unfair Sales Techniques

355

His Honour found that Excite Mobile had used “undue coercion” when attempting to collect debts for mobile phone services in contravention of s 60 of the TPA.131 Excite Mobile created a fictitious debt collector, Jerry Hastings, and sent intimidating debt collection letters using strong and threatening language. The letters contained false representations that unless an agreement was entered to pay the alleged debt, Excite Mobile would obtain court orders requiring the customer to pay an additional charge equal to 20% of the customer’s alleged debt.132 The letters contained the following “fictional construct”: Believe me there is no way you want to meet my lawyer in court. While she seems like a nice lady she is a killer in front of the judge. One case she even got the judge to order a young mother have her kids game machine repossessed. She has no feelings towards you at all. Her job is to be as mean as possible towards you. She can make your life extremely uncomfortable.133

In ACCC v Origin Energy Electricity Ltd,134 Origin Energy Electricity Ltd (Origin) and Origin’s marketing company, SalesForce Australia Pty Ltd (SalesForce), the sales representative continued to negotiate with a consumer, Witness E, after she informed him that she was not the authorised account holder, and repeatedly advised that she was not interested in changing her electricity supplier. During a telephone call with SalesForce to confirm a contract with Origin, the sales representative instructed Witness E to state that her husband, who was the authorised account holder, had signed the agreement when this was not the case.135 This conduct was held to contravene s 50(1) of the ACL.136

Criminal liability [7.220]

Section 168 creates a separate criminal offence that replicates s 50 of the ACL. It mirrors s 75AZN of the TPA. The offence in s 168 is one of strict liability so that it is not necessary to consider the intent of the person committing the offence. According to the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, The strict liability nature of this offence reflects the potential for widespread detriment, both financially for individual consumers and for its effect on the market and consumer confidence more generally, that can be caused by a person that breaches this provision, whether or not he or she intended to engage in the contravention.137

Part 4-6 of the ACL provides defences applicable to criminal proceedings of: • a reasonable mistake of fact;138 131 ACCC v Excite Mobile Pty Ltd [2013] FCA 350 at [208]. 132 ACCC v Excite Mobile Pty Ltd [2013] FCA 350 at [42]. 133 ACCC v Excite Mobile Pty Ltd [2013] FCA 350 at [43]. 134 ACCC v Origin Energy Electricity Ltd [2015] FCA 278 (Katzmann J). 135 ACCC v Origin Energy Electricity Ltd [2015] FCA 278 at [52]. 136 ACCC v Origin Energy Electricity Ltd [2015] FCA 278 at [55]. 137 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.398]. 138 See [13.115].

356

The Australian Consumer Law

[7.225]

• where the contravention was caused by the act or default of another person or an accident or cause beyond the person’s control, and where the person took reasonable precautions and exercised due diligence to avoid the contravention;139 and • where an advertiser publishes an advertisement in the ordinary course of business and does not know and had no reason to suspect the advertisement amounted to a contravention.140

ASIC ACT: HARASSMENT OR COERCION [7.225]

Section 12DJ of the ASIC Act mirrors s 50 of the ACL with respect to undue harassment or coercion in relation to the supply or payment for financial products. Section 12DJ provides: (1) A person contravenes this subsection if: (a) the person uses physical force or undue harassment or coercion; and (b) the person uses such force, harassment or coercion in connection with the supply or possible supply of financial services to a consumer, or the payment for financial services by a consumer. Note Failure to comply with this subsection is an offence (see section 12GB). (2) Strict liability applies to paragraph (1)(b).

The ACCC and ASIC have published, Debt Collection Guideline: for collectors and creditors, which sets out their views on collection practices that comply with the ACL.141 The guideline provides practical guidance about matters such as when it is appropriate to contact a debtor, including what constitutes contact and reasonable contact hours, and the methods and frequency of contact. In ASIC v Accounts Control Management Services Pty Ltd142, Perram J held that ACM had contravened the ASIC Act equivalents to ACL, ss 18 and 60, namely ASIC Act, ss 12DA(1) and 12DJ(1) while recovering debts by heaping personal abuse upon debtors or blackmailing them by threatening to reveal their positions as debtors to relatives, friends, employers and neighbours. The ACCC and ASIC published in 2015, Debt Collection Guideline: For Collectors and Creditors, which sets out their views on collection practices that comply with the ACL.143 The guideline provides practical guidance about matters such as when it is appropriate to contact a debtor, including what constitutes contact and reasonable contact hours, and the methods and frequency of contact.

139 See [13.120]. 140 See [13.125]. 141 ACCC and ASIC, Debt Collection Guideline: for collectors and creditors (July 2015), at http:// www.download.asic.gov.au/media/3285155/rg96-published-10-july-2015.pdf?_ga= 1.66469550.1616486917.1449707335. 142 ASIC v Accounts Control Management Services Pty Ltd [2012] FCA 1164. 143 At https://www.accc.gov.au/publications/debt-collection-guideline-for-collectors-creditors.

8

Consumer Guarantees for Goods [8.05] INTRODUCTION ................................................................................................................ 358 [8.10] PART I: BACKGROUND AND POLICY OBJECT ......................................................... 360

[8.15] [8.20] [8.45] [8.50] [8.55] [8.60]

Guarantees not intended to cover the field ................................................... Findings of the NEIAT study ........................................................................... Commonwealth Consumer Affairs Advisory Council ................................. Clarifying the law ............................................................................................... Policy objects ....................................................................................................... Commencement date ..........................................................................................

361 362 364 365 367 368

[8.65] PART II: CONSUMER GUARANTEES – SUPPLY OF GOODS ................................. 369

[8.70] Definition of consumer ...................................................................................... 369 [8.115] Presumption ....................................................................................................... 378 [8.120] Goods protected ................................................................................................ 378 [8.125] Distinguishing between goods and services ................................................ 379 [8.130] Mixed supply of goods and services ............................................................ 380 [8.135] Digital products: goods or services? ............................................................. 381 [8.145] Goods affixed to land or premises ................................................................. 383 [8.150] Residential dwelling ......................................................................................... 384 [8.155] Trade or commerce requirement .................................................................... 385 [8.160] Supply ................................................................................................................. 385 [8.170] Sales by auction ................................................................................................. 387 [8.175] Convention on Contracts for the International Sale of Goods ................. 388 [8.180] Consumer guarantees in relation to goods .................................................. 388 [8.185] Guarantee: title .................................................................................................. 389 [8.190] Guarantee: undisturbed possession ............................................................... 391 [8.195] Guarantee: undisclosed securities .................................................................. 392 [8.205] Guarantee: acceptable quality ......................................................................... 393 [8.210] Merchantable quality: TPA, s 66(2) ................................................................ 395 [8.220] Definition of acceptable quality: ACL ........................................................... 399 [8.310] Defences .............................................................................................................. 413 [8.350] Guarantee: fitness for purpose ....................................................................... 417 [8.385] Guarantee: correspondence with description .............................................. 426

358

The Australian Consumer Law

[8.05]

[8.390] Guarantee: supply by sample ......................................................................... 428 [8.395] Guarantee: repair and spare parts ................................................................. 429 [8.400] Guarantee: manufacturer’s and supplier’s express warranty ................... 430 [8.405] Warranties against defects ............................................................................... 432

INTRODUCTION [8.05] The consumer guarantees contained in Ch 3, Pt 3-2, Div 1 of the ACL create a number of minimum standards or statutory duties, called “guarantees” which apply where goods or services are supplied to consumers. The term “guarantee” is used in the sense of a statutory duty imposed on the supplier or manufacturer to meet a certain standard, rather than a promise to answer for the debt of another. Implementation of the consumer guarantees law is dealt with in item 6 of Sch 7 of the Second Commonwealth Act. It provides that Ch 3, Pt 3-2 (Consumer transactions) applies to all relevant conduct occurring in trade or commerce on or after 1 January 2011. Conduct occurring prior to 1 January 2011 will remain subject to the repealed (and saved, for those purposes) provisions of Pt V, Div 2 and Div 2A of the Trade Practices Act 1974 (Cth) (TPA), or the relevant FTA of a State or Territory.1 The ACL regulators have issued a guide to help businesses understand their responsibilities under the law.2 Failure to comply with a consumer guarantee gives rise to statutory causes of action. Failure to comply with a consumer guarantee does not constitute conduct that contravenes a provision of Chs 2 or 3 of the ACL, and therefore does not give rise to a cause of action for damages under s 236 of the ACL or the other private remedies considered in Chapter 14 of this book. The rights and remedies available for a failure to comply with the consumer guarantees are considered in detail in Chapter 15. In summary, the guarantees are enforced by private litigation, although there is scope for the ACCC to bring a representative action on behalf of consumers to enforce the guarantees. Where there is a failure to comply with a consumer guarantee, the consumer has a choice. The consumer can seek recourse against the manufacturer, or pursue the person who supplied the goods to the consumer (typically, a retailer or dealer). The consumer’s rights against the supplier are more extensive than they are against the manufacturer. The consumer can only recover his or her losses (monetary damages) from the manufacturer, whereas the consumer has specific repair, replacement and refund rights against the supplier. The consumer’s specific rights and remedies against the supplier depend on whether the fault is major, or not major. If the fault is major and cannot be remedied within a reasonable time, the consumer can either:

1 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.144]. 2 Australian Consumer Law, Consumer Guarantees, A Guide for Businesses and Legal Practitioners, available at http://www.consumerlaw.gov.au/files/2015/09/consumer_guarantees_guide.pdf.

[8.05]

8 Consumer Guarantees for Goods

359

• reject the goods (in which case the supplier would have to collect the goods at the supplier’s expense if the goods cannot be returned or removed without significant cost to the consumer), and, at the consumer’s election, obtain a refund or have the goods replaced at the supplier’s cost;3 or • keep the goods and ask for compensation to make up the difference in value caused by the failure.4 If the failure to comply with a guarantee can be remedied and is not major, the consumer may require the supplier either: • to remedy the failure within a reasonable time at the supplier’s cost;5 or • if the supplier refuses or fails to remedy the failure within a reasonable time (i) have the failure remedied and recover the costs incurred from the supplier, or (ii) notify the supplier that the consumer rejects the goods, and of the ground or grounds for the rejection.6 In all cases (whether the failure is major or not major) the consumer has in addition, a right to sue the supplier for any reasonably foreseeable consequential loss or damage.7 Where a consumer exercises his or her rights against the supplier, the supplier will have a right of indemnity against the manufacturer. Sections 271(1) and (2) of the ACL provide that the manufacturer is liable to indemnify the supplier in respect of the liability of the supplier to a consumer if the supplier is liable for a failure of the goods to comply with the guarantee of acceptable quality in s 54 of the ACL. Section 274(3) of the ACL states that the manufacturer’s liability to indemnify the supplier is the same as if it had arisen under a contract of indemnity made between the supplier and the manufacturer. This means that the manufacturer must hold the supplier harmless in relation to the failure to comply with the consumer guarantee. The consumer’s specific rights against the manufacturer depend on whether the manufacturer has agreed to provide an express warranty. Manufacturers generally prefer to repair or replace faulty goods rather than pay damages. Where the manufacturer provides an express warranty specifying that they will remedy a fault by repair or replacement of the goods, they must remedy the failure within a reasonable time.8 Where the manufacturer has not provided an express warranty, or fails to remedy the failure within a reasonable time, the consumer may recover damages against the manufacturer in accordance with s 272(1)(a) of the ACL, for any reduction in value of the goods resulting from the failure to comply with the guarantee. In addition, the consumer will be able to recover any reasonably foreseeable consequential loss or damage against the manufacturer pursuant to s 272(1)(b) of the ACL. This chapter is divided into two parts. 3 ACL, s 259(3)(a). 4 ACL, s 259(3)(b). 5 ACL, s 259(2)(a). 6 ACL, s 259(2)(b). 7 ACL, s 259(6). 8 ACL, s 271(6).

360

The Australian Consumer Law

[8.10]

Part I – examines the background and policy object of the consumer guarantees law. Part II – considers the consumer guarantees that apply to goods.

PART I: BACKGROUND AND POLICY OBJECT [8.10] Part V, Div 2 of the former TPA created a set of implied terms that imposed contractual obligations in favour of consumers that could not be excluded by suppliers. Those provisions were modelled on similar provisions contained in the State9 and Territory10 Sale of Goods Acts. However, they were different in scope and incorporated a number of important modifications designed to improve the position of consumers. Similar provisions to Pt V, Div 2 of the TPA were introduced in Victoria,11 Western Australia,12 South Australia,13 and the Northern Territory.14 New South Wales, Queensland, the Australian Capital Territory and Tasmania did not introduce special provisions, apparently being content to leave the matter to the TPA. While there was a general consensus that Pt V Div 2 and Div 2A of the TPA had outlived their usefulness, there was also broad agreement that their essential elements should be retained. The consumer guarantees law in the ACL employs some of the language of the repealed provisions in relation to statutory implied terms in consumer contracts with suppliers in Pt V Div 2,15 the statutory causes of action that consumers could bring directly against manufacturers in ss 74B and 74D of the TPA, and State and Territory fair trading and sale of goods laws dealing with implied conditions and warranties in consumer contracts. Thus, the jurisprudence relating to the TPA will also be relevant to the interpretation and understanding of the ACL where the same language is adopted in the ACL.16 The consumer guarantees law is similar to the statutory causes of action contained in Pt VA of the TPA which were intended to provide relief in cases of goods having a defect which cause personal injury or death to consumers. The consumer guarantees regime uses some of same terminology in Pt VA, such as the broad definitions of “supplier” and “manufacturer”; and the relevant circumstances that are to be taken into account in deciding whether goods have a “defect” listed in 9 Sale of Goods Act 1923 (NSW); Goods Act 1958 (Vic); Sale of Goods Act 1896 (Qld); Sale of Goods Act 1895 (SA); Sale of Goods Act 1895 (WA); Sale of Goods Act 1896 (Tas). 10 Sale of Goods Act 1954 (ACT); Sale of Goods Act (NT). 11 Pt IV of the Goods Act 1958 (Vic), introduced by the Goods (Sales and Leases) Act 1981 (Vic). 12 Fair Trading Act 1987 (WA). 13 Consumer Transactions Act 1972-1983 (SA). 14 Consumer Affairs and Fair Trading Act (NT). 15 For example, s 60 of the ACL imposes a statutory guarantee that services will be rendered with “due care and skill”. This mirrors the statutory implied warranty in s 74(1) of the TPA that services will be rendered with “due care and skill”. 16 See eg, Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [3.34] in relation to the meaning of “related bodies corporate”; [2.36] in relation to the meaning of “manufactured”; [2.52] in relation to the meaning of “acquisition”, supply and re-supply.

[8.15]

8 Consumer Guarantees for Goods

361

s 75AC(2) are similar to the statutory factors listed in s 54(3) in deciding whether goods are of “acceptable quality” under the ACL. These statutory causes of action arise independently of contract, and thereby avoid the difficulty sometimes encountered with the statutory implied terms regime where consumers could not bring actions against suppliers of faulty goods because they were unable to point to a contract onto which the implied term could be grafted.17 The Second Explanatory Memorandum accompanying the Bill, states that the provisions set out in Pt 3-2, Div 1 of the ACL are couched in terms broadly similar to those used in the New Zealand Consumer Guarantees Act 1993 (NZ) (NZ CGA) and “the jurisprudence applicable to that Act is of relevance to those provisions.”18

Guarantees not intended to cover the field [8.15] Section 131C(4) of the CCA provides: Except as expressly provided by this Part or the Australian Consumer Law, nothing in this Part or the Australian Consumer Law is taken to limit, restrict or otherwise affect any right or remedy a person would have had if this Part and the Australian Consumer Law had not been enacted.

The purpose of this provision is to ensure that it is not held that the ACL is intended to “cover the field” of consumer protection regulation, so as to render invalid State or Territory legislation dealing with that topic. Consequently, the ACL will exist side by side with other legislation regulating transactions with consumers in cases where failure to comply with a consumer guarantee is also a breach of an implied term of a contract for the supply of goods or services. For example, the State and Territory Sale of Goods Acts, imply conditions and warranties into contracts for the sale of goods that will continue to exist alongside the consumer guarantees in the ACL. The Sale of Goods legislation in each State and Territory contains a set of implied terms relating to the title and quality of the goods sold and provisions governing the remedies available to the seller and buyer in the event of a breach of contract. These implied terms improve the contractual position of the buyer by imposing, in certain circumstances, contractual obligations on the seller. There are three principal differences between the consumer guarantees law in the ACL and the Sale of Goods legislation.

(a) They cover different transactions. Thus, whilst the Sale of Goods Acts apply only to contracts for the “sale” of “goods”, the consumer guarantees apply to contracts for the “supply” of both goods and services. 17 See “E” v Australian Red Cross Society (1991) ATPR ¶41-085; (1991) 27 FCR 310 (Wilcox J); Arturi v Zupps Motors Pty Ltd (1980) ATPR ¶40-189 (Brennan J); and Zalai v Col Crawford (Retail) Pty Ltd (1980) ATPR ¶40-177 (Rogers J). 18 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.9], p 179. For commentary on the NZ CGA, see Gault on Commercial Law; Borrrowdale (ed), Butterworths Commercial Law in New Zealand (4th ed, Butterworths, 2000), (ch 18 by Cynthia Hawes); Tokeley, Consumer Law in New Zealand (Butterworths, 2000), chs 2 and 3; and Paterson and Tokeley, “Consumer Guarantees”, in Malbon and Nottage (eds), Consumer Law & Policy in Australia and New Zealand (Federation Press, Sydney, 2013), Ch 4.

362

The Australian Consumer Law

[8.20]

(b) They impose obligations on different persons. Thus, whilst the Sale of Goods Acts apply only to sellers whether or not they are incorporated, the consumer guarantees law adopts a “whole of supply chain” approach making manufacturers as well as suppliers liable for goods and services that do not comply with the consumer guarantees. (c) They create rights in favour of different persons. Thus, whilst the consumer guarantees law creates rights only in favour of consumers as defined in s 3 of the ACL, the Sale of Goods Acts create rights in favour of businesses and consumers. However, the Sale of Goods legislation has been of limited value to consumers because it allows the seller to limit, or exclude altogether, its liability for breach of these obligations.19 The new statutory causes of action are in addition to the other rights and remedies the consumer may have under the ACL, and there is scope for overlap, where, for example, the supplier engages in misleading conduct with respect to the attributes of the goods or services supplied contrary to ss 18 or 29(1)(g), (m) and (n) of the ACL.

Findings of the NEIAT study [8.20] The National Education and Information Advisory Taskforce (NEIAT) conducted a study during July and August of 2009 to obtain data from consumers and traders in relation to the statutory implied terms scheme in three markets – white goods, electronic goods and mobile phones.20 The NEIAT Study concluded that there were four principal barriers to consumers exercising their statutory rights under Pt V Div 2 of the TPA. They are: • lack of awareness of the law on the part of consumers, retailers and manufacturers was found to be the primary barrier for both consumers and traders, when consumers sought to exercise their rights; • lack of clarity as to the meaning and scope of the existing law; • lack of cost effective dispute resolution mechanisms for consumers; and • lack of incentives for suppliers to comply. Lack of awareness

[8.25] The primary reason for the existing laws being ineffective was lack of awareness. One of the surprising findings of the NEIAT study was that consumers, retailers and manufacturers only had a limited understanding of their rights and 19 See Paterson, “The New Consumer Guarantee Law and the Reasons for Replacing the Regime of Statutory Implied Terms in Consumer Transactions” (2011) 35(1) Melbourne University Law Review 252. 20 NEIAT, “National Baseline Study for Statutory Warranties and Refunds”, Research Paper No 2 (October 2009) (NEIAT Baseline Study), at http://www.archive.treasury.gov.au/documents/1666/ PDF/National_Baseline_Study_Warranties_and_Refunds.pdf.

[8.30]

8 Consumer Guarantees for Goods

363

obligations under the existing law. The study found that 57% of retailers and 47% of manufacturers were unaware that consumers are entitled to remedies for breaches of statutory implied terms.21 It also found that consumer awareness of statutory warranties was very low, with 71% of consumers being unaware that they had any implied statutory rights.22 Most believed they only had rights if the manufacturer provided an express warranty. Manufacturers and retailers exploited this lack of awareness on the part of consumers by playing the “blame game”.23 The consumer bears the onus of proving which firm in the supply chain is responsible for a fault, and unless the consumer can do so, the retailer and the manufacturer blame each other, or a third party such as a spare parts manufacturer. Lack of clarity

[8.30] A further problem with Pt V Divs 2 and 2A of the TPA identified by the NEIAT survey was ambiguity and lack of clarity as to the nature and content of consumers’ rights and traders’ obligations. As the NEIAT study noted under the heading “ambiguous law”: “[t]he law cannot empower consumers if there are grey areas”.24 Under the former conceptual framework, consumers’ rights were based on terms that were implied into the contract between the trader and the consumer. There were 15 different Commonwealth, State and Territory statutes that established generic statutory implied terms regimes. This created a compliance nightmare for businesses that trade across more than one jurisdiction. There were two tiers of implied terms under the TPA, conditions and warranties, with different remedies attaching to their breach. Breach of condition entitled the consumer to a right of termination and a right to damages, whereas a breach of warranty only entitled the consumer to a right to damages. In order to be entitled to return the goods, a consumer was required to rescind the contract under s 75A of the TPA. This required proof that the supplier had breached a condition rather than a warranty. There were no statutory remedies for breach of the implied terms. In order to obtain a remedy a consumer was required to commence a civil action for damages for breach of contract.

21 NEIAT, “National Baseline Study for Statutory Warranties and Refunds”, Research Paper No 2 (October 2009) (NEIAT Baseline Study), p 52. 22 NEIAT, “National Baseline Study for Statutory Warranties and Refunds”, Research Paper No 2 (October 2009) (NEIAT Baseline Study), p 51. 23 NEIAT, “National Baseline Study for Statutory Warranties and Refunds”, Research Paper No 2 (October 2009) (NEIAT Baseline Study), Table 3, p 69. 24 NEIAT, “National Baseline Study for Statutory Warranties and Refunds”, Research Paper No 2 (October 2009) (NEIAT Baseline Study), Table 3, p 69.

364

The Australian Consumer Law

[8.35]

There was also uncertainty as to the meaning of key concepts such as the condition that goods sold must be of “merchantable quality”.25 The term “merchantable quality” is general and vague. It was accepted that the goods in question must be durable for a period of time that is reasonable in light of the circumstances of the sale, but the elusive question was: for how long after purchase must the goods remain durable? Lack of effective dispute resolution mechanisms

[8.35] A third barrier to consumers exercising their statutory rights identified in the NEIAT study was the lack of effective dispute resolution mechanisms for consumers. Consumers perceived the exercise of their statutory rights as involving a “lengthy process that is unlikely to result in a positive outcome”.26 Civil litigation is expensive. The limited dollar value of most consumer claims meant that consumers were unlikely to seek redress through the superior courts. Lack of incentives to comply

[8.40] A fourth barrier to consumers exercising their statutory rights was the lack of incentives to comply. The only incentive for a recalcitrant supplier to comply was the threat of civil action by individuals. There was no scope for action by regulators on behalf of consumers. Recalcitrant suppliers were aware that consumers were unlikely to litigate in the event of a dispute; so suppliers had little incentive to comply. The result was that “retailers and manufacturers play the ‘blame game’ with neither party prepared to take responsibility”.27 Commonwealth Consumer Affairs Advisory Council [8.45] On 13 March 2009, the Australian Government announced that a review of the Australian law of implied terms would be undertaken by the Commonwealth Consumer Affairs Advisory Council (CCAAC). CCAAC’s starting point was that consumers’ reasonable expectations should be met, and that they should be entitled to get what they pay for.28 It examined ways to reduce consumer detriment, principally by reducing the barriers identified in the NEIAT Study that prevent consumers having recourse to retailers and manufacturers for faulty goods and services. In order to clarify the law CCAAC recommended replacing the current implied terms regime with a new statutory scheme that stands independently of the law of contract. It recommended that the Australian Consumer Law (ACL) should include a single set of statutory consumer guarantees along the lines of those contained in the NZ CGA. The NZ CGA resulted from a Report prepared by Professor David Vernon at the request of the Minister for Justice, the Rt Hon 25 See Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [25.25]. 26 NEIAT, “National Baseline Study for Statutory Warranties and Refunds”, Research Paper No 2 (October 2009) (NEIAT Baseline Study), Table 3, p 69. 27 NEIAT, “National Baseline Study for Statutory Warranties and Refunds”, Research Paper No 2 (October 2009) (NEIAT Baseline Study), Table 3, p 69. 28 The report is available on the Australian Government, the Treasury’s website, Consumer Rights – CCAAC Report on Statutory Implied Conditions and Warranties (2009), at http://www.ccaac.gov.au.

[8.50]

8 Consumer Guarantees for Goods

365

Geoffrey Palmer (the Vernon Report). The Vernon Report recommended that the interference with the functioning of the free market should be minimal and only to the extent necessary to provide consumer protection.29 The rationale for eliminating the need for a contract, and imposing liability on both the manufacturer as well as the retailer of goods was explained by Professor Vernon in terms of a “single enterprise theory”. According to the single enterprise theory, consumer sales are made possible by the co-operative efforts of everyone in the distribution chain and accordingly they should be jointly responsible. While manufacturers have the greatest control over production of the goods and so prevent faults occurring, distributors and retailers profit from the transaction, and should also be held accountable: Some retailers may object to shouldering the responsibility for defects. They may perceive their role simply as a conduit of a product manufactured and packaged by others in the distribution chain. Since these retailers play no role in creating the product, they may view themselves as blameless when the goods or services turn out to be badly designed or produced. In a very real sense, they are blameless unless they had reason to know of the defect prior to sale. Accepting as fact the retailers’ claim that they neither created the defect nor had any way of knowing prior to sale that it existed does not lead to the conclusion that they should be exempted from responsibility to consumers for the defect. It leads only to the conclusion that they should be reimbursed for their outlay by others in the distribution chain or that it is merely another cost of doing business. The retailer, who sells the goods or services in an effort to make a profit, should not be permitted to retain the profit while rejecting responsibility for the very thing that produced it. Indeed, no entity in the chain should be permitted to shelter itself from its obligation to the ultimate consumer by pointing a finger at someone else in the chain. It is beyond argument that all in the chain are engaged in a single enterprise. Since the enterprise functionally is a separate unit, the fault of one is functionally the fault of all.30

CCAAC recommended that manufacturers and retailers should assume joint responsibility for the quality of the goods and services they release into the market place. Consumers should not be forced to identify the cause of the fault and prove which firm in the supply chain was responsible for it.

Clarifying the law [8.50] In order to clarify the law CCAAC recommended that the ACL should include a single set of statutory consumer guarantees along the lines of those contained in the NZ CGA. Consumer guarantees impose strict liability on both manufacturers and suppliers of goods and services. Strict liability means that the guarantees may be breached without negligence. As Treasury noted in its submission to the Senate Economics Legislation Committee: 29 Vernon, An Outline for Post-Sale Consumer Legislation in New Zealand: A Report to the Minister of Justice (1987), p 8 (Vernon Report). For commentary on the Vernon Report see Harland, “Post-Sale Consumer Legislation for New Zealand – A Discussion of the Report to the Minister of Justice by Professor David H Vernon” (1988) 3 Canterbury Law Journal 410. 30 Vernon, An Outline for Post-Sale Consumer Legislation in New Zealand: A Report to the Minister of Justice (1987), p 17.

366

The Australian Consumer Law

[8.50]

A significant benefit of the consumer guarantee is that it is written on the face of the law. As such, a statutory guarantee is more accessible to consumers compared to actions for negligence, which usually requires the services of a lawyer to understand. This is a different protection to the common law notion of negligence, which provides consumers with protection when services are provided in a way which does not meet the standard of care required. The consumer guarantee is directed to ensuring that the services are provided in accordance with the purpose expressed by the consumer. A particular service might be provided in a way that is not negligence but may, nevertheless, fail to achieve the purpose that a consumer made known to a supplier.31

“Innocent” suppliers who are obliged to provide consumers with remedies will be able to recover the costs incurred from manufacturers. It is apparent that in enacting the consumer guarantees law Parliament intended: • to increase consumer and business understanding and raise awareness; • to harmonise differences between national, State and Territory laws; and • to make enforcement activity more effective. It also intended to create some new substantive consumer rights and remedies available to consumers for failure to comply with the guarantees.32 However, in relation to the scope of consumer guarantees themselves, it only intended to repeat and clarify the previous law relating Pt V Div 2 and Div 2A of the TPA; it did not intend to expand those provisions. This is apparent from the Joint Communiqué issued Ministerial Council on Consumer Affairs (MCCA) when it met in Perth on 4 December 2009 which states: MCCA agreed, as part of the development of the Australian Consumer Law, to improve the legal framework for consumer rights that apply to the acquisition of goods and services. This will be a single national law guaranteeing consumer rights in relation to their acquisition of goods and services. They will be based on existing implied conditions and warranties, which will be simplified and streamlined.33

It is also apparent from the Second Explanatory Memorandum which states: The RIS discusses the impact of implementing the CCAAC recommendations, including the costs and benefits of moving from a system of implied conditions and warranties to statutory consumer guarantees. Given that the proposal does not involve a change in the substantive rights and obligations of business and consumers, the only cost is transitional in nature.34 31 Treasury, Submission 46, p 22. 32 For example, the effect of ACL, s 59 is to elevate all pre-contractual representations by a supplier or manufacturer to the status of consumer guarantees. Consumers will have a statutory cause of action under the ACL for damages, repair or replacement if there is a failure to comply with any Express Warranty. This represents a significant increase in the rights of consumers over the rights available under the TPA. 33 See The MCCA Joint Communiqué (2009), p 4 at http://www.consumerlaw.gov.au/files/2015/09/ Meeting_22_4_Dec_09.pdf. For a consideration of the policy objectives of the consumer guarantees provisions see Paterson, “The New Consumer Guarantees Law and the Reasons for Replacing the Regime of Statutory Implied Terms in Consumer Transactions” (2011) 35(1) Melbourne University Law Review 252. 34 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [25.8].

[8.55]

8 Consumer Guarantees for Goods

367

For example, as regards the guarantee of acceptable quality, it appears that it was not intended to extend the protection afforded by s 71(1) of the TPA. It was intended only to clarify the scope of the protection by, for example, expressly providing that durability and minor defects as to appearance and finish are to be taken into account in determining whether goods are of acceptable quality. Thus, in order to understand the scope of the new consumer guarantees law, it is first necessary to consider the scope of the equivalent statutory implied terms of Pt V Div 2 of the TPA, and the statutory causes of action that were available against manufacturers and importers under Pt V Div 2A of the TPA.

Policy objects [8.55] According to the Second Explanatory Memorandum, the government had three objects in adopting the consumer guarantees law: • reducing complexity and uncertainty in the law; • improving consumers’ awareness of their rights; and • providing effective enforcement mechanisms for consumers.35 The government’s object in providing for a national consumer guarantees law according to the Second Explanatory Memorandum was to: [provide] consumers with a minimum level of protection in all transactions for the acquisition of goods and services while minimising complexity, uncertainty and the cost burden of regulation. The RIS concludes that legislating to provide a national system of statutory consumer guarantees is the most appropriate option given the objectives of government action.36

It has been recognised that New Zealand’s consumer guarantees law provides a “loss allocation mechanism” between manufacturers, suppliers and consumers.37 The consumer guarantees law attempts to strike a balance between the rights of the manufacturer, the supplier and the consumer. It is not intended to provide the consumer with an indemnity against all of the consequences of all defects in goods or faulty services. The policy of the consumer guarantees law is to make legal redress readily accessible to consumers. Broadly, it provides that consumers can recover from the manufacturer or the supplier without proof of fault or negligence. If the consumer recovers against the supplier, the supplier must pursue its own remedies against the manufacturer. The policy of the scheme recognises that the supplier will be in a stronger position to negotiate with the manufacturer than the consumer. In its Report to the then Minister for Competition Policy and Consumer Affairs, the Hon Dr Craig Emerson MP, CCAAC recommended that consumers should be able to proceed against either the supplier or the manufacturer for the full amount of the 35 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [25.43]-[25.58]. 36 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [25.6]. 37 Acquired Holdings Ltd v Turvey (2008) 8 NZBLC 102 at 107 (Winkelmann J). See also the commentary by Miller J in Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [132]-[134].

368

The Australian Consumer Law

[8.60]

damage at the consumer’s option.38 In effect, the supplier and manufacturer will be jointly and severally liable to the consumer. However, CCAAC recognised that in some circumstances it would be unreasonable to make the supplier jointly liable with the manufacturer. This is because it is the manufacturer who is responsible for putting the unsuitable or defective goods into circulation and it is the manufacturer who is responsible for the packaging and labelling which describe the goods. In such circumstances, where the consumer elects to seek redress from the supplier, the supplier should be indemnified by the manufacturer pursuant to s 274 of the ACL. However, in other respects responsibility is assigned to consumers. Suppliers must first be given the opportunity to make good any failure to comply with the guarantee, if the failure is not major and capable of remedy. This gives the supplier the opportunity to assess whether the goods in question have been subjected to unreasonable use. Section 54(6) of the ACL provides that goods do not fail to be of acceptable quality if the consumer to whom they are supplied causes them to become of unacceptable quality, or fails to take reasonable steps to prevent them from becoming of unacceptable quality; and they are damaged by abnormal use. Also, in relation to the definition of acceptable quality, s 54(3)(c) and (d) of the ACL recognise that the consumer must take into account any statements made about the goods on any packaging or label on the goods, and any representation made about the goods by the supplier or manufacturer. In this way, it allows suppliers and manufacturers to put consumers on notice if the goods in question have limitations. Consumers cannot then complain that the goods fail to comply with the guarantee of acceptable quality. Section 54(4), (5), (6) and (7) excuse the supplier of liability in the following circumstances: • where the problems with the goods were specifically drawn to the consumer’s attention before the consumer agreed to the supply;39 • where goods were displayed for sale or hire with a notice drawing the consumer’s attention to the problems with the goods;40 • the consumer subjected the goods to abnormal use;41 and • the consumer examined the goods before supply and the examination ought reasonably to have revealed the problems with the goods.42

Commencement date [8.60] These guarantees replace the statutory implied warranties and conditions contained in the repealed Pt V Div 2 of the TPA and the repealed statutory causes 38 CCAAC, Consumer Rights: Reforming Statutory Implied Conditions and Warranties (Final Report, October, 2009), Finding 5.3, 51-53 at http://www.ccaac.gov.au. See Corones, “Consumer Guarantees in Australia: Putting an End to the Blame Game” (2009) 9(2) Queensland University of Technology Law and Justice Journal 137. 39 ACL, s 54(4). 40 ACL, s 54(5). 41 ACL, s 54(6). 42 ACL, s 54(7).

[8.70]

8 Consumer Guarantees for Goods

369

of action in Pt V Div 2A of the TPA. Goods and services acquired before 1 January 2011 will be covered by regime. Eligible goods and services acquired on or after 1 January 2011 will be subject to the consumer guarantees law. Where conduct occurs both before and after the commencement of the ACL, courts must observe the general presumption against retrospective application.43 In practice, this means that where conduct occurs prior to the commencement of the ACL, and continues after the commencement of the ACL it would not be covered by the consumer guarantees law.

PART II: CONSUMER GUARANTEES – SUPPLY OF GOODS [8.65] The purpose of this Part is to consider the scope of the consumer guarantees that apply in relation to the supply of goods to a consumer. The sums involved in relation to the supply of consumer goods will not generally warrant the time and expense involved in bringing proceedings in the superior courts in Australia. However, there have been a number of tribunal decisions relating to the scope of the consumer guarantees that apply in relation to the supply of goods to a consumer, which will be considered in this chapter. Part 3-2, Div 1, subdiv A imposes ten consumer guarantees in relation to the supply of goods to a consumer. Some of these guarantees mirror the warranties that were implied into contracts for the supply of goods under the TPA. The statutory causes of action for failure to comply with these consumer guarantees for goods will be considered in Chapter 15.

Definition of consumer [8.70] The word “consumer” is defined in s 3 of the ACL. The approach adopted in s 3 mirrors that in s 4B of the TPA. Section 3 provides: (1) A person is taken to have acquired particular goods as a consumer if, and only if: (a) the amount paid or payable for the goods … did not exceed: (i) $40,000; or (ii) if a greater amount is prescribed for the purposes of this paragraph – that greater amount; or (b) the goods were of a kind ordinarily acquired for personal, domestic or household use or consumption; or (c) the goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads. (2) However, subsection (1) does not apply if the person acquired goods or services, or held himself or herself out as acquiring the goods: (a) for the purpose of re-supply; or (b) for the purpose of using them up or transforming them, in trade or commerce: (i) in the course of a process of production or manufacture; or (ii) in the course of repairing or treating other goods or fixtures on land. 43 Maxwell v Murphy (1957) 96 CLR 261.

370

The Australian Consumer Law

[8.75]

In order to satisfy the definition of consumer it is necessary that the consumer “acquire” the goods. The word “acquire” is defined in an inclusive way in s 2(1) of the ACL to mean: (a) in relation to goods – acquire by way of purchase, exchange or taking on lease, on hire or hire-purchase

The definition of “acquire” in s 2(1) of the ACL is inclusive but the examples given are all transaction based, and have in common the acquisition of goods by payment of some form of consideration. This is re-enforced by s 3 framing the primary test of “consumer” by reference to the price of the goods or services. If this construction is correct it narrows the scope of the definition of “consumer” and excludes third party bystanders who suffer product-related loss and volunteers.44 Since the definition of “acquire” in s 2(1) of the ACL is inclusive, “acquire” may also embrace its ordinary meaning. The Macquarie Dictionary definition of “acquire” is “to come into possession of”,45 which is broad enough to include third party bystanders who suffer product-related loss and volunteers. However, for the consumer guarantees to apply, there must be a “supply” of goods or services that was “in trade or commerce”. The definition of “supply” is considered at [8.160] and for the reasons given there a volunteer is not considered to be a consumer for the purposes of the definition in s 3 of the ACL. The definition of consumer in s 3 of the ACL has two parts. In the first part, s 3(1) provides that “a person” shall be taken to have acquired particular goods as a consumer if, and only if: • the amount paid or payable was less than $40,000 or the prescribed amount; or • adopts an objective test and focuses on the uses to which the goods or services at issue are ordinarily put; or • the goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads. In the second part, s 3(2), contains three exceptions. It adopts a subjective test and focuses on the purpose of the particular person who acquired the goods or services in question. If that person had one of the three excluded purposes, then the acquirer is not a “consumer”, even though the goods or services at issue may be ordinarily acquired for personal, domestic or household use or consumption. As “a person” is defined in s 2C(1) of the Acts Interpretation Act 1901 (Cth) to include a “body politic or corporate as well as an individual”, this definition is wide enough to embrace the acquisition of goods or services by businesses as well as by individuals. Furthermore, s 3(4) of the ACL creates a presumption that a person was a “consumer” unless the contrary is established. The three grounds upon which a person may be a “consumer” under s 3(1) of the ACL will be considered in turn. Prescribed amount

[8.75] The first ground upon which a person may be taken to have acquired goods or services as a “consumer” is by reference to the “amount paid or payable” 44 See Kellam, Clark and Glavac, “Theories of Product Liability and the Australian Consumer Law” (2013) 21(1) Competition & Consumer Law Journal 1 at 52. 45 Macquarie Dictionary (4th ed, Macquarie University, Sydney, 2005), p 12.

[8.75]

8 Consumer Guarantees for Goods

371

for the goods. Unless the “non-consumer” use exceptions (discussed at [8.110]) apply, where the amount paid or payable does not exceed $40,000, a person will be a “consumer” and it is not necessary to inquire into the nature of the goods or services. The effect of this provision is that business goods acquired for a price less than $40,000 will be deemed to be consumer goods and the consumer guarantee provisions in Pt 3-2 of the ACL will apply to them. Under the TPA, when an end user acquired goods or services as a consumer, Div 2 of Pt V implied statutory terms into the supply contract. For example, in Crawford v Mayne Nickless Ltd46 it was assumed that the repealed s 74 of the TPA which implied a warranty of due care and skill into contracts for the supply or services which did not exceed $40,000, applied to the defendant’s installation of a security system, even though this was installed at the plaintiff’s commercial premises, rather than at a home because the amount paid was less than $40,000. In relation to the supply of goods s 71(1) and (2) of the TPA implied conditions of merchantable quality and fitness for purpose into the contract for the supply of the goods.47 However, where goods were not of a kind ordinarily acquired for personal, domestic or household use, s 68A of the TPA allowed the supplier to limit liability for breach of those conditions and warranties and effectively exclude liability for consequential loss. Unlike the definition of “consumer goods” in s 4B of the TPA which defined the term by reference to “the price of the goods”, s 3 of the ACL defines “consumer” by reference to “the amount paid or payable” for the acquisition. Section 3(1)(a) provides that the amount paid or payable for the goods is to be worked out under subss (4) to (9). Section 3(4) of the ACL provides the amount paid or payable for goods purchased by a person is taken to be the price paid or payable for the goods unless s 3(5) applies. The word “price” is defined in s 2 of the ACL to mean: (a) the amount paid or payable (including any charge of any description) for the acquisition; or (b) if such an amount is not specified because the acquisition is part only of a transaction for which a total amount is paid or payable: (i) the lowest amount (including any charge of any description) for which the goods or services could reasonably have been acquired from the supplier at the time of the transaction or, if not from the supplier, from another supplier; or (ii) if they could not reasonably have been acquired separately from another supplier – their value at the time of the transaction.

In connection with s 3 it seems that any form of consideration upon which a monetary value can be placed is covered. Where a single item is purchased for a cash sum in a single contract, the position is clear. So too is the position where multiple items are acquired under a single contract and the total consideration does not exceed $40,000. 46 Crawford v Mayne Nickless Ltd (1992) ATPR (Digest) ¶46-091. 47 See Jones v West Star Motors Pty Ltd (1995) ATPR ¶41-447 (MacKenzie J with whom McPherson JA agreed); Carpet Call Pty Ltd v Chan (1987) ATPR (Digest) ¶46-025 (Thomas J).

372

The Australian Consumer Law

[8.80]

Aggregation

[8.80] Where each contract for the sale of goods is unconnected with the others, aggregation is not possible, but what is the position where an acquirer enters in to a single contract for multiple items or where multiple orders are placed over a number of years pursuant to a single contract? Is each order to be assessed separately to determine whether it exceeds $40,000, or are the orders to be aggregated to determine whether the total amount payable for all of the orders exceeds the $40,000 limit? The position is unclear. In the context of the repealed s 51AC of the TPA (unconscionable conduct in the context of business transactions where the price did not exceed $3 million), the Full Federal Court ruled that there was no general rule as to whether the prices of goods or services over a period of a relationship should be aggregated or not for the purposes of s 51AC(9). The court was required to take into account all the facts and circumstances before deciding whether aggregation was appropriate or not.48 In Business and Professional Leasing Pty Ltd v Dannawi,49 two pizza ovens were purchased and the purchase price was documented as $42,900. The question arose as to whether s 4B of the TPA referred to the price of each item of goods or the aggregate purchase price. Young CJ in Equity held that the prices of two separate identical items in one single transaction ought not to be aggregated in determining whether it was a consumer sale. His Honour stated: when one looks at the whole of the material, two ovens were being purchased for two different sites. There was no discount for quantity. The deal should be considered as two separate transactions. It really makes nonsense in the present type of case to hold that a company making two purchases for different businesses loses its protection under a consumer sale because the paperwork puts the two in the one document.50

In relation to s 3 of the ACL it will be necessary to consider what is being sold. Where two or more different and unrelated items of goods are being purchased under the same contract, and a price is assigned to each item in the contract, each item is to be separately assessed to determine whether it exceeds $40,000. It is irrelevant that the aggregate price for all the items in the same contract exceeded $40,000. Where two identical items of goods are purchased at the same time under the same contract and the price of each item exceeded $20,000 each item should be separately assessed as a separate transaction to determine whether it exceeds $40,000. This approach was applied in Ogden, Contech Technical Services Pty Ltd v Unmanned Systems Asia Pacific (General),51 where three different but related items were purchased under the same contract. In that case, the applicants were surveyors and ordered from the respondent, an unmanned aerial vehicle, software, and a camera. The unmanned aerial vehicle could fly over a pre-determined area in such a fashion 48 Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372 at [33] (Finkelstein J); [112] (Rares J), and [151] (Gordon J). 49 Business and Professional Leasing Pty Ltd v Dannawi [2008] NSWSC 902. 50 Business and Professional Leasing Pty Ltd v Dannawi [2008] NSWSC 902 at [150]. 51 Ogden, Contech Technical Services Pty Ltd v Unmanned Systems Asia Pacific (General) [2013] NSWCTTT 378 at [77].

[8.90]

8 Consumer Guarantees for Goods

373

that photographs were automatically taken by the camera on the vehicle, which could be processed by the software in such a way that a finished mosaic image could be produced. The final quote did not specify the cost of each item, but provided a lump sum figure of over $50,000. The three items were different but related in the sense that all three were necessary to produce the photographic image required. The cost of each item was less than $40,000. They were treated as though they were three separate transactions and the ACL applied. Mixed supply

[8.85] Difficulties may also arise where the goods or services in issue are supplied in conjunction with other goods or services. For example, chattels such as a dishwasher (goods) may be acquired in conjunction with an interest in real property (a lease) which is included in the definition of “services” in s 2 of the ACL, for a single price (“mixed supply”). The position is dealt with in s 3(5) of the ACL which provides: (5) For the purposes of subsection (1) or (3), if a person purchased goods or services by a mixed supply and a specified price was not allocated to the goods or services in the contract under which they were purchased, the amount paid or payable for goods or services is taken to be: (a) if, at the time of the acquisition, the person could have purchased from the supplier the goods or services other than by a mixed supply–the price at which they could have been purchased from the supplier; or (b) if: (a) paragraph (a) does not apply; but (b) at the time of the acquisition, goods or services of the kind acquired could have been purchased from another supplier other than by a mixed supply; the lowest price at which the person could, at that time, reasonably have purchased goods or services of that kind from another supplier; or (c) if, at the time of the acquisition, goods or services of the kind acquired could not have been purchased from any supplier except by a mixed supply–the value of the goods or services at that time.

“Mixed supply” is defined in s 3(11) to mean: (11) A purchase or other acquisition of goods or services is made by a mixed supply if the goods or services are purchased or acquired together with other property or services, or together with both other property and other services.

Section 3(5) provides that the relevant amount in determining whether the goods are consumer goods is that which would have been paid if the goods were available from the supplier for purchase separately. If the goods were not available from the supplier for purchase separately, the relevant amount is the lowest reasonable price for which goods of that kind (close substitutes) could have been purchased in the market place from another supplier. If there are no close substitutes for the goods in question, the relevant amount is to be calculated by reference to the value of the goods. Purchase, hire or lease

[8.90] Where a person acquires goods other than by way of purchase, the price of the goods is, by virtue of s 3(6) of the ACL, taken to be:

374

The Australian Consumer Law

[8.95]

the price at which, at the time of the acquisition, the person could have purchased the goods from the supplier, unless subsection (7) or (8) applies.

Section 3(6) of the ACL will be relied on when goods are hired or leased, and the price for the purposes of applying the definition of “consumer” will be the price that would have been paid if the hirer or lessor had, in fact, purchased the goods. Section 3(7) of the ACL provides: For the purposes of subsection (1) or (3), if: (i) goods acquired by a person other than by way of purchase could not, at the time of the acquisition, have been purchased from the supplier, or could have been purchased only by a mixed supply; but (ii) at that time, goods of the kind acquired could have been purchased from another supplier other than by a mixed supply; the amount paid or payable for the goods is taken to be the lowest price at which the person could, at that time, reasonably have purchased goods of that kind from another supplier.

Section 3(8) of the ACL provides: For the purposes of subsection (1) or (3), if goods acquired by a person other than by way of purchase could not, at the time of the acquisition, have been purchased from any supplier other than by a mixed supply, the amount paid or payable for the goods is taken to be the value of the goods at that time.

Credit terms

[8.95] Section 3(9) of the ACL provides: If: • a person obtains credit in connection with the acquisition of goods by him or her; and • the amount paid or payable by him or her for the goods is increased because he or she so obtains credit; obtaining the credit is taken for the purposes of subsection (3) to be the acquisition of a service, and the amount paid or payable by him or her for the service of being provided with the credit is taken to include the amount of the increase.

The effect of s 3(9) is that for the purpose of ascertaining whether a person who acquires goods on credit is a consumer, the provision of credit is deemed to be the provision of a separate service in addition to the goods. Any additional amount representing the credit charges is excluded from the determination of whether the amount paid or payable for the goods exceeds $40,000. Thus, for example, if the amount paid or payable for the goods is $39,000 and the person acquires them on credit for which the person pays an additional sum of $2,000, although the total amount paid exceeds $40,000, the additional sum of $2,000 for credit is disregarded, and the goods are deemed to be consumer goods and it is not necessary to consider whether the goods are of a kind ordinarily acquired for person, domestic or household use or consumption. The supply of

[8.100]

8 Consumer Guarantees for Goods

375

credit is deemed to be a separate service, but unless the credit is supplied by a linked credit provider,52 it will be a financial service and outside the scope of the ACL.53 Section 12BAB of the ASIC Act provides that a person provides a financial service if they provide financial product advice or deal in financial products. Section 12BAA(7)(k) provides that a credit facility (within the meaning of the regulations) is a financial product. Credit is defined broadly to mean a contract, arrangement or understanding under which payment of a debt owed by one person (a debtor) to another person (a credit provider) is deferred or one person (a debtor) incurs a deferred debt to another person (a credit provider): Regulation 2B(3) of the ASIC Regulations 2001 (Cth). Objective approach

[8.100]

The second ground upon which a person may be taken to have acquired goods as a “consumer” is where the goods being acquired are “of a kind ordinarily acquired for personal, domestic or household use or consumption”. This expression was adopted from the Supply of Goods (Implied Terms) Act 1973 (UK).

In Cinema Centre Services Pty Ltd v Eastaway Air Conditioning Pty Ltd,54 the applicant was held to be a consumer in relation to the purchase of a number of air-conditioning units because, although they were acquired for use in its motel business, they were goods of a kind ordinarily acquired for personal or domestic use. Conversely, goods are not “personal” merely because they are personal to the acquirer. For example, in Jillawarra Grazing Company v John Shearer Ltd55 the court rejected an argument that an agricultural air seeder was a consumer item because “everything on the farm is domestic to a farmer”. Toohey J held: the term “domestic” carries its usual significance of pertaining to the home. I refer to only one dictum, that of Phillimore J in Metropolitan Water Board v Colley’s Patents Ltd [1911] 2 KB 38 at 40: … “domestic” does not mean civilised or domesticated or something appertaining to man, but means something to do with man as occupying or using a house or dwelling. In no sense is an air seeder within goods of a kind ordinarily acquired for use or consumption in connection with the home. The fact that a farmer’s residence is ordinarily on the land where he conducts his business does not mean that the distinction ceases to exist.56

In Carpet Call Pty Ltd v Chan,57 the defendants acquired commercial quality carpet for their nightclub at a cost of approximately $69,000. As the price of the carpet exceeded the prescribed amount, the court had to decide whether the carpet was “of a kind ordinarily acquired” for use in the home or for personal use. 52 See [15.220]. 53 CCA, s 131A(1). See [1.105]. 54 Cinema Centre Services Pty Ltd v Eastaway Air Conditioning Pty Ltd (1999) ASAL 55-034. 55 Jillawarra Grazing Company v John Shearer Ltd (1984) ATPR ¶40-441. 56 Jillawarra Grazing Company v John Shearer Ltd (1984) ATPR ¶40-441 at 45,090-1. 57 Carpet Call Pty Ltd v Chan (1987) ATPR (Digest) ¶46-025.

376

The Australian Consumer Law

[8.100]

Thomas J held: It should also be noted that the purchasers … invoked s 71(2) of the Trade Practices Act as a basis for the warranty … such a warranty arises only in relation to goods supplied to “a consumer” and this requirement may be satisfied only when the price is below a prescribed amount (not satisfied in this case) or in relation to goods that are of a kind “ordinarily acquired for personal, domestic or household use or consumption” (s 4B(1)(a) and 4B(2)). In my view “carpet” is a commodity, or goods, ordinarily acquired for domestic consumption, and it does not lose that description by reason of a commercial rating, or some quality which makes it last longer than other carpet normally supplied for use in a domestic setting.58

An industrial photocopier with a reduction facility was held not to be of a kind ordinarily acquired for personal, domestic or household use or consumption in Four Square Stores (Queensland) Ltd v ABE Copiers Pty Ltd.59 Goods or services may be capable of several uses (personal or business or both). In Bunnings Group Ltd v Laminex Group Ltd,60 the product at issue was insulation with a white facing. It was advertised on the basis that it was suitable for industrial or commercial buildings where there was no ceiling or wall lining to conceal the insulation material. However, it could also be used in a domestic setting. Young J, made three important findings. First, his Honour held that the word “ordinarily” means “commonly” or “regularly”, not “principally”, “exclusively” or “predominantly”.61 Secondly, his Honour held the question whether goods were of a kind ordinarily acquired for personal, domestic or household use or consumption, is a single composite question. Thirdly, Young J held that in deciding whether goods were of a kind ordinarily acquired for personal, domestic or household use or consumption it will be relevant to inquire as to the essential character of the goods in question. The essential character test is relevant, but it is necessary to undertake a broader inquiry into the design, marketing, pricing and potential uses of the goods in question. Young J concluded that the products were marketed as being ideally suited for use in commercial and industrial applications, but their use in residential applications was left open. Nothing other than price made them unsuitable for use in residential applications. Accordingly, the products were of a kind ordinarily acquired for personal, domestic or household use or consumption within the meaning of the repealed s 74A(2)(a) of the TPA.62 While the expression “ordinarily acquired for personal, domestic or household use or consumption” gives rise to difficulties where the same goods are bought for private and commercial use, s 3(10) of the ACL creates a presumption that a person was a consumer unless the contrary is established. 58 Carpet Call Pty Ltd v Chan (1987) ATPR (Digest) ¶46-025 at 53,072. 59 Four Square Stores (Queensland) Ltd v ABE Copiers Pty Ltd (1981) ATPR ¶40-232 at 43,114 (Campbell J). 60 Bunnings Group Ltd v Laminex Group Ltd (2006) ATPR ¶42-115. 61 Bunnings Group Ltd v Laminex Group Ltd (2006) ATPR ¶42-115 at [81]. 62 Bunnings Group Ltd v Laminex Group Ltd (2006) ATPR ¶42-115 at [113].

[8.110]

8 Consumer Guarantees for Goods

377

Commercial road vehicles and trailers

[8.105]

Section 3(1)(c) of the ACL sets out the third ground upon which a person may be taken to have acquired goods as a “consumer”. If the goods consist of a commercial road vehicle or trailer acquired for use principally in the transport of goods on public roads they are deemed to be consumer purchases. Thus, the purchaser of a prime mover for $140,000 for the transport of goods on public roads will be able to rely on the consumer guarantees law that applies to the supply of goods in Pt 3-2, Div 1 of the ACL.

Non-consumer use exceptions

[8.110]

The exception in s 3(2) of the ACL provides that a person who is otherwise a consumer will not be so: if the person acquired goods, or held himself or herself out as acquiring the goods: (1) for the purpose of re-supply; or (2) for the purpose of using them up or transforming them, in trade or commerce: (a) in the course of a process of production or manufacture; or (b) in the course of repairing or treating other goods or fixtures on land.

As regards para (a), a retailer who purchases goods for sale is acquiring them for re-supply and is not considered to be a “consumer” in relation to those goods. The word “supply” is defined in s 2 to include re-supply by way of sale, exchange, lease, hire or hire-purchase, so that a car hire firm will be excluded from the definition of “consumer”. For example, in relation to a contract for the sale of a business, the contract may involve the sale of land, stock-in-trade, and equipment such as an air-conditioning system, a refrigerator, a computer and computer software and an alarm system. The stock-in-trade will be excluded from the definition of consumer goods because it has been acquired for re-supply. The other goods will be consumer goods under s 3(5) if the lowest reasonable price for which goods of that kind (close substitutes) could have been purchased in the market place from another supplier does not exceed $40,000. As regards para (b), using up goods, or transforming them as part of a process of production or manufacture, is easily understood. Note, however, that there is a distinction to be drawn between “using” goods and “using them up” in the course of production or manufacture. Thus, a car manufacturer that acquires sheet steel and transforms it into a car body is transforming it in the course of a process of manufacture and will be excluded from the definition of consumer. If the same car manufacturer acquires tools valued at less than $40,000 for use in the manufacturing process, it will be a consumer in relation to those tools and will not come within the exception. If the car manufacturer acquires tyres to affix to its cars, the manufacturer will not be using them up or transforming them, but they will have been acquired for the purpose of re-supply and so will not be consumer goods. However, where a tyre is acquired as a replacement, or for repair, the acquirer will be a consumer, and the

378

The Australian Consumer Law

[8.115]

exception will not apply. In Laws v GWS Machinery Pty Ltd,63 the plaintiff claimed damages for serious injuries suffered when a tyre he was fitting to his tractor exploded. GWS argued that Mr Laws was not a consumer because, although under the prescribed monetary limit, Mr Laws acquired them for the purpose of using them up. It was argued that the term “use up” includes “consumed the whole of or exhaust”, and that because a tyre is perishable, and may blow out and be damaged beyond repair, it is consumed in whole or exhausted. Rothman J rejected the GWS’s submission. His Honour held: The fallacy in the submission of GWS is that it omits the words “in the course of” and reads the section as if the word “of” did not appear before the words “repairing or treating”. The use there of the word “of”, after the word “or”, means that the reading of the subsection requires that the alternative (“of repairing or treating other goods”) is an alternative to one of: the purpose of re-supply; or the purpose of using them up; or the process of production or manufacture. The last mentioned reading is the only logical result. In that way the person remains a consumer even though goods are required for the purpose of using them up unless the goods are used up, relevantly, “in the course of repairing or treating other goods” or “in the course of the process of repairing or treating other goods”. On that construction, a manufacturer who purchases biscuits for its staff is a consumer, even if the staff eats the biscuits while manufacturing, repairing etc. Also, a manufacturer or owner of other goods is still a consumer if it acquires goods for the purpose of using them up but the consumption of them is not in the course of a process of production or manufacture or in the course of repair or treating other goods. A tyre on a car, truck or tractor is a perfect example of the acquisition of goods which may be used in repairing or treating other goods (and sometimes in the course of a process of production or manufacture) and would be acquired for the purpose of using it up, but it would not be used up in the course of that repair or treatment. It would be used up by the use of the tyre (or goods on which it was fitted) once repaired or treated.64

Presumption [8.115]

Section 3(10) of the ACL creates a presumption in relation to the definition of consumer in s 3. It provides: If it is alleged in any proceeding under this Schedule, or in any other proceeding in respect of a matter arising under this Schedule, that a person was a consumer in relation to particular goods or services, it is presumed, unless the contrary is established, that the person was a consumer in relation to those goods or services.

Thus, the onus or proving that a person was not a “consumer” rests on the supplier.

Goods protected [8.120]

Part 3-2, Div 1 of the ACL is much broader in scope than the Sale of Goods Acts. It is not limited to contracts of sale, or to contracts relating to goods, but covers, instead, the “supply” of “goods” or “services” to consumers. Section 2 of the ACL defines “goods” to mean: goods includes:

63 Laws v GWS Machinery Pty Ltd [2007] NSWSC 316. 64 Laws v GWS Machinery Pty Ltd [2007] NSWSC 316 at [142]-[143].

[8.125]

8 Consumer Guarantees for Goods

379

(a) ships, aircraft and other vehicles; and (b) animals, including fish; and (c) minerals, trees and crops, whether on, under or attached to land or not; and (d) gas and electricity; and (e) computer software; and (f) second-hand goods; and (g) any component part of, or accessory to, goods.

Section 2 of the ACL defines “services” to mean: services includes: (a) any rights (including rights in relation to, and interests in, real or personal property), benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce; and (b) without limiting paragraph (a), the rights, benefits, privileges or facilities that are, or are to be, provided, granted or conferred under: (i) a contract for or in relation to the performance of work (including work of a professional nature), whether with or without the supply of goods; or (ii) a contract for or in relation to the provision of, or the use or enjoyment of facilities for, amusement, entertainment, recreation or instruction; or (iii) a contract for or in relation to the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; or (iv) a contract of insurance; or (v) a contract between a banker and a customer of the banker entered into in the course of the carrying on by the banker of the business of banking; or (vi) any contract for or in relation to the lending of money; but does not include rights or benefits being the supply of goods or the performance of work under a contract of service.

These definitions mirror the definitions of “goods” and “services” in s 4 of the CCA. They give rise to a number of complex issues including the following: • • • •

how to distinguish between goods and services; the mixed supply of goods and services; whether digital products should be characterised as goods or services; and the treatment of goods affixed to land or premises.

Distinguishing between goods and services [8.125]

The definition of goods is inclusive, and includes its ordinary meaning of “goods”. In Pont Data Australia Pty Ltd v ASX Operations Pty Ltd, Wilcox J held that: The word [goods] generally refers to tangible and visible objects; although it is notable that both the Oxford English Dictionary and the Macquarie Dictionary define “goods” or “goods and chattels” as referring merely to “movable property”, without further limitation.65

65 Pont Data Australia Pty Ltd v ASX Operations Pty Ltd (1990) 21 FCR 385 at 421. On appeal the Full Federal Court agreed that the definition of “goods” extended the ordinary meaning of “goods”. See ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1991) 27 FCR 460 at 468.

380

The Australian Consumer Law

[8.130]

In ACCC v Valve Corporation (No 3),66 Edelman J observed: The definition emphasises an important aspect of a “good”. That aspect is sometimes described in theoretical studies as “thinghood”: eg Penner J, The Idea of Property in Law (Clarendon Press, Oxford, 1997). The legal meaning of “goods” can be analogised to the strict definition of “property” which is “a description of a legal relationship with a thing”: Yanner v Eaton [1999] HCA 53; (1999) 201 CLR 351, 365-366 [17] (Gleeson CJ, Gaudron, Kirby, and Hayne JJ describing the word “property”). This explains why a chose in action, such as a debt, is not a “good”. A chose in action is a right against a person. It is not a right in relation to a thing.67

The definition of services in s 2 includes any rights, benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce, but does not include work to be performed under a contract of service. This is intended to ensure that the regulation of contracts of employment is not affected by the CCA and the ACL, but left to the industrial jurisdiction. The activities of professionals are included within the definition of services. Paragraph (a)(i) of the definition of “services” set out in [8.120] expressly includes rights, benefits, privileges or facilities provided, granted or conferred under a contract for the performance of work, including work or a professional nature. The professional services must be provided “in trade or commerce”.68 On a broad reading of the definition, the mere payment of money may be the provision of a service in the sense of conferring a benefit. In SWB Family Credit Union Ltd v Parramatta Tourist Services Pty Ltd,69 Sheppard J held that the payment by the Credit Union of a credit into a member’s account was not the supply of a service, but emphasised that every case of a payment of money would need to be determined on its facts. In TPC v Queensland Aggregates Pty Ltd, Sheppard J held that offering paid work as a cartage contractor was offering a “benefit” which came within the definition of “services”.70 This was confirmed by the Full Federal Court.71

Mixed supply of goods and services [8.130]

The definition of “services” in s 2(1) of the ACL “does not include rights or benefits being the supply of goods”. It is important to appreciate the role played by these exclusionary words. The definition contemplates that services may accompany the supply of goods. However, if the transaction is properly characterised as a supply of goods, the effect

66 ACCC v Valve Corporation (No 3) [2016] FCA 196. 67 ACCC v Valve Corporation (No 3) [2016] FCA 196 at [128]. 68 See Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 71 ALR 615 at 620 (French J); Yates v Whitlam (1999) ATPR ¶41-722 at 43,380-43,381 (Windeyer J); and Nixon v Slater & Gordon (2000) ATPR ¶41-765 at [27]-[29] (Merkel J) 69 SWB Family Credit Union Ltd v Parramatta Tourist Services Pty Ltd (1980) ATPR ¶40-180 at 42,487. 70 TPC v Queensland Aggregates Pty Ltd (1981) ATPR ¶40-228 at 43,081-43,082. 71 TPC v Queensland Aggregates Pty Ltd (1981) ATPR ¶40-236 at 43,143 (Bowen CJ. Deane and Lockhart JJ).

[8.135]

8 Consumer Guarantees for Goods

381

of the exclusionary words is that the accompanying services are disregarded, and the whole transaction is treated as a supply of goods.72 For example, in Ryan Connor v Teela Enterprises Pty Ltd and Robyn May Stevenson t/as Sureflo Exhaust,73 the contract was for the supply of an exhaust system purchased from, and installed by, the respondent. The cost of the exhaust system was $1,500. The installation services were relatively minor. Over a year after the purchase and installation of the exhaust system, the applicant noticed a noise from the left rear of the vehicle when driving over bumps. It was discovered that the left rear “hangar” (the rod attaching the muffler to the vehicle) was missing. The applicant unsuccessfully claimed that the muffler failed to comply with the guarantee of acceptable quality. No claim was made that the installation services were not rendered with due care and skill. Similarly, in Zhang v United Auctions,74 the respondent operated a business of retailing and installing kitchens and other improvements to residential premises. In October 2011, the applicant visited the respondent’s show rooms and ordered a kitchen for his home which was to be installed by the respondent. On completion, there was an unattractive and raised joint line on the granite bench top in the kitchen. The applicant successfully claimed the granite bench top failed to comply with the guarantee of acceptable quality, rather than the installation services failed to comply with the guarantee of due care and skill. However, maintenance agreements on hired or purchased goods will probably be for the supply of services rather than part of the supply of goods.

Digital products: goods or services? [8.135]

At common law, and under the Sale of Goods Acts in the States and Territories, computer software supplied by means of a physical medium, for example, on a CD, DVD or USB, are a supply of goods because the physical medium contains the software.75 Where no physical medium is supplied at the time of purchase, for example if the software is downloaded from the internet onto a device operated by the purchaser, this was held not to be a supply of goods under the Sale of Goods Act 1923 (NSW).76 Following the extension of the definition of “goods” in s 2 of the ACL to include computer software a physical medium is not required. For example, in Goldiwood Pty Ltd t/as Margaret Franklin & Associates v ADL (Aust) Pty Ltd t/as Adviser Logic,77 web-based software was held to fall within the definition of “goods” in s 2 of the ACL. In order to use the software clients needed to access the web-based system through the internet. Once logged in, users 72 See Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd (1986) 162 CLR 395 at 402 (Wilson J). 73 Ryan Connor v Teela Enterprises Pty Ltd and Robyn May Stevenson t/as Sureflo Exhaust [2014] NSWCATCD 93. 74 Zhang v United Auctions [2013] NSWCTTT 6. 75 See St Albans City and District Council v International Computers Ltd [1996] 4 All ER 481. 76 Gammasonics Institute of Medical Research Pty Ltd v Comrad Medical Systems Pty Ltd [2010] NSWSC 267. 77 Goldiwood Pty Ltd t/as Margaret Franklin & Associates v ADL (Aust) Pty Ltd t/as Adviser Logic [2014] QCAT 238.

382

The Australian Consumer Law

[8.140]

could ask for financial planning documents and reports to be produced, downloaded and/or printed. The licence also provided for the migration of data services and training. The Tribunal held the software itself was expressly included within the definition of “goods” in ACL, s 2(1). New releases of the software would also constitute the supply of goods. Digital products and consumer software

[8.140]

As explained earlier in this chapter, the definition of “services” in s 2 of the ACL set out at [8.120], “does not include rights or benefits being the supply of goods”. Australian courts have only recently considered the legal characterisation of digital products. Digital products such as songs, books and games generally involve the supply of computer software in order to enable a consumer to download them, and the supply of other non-executable data such as html images and music. In each case it will be necessary to determine whether the supply of the computer software supplied was integral to the supply of the particular digital product, or merely incidental. If the supply of computer software is integral, then it will be a contract for the supply of goods. In relation to digital music, the major record companies are generally the owners of the copyright in the music. They allow the music to be sold but only on the condition that the downloaded music is protected by a Digital Rights Management (DRM) technology. The music can be played on a buyer’s device, but only using software produced by the licensees of the DRM technology. Other software will be unable to read or play the downloaded music files. If the buyer wishes to use the songs on a device, such as an iPod, they can only do so by utilising the appropriate DRM technology. In other words, because of the use of Apple iTunes DRM technology (known as “FairPlay”), the music purchased from an Apple iTunes Music Store can only be played on a DRM compatible device, such as an iPod. The definition of “goods” in ACL, s 2 expressly includes “computer software”. The definition of “services” includes “rights in relation to personal property granted or conferred in trade or commerce”. Copyright is a chose in action. It is personal property, but does not fall within the ordinary meaning of “goods”. See [8.125]. The iTunes software program that allows the download to occur involves the supply of “goods”. However, an iTunes song that is downloaded is not software. The digital download is supplied with DRM technology that allows the owner of the digital content to control access to it. A consumer who “buys” an iTunes song acquires a licence to play the song. The licence takes the form of an encryption key that allows the consumer to unlock the DRM technology. However, since the downloaded iTunes software program falls within the definition of “goods” and it is integral to the supply of the digital music, it will be a contract for the supply of goods to the exclusion of the supply of services.

In ACCC v Valve Corporation (No 3),78 a consumer obtained digital games from Valve by going to the Steam website and clicking on the hyperlink “Install Steam”, and installing a software program, “Steam Client”, on the consumer’s computer. The 78 ACCC v Valve Corporation (No 3) [2016] FCA 196.

[8.145]

8 Consumer Guarantees for Goods

383

Steam Client software allowed the consumer to download digital games.79 In characterising the nature of the digital games as goods or services, Edelman J distinguished between non-executable data such as music and html images downloaded by consumers which were not computer software, and the Steam Client software that was used to access the games. The games consisted of software and other assets (music and images).80 Valve submitted that the transaction should be characterised as a supply of services – a software licence which was a chose in action. Edelman J rejected this submission and concluded: Although not everything Valve supplied was a good, the important point for the purposes of this case is that the core of Steam’s supply to its subscribers was the provision of games. And at the heart of the provision of games was the supply of computer software.81

Accordingly, the contract was one for the supply of goods. A separate question then arises as to whether there has been a “supply” of the downloaded software if it is supplied free of charge. The definition of supply considered at [8.160] requires a supply of goods for consideration before the consumer acquires any rights under the consumer guarantees. If the digital download is characterised as two separate transactions and the software is supplied free of charge the consumer guarantees in relation to goods will not apply to it. However, if the proper characterisation is one transaction, consisting of the provision of the software together with the data, there will be a supply of goods and services for consideration, and both sets of guarantees will apply – the guarantees in relation to goods for the software, and the guarantees in relation to services for the downloaded data. In the United Kingdom, Ch 3 of the Consumer Rights Act 2015 (UK) introduces new rules in relation to digital content and consumer remedies. The statutory rights of satisfactory quality,82 fitness for purpose83 and compliance with description84 that apply to goods also apply to digital content.

Goods affixed to land or premises [8.145]

Where a contract for the sale of land or a business includes chattels, such as air-conditioners, dishwashers and hot water systems, the vendor is unable to avoid liability under the consumer guarantees regime in the ACL by arguing that the chattels are fixtures and thus part of the land. The fact that they are attached to premises does not change their status as “goods”. Section 8 of the ACL expressly provides: goods are taken to be supplied to a consumer even if they are affixed to land or premises at the time of supply.

79 ACCC v Valve Corporation (No 3) [2016] FCA 196 at [14]-[23]. 80 ACCC v Valve Corporation (No 3) [2016] FCA 196 at [138]-[139]. 81 ACCC v Valve Corporation (No 3) [2016] FCA 196 at [157]. 82 Consumer Rights Act 2015 (UK), s 34. 83 Consumer Rights Act 2015 (UK), s 35. 84 Consumer Rights Act 2015 (UK), s 36.

384

The Australian Consumer Law

[8.150]

Chattels affixed to land or premises are “goods” for the purposes of the definition in s 2 of the ACL. The consumer guarantees in relation to goods will apply to chattels if the supply was “in trade or commerce” and the supply was to a “consumer”. According to the Second Explanatory Memorandum: Goods supplied in relation to another transaction, for example the transfer of an interest in a property, are subject to the ACL for certain purposes. This could include, for example, kitchen or laundry fittings supplied as part of a home construction contract, which would otherwise become fixtures at the time of their installation.85

The following transactions involving the supply of chattels will be “in trade or commerce” and the consumer guarantees will apply to any chattels if the amount paid or payable for the chattels did not exceed $40,000, or they are of a kind ordinarily acquired for personal, domestic or household use or consumption: • the sale of a residential investment property; • the sale of a residential property built for the purpose of resale at a profit by a property developer; • the sale of a residential property by a mortgagee; • the sale of a business; • the sale of a commercial or agricultural property; and • the sale of a commercial property by a mortgagee or receiver. In the case of mixed supply of goods and services (chattels and a dwelling or whole building), the value of the chattels will be calculated in accordance with s 3(5) of the ACL. The prices of the chattels will be calculated by reference to the price at which the chattels could have been purchased from the vendor or another supplier on a stand-alone basis.

Residential dwelling [8.150]

If a residential dwelling on the land is defective in some way, for example, it has a leaking roof or termites, can the purchaser claim relief for failure to comply with the guarantees of acceptable quality or fitness for purpose that apply in relation to goods supplied to a “consumer”? A residential dwelling does not fit easily within the ordinary dictionary definition of “goods”. Section 2(1)(c) of the NZ CGA expressly excludes from the definition of “goods” “a whole building, or part of a whole building, attached to land unless the building is a structure that is easily removable and is not designed for residential accommodation”. There is no equivalent exclusion from the definition of “goods” in s 2 of the ACL. Does this mean that Parliament intended to include a whole building, or part of a building, attached to land within the definition of “goods”? The extrinsic materials do not provide any guidance on the matter. It seems that a residential dwelling would not satisfy the definition of “goods” since it does not fall within the ordinary dictionary definition of “goods” and is not included in the extended definition of “goods” in s 2 of the ACL; see [9.40]–[9.45].

85 Second Explanatory Memorandum Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [2.42].

[8.160]

8 Consumer Guarantees for Goods

385

Trade or commerce requirement The consumer guarantees as to undisturbed title to goods,86 undisturbed possession of goods,87 and no undisclosed securities,88 apply to any supply of goods. It is not necessary to prove that the goods were supplied “in trade or commerce”.

[8.155]

However, the guarantees as to goods of acceptable quality,89 goods fit for the purpose,90 goods of corresponding description,91 supply by way of sample or demonstration model,92 repairs and spare parts,93 compliance with any express warranty,94 services rendered with due care and skill,95 services fit for the purpose,96 and services supplied within a reasonable time,97 are only imposed where the goods are supplied to a consumer “in trade or commerce”; see [2.75]–[2.105]. Thus, the consumer guarantees do not apply to a private sale, that is, one where an individual person sells, say a motor vehicle, to another consumer through a classified advertisement in a newspaper. There will be no consumer guarantee as to acceptable quality in a private sale of this nature, and buyers will need to undertake their own independent mechanical checks prior to purchase.

Supply [8.160]

Section 2(1) of the ACL defines “supply” to mean:

supply when used as a verb, includes: (a) in relation to goods–supply (including re-supply) by way of sale, exchange, lease, hire or hire-purchase; and (b) in relation to services–provide, grant or confer; and, when used as a noun, has a corresponding meaning, and supplied and supplier have corresponding meanings.

Section 5 of the ACL deals with “donation” as a form of “supply”. It provides: (1) For the purposes of this Schedule, other than Parts 3-3, 3-4, 4-3 and 4-4: (a) a donation of goods or services is not treated as a supply of the goods or services unless the donation is for promotional purposes; and (b) receipt of a donation of goods or services is not treated as an acquisition of the goods or services unless the donation is for promotional purposes. 86 ACL, s 51. 87 ACL, s 52. 88 ACL, s 53. 89 ACL, s 54. 90 ACL, s 55. 91 ACL, s 56. 92 ACL, s 57. 93 ACL, s 58. 94 ACL, s 59. 95 ACL, s 60. 96 ACL, s 61. 97 ACL, s 62.

386

The Australian Consumer Law

[8.165]

(2) For the purposes of Parts 3-3, 3-4, 4-3 and 4-4: (a) any donation of goods or services is treated as a supply of the goods or services; and (b) receipt of any donation of goods or services is treated as an acquisition of the goods or services.

The definition of “supply” in s 2(1) of the ACL is inclusive but the examples given are all transaction based, and have in common the supply of goods in return for some form of consideration. If this construction is correct it narrows the scope of the protection afforded by the consumer guarantees and excludes volunteers, unless the volunteer can have recourse to s 266 of the ACL, or it is a promotional donation. Section 266 provides that if a consumer acquires goods from a supplier and gives them to another person, the recipient of a gift may also enforce the consumer guarantees against the supplier or manufacturer. Thus, where goods or services are acquired not for the consumer paying for them, but for a family member or friend, that person has the same rights as the consumer who acquired them. However, there must first have been a supply of goods to a consumer for consideration before the recipient of the goods acquires any rights. As a matter of statutory interpretation, s 266 of the ACL supports the view that the definition of “supply” in s 2(1) of the ACL does not extend to cover supply by way of gift. If Parliament intended the definition of “supply” to include supply by way of gift there would have been no need to include s 266 in the ACL. This interpretation is re-enforced by s 3 framing the primary test of “consumer” by reference to the price of the goods or services, and by many of the guarantees only applying where the goods or services were supplied “in trade or commerce” (see [8.155]). Furthermore, in determining the scope of the guarantee of acceptable quality in s 54 one of the matters that is to be taken into account under s 54(3)(b) of the ACL is the price of the goods (see [8.280]). Supply of chattels

[8.165]

Where a contract for the sale of land or a business includes chattels, such as air-conditioners, dishwashers and hot water systems, the vendor is unable to avoid liability under the consumer guarantees regime in the ACL by arguing that the chattels are fixtures and thus part of the land. The fact that they are attached to premises does not change their status as “goods”. Section 8 of the ACL expressly provides: goods are taken to be supplied to a consumer even if they are affixed to land or premises at the time of supply.

Chattels are “goods” for the purposes of the definition in s 2 of the ACL. The consumer guarantees in relation to goods will apply to chattels if the supply was “in trade or commerce” and the supply was to a “consumer”. The following transactions involving the supply of chattels will be “in trade or commerce” and the consumer guarantees will apply to any chattels if the amount paid or payable for the chattels did not exceed $40,000, or they are of a kind ordinarily acquired for personal, domestic or household use or consumption: • the sale of a residential investment property;

[8.170]

8 Consumer Guarantees for Goods

387

• the sale of a residential property built for the purpose of resale at a profit by a property developer; • the sale of a residential property by a mortgagee; • the sale of a business; • the sale of a commercial or agricultural property; and • the sale of a commercial property by a mortgagee or receiver. In the case of mixed supply of goods and services (chattels and a dwelling or whole building), the value of the chattels will be calculated in accordance with s 3(5) of the ACL. See [8.85]. The prices of the chattels will be calculated by reference to the price at which the chattels could have been purchased from the vendor or another supplier on a stand-alone basis.

Sales by auction The guarantees as to acceptable quality,98 fitness for any disclosed purpose, supply of goods by description,100 supply of goods by way of sample,101 repairs and spare parts,102 and express warranties,103 do not apply to sales by auction.

[8.170]

99

The guarantees as to title,104 undisturbed possession,105 and undisclosed securities, 106 apply regardless of whether the goods are sold at auction. This approach followed the recommendation by CCAAC that auctions should not be subject to the consumer guarantees law to the same extent as in-store transactions. CCAAC took the view that: Unlike in-store transactions, auctions provide consumers with the opportunity to examine goods, note defects and then make bid based on an evaluation of the value of the goods to the consumer. Further, auctions often act as a clearing-house, allowing consumers to purchase new and used goods at bargain prices.107

The term “sale by auction”, is defined in s 2 of the ACL to mean: in relation to the supply of goods by a person, means a sale by auction that is conducted by an agent of the person (whether the agent acts in person or by electronic means).

The effect of this definition is that online transactions (including online “auctions” such as eBay) should be covered by the consumer guarantees law in the same way 98 ACL, s 54(1)(b). 99 ACL, s 55(1)(b). 100 ACL, s 56(1)(b). 101 ACL, s 57(1)(b). 102 ACL, s 58(1)(b). 103 ACL, s 59(1)(b). 104 ACL, s 51. 105 ACL, s 52. 106 ACL, s 53. 107 CCAAC Report, Consumer Rights – CCAAC Report on Statutory Implied Conditions and Warranties (2009), p 123 at http://www.ccaac.gov.au.

388

The Australian Consumer Law

[8.175]

as in-store transactions.108 Websites such as eBay do not act as the agent of the person selling the goods. eBay is simply a conduit: it facilitates the making of relationships between consumers for the supply of goods. It supplies a service to consumers but does not supply goods. The seller pays a small amount to list goods on eBay and a larger amount if the goods are sold.109 This interpretation of “sale by auction” was adopted in Malam v Graysonline, Rumbles Removals and Storage (General).110

Convention on Contracts for the International Sale of Goods [8.175]

The United Nations Convention on Contracts for the International Sale of Goods 1980 (Vienna Convention), provides uniform rules that govern contracts for the sale of goods between people located in different countries. The terms of the Vienna Convention are contained in the Sale of Goods (Vienna Convention) Acts passed in each State and Territory.111

Section 68 of the ACL provides: The provisions of the United Nations Convention on Contracts for the International Sale of Goods, done at Vienna on 11 April 1980, as amended and in force for Australia from time to time, prevail over the provisions of this Division to the extent of any inconsistency.112

Thus, the Sale of Goods (Vienna Convention) Acts passed in each State and Territory will prevail over the ACL in relation to international contracts for the supply of consumer goods.

Consumer guarantees in relation to goods [8.180]

Part 3-2, Div 1, sub-Div A of the ACL imposes ten guarantees in relation to the supply of goods: (1) s 51 – a guarantee that the supplier has the right to sell the goods; (2) s 52 – a guarantee that the consumer will have undisturbed possession of the goods; (3) s 53 – a guarantee that the goods are free from any undisclosed security; (4) s 54 – a guarantee that goods are of acceptable quality;

108 CCAAC Report, Consumer Rights – CCAAC Report on Statutory Implied Conditions and Warranties (2009), Finding 10.1, p 111 at http://www.ccaac.gov.au. 109 In Smythe v Thomas (2007) 71 NSWLR 537, Rein AJ ordered specific performance of an online contract. See Tokeley, “Towards a New Regulatory Regime for New Zealand Online Auctions” [2011] New Zealand Law Review 91. The exception for auctions was removed from the NZ CGA in 2013. 110 Malam v Graysonline, Rumbles Removals and Storage (General) [2012] NSWCTTT 197 (18 May 2012). 111 See Sale of Goods (Vienna Convention) Act 1986 (NSW); Sale of Goods (Vic); Sale of Goods (Vienna Convention) Act 1986 (Qld); Sale of Goods (SA); Sale of Goods (Vienna Convention) Act 1986 (WA); Sale of Goods (Tas); Sale of Goods (Vienna Convention) Act (NT); and Sale of Goods (ACT).

(Vienna (Vienna (Vienna (Vienna

Convention) Convention) Convention) Convention)

Act Act Act Act

1987 1986 1987 1987

112 The text of the Convention is set out in Australian Treaty Series 1988 No 32 ([1988] ATS 32). In 2010, the text of a Convention in the Australian Treaty Series was accessible through the Australian Treaties Library on the AustLii website (http://www.austlii.edu.au).

[8.185]

8 Consumer Guarantees for Goods

389

(5) s 55 – a guarantee that the goods are reasonably fit for a disclosed purpose; (6) s 56 – where goods are sold by description, a guarantee that goods will comply with that description; (7) s 57 – where goods are sold by sample or demonstration model, a guarantee that the goods comply with that sample or model; (8) s 58 – a guarantee that the manufacturer will take reasonable action to ensure that facilities for repair of the goods and parts for goods are reasonably available for a reasonable period after goods are supplied; (9) s 59(1) – where a manufacturer provides an express warranty, a guarantee that the manufacturer will comply with the express warranty; and (10) s 59(2) – where a supplier provides an express warranty, a guarantee that the supplier will comply with the express warranty. Their underlying philosophy reflects the realities of the market place and modern methods of doing business. As explained at [8.45], the consumer guarantees law adopts a “single enterprise” approach under which manufacturers assume joint responsibility with other suppliers for the goods or services they release into the market place, and these statutory duties exist independently of contract. The rationale for this approach is that it is manufacturers who should be responsible for ensuring that goods are of acceptable quality. They should accept responsibility if their goods turn out to be defective. Manufacturers are responsible for packaging and labelling and for the description of the goods, and accordingly, should be responsible if the goods do not comply with that description. Manufacturers are responsible for any promotional material that has a natural tendency to induce the sale of their products, and accordingly they should accept responsibilities for any express warranties in that material. Finally, manufacturers should ensure that there are adequate spare parts and repair services available for their goods so that consumers have the full benefit of them over their expected life-cycle.

Guarantee: title [8.185]

Section 51 of the ACL provides:

(1) If a person (the supplier) supplies goods to a consumer, there is a guarantee that the supplier will have a right to dispose of the property in the goods when that property is to pass to the consumer. (2) Subsection (1) does not apply to a supply (a supply of limited title) if an intention that the supplier of the goods should transfer only such title as the supplier, or another person, may have: (c) appears from the contract for the supply; or (d) is to be inferred from the circumstances of the contract. (3) This section does not apply if the supply is a supply by way of hire or lease.

The repealed s 69(1)(a) of the TPA implied a condition that in the case of a supply by way of sale, the supplier had a right to sell the goods. Section 17(1) of the Sale of Goods Act 1923 (NSW), provides that “in a contract of sale, unless the circumstances of the contract are such as to show a different intention, there is an implied condition on the part of the seller that in the case of a sale he has a right to sell the

390

The Australian Consumer Law

[8.185]

goods, and that in the case of an agreement to sell he will have a right to sell the goods at the time when property is to pass”.113 Section 51 imposes a guarantee that the supplier “will have a right to dispose of the property in the goods when that property is to pass to the consumer”. The rules relating to when property passes are dealt with under the Sale of Goods Act legislation.114 If the goods are specific or ascertained, property passes when the parties intend it to be transferred,115 and that intention is to be determined from the terms of the contract, the conduct of the parties and the circumstances of the case. If the goods are unascertained, no property can pass until the goods are ascertained.116 Once the goods are ascertained, s 22(1) of the Sale of Goods Act 1923 (NSW) applies and property passes when the parties intend it to be transferred. The most obvious situation covered by the s 51 guarantee is the sale by a supplier who has no title to the goods sold. However, the use of the words “right to dispose of the property in the goods” means that it is not restricted to the case where the seller owns the goods and can pass the property in them, but has not the right to sell the goods. For example, in Niblett v Confectioners’ Materials Co Ltd,117 it was held that the seller had no right to sell goods because they carried a label which infringed the trade mark of a third party. Scrutton LJ observed that “If a vendor can be stopped by process of law from selling he has not the right to sell”.118 Section 51(2) of the ACL provides that the guarantee as to title does not apply if a supply is of limited title. According to the Second Explanatory Memorandum, “A supply of limited title occurs when a supplier tells prospective purchasers of good that they do not know whether there are any claims over particular goods and that, in the event of a sale, they will be transferring only the title that they have”.119 Section 51(3) of the ACL provides that the guarantee as to title does not apply to a hire or lease of goods, in which case the consumer acquires a right to use goods for a certain period of time but does not acquire title to the goods. The ACL Guide on Consumer Guarantees provides: A supplier guarantees they have the right to sell the goods (clear title), unless they alerted the consumer before the sale that they had “limited title”. If goods are sold with limited title, any other person with ownership rights – for example, a person owed money by the previous owner – can ask a court for permission to take the goods back from the consumer. This happens most often when goods are sold from deceased estates. While 113 Sale of Goods Act 1923 (NSW), s 17(1). 114 For example, the rules relating to transfer of property as between buyer and seller are contained in ss 21 to 25 of the Sale of Goods Act 1923 (NSW). 115 Sale of Goods Act 1923 (NSW), s 22(1). 116 Sale of Goods Act 1923 (NSW), s 21. 117 Niblett v Confectioners’ Materials Co Ltd [1921] 3 KB 387. 118 Niblett v Confectioners’ Materials Co Ltd [1921] 3 KB 387 at 398. 119 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.19].

[8.190]

8 Consumer Guarantees for Goods

391

alive, the person may have pledged the goods as security. People owed money by the deceased sometimes try to repossess the goods after the items were sold as part of the deceased estate.120

Guarantee: undisturbed possession [8.190] Section 52(1) of the ACL imposes a guarantee that the consumer has the right to undisturbed possession of the goods. It provides: If: (a) a person (the supplier) supplies goods to a consumer; and (b) the supply is not a supply of limited title; there is a guarantee that the consumer has the right to undisturbed possession of the goods.

The repealed s 69(1)(b) of the TPA implied a warranty that the consumer would enjoy quiet possession of the goods except so far as it may lawfully be disturbed by the supplier or by another person who is entitled to the benefit of any charge or encumbrance disclosed or known to the consumer before the contract is made. The Sale of Goods Acts also provide that in the absence of a different intention, there are implied warranties that the buyer shall have and enjoy quiet possession of the goods, and that the goods shall be free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time of the contract.121 Section 52(2) provides that the guarantee of undisturbed possession does not apply if possession is disturbed by a security, charge or encumbrance (eg, lease or hire-purchase) that the consumer was told about prior to supply. It seems that the guarantee of undisturbed possession and the guarantee as to title may run from different times. The guarantee as to undisturbed possession may apply where the guarantee as to title does not. In relation to the Sales of Goods Act, in Microbeads AG v Vinhurst Road Markings Ltd122 it was held by the English Court of Appeal that the implied condition as to title under the Sale of Goods Act 1979 (UK) only had to be satisfied at the time of sale, so that if the supplier had a right to sell at that time, the condition could not be breached. On the other hand, the implied warranty as to quiet possession under the United Kingdom Sale of Goods Act applied not only at the time of sale but also after that date. In that case goods were sold, but at the time of sale they were the subject of a patent application. After the sale, letters patent were granted which enabled the patentee to restrain the use of the goods. The buyer was unable to rely on the implied condition as to title; however, it was held that there was a breach of the implied warranty as to quiet possession. Section 52(3) deals with a situation where the parties intend that the supplier should transfer only a limited title. It provides: 120 ACL, Consumer Guarantees, p 17. 121 See eg, Sale of Goods Act 1923 (NSW), s 17(2). 122 Microbeads AG v Vinhurst Road Markings Ltd [1975] 1 WLR 218.

392

The Australian Consumer Law

[8.195]

If: (a) a person (the supplier) supplies goods to a consumer; and (b) the supply is a supply of limited title; there is a guarantee that the following person will not disturb the consumer’s possession of the goods: (c) the supplier; (d) if the parties to the contract for the supply intend that the supplier should transfer only such title as another person may have – that other person; or (e) anyone claiming through or under the supplier or that other person (otherwise than under a security, charge or encumbrance disclosed to the consumer before the consumer agreed to the supply

When it applies the supplier guarantees that; • the supplier; or • a third party where the agreement is to transfer a third party’s interest (eg, a deceased estate); or • a person claiming through them (other than in respect of disclosed charges etc), will not disturb the consumer’s possession. Section 52(4) provides that the guarantee of undisturbed possession applies to a supply by way of hire or lease only for the period of the hire or lease. Thus, if a consumer hires a motor vehicle for one month, the guarantee as to undisturbed possession applies only for that month.

Guarantee: undisclosed securities [8.195]

Section 53(1) of the ACL provides:

If: (a) a person (the supplier) supplies goods to consumer; and (b) the supply is not a supply of limited title; there is a guarantee that: (c) the goods are free from any security, charge or encumbrance: (i) that was not disclosed to the consumer, in writing, before the consumer agreed to the supply; or (ii) that was not created by or with the express consent of the consumer; and (d) the goods will remain free such a security, charge or encumbrance until the time when the property in the goods passes to the consumer.

Section 53(1) imposes a guarantee that goods are free from any security, charge or encumbrance • that was not disclosed to the consumer, in writing, before the consumer agreed to the supply, or • that was not created by or with the consent of the consumer. The goods must remain free from undisclosed securities until property in the goods passes to the consumer. Section 53(2) provides that the existence of a floating charge is not a failure to comply with the guarantee unless the charge becomes fixed and enforceable.

[8.205]

8 Consumer Guarantees for Goods

393

Section 53(3) provides that in relation to a supply of limited title, there is a guarantee that all securities, charges or encumbrances known to the supplier and not known to the consumer, were disclosed to the consumer before the consumer agreed to the supply. Section 53(4) provides that the guarantee as to undisclosed securities does not apply to supply by way of hire or lease. Thus, a motor vehicle hire company does not need to provide a notice to its customers of any securities over its motor vehicles, and any rights of repossession inherent in those securities. The ACL Guide on Consumer Guarantees provides: A supplier guarantees that goods bought by a consumer are free of any hidden securities or charges and will remain so, unless the security or charge was either: • placed on the goods with the consumer’s permission • brought to the consumer’s attention in writing before they bought the goods. A supplier who makes it clear to the consumer there is limited title before sale can claim to have disclosed all known securities or charges over the goods. For example: • A financier claims to be owed money by the former owner of some goods, who may have used the goods as security for a loan. If the consumer did not know about the outstanding debt when buying the goods, the supplier would have to provide a remedy – for example, replacement goods.123

Summary

[8.200]

In summary, these guarantees as to title, undisturbed possession and undisclosed securities are intended to ensure that the supplier is able to pass property in the goods to the consumer. The supplier must disclose in writing to the consumer if a third party has rights over the goods. The consumer is entitled to expect that no one will have any right or claim over the goods, unless the supply is by way of lease or hire. Where the supplier tells prospective purchasers of goods that there are claims over particular goods (supply of limited title), and the consumer is made aware of the possibility of repossession, in the event of a sale, the supplier will only transfer the title that they have.

Guarantee: acceptable quality [8.205]

Section 54 of the ACL imposes a guarantee that goods supplied to a consumer in trade or commerce (other than by way of auction), will be of acceptable quality. For the guarantee to be imposed, there is only one pre-condition, namely that the supply must have occurred in trade or commerce. However, the guarantee will not be imposed in relation to: • a sale by auction; • defects specifically drawn to the consumer’s attention (not in general terms);124

123 ACL, Consumer Guarantees, p 17. 124 See Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [114].

394

The Australian Consumer Law

[8.205]

• where the consumer has inspected the goods in relation to defects that the examination ought to have revealed, or • defects arising from abnormal use by the consumer. Section 54(1) provides: (1) If: (a) a person supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the goods are of acceptable quality.

Section 54(1) imposes strict liability in the sense that the supplier of goods will be liable if they are not of acceptable quality even though the supplier was in no way to blame for the faults in the goods. Section 54(1) makes a fundamental break with the Sale of Goods legislation which implies a condition into contracts that goods will be of merchantable quality.125 A similar condition was imposed under the repealed s 71(1) of the TPA. The definition of merchantability under the Sale of Goods legislation relates to the saleability of goods and is appropriate for commercial transactions where goods are purchased by merchants for re-sale: they will be suitable for re-sale if they are fit for at least one of the purposes for which goods of that kind or description are purchased. The definition of acceptable quality adopts as its test the reasonable expectations of consumers. Where goods have more than one purpose, the reasonable expectations of a consumer at the time of purchase are that the goods will be fit for all of their normal purposes. Sections 54(2) and (3) of the ACL define “acceptable quality” for the purposes of the guarantee. They provide: (2) Goods are of acceptable quality if they are: (a) fit for all the purposes for which the goods of that kind are commonly supplied; and (b) acceptable in appearance and finish; and (c) free from defects; (d) safe; and (e) durable as a reasonable consumer fully acquainted with the state and condition of the goods, (including any hidden defects of the goods), would regard as acceptable, having regard to the matters in subsection (3). (3) The matters for the purposes of subsection (2) are: (a) the nature of the goods; and (b) the price of the goods (if relevant); and (c) any statements made about the goods on any packaging or label on the goods; and (d) any representation made about the goods by the supplier or manufacturer of the goods; and (e) any other relevant circumstances relating to the supply of the goods. 125 Sale of Goods Act 1923 (NSW), s 19(2).

[8.210]

8 Consumer Guarantees for Goods

395

This definition of “acceptable quality” mirrors that contained in s 7(1) of the NZ CGA, and is similar to the definition of merchantable quality in s 66(2) of the TPA. The first and most obvious change is the substitution of “acceptable” for “merchantable”, thereby emphasising that it is a consumer protection provision and is not concerned with the commerce and the requirements of merchants who purchase goods for re-sale. The second change is that the condition of merchantable quality under s 71(1) of the TPA only applied to supplies of goods in the course of a business carried on by the supplier. The ACL guarantee of acceptable quality applies to the supply of goods in trade or commerce, even though the person is not in the business of supplying those goods. The use of “trade or commerce” indicates an intention to broaden the scope of the guarantees. Before examining the definition of “acceptable quality” in s 54 of the ACL, it is first necessary to examine the scope of the definition of “merchantable quality” in the repealed s 66(2) of the TPA.

Merchantable quality: TPA, s 66(2) [8.210]

The repealed s 71(1) of the TPA provided:

Where a corporation supplies (otherwise than by way of auction) goods to a consumer in the course of a business, there is an implied condition that the goods supplied under the contract for the supply of the goods are of merchantable quality, except that there is no such condition by virtue only of this section – (a) as regards defects specifically drawn to the consumer’s attention before the contract is made; or (b) if the consumer examines the goods before the contract is made, as regards defects which that examination ought to reveal.

The rights could be enforced against the supplier, but also against the manufacturer under Pt V Div 2A. The repealed s 66(2) of the TPA provided: Goods of any kind are of merchantable quality within the meaning of this Division if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all other relevant circumstances.

This definition of merchantable quality was copied from the Supply of Goods (Implied Terms) Act 1973 (UK). It was intended to provide a flexible means to allow each case to be decided on its merits and specifically identified two relevant matters that were to be taken into account in deciding whether goods were of merchantable quality – the description applied to them and the price. The concept of merchantable quality was quite different from the concept of merchantable quality under the Sale of Goods Acts. In Rasell v Cavalier Marketing (Australia) Pty Ltd,126 Cooper J (with whom Shepherdson and Kneipp JJ agreed on the question of merchantability) stated: 126 Rasell v Cavalier Marketing (Australia) Pty Ltd [1991] 2 Qd R 323 (FC).

396

The Australian Consumer Law

[8.215]

It is unnecessary and undesirable to look to the common law definition of merchantability for the purposes of construing s 66(2) … of the Act. The common law tests relate to saleability of goods. They are the tests of merchants and are more appropriate to commercial sales. The provisions of s 66(2) … are quite different and focus on the reasonable objective expectations of a consumer as defined.127

Cooper J in Rasell v Cavalier Marketing held: The definition of merchantable quality requires a determination of two matters. The first matter for determination is the identification of the “purpose or purposes for which goods of that kind are commonly bought”. The second matter for determination is whether the goods are as fit for the purpose, or purposes, so identified, as reasonable to expect having regard to the listed criteria. This is an objective test. Goods may have more than one normal purpose, eg a utility motor vehicle has two obvious purposes, namely, to act as a means of transport to convey the driver from A to B and also to act as a means of transport to convey cargo from A to B. Some consumers may acquire a utility solely as a means of personal transport; others may acquire it for both purposes. In my view, as a matter of construction and as a matter of legislative intent, the section requires that all normal purposes for which goods are commonly bought be brought into consideration. Fitness is to be tested against each of those purposes and none are to be excluded.128

Although this dictum was concerned with a case under Pt V Div 2A it was implicit that it applied equally to the implied terms in Pt V Div 2, since the definition of “merchantable quality” in s 74D(3) was the same as that in s 66(2) of the TPA. The purpose or purposes for which the goods would be put expanded and contracted with the description attached to the goods by the supplier. For example, in Bartlett v Sydney Marcus Ltd,129 a car with a defective clutch was sold. Had a new car been sold in this condition without any accompanying statement describing the vehicle it would have been unmerchantable. However, the contract description was a “second-hand car with defective clutch” and so described it was not unmerchantable. This case was adopted by Pincus J in Atkinson v Hastings Deering (Queensland) Pty Ltd,130 and by McPherson JA in Jones v West Star Motors Pty Ltd.131

[8.215]

The purpose or purposes for which the goods would be put also expanded and contracted with the price received for the goods by the supplier. A low price might indicate that a particular normal purpose should be excluded; a high price might indicate higher quality and raise the reasonable expectations of the consumer about additional purposes and performance levels. In Medtel Pty Ltd v Courtney,132 Branson J held that what it is objectively reasonable to expect at the time of supply to the consumer under s 74D(3) depended on all the relevant circumstances including price: 127 Rasell v Cavalier Marketing (Australia) Pty Ltd [1991] 2 Qd R 323 at 348. 128 Rasell v Cavalier Marketing (Australia) Pty Ltd [1991] 2 Qd R 323 at 348. 129 Bartlett v Sydney Marcus Ltd [1965] 1 WLR 1013. 130 Atkinson v Hastings Deering (Queensland) Pty Ltd (1985) 71 ALR 93 at 98. 131 Jones v West Star Motors Pty Ltd (1995) ATPR ¶41-447 at 41,016. 132 Medtel Pty Ltd v Courtney (2003) 130 FCR 182.

[8.215]

8 Consumer Guarantees for Goods

397

What it would be reasonable to expect in terms of fitness for purpose of an inexpensive product might be quite different from what it would be reasonable to expect of an expensive product of the same kind.133

However, there was no express reference to durability in s 66(2) of the TPA. The implied obligations of merchantability and fitness under the TPA and the sale of goods legislation, only related to the state of goods when they were delivered. The defects may not have been immediately apparent, but provided they existed at the time of delivery, there was a breach of s 71(1) of the TPA. The merchantable quality of a product was to be ascertained at the time of delivery of the goods. This did not preclude claims for latent defects which only appeared after the time of delivery as occurred in David Jones Ltd v Willis.134 However, the latent defect must have been present at the time of delivery. Section 71(1) of the TPA did not impose a continuing obligation guaranteeing the durability of goods.135 In Medtel v Courtney,136 the appellant was the Australian distributor of Tempo pacemakers. Mr Courtney had a Tempo pacemaker implanted in 1999. Following the implantation the pacemaker was tested and found to be functioning normally. In 2000 it was discovered that there was a risk of early battery depletion that affected Tempo pacemakers because they were manufactured with “yellow spool solder”. Mr Courtney’s Tempo pacemaker was removed. It was tested twice (eight months and 12 months after removal) and found to be working normally. Nevertheless the primary judge, Sackville J, held that the pacemaker was not of merchantable quality or fit for the purpose for which it was sold, even though it had never failed, because of the “super-added” risk of failure.137 The question posed by the legislation is whether the particular goods are as fit for the purpose for which goods of that kind are commonly bought as it is reasonable to expect. If it is reasonable to expect that products of a certain kind will not have a physical anomaly that materially increases the risk that they will not fulfil the relevant purpose, it seems to me consistent with the statutory language to hold that each item with that physical anomaly is not of merchantable quality. To so hold is also consistent with the “remedial character” of the legislation (Rasell v Cavalier Marketing at 348 per Cooper J). Nor do I consider that acknowledging that the reasonable expectations of consumers can extend to the superadded risk that a particular device will fail imposes an inappropriate or unsustainable burden on a manufacturer or distributor. The complaint in the present case is not that Pacesetter and Medtel have been unable to eliminate all risk from a product that human ingenuity can never make risk-free. The complaint is that each Pacemaker implanted into a patient was manufactured using materials that exposed the patient to a 133 Medtel Pty Ltd v Courtney (2003) 130 FCR 182 at [64]. 134 David Jones Ltd v Willis (1934) 52 CLR 110. 135 See Sutton, Sales and Consumer Law (4th ed, LBC Information Services, 1995) at [10.48] and Kapnoullas and Clarke, “Countdown to Zero: The Duration of Statutory Rights for Unfit and Unmerchantable Goods” (1999) 14 Journal of Contract Law 154 at 161. 136 Medtel v Courtney (2003) 126 FCR 219. 137 Medtel v Courtney (2003) 126 FCR 219 at [241]-[242].

398

The Australian Consumer Law

[8.215]

substantial risk of failure that did not apply to other similar devices manufactured using different materials. It is not clear to me why the patient, rather than the manufacturer or distributor, should bear any loss or damage fairly attributable to the use of materials in the manufacturing process that significantly increased the risk that the goods would fail to achieve their purpose. Doubtless, the manufacturer did not appreciate at the time that the yellow spool solder should not have been used to manufacture pacemakers. But as between the manufacturer and distributor, on the one hand, and the consumer, on the other, it was the former that had the capacity to prevent or eliminate the problem.138 The Full Federal Court dismissed the appeal. Moore J observed: Central to this appeal is the apparent paradox arising from a conclusion that Mr Courtney’s pacemaker was not fit for the purpose for which pacemakers are acquired (and therefore not of merchantable quality) yet it served that purpose prior to explanation and would, on the findings of the primary judge, have continued to serve that purpose into the foreseeable future had it remained implanted. Both elements of the paradox are sustained by facts now known but not known (or at least the significance of which was not known) at the time Mr Courtney acquired his pacemaker. It was common ground both before the primary judge and on appeal that facts now known can be relied on in determining whether Mr Courtney’s pacemaker was of merchantable quality.139

Branson J (with whom Jacobson J agreed) observed: It was accepted on this appeal, as it was before the learned primary judge, Sackville J, that the time at which it is to be determined whether the goods are of merchantable quality is the time of the supply of the goods to the consumer. However, although the determination to be made is whether the goods supplied to the consumer were of merchantable quality when so supplied, it is accepted that at least some information not available at that time may be taken into account at trial for the purpose of making that determination. A critical question on this appeal, as it seems to me, is how much later-acquired information may be taken into account.140

Her Honour held: Section 74D, as is mentioned above, calls for the quality, or fitness for purpose, of the goods to be measured against what it was reasonable to expect in that regard at the time of the supply of the goods to the consumer. That measurement must be undertaken, in my view, in the light of information concerning the goods available at the time of trial.141 However, the issue remains whether the goods were as fit for the relevant purpose as it was reasonable to expect at the time of their supply to the consumer.

Branson J agreed with the primary judge that at the time of supply the pacemaker was not of merchantable quality because the use of yellow spool solder meant that it has an appreciably higher risk of premature failure.142 138 Medtel v Courtney (2003) 126 FCR 219 at [232]-[233]. 139 Medtel v Courtney (2003) 130 FCR 182 at [36]. 140 Medtel v Courtney (2003) 130 FCR 182 at [57]. 141 Medtel v Courtney (2003) 130 FCR 182 at [70]. 142 Medtel v Courtney (2003) 130 FCR 182 at [78].

[8.230]

8 Consumer Guarantees for Goods

399

Definition of acceptable quality: ACL [8.220]

Section 54(1) of the ACL imposes strict liability in the sense that the supplier of goods will be liable if they are not of acceptable quality even though the supplier was in no way to blame for the faults in the goods. Section 54(2) and (3) defines “acceptable quality” for the purposes of the guarantee. The definition of acceptable quality falls into three parts. The first part consists of the set of attributes in s 54(2). The second part consists of a reasonable consumer test which applies an objective evaluation of the attributes taking into account the characteristics specified in the third part of the definition in s 54(3). As regards the second part of the definition, acceptable quality is to be determined in accordance with the expectations of a hypothetical reasonable consumer who is fully acquainted with the state and condition of the goods, including any hidden defects. This definition of acceptable quality mirrors that contained in s 7(1) of the NZ CGA.

First part: attributes

[8.225]

The first part consists of a set of attributes which must be complied with as part of the statutory duty. These are set out in s 54(2): • fit for all the purposes for which the goods of that kind are commonly supplied; • acceptable in appearance and finish; • free from defects; • safe; and • durable. The hypothetical reasonable consumer test is to be applied to the particular goods and circumstances surrounding the supply transaction. Not all of the attributes set out in s 54(2) will necessarily apply to the supply transaction at issue. Similarly, not all of the characteristics specified in s 54(3) will be relevant to the supply transaction at issue.

Fit for all of the purposes for which goods of that kind are commonly supplied

[8.230]

The first attribute specified in s 54(2)(a) of the ACL is that the goods must be “fit for all of the purposes for which goods of that kind are commonly acquired”. This repeats the wording of the definition of “merchantable quality” in s 66(2) of the TPA. All of the purposes must first be identified; if the goods in question are not fit for one of those purposes they are not of acceptable quality.

For example, in Paul Madsen v Agrison Pty Ltd,143 the applicant purchased a second-hand tractor from the respondent for $24,699. Its known and intended purpose was general property maintenance, such as keeping paddocks in working order by slashing. The contract included a new, complementary 6-foot slasher as a part of the package. Mr Madsen purchased the tractor and slasher sight unseen, and did not obtain a mechanical report prior to completing the sale. He was told by the respondent’s sales representative that the tractor was “like new” and that it had only been operated for 12 hours. On 27 April 2013, the applicant’s mechanic, Mr Tatarko, conducted a detailed inspection of the tractor and advised Mr Madsen 143 Paul Madsen v Agrison Pty Ltd [2014] NSWCATCD 79.

400

The Australian Consumer Law

[8.235]

not to operate it further because it was unsafe to operate and to ask for a refund as repairs were not practical. Mr Madsen sought to reject the tractor on the basis that it failed to comply with the guarantee of acceptable quality in ACL, s 54. The Tribunal found that the tractor had numerous defects of a serious character; was not fit for purpose and did not comply with the guarantee of acceptable quality.144 In Harwood, Howard v Rich and Mor Diamonds Pty Ltd,145 the applicant Mr Harwood and his fiancé, Ms Howard, approached the respondent to create an engagement ring in accordance with their design. Ms Howard informed the respondent that the ring had to be of sufficient strength to withstand normal every day wear without any damage. Ms Howard took delivery of the ring in January 2013. On 30 March 2013 one of the diamonds fell out of the setting. The Tribunal accepted the evidence of the applicants’ expert that the size and type of the settings for the diamonds was not suitable to support and retain them and that they were likely to fall out.146 The ring manufacture did not reach commercially acceptable standards.147 The Tribunal found that the ring did not comply with the guarantee of acceptable quality and ordered the respondent to refund the purchase price of the ring.148 Acceptable in appearance and finish

[8.235]

The second attribute specified in s 54(2)(b) of the ACL is that the goods must be acceptable in appearance and finish. This confirms the principle established in Rasell v Cavalier Marketing (Australia) Pty Ltd, that the aesthetic quality of goods is relevant in determining whether they are fit for purpose. The Second Explanatory Memorandum provides an example of how this aspect of the definition of acceptable quality may vary depending on the factors listed in s 54(3): The appearance and durability that a reasonable consumer would expect of a 10 year-old motor vehicle would be of a much lower standard than would apply to a new vehicle. The age of the goods is relevant under s 54(3) under the heading of “the nature of the goods”. On the other hand, the price and the nature of the goods are relevant considerations under subs 54(3), as the appearance expected of a vintage motor vehicle purchased for a large sum of money might be of a relatively high standard, irrespective of its age.149

In Zhang v United Auctions,150 the Tribunal took into account the aesthetic quality and appearance of the installed bench top. It took into account that the applicant had first inspected the demonstration model in the respondent’s shop and concluded that the materials and workmanship was not of acceptable quality.151 See [8.130]. 144 Paul Madsen v Agrison Pty Ltd [2014] NSWCATCD 79 at [85]. 145 Harwood, Howard v Rich and Mor Diamonds Pty Ltd [2013] NSWCTTT 502. 146 Harwood, Howard v Rich and Mor Diamonds Pty Ltd [2013] NSWCTTT 502 at [25]. 147 Harwood, Howard v Rich and Mor Diamonds Pty Ltd [2013] NSWCTTT 502 at [17]. 148 Harwood, Howard v Rich and Mor Diamonds Pty Ltd [2013] NSWCTTT 502 at [25]. 149 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.31]. 150 Zhang v United Auctions [2013] NSWCTTT 6. 151 Zhang v United Auctions [2013] NSWCTTT 6 at [83].

[8.245]

8 Consumer Guarantees for Goods

401

Free from defects

[8.240]

The third attribute specified in s 54(2)(c) of the ACL is that the goods must be free from defects. The word “defects” for the purposes of the definition of “acceptable quality” in s 54(2)(c) is not defined. The Macquarie Dictionary (4th ed) defines the word “defect” to mean: “a fault” or “imperfection”. In relation to s 7(1) of the NZ CGA, Miller J, in Contact Energy Ltd v Jones, held that defects are not confined to inherent defects, but may include: • design defects (those caused by matters such as the form, structure and composition of the goods) • manufacturing defects, (those caused by matters such as the process of construction and assembly), or • “instructional” defects (those caused by incorrect or inadequate warnings and instructions).152 As regards s 54(3)(c) of the ACL, any statements made about the goods on any packaging or label on the goods, the guarantee could be broken by not informing the buyer that the goods sold would react dangerously if mixed with other goods – apparently even though the goods sold were fit for the purpose for which they were bought. Miller J held: The hypothetical reasonable consumer is taken to be fully acquainted with the “state and condition” of the goods, including any hidden defects. Less obviously, he or she must also be taken to know the nature of the goods, all relevant circumstances of supply, and any representations made about the goods by the manufacturer or supplier, so far as relevant. That is so because it is the hypothetical consumer who determines by reference to those considerations whether the goods are acceptable. The test is objective, but it is applied to the particular goods and circumstances.153

The question is: would a reasonable consumer knowing all these defects about the goods at the time of supply regard them as acceptable? The time for assessing whether goods are free from defects is the time of supply. Safe

[8.245]

The fourth attribute specified in s 54(2)(d) is that the goods must be safe. The definition of acceptable quality does not require that goods be absolutely free from risk. The level of safety required is that which a reasonable consumer would regard as acceptable. “Safety” for the purposes of ACL, s 54(2)(d) is used in a relative sense, according to the factors set out in ACL, s 54(3), including the price paid for the goods. Higher levels of safety would be expected by a reasonable consumer of goods on goods, (such as a motor vehicle) that are expensive relative to what would be expected of less expensive goods in the same category. However, a reasonable consumer would not expect goods to be absolutely safe, and goods are likely to be of acceptable quality in circumstances where a defect could not have been detected given the state of scientific or technical knowledge that existed at the

152 Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [84]. 153 Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [94].

402

The Australian Consumer Law

[8.245]

time the goods were supplied. In Marwood v Agrison Pty Ltd,154 the Tribunal member had to assess whether a relatively low-priced tractor was “safe” for the purposes of s 54. The Tribunal member observed: When setting out the consumer guarantee of safety (and the other guarantees), section 54 does not say “the goods must be safe”. It says they must be “as safe … as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods), would regard as acceptable having regard to the matters in subsection (3)”. Then subsections (3) (a) and (b) say that the nature of the goods and the price if relevant are such factors. In the context of safety the “nature of the goods” requires one to distinguish between goods which were normally used by qualified people and those who were not (say, a fork lift v a jet ski) and the locations where the goods are normally used (a paddock v a confined child care centre). Similarly, whilst even a very low price could never justify the sale of goods which were dangerous (eg, small plastic toys with sharp removable parts which could injure children), there is a point where the consumer gets what they pay for. Subsections 54(3)(a) and (b) recognise that if one class of goods simply complies with safety legislation whereas a more expensive class of goods has additional features which improve safety, it does not follow that the goods in the former class do not meet the guarantee.155

It is thus the objective knowledge and expectations of a reasonable consumer which are to be assessed, not the subjective knowledge and expectations of the particular consumer who is dissatisfied with the goods. In assessing “safety”, the potential risk of damage to property should be taken into account as well as the risk of personal injury or death. It would also be relevant to consider the extent, duration, and frequency of any faults. The cost of eliminating some faults completely may be so high that a reasonable consumer may be taken to have accepted any damage resulting from that cause otherwise this would have an adverse impact on the price and the range of goods available to consumers. For the purposes of the product liability regime in Part 3-5, Div 1 of the ACL, the term “safety defect” is defined in ACL, s 9. Section 9(1) of the ACL provides that “goods have a ‘safety defect’ if their safety is not such as persons generally are entitled to expect”. Section 9(2) provides that in determining the extent of the safety of goods, regard is to be given to all relevant circumstances, including: (a) (b) (c) (d)

the manner in which, and the purposes for which, they have been marketed; and their packaging; and the use of any mark in relation to them; and any instructions for, or warnings with respect to, doing, or refraining from doing, anything with or in relation to them; and (e) what might reasonably be expected to be done with or in relation to them; and (f) the time when they were supplied by their manufacturer.

The word “safe” in ACL, s 54(2)(d) is to be distinguished from the term “safety defect”. According to the Second Explanatory Memorandum (at [2.46]), the test to be applied in relation to the term “safety defect” for the purposes of the product liability regime “is an absolute, rather than relative proposition, and must be 154 Marwood v Agrison Pty Ltd [2013] VCAT 1549. 155 Marwood v Agrison Pty Ltd [2013] VCAT 1549 at [54]-[55].

[8.245]

8 Consumer Guarantees for Goods

403

determined with reference to the state of scientific or technical knowledge that existed at the time the goods were supplied”. In Paul Madsen v Agrison Pty Ltd,156 the Tribunal member referred to s 9(2) of the ACL and held that in determining whether goods are safe for the purposes of ACL, s 54, it was relevant to consider the accuracy of any operational instructions issued in relation to them. Are goods “unsafe” for the purposes of s 54 if they are rendered unsafe by minor flaws that can be easily remedied? In Paul Madsen v Agrison Pty Ltd, the Tribunal member stated: Aside from the structural flaws discussed above, specific issues include the mislabelled operational instructions, and the detachable mirror, which render operation of the tractor – in particular for a new owner who is unfamiliar with the vehicle – to be unsafe. The fact that these flaws can be corrected with relative ease – as observed by Mr Banks – is irrelevant; the applicant is entitled to expect that controls be labelled correctly, and there not being so constitutes a safety hazard. So too does the defective door handle, which hinders the operator entering and exiting the vehicle both during normal operation and should an emergency occur. Mr Banks claims he fixed this problem, however the applicant states that it has since recurred.157

The Tribunal concluded that the tractor was “if not unsafe, of unsound condition”, and that the tractor did not comply with the guarantee of acceptable quality.158 It appears that vehicles subject to a voluntary recall by a manufacturer are not deemed to be unsafe for the purposes of the guarantee of acceptable quality. Vehicle recalls occur where there is the possibility of a safety concern with one or more of the parts used in vehicles that are part of the recalled model range. A recall applies to all vehicles and models that use the part. Generally, the majority of the vehicles the subject of a voluntary recall will be safe, but there may a possibility that some of them will contain a defective part. A recall is not evidence that any particular vehicle that is part of a recalled model is unsafe or defective. According to the ACCC: A recalled vehicle is not automatically considered “unsafe” for the purposes of failing the guarantee of acceptable quality under the consumer guarantees. The two regimes operate independently and the reason for the recall will still need to be considered in relation to the test of “acceptable quality”.159

Where a particular vehicle is part of a category that is covered by a vehicle recall, the question of whether the guarantee of merchantable quality has been complied with needs to be considered on a case-by-case basis for each vehicle. The voluntary recall does not, of itself, provide evidence of this.160

156 Paul Madsen v Agrison Pty Ltd [2014] NSWCATCD 79. 157 Paul Madsen v Agrison Pty Ltd [2014] NSWCATCD 79 at [99]. 158 Paul Madsen v Agrison Pty Ltd [2014] NSWCATCD 79 at [101] and [106]. 159 See ACCC, “Motor Vehicle Sales and Repairs: An Industry Guide to the Australian Consumer Law”, p 8. 160 ACCC Media release, “Takata Air bags – Your Consumer Rights” (30 July 2015), at https:// www.accc.gov.au/update/takata-airbag-recalls-your-consumer-rights.

404

The Australian Consumer Law

[8.250]

Durable

[8.250]

The fifth attribute specified in s 54(2)(e) of the ACL is that the goods must be durable. The word “durable” for the purposes of the definition of “acceptable quality” in s 54(2)(e) is not defined. The Macquarie Dictionary (4th ed) defines the word “durable” to mean: “having the quality of lasting or enduring; of or relating to goods which will be good for some time, as opposed to those intended to be used or consumed immediately”.161

Goods will not be of acceptable quality if they have latent defects at the time of supply even though the defects may take some time to manifest themselves. The absence of a defect at the time of supply does not preclude being able to demonstrate by evidence available after the time of supply that the goods were not of acceptable quality at the time of supply.162 If goods possess latent defects at the time of supply they will not be durable for the purposes of the definition of acceptable quality. They must last or endure in a reasonable condition for a reasonable time taking into account the factors listed in ACL, s 54(3). Whether second-hand goods are sufficiently durable to satisfy the guarantee of acceptable quality will depend on the characteristics to be taken in to account by the reasonable consumer in s 54(3), especially the price paid for the goods. In Barratta v TPA Pty Ltd,163 the applicant, Ms Baratta, inspected a 2007 Nissan Navara utility vehicle at the premises of the respondent. She told the respondent’s director that she wanted it for towing a horse float and for use on a farm. He replied that the car would be suitable for that purpose because it was a 4-wheel drive utility vehicle with a towing capacity of three tonnes and a diesel engine which was better for towing than a petrol engine. On 8 January 2011 she purchased the vehicle for $27,070. On 14 January 2011 she collected the vehicle. On 16 January 2011 after a short trip of about 15 to 20 minutes she noticed that the temperature gauge in the vehicle had risen. She put coolant in the car at once. On 17 January 2011 she drove the vehicle back to the dealership where it was inspected, and the temperature gauge was operating at the normal level. However, when driving back from the dealership the vehicle overheated and it was also prone to stalling and loss of power after use for a short period. On 20 January 2011, the vehicle again overheated after being driven a short distance, and the applicant thereafter notified the respondent through her lawyers that she rejected the vehicle and of the grounds for her rejection in accordance with ACL, s 259(3)(a). On 12 July 1011, the applicant arranged for an expert (Mr Cuthbert) to inspect the vehicle. Based on his inspection after purchase the vehicle had a defect that was probably a cracked cylinder head and the defect existed prior to the applicant’s purchase. The Tribunal held that information available after the time of purchase may be taken into account in deciding whether the car was of acceptable quality for the 161 Macquarie Dictionary (4th ed, Macquarie University, Sydney, 2005), p 443. 162 Medtel Pty Ltd v Courtney [2003] FCAFC 151; (2003) 130 FCR 182 at [74] in relation to the equivalent guarantee in s 74D of the TPA. Applied in Barratta v TPA Pty Ltd [2012] VCAT 679 at [164] and Cary Boyd v Agrison Pty Ltd [2014] VMC 23 at [74]. 163 Barratta v TPA Pty Ltd [2012] VCAT 679.

[8.255]

8 Consumer Guarantees for Goods

405

purposes of ACL, s 54 at the time it was purchased.164 Relevant information included the driving history of the vehicle after purchase, and the evidence of the expert witness, Mr Cuthbert, based on his inspection after purchase.165 The Tribunal concluded: The car had a defect (suggested by Mr Cuthbert to be a cracked cylinder head) such that it was and is not fit for the purpose for which a car is commonly supplied, namely driving reasonable distances. Nor is it durable. Therefore, I agree with the applicant that paragraphs (a), (c) and (e) of sub-s 54(2) apply.166

Second part: “reasonable consumer” standard

[8.255]

The second part of the definition promulgates an objective test: the court is required to make an objective assessment of the quality elements in ACL, s 54(2) taking into account the factors set out in the third part of the definition in s 54(3). As regards the second part of the definition, acceptable quality is to be determined in accordance with the expectations of a hypothetical reasonable consumer who is fully acquainted with the state and condition of the goods including any hidden defects. The question is: would a reasonable consumer knowing all these defects about the goods at the time of supply regard them as acceptable? It is not a guarantee that the goods supplied will be perfect. Rather, it is a guarantee that the goods are of a quality that a reasonable consumer would consider acceptable, taking into account the circumstances of the particular transaction. The flexibility of the reasonableness test in the guarantee of acceptable quality is intended to protect consumers and suppliers: to protect consumers while not imposing unrealistic standards on suppliers. Some guidance as to how to apply this part of the test, can be obtained from having regard to the way the New Zealand courts have applied the equivalent test of “acceptable quality” under the NZ CGA. According to the Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill 2009, New Zealand Case law will be of persuasive authority in interpreting Pt 3-2, Div 1 of the ACL.167

There have only been a small number of New Zealand cases interpreting and applying the guarantee of acceptable quality.168 In Stephens v Chevron Motor Court Ltd,169 the appellant consumer purchased a 1983 Mitsubishi Pajero from the respondent dealer. The vehicle was 11 years old at the time of sale and the price 164 Barratta v TPA Pty Ltd [2012] VCAT 679 at [164]. 165 Barratta v TPA Pty Ltd [2012] VCAT 679 at [165]. 166 Barratta v TPA Pty Ltd [2012] VCAT 679 at [166]. 167 Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill 2009, at [7.9]. 168 The equivalent definition of “acceptable quality” in relation to s 7(1) of the NZ CGA was considered in Stephens v Chevron Motor Court Ltd [1996] DCR 1; NZ DCR Lexis 29 (Judge JE MacDonald); Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170; NZ DCR Lexis 19 (Judge GV Hubble); and Norton v Hervey Motors Ltd [1996] DCR 427; 5 NZBLC 99-387 (Judge JE Ryan). 169 Stephens v Chevron Motor Court Ltd [1996] DCR 1; NZ DCR Lexis 29.

406

The Australian Consumer Law

[8.255]

paid was $24,000. Within a matter of days after supply, the vehicle developed a number of ongoing problems. The cost of repairs which amounted to $1,200 was paid by the dealer. The District Court (Dunedin) held that there was a breach of the guarantee of acceptable quality. A reasonable consumer would not have acquired the vehicle if acquainted with the badly worn state of the rings and the cost of repairs, even though cost of repairs represented only 5% of the purchase price. The court ordered a full refund of the purchase price despite the fact that 14 months had elapsed since the date of purchase and during that time the purchaser had driven some 15,000 km. The provided no means of compensating the dealer for the use of the vehicle in the interim period. In Cooper v Ashley & Johnson Motors Ltd,170 Dr Cooper visited the defendant’s premises and test-drove a 1989 Nissan Fairlady that was six years old at the time. He entered into a contract to purchase it for $41,000. The defendant’s salesperson told the plaintiff that the vehicle was “a good one”. A few days after supply the vehicle, a number of ongoing minor problems manifested themselves, requiring repairs over the next 12 months that eventually cost a total of $2,000. The District Court (Auckland) held that the vehicle supplied was in breach of the guarantee of acceptable quality. At the time of supply it had substantial latent defects in that the transmission was faulty (it needed replacement within three or four days of purchase); the driveshaft couplings were in a seriously worn state and required replacement by 7 November; and the vehicle was starting poorly and running roughly, the reasons for which did not emerge until much later. A reasonable consumer fully acquainted with these defects the vehicle would not have regarded it as acceptable. In this case the plaintiff’s position is strengthened further by the fact that there was an admitted representation that the vehicle was “a good one”. The court ordered that the plaintiff was entitled to a full refund of the purchase price. Judge Hubble made two significant findings. First, his Honour held that the time at which it is to be determined whether the goods are of acceptable quality is the time of the supply of the goods to the consumer: In my judgment this vehicle was supplied in breach of that guarantee [of acceptable quality]. At the time of supply it had substantial latent defects in that the transmission was faulty (it needed replacement within three or four days of purchase); the drive shaft couplings were in a seriously worn state and required replacement by 7 November; and the vehicle was starting poorly and running roughly, the reasons for which did not emerge until much later. If a reasonable consumer was fully acquainted with these defects I am satisfied that the vehicle would not have been regarded as acceptable.171 (emphasis added)

Secondly, Judge Hubble made clear that the supplier has an ongoing obligation to assist the purchaser to detect any latent defects: In my view it is a continuing obligation of the supplier to provide a consumer with sufficient information on which to make that informed decision. In other words if a 170 Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170; NZDCR Lexis 19. 171 Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170; NZDCR Lexis 19 at 24-25.

[8.260]

8 Consumer Guarantees for Goods

407

problem of a “substantial character” exists at the time of sale, the dealer is prima facie responsible for the diagnosis of that problem and to fully inform the purchaser accordingly. If the dealer abdicates that responsibility to the purchaser then he cannot be heard to complain in my opinion if the purchaser takes a long time to carry out the diagnosis himself.172 (emphasis added)

In Nesbit v Porter,173 the defects relied on by the Nesbits were the extensive rust and the problems with the steering box and the shock absorbers, which were latent at the time of supply, but which became apparent six months later at the time of the first mandatory warranty check on 19 January 1996.

[8.260]

In relation to s 7(1) of the NZ CGA, Miller J, in Contact Energy Ltd v Jones,174 held: The hypothetical reasonable consumer is taken to be fully acquainted with the “state and condition” of the goods, including any hidden defects. Less obviously, he or she must also be taken to know the nature of the goods, all relevant circumstances of supply, and any representations made about the goods by the manufacturer or supplier, so far as relevant. That is so because it is the hypothetical consumer who determines by reference to those considerations whether the goods are acceptable. The test is objective, but it is applied to the particular goods and circumstances.175

His Honour identified the following, non-exhaustive list of things that the reasonable consumer must be taken to have considered in that case: • The uses to which electricity is commonly put, including personal computers and other electronic consumer equipment.176 • The nature and extent of the risk posed by the fault, and the extent to which safety may be compromised.177 • The extent, duration, and frequency of the faults: one or more outages or voltage fluctuations may be acceptable, but not a series of outages including a nine hour outage as in the Taylor complaint.178 • The point at which an outage or voltage fluctuation becomes unacceptable needs to have regard to the nature of the distribution system to which the consumer is connected (urban or rural environmental risks; overhead or underground lines) and any quality standards set by the regulator.179 • The cause of the fault is relevant but not determinative: the reasonable consumer does not expect the retailer or lines company to manage force majeure events, including acts of God or other extraordinary circumstance that could not have been foreseen and guarded against, and third party damage; however, a

172 Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170; NZDCR Lexis 19 at 24-5. 173 Nesbit v Porter [2000] 2 NZLR 465. 174 Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [56]. 175 Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [94]. 176 Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [94]. 177 Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [103]. 178 Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [104]. 179 Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [105].

408

The Australian Consumer Law

[8.265]

reasonable consumer would expect them to protect against some third party damage where assets are exposed and or the consequence of failure very severe.180 • The price of the service: if the cost of eliminating some interruptions completely is so high that consumers would not be prepared to pay the consumer must be taken to have accepted an outage or surge resulting from that cause.181 • Information provided by the supplier as to the quality of the goods: information that surge protection equipment may protect against risks that the retailer cannot control may mean that the guarantee was not breached.182 Miller J observed that “acceptable quality is a composite and context-specific attribute”.183

[8.265]

The reasonable consumer test has regard to the price and the nature of the goods and by linking the quality expectations to price, the guarantee of acceptable quality contemplates that consumers may choose to buy low quality goods at a low price.184

Goods do not have to be absolutely free from defects or absolutely safe. It is not a guarantee that the goods supplied will be perfect. Rather, it is a guarantee that the goods are of a quality that a reasonable consumer would consider acceptable, taking into account the circumstances of the particular transaction. The flexibility of the reasonableness test in the guarantee of acceptable quality is intended to protect consumers and suppliers: that is, to protect consumers while not imposing unrealistic standards on suppliers. The reasonable consumer does not expect the retailer to manage force majeure events, including acts of God or other extraordinary circumstance that could not have been foreseen or guarded against.185 The cost of eliminating some risks is so high that consumers would not be prepared to pay, and the reasonable consumer must be taken to have accepted safety risks arising from that cause.186 There may be scope for arguing that a reasonable consumer would not hold manufacturers liable for defects that could not be detected given the state of scientific and technical knowledge at the time the goods were put into circulation. This would import a “state of the art” defence into the guarantee of acceptable quality, see [12.130]. 180 Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [106]. 181 Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [107]. 182 Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [108]. 183 Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [95]. In so holding Millar J adopted the observations of Ormrod LJ, speaking of merchantable quality, in Cehave NV v Bremer Handelsgesellschaft mbH [1976] QB 44 at 80, “It is a composite quality comprising elements of description, purpose, condition and price. The relative significance of each of these elements will vary from case to case according to the nature of the goods in question and the characteristics of the market which exists for them. This may explain why the formulations of the test of merchantable quality vary so much from case to case.” 184 Contact Energy v Jones [2009] 2 NZLR 830 at [106]. 185 Contact Energy v Jones [2009] 2 NZLR 830 at [106]. 186 Contact Energy v Jones [2009] 2 NZLR 830 at [107].

[8.280]

8 Consumer Guarantees for Goods

409

Third part: matters to be taken into account by reasonable consumer

[8.270]

The third part of the definition in ACL, s 54(3) sets out the specific factors that must be taken into account in considering each of the qualities listed in s 54(2). The use of the conjunction “and” in s 54(3) means all of the matters are to be taken into account, rather than considering only one matter in isolation.187

Nature of the goods

[8.275]

The first characteristic specified in ACL, s 54(3)(a) that must be considered is the nature of the goods. This factor would include the uses to which the goods in question are commonly put which will have an impact on their durability. A reasonable consumer would expect a refrigerator to last longer than a toaster.

Price of the goods

[8.280]

The second characteristic specified in ACL, s 54(3)(b) that must be considered is the price of the goods (if relevant). A reasonable consumer would expect fewer (or no) faults in high priced goods. A reasonable consumer would expect an expensive toaster to last longer than a cheap toaster. The price of a motor vehicle may be so low that a reasonable consumer would conclude that a purchaser was prepared to accept any and all defects. The actual purchaser could not subsequently complain that the vehicle was not roadworthy or fit to drive. On the other hand, a reasonable consumer would not expect an expensive watch costing $4,000 to stop working after 18 months. A watch of that price should still be fit for purpose and durable: it should still be keeping accurate time.

In Cary Boyd v Agrison Pty Ltd,188 the applicant lived in Evandale, Tasmania. He worked as a slashing contractor. Agrison was a company that imported tractors from China and sold them under the Agrison brand name. They were located in Victoria. Mr Boyd came to Melbourne to examine an Agrison tractor at Agrison’s premises. He disclosed to the sales representative that he required a tractor that was suitable for his work as a slashing contractor, and that it must be capable of travelling long distances on open roads to and from contract slashing jobs. He told the sales representative that the tractor needed to be fast, but stable. The sales representative advised him that the Agrison tractor he examined could achieve 35 to 38 km/hour. The applicant purchased the tractor and had it shipped to Tasmania. The applicant claimed the tractor was rife with problems from the outset of its delivery and was unsafe to drive. He was unable to use it for his intended purpose of work and so he rejected it. The applicant claimed that he was entitled to reject the tractor because of the defects and that the defects amounted to a major failure within the meaning of the ACL. Before the Magistrates’ Court of Victoria, the defendant argued that in determining whether the tractor was of acceptable quality, the price of the Agrison tractor was a relevant consideration: 187 Burton v Chad One Pty Ltd [2013] NSWDC 301 at [42] (Olsson DCJ). 188 Cary Boyd v Agrison Pty Ltd [2014] VMC 23.

410

The Australian Consumer Law

[8.285]

The defendant uses the example of a watch and pointed out that it is trite that acceptable quality for a high-end Swiss engineered timepiece will not be assessed for “acceptable quality” in the same way that a functional digital-watch is sold by a general department store. Mr White said that an Agrison tractor is different to a John Deere tractor. They are directed to different segments of the market. That Agrison occupies the budget end of the tractor market was a factor of some attraction to Mr Boyd who acknowledged that he was “price sensitive”.189

Nevertheless, the court was not persuaded that the comparatively cheap price of the Agrison tractor diluted the expectations of a reasonable consumer regarding the safety of the tractor. The court concluded: I am satisfied that there is more than sufficient evidence to enable me to conclude that the tractor was supplied to Mr Boyd in a state in which the steering was compromised and that this amounted to a very significant defect such as to render the tractor unsafe. It follows in my assessment that the tractor being unsafe that it cannot be regarded as of acceptable quality and therefore does not comply with the applicable consumer guarantee.190

Statements made about the goods on any packaging or label

[8.285]

The third characteristic specified in ACL, s 54(3)(c) that must be considered is any statements made about the goods on any packaging or label. A reasonable consumer would expect a washing machine labelled “commercial” or “heavy duty” to last longer than one labelled “suitable for domestic use only”.

Representations made by the supplier or manufacturer

[8.290]

The fourth characteristic specified in s 54(3)(d) that must be considered is any representation made about the goods by the supplier or manufacturer of the goods. Representations made by the supplier or manufacturer, will often be an important consideration. A reasonable consumer would expect a washing machine described as “2 years old in good condition” to last longer than one described as “10 years old with defective motor”. If the supplier represents that a motor vehicle is of “premium quality” or “top quality”, the guarantee of acceptable quality expands and this will strengthen a consumer’s claim that the vehicle is not satisfy the guarantee of acceptable quality if major and minor faults become apparent soon after purchase. On the other hand, if the vehicle is described as “second hand car with defective clutch,” the guarantee of acceptable quality contracts. Representations can also have the effect of expanding or contracting the number of different purposes for which the goods must be fit, how they are expected to perform, and how long they are expected to last.

The manner in which the scope of the guarantee of acceptable quality can expand or contract by means of the representations made in relation to the goods at the time of supply can be illustrated by two tribunal decisions involving similar facts. In Brandt v Flower Power and Stone Masonry Pty Ltd,191 the applicant purchased paving tiles for landscaping around the swimming pool at her residence from the 189 Cary Boyd v Agrison Pty Ltd [2014] VMC 23 at [67]. 190 Cary Boyd v Agrison Pty Ltd [2014] VMC 23 at [75]. 191 Brandt v Flower Power and Stone Masonry Pty Ltd [2012] NSWCTTT 261.

[8.300]

8 Consumer Guarantees for Goods

411

first respondent (the supplier). The second respondent, Stone Masonry (NSW) Pty Ltd, was the manufacturer of the tiles. The supplier’s brochure stated that the pavers may have a 3mm thickness variation. A representative of the manufacturer advised the applicant that the tiles needed to be laid in a compacted sand and concrete base so that the tiles would not shift. The applicant stated that it would be too expensive to lay the tiles in this manner. The applicant claimed that the pavers were not of acceptable quality because they were “uneven” when laid. No evidence was given as to whether the tiles had been laid in a compacted sand base. The Tribunal referred to the manufacturer’s representation in the brochure that the pavers may have a 3mm thickness variation, and on the evidence, was not satisfied that the “unevenness” of the pavers was due to the quality of the pavers, rather than the manner in which they had been laid.192 On the other hand, in Bonomo v Tile Trends,193 the applicant was shown floor tiles prior to purchase that were very white and shiny with no marks. The sales person represented to the wife of the applicant that the tiles when laid would look the same as the sample on the floor in the shop. However, when the tiles had been laid they had a film over them that prevented them being shiny and they showed up all marks. The applicant tendered an expert report that the tiles suffered from “optical hazing” which was an aesthetic problem but did not affect the technical performance of the tile. The Tribunal found: On the balance of probabilities and the evidence before me, I accept that the tiles supplied did not match the quality of those provided in the sample. I am satisfied that the applicant relied on the pre-contractual representation made at the salesroom by the salesperson that the tiles would correspond in appearance to those shown in the sample at the showroom. It may be true as the respondent states that optical hazing is an inherent aspect of tiles. However, the evidence shows that the applicant clearly represented that the appearance of tiles was important and needed to match that provided in the sample in the showroom.194

Any other relevant circumstances

[8.300]

The fifth characteristic specified in s 54(3)(e) of the ACL that must be considered is any other relevant circumstances relating to the supply of the goods. Relevant circumstances relating to the supply of the goods may include: (a) the manner in which and the purposes for which the goods have been marketed; and (b) the role played by intermediaries in the supply of the goods.

In Burton v Chad One Pty Ltd,195 the applicant purchased a second hand, 1998 model, Nissan Patrol from the respondent. The purchase price was $16,990. The odometer recorded that the vehicle had travelled 250,816km. Just over three months later having driven 3,249km since purchase, the vehicle broke down. The estimated 192 Brandt v Flower Power and Stone Masonry Pty Ltd [2012] NSWCTTT 261 at [61]. 193 Bonomo v Tile Trends [2012] NSWCTTT 363. 194 Bonomo v Tile Trends [2012] NSWCTTT 363 at [20]. 195 Burton v Chad One Pty Ltd [2013] NSWDC 301.

412

The Australian Consumer Law

[8.305]

cost of the repairs was approximately $12,000. At the time of sale the applicant signed Form 8 under the Motor Dealers Act 1974 (NSW) which stated: THERE IS NO WARRANTY UNDER THE MOTOR DEALERS ACT 1974 IN RESPECT TO THE SALE OF THIS VEHICLE. ACCORDINGLY THE DEALER IS NOT REQIRED BY THE ACT TO REPAIR OR MAKE GOOD ANY DEFECT WHICH MAY EXIST OR OCCUR IN THIS VEHICLE.

The applicant commenced proceedings in the Consumer Trader and Tenancy Tribunal on the basis that the goods failed to be of acceptable quality. The Tribunal held that the signing of Form 8 was a “relevant circumstance” for the purposes of ACL, s 54(3)(e), and that any reasonable consumer who signed Form 8 would appreciate that they were assuming the risk of the vehicle not complying with the guarantee of acceptable quality, and accordingly denied the applicant a remedy. On appeal, the News South Wales District Court held that the Tribunal had made an error of law in its interpretation of s 54(3), by considering s 54(3)(e) alone in determining whether the car was of acceptable quality, and not taking into account all of the matters in s 54(3). The court concluded the car was not of acceptable quality: The preponderance of evidence before the Tribunal was that the subject vehicle was sold for a price that was greatly in excess of the market price for a vehicle of that age and mileage. Price is a factor to be considered in the matters to be considered in s 54(3) of the ACL. The evidence suggests that in this case, it was an important factor.196

Time at which goods are to be of acceptable quality

[8.305]

The time at which goods are to be of acceptable quality is the time at which the goods are supplied to the consumer. The Full Federal Court held in Medtel Pty Ltd v Courtney,197 in relation to s 74D of the TPA, stated that the time for assessing whether goods were of merchantable quality was at the time they were supplied to the consumer. This approach has been applied by tribunals in relation to s 54 of the ACL.198 It was implicitly applied as the correct test by the New South Wales Court of Appeal in Freestone Auto Sales Pty Ltd v Musulin.199 The onus is on the consumer to prove that there existed an inherent defect in the goods that was present at the time of supply and that it was the cause of the damage suffered by

196 Burton v Chad One Pty Ltd [2013] NSWDC 301 at [44]. 197 Medtel Pty Ltd v Courtney (2003) 130 FCR 182 at [64] and [70]. This was confirmed by the Full Federal Court in Merck Sharp & Dohme (Australia) Pty Ltd v Peterson (2011) 196 FCR 145; [2011] FCAFC 128 at [180]. 198 See Cicchini v Brabazon [2014] QCAT 671 at [21]-[22]; Burdon v Outback Generators Pty Ltd [2013] NSWCTTT 270 at [14], [22]; Bialous v Budget Vehicles Pty Ltd [2013] NSWCTTT 130 at [36] and [41]; Serini v Surf Toyota [2013] NSWCTTT 531 at [15]; and Baratta v TPA Pty Ltd [2012] VCAT 679 at [164]-[165]. 199 Freestone Auto Sales Pty Ltd v Musulin [2015] NSWCA 160 at [63] where Simpson J stated: “An inference is arguably available that the ignition problems were present, although latent, at the time of sale.” McColl JA and Ward JA agreed with Simpson J.

[8.325]

8 Consumer Guarantees for Goods

413

the applicant. However, where a supplier contends that a defect arose after it was supplied from abnormal use or lack of maintenance by the consumer, the supplier bears the onus of proving that fact.200

Defences [8.310]

The guarantee of acceptable quality is not intended to provide the consumer with a complete indemnity against the consequences of all defects in the goods. The supplier is excused from liability in the following circumstances: • ACL, s 54(4): where the problem with the goods was specifically drawn to the consumer’s attention before the consumer agreed to the supply; or • ACL, s 54(5): where goods were displayed for sale or hire with a notice drawing the consumer’s attention to the problem with the goods; or • ACL, s 54(6): the consumer subjected the goods to abnormal use; or • ACL, s 54(7): the consumer examined the goods before supply and that examination ought reasonably to have revealed the problem with the goods.

Defects specifically drawn to the consumer’s attention

[8.320]

Section 54(4) of the ACL deems goods to be of acceptable quality if the only reason that they are not of acceptable quality relates to matters that were specifically drawn to the consumer’s attention prior to supply. It provides: If: (a) goods supplied to a consumer are not of acceptable quality; and (b) the only reason or reasons why they are not of acceptable quality were specifically drawn to the consumer’s attention before the consumer agreed to the supply; the goods are taken to be of acceptable quality.

This mirrors s 7(2) of the NZ CGA. The underlying premise for excluding the consumer guarantee in such circumstances is that if the consumer has been made aware of the defect prior to the agreement to supply, the consumer has the opportunity choose other goods without such defect, perhaps at a higher price. The reference to the word “specifically” in ACL, s 54(4) means that the guarantee would not be excluded if a supplier draws the consumer’s attention to the risk of defects in very general terms, or blanket statements as to their condition, such as, “these goods are sold as is”. Nevertheless, the proviso allows suppliers a measure of protection if they make full disclosure. Written notice of defects

[8.325]

A separate deeming provision applies to goods that are displayed for sale. They will be deemed to be of acceptable quality if they are displayed with a written notice that specifically draws the consumer’s attention to the reason why they are not of acceptable quality. Section 54(5) of the ACL provides: (5) If:

200 Effem Foods Ltd v Nicholls [2004] NSWCA 332. See Cicchini v Brabazon [2014] QCAT 671 at [21]-[22]; Burdon v Outback Generators Pty Ltd [2013] NSWCTTT 270 at [14], [22].

414

The Australian Consumer Law

[8.330]

(a) goods are displayed for sale or hire; and (b) the goods would not be of acceptable quality if they were supplied to a consumer; the reason or reasons why they are not of acceptable quality are taken, for the purposes of subsection (4), to have been specifically drawn to consumer’s attention if those reasons were disclosed on a written notice that was displayed with the goods and that was transparent.

This mirrors s 7(3) of the NZ CGA. The “ACL Guide on Consumer Guarantees” provides: Some goods may not be of acceptable quality due to problems already known to the supplier – for example, goods with cosmetic defects sold as “seconds”. Defective goods can be sold, usually for lower prices, if the consumer is alerted to the defects before sale. For instance, the supplier: (2) tells the consumer before selling the goods, or (3) displays a written notice with the goods. This must be clearly presented, legible and expressed in plain language. It is not enough to simply describe the goods as “seconds”, “sale” items or “as is”. However, a consumer is assumed to be aware of defects if a written notice setting out the defects was displayed with the goods. When a consumer is alerted to defects in goods before sale, they will not have the right to a remedy if those particular defects later cause problems with the goods. However, the consumer may be entitled to a remedy for a different fault. For example: A consumer finds a bargain in a shoe shop – shoes labelled as “seconds”. A tag attached to the shoes advises there is a problem with the stitching. He buys the shoes. When the stitching splits, he cannot claim the shoes were not of acceptable quality. However, he may be entitled to a remedy if another fault develops, such as the sole cracking.201

Abnormal use

[8.330]

The third defence applies where the consumer to whom the goods were supplied damages them by abnormal use. Section 54(6) provides: Goods do not fail to be of acceptable quality if: (a) the consumer to whom they are supplied causes them to become of unacceptable quality, or fails to take reasonable steps to prevent them from becoming of unacceptable quality; and (b) they are damaged by abnormal use.

This mirrors s 7(4) of the NZ CGA. The term “abnormal use” is not defined. The Macquarie Dictionary (4th ed) defines the word “abnormal” to mean: “not conforming to rule; deviating from the type or standard; irregular”.202 The “ACL Guide on Consumer Guarantees” provides: Goods are not expected to be indestructible; a consumer’s use of goods can affect the durability of those goods. The guarantee of acceptable quality will not apply if the consumer: 201 ACL, “Guide on Consumer Guarantees”, p 13. 202 Macquarie Dictionary (4th ed, Macquarie University, Sydney, 2005), p 3.

[8.335]

8 Consumer Guarantees for Goods

415

• uses the goods abnormally • causes the quality of the goods to become unacceptable • fails to take reasonable steps to avoid the quality becoming unacceptable. The law does not define “abnormal use”. However, examples of abnormal use include: • • • •

a mobile phone is dropped in water or is left out in the rain a television is broken by an object hitting the screen a small electric lawnmower is used to mow four hectares every fortnight a laptop is picked up by the corner of its screen, which then cracks down the middle.203

Examination of goods

[8.335]

The fourth defence applies where the consumer has examined the goods prior to their supply. Section 54(7) provides: Goods do not fail to be of acceptable quality if: (a) the consumer acquiring the goods examines them before the consumer agrees to the supply of the goods; and (b) the examination ought reasonably to have revealed that the goods were not of acceptable quality.

The Second Explanatory Memorandum provides: This exemption may be particularly relevant to second-hand goods and antiques. Such goods are often sold on an “as-is” basis. In such circumstances, suppliers are not required to remedy defects that a consumer should have noticed when examining the goods. The amount of effort that a consumer should take examining goods depends on the nature of the goods. For example, in the case of new goods sold by commercial retailers, very limited or no examination will be required in almost all cases.204

This explanation is somewhat misleading in that it implies a consumer is required to examine the goods, especially second-hand goods, and to a lesser extent new goods, prior to their supply. It is important to appreciate that the consumer is not required to examine the goods before supply. Accordingly, a consumer who does not bother to examine the goods is in a better position than one who does. This is because an examining consumer will be unable to rely on the guarantee of acceptable quality if a reasonable consumer making the type of examination actually made by the consumer would have discovered the defects. However, the proviso only operates in respect of the examination actually made, rather than one that could have been made. Accordingly, a consumer who makes a cursory examination will be in a better position than one who makes a thorough examination. In Carroll v Pollock Wholesale Pty Ltd,205 the applicant purchased a 12-year old, second hand vehicle which had an odometer reading of 12,108 km. The applicant examined and test drove the vehicle before purchase without incident. For about three weeks after purchase the vehicle was driven without incident. Problems with the vehicle became apparent when the service light came on. The applicant had the 203 ACL, “Guide on Consumer Guarantees”, p 14. 204 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.39]. 205 Carroll v Pollock Wholesale Pty Ltd [2014] ACAT 14.

416

The Australian Consumer Law

[8.340]

vehicle serviced and was advised to replace the front and rear brake discs and pads at a cost of $1,300. The applicant had the work done because of safety concerns. Additional work was recommended, namely, the replacement of the “strut tops” and the “throttle body”. On 30 April 2013, less than seven weeks after the purchase, the applicant telephoned the respondent and purported to reject the vehicle. The Tribunal concluded that the vehicle was not free from defects as required by s 54(2)(c) of the ACL because the “strut tops”, brake pads and discs, and the “timing belt” all needed replacement. The vehicle could not be driven with confidence as to its safety as required by s 54(2)(d); and the vehicle was not durable as required by ACL, s 54(2)(e). The Tribunal held that for the purposes of s 54(7), the inspection and test drive made by the applicant would not have revealed the problems that emerged, and that it was reasonable for the applicant not to arrange for a further inspection after the test drive.206 In McQuillan v Thomas,207 the applicant purchased a 1995 BMW M3 motor vehicle from the respondent who was a motor dealer. The applicant had it inspected by RW Brown (the inspector), prior to purchase. During the pre-purchase inspection the inspector detected engine oil and coolant leaks, the source of which could not be identified without further investigation. The inspection report recommended that the vehicle be re-inspected once the engine had been cleaned, but this was not carried out. Subsequently, after purchase the source of the oil leak was identified as a cracked engine block which had been repaired with silicon based sealant. The Tribunal held that the defence in ACL, s 54(7) applied: The applicant had the vehicle examined prior to purchase. Had he acted on the recommendation of the inspector and had the vehicle re-inspected once the engine had been cleaned, that examination ought to reasonably have revealed the defect.208

Evidentiary issues

[8.340]

State and Territory tribunals provide a process for the resolution of small claims, but the process requires a hearing of each party’s evidence and submission being considered. Proceedings in the tribunals are less formal than those in superior courts and they are not bound by the rules of evidence.209 Nevertheless, it has been held that the applicant bears the onus of proof according to the civil standard, the balance of probabilities. In Gurr v Hunter Volkswagen, the tribunal stated:

206 Carroll v Pollock Wholesale Pty Ltd [2014] ACAT 14 at [91]-[92]. 207 McQuillan v Thomas [2012] NSWCTTT 107. 208 McQuillan v Thomas [2012] NSWCTTT 107 at [24]. 209 Section 38(2) of the Civil and Administrative Tribunal Act 2013 (NSW) provides that the NSW Civil and Administrative Tribunal “is not bound by the rules of evidence and may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice”. In addition, s 38(4) provides that the Tribunal “is to act with as little formality as the circumstances of the case permit and according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms”.

[8.350]

8 Consumer Guarantees for Goods

417

… in order to succeed, the applicant, who bears the onus of proof, must show that there are problems with the vehicle, and that in all the circumstances the respondents or either of them is responsible for those problems. He has failed to discharge this onus of proof.210

Such findings are not uncommon in tribunal disputes involving motor vehicles. If the applicant fails to adduce sufficient evidence to allow the tribunal to conclude that there has been a major failure to comply a statutory guarantee, the tribunal has no choice but to dismiss the application.211 Both parties are likely to give sworn evidence that is contradictory. The applicant may present evidence as the general nature of the problem and be accepted by the tribunal to be an honest witness. However, honesty is not enough. In order to obtain a refund the applicant must present expert evidence that will persuade the tribunal that there is an inherent defect in the vehicle that was present at the time of supply which constitutes a major failure to comply with the guarantee of acceptable quality.212 Summary

[8.345]

Some may argue that the standard of acceptable quality is just as uncertain as the standard of merchantable quality, and that the amendment does not assist to clarify the law. It is necessary to adopt a standard that provides for flexibility, so that it can be applied to a myriad of different consumer transactions. That flexibility comes at the loss of some certainty.

As CCAAC noted in its Report,213 there will always be a degree of uncertainty surrounding statements or definitions of the standard of quality required by the law. The adoption of the concept of “acceptable quality”, along with a more certain definition will retain the intended effect of the merchantability provision, while providing clarity to both consumers and businesses, especially in relation to the issue of durability.

Guarantee: fitness for purpose [8.350]

The scheme of Pt 3-2, Div 1, Subdiv A is to allow s 54 to deal with the general suitability of goods and requires that the goods supplied will be reasonably fit for all of the purposes for which goods of that kind are commonly supplied. Section 55 of the ACL, on the other hand, deals with the suitability of goods for one or more specific disclosed purpose(s) made known by the consumer to the supplier, or a person by whom any prior negotiations or arrangements in relation to the acquisition of the goods were conducted or made, or the manufacturer. Section 55 does this by imposing a guarantee where there is a supply of goods (otherwise than by auction) that the goods are reasonably fit for any disclosed purpose. It provides: (1) If:

210 Gurr v Hunter Volkswagen [2011] NSWCTTT 146. 211 See Alley v Quayside [2011] NSWCTTT 228 and Reinhold v Ford Motor Company [2014] QCAT 671 at [47]-[48]. 212 See Corones, “Why Australia Needs a Motor Vehicle Lemon Law” (2016) 39(2) University of New South Wales Law Journal (forthcoming). 213 CCAAC Report, p 38 and ch 7, at http://www.ccaac.gov.au.

418

The Australian Consumer Law

[8.355]

(a) a person (the supplier) supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of auction; there is a guarantee that the goods are reasonably fit for any disclosed purpose, and for any purpose for which the supplier represents that they are reasonably fit. (2) A disclosed purpose is a particular purpose (whether or not that purpose is a purpose for which the goods are commonly supplied) for which the goods are being acquired by the consumer and that: (a) the consumer makes known, expressly or by implication to: (i) the supplier; or (ii) a person by whom any prior negotiations or arrangements in relation to the acquisition of the goods were conducted or made; or (b) the consumer makes known to the manufacturer of the goods either directly or through the supplier or the person referred to in paragraph (a)(ii). (3) This section does not apply if the circumstances show that the consumer did not rely on, or that it was unreasonable for the consumer to rely on, the skill or judgment of the supplier, the person referred to in subsection (2)(a)(ii) or the manufacturer, as the case may be.

There are two pre-conditions that must be satisfied before the s 55 guarantee will apply. First, the consumer must disclose the particular purpose for which goods are acquired. This may be done expressly or by implication and may be communicated directly to the corporation or to any person negotiating for it. Secondly, the supply must be in trade or commerce. This requirement is less onerous than the fitness for purpose implied term under the Sale of Goods Acts. In particular, there is no requirement that the goods sold be of a kind which it was in the course of the seller’s business to supply. However, no liability is imposed on the supplier where the circumstances show that the consumer did not rely, or that it was unreasonable for the consumer to rely, on the supplier’s skill or judgment, or that of the person who conducted the negotiations or the manufacturer. Fitness for purpose under ss 71(2) and 74B of the TPA

[8.355]

Before considering the terms of ACL, s 55, it is necessary to consider how fitness for purpose in relation to goods was treated under the previous law relating Pt V Div 2 and Div 2A of the TPA. Section 55 is only intended to repeat and clarify that pre-existing law; it is not intended to expand it. The repealed s 71(2) of the TPA implied a condition into a contract between a supplier and a consumer that the goods would be fit for purpose. It provided: Where a corporation supplies (otherwise than by way of sale by auction) goods to a consumer in the course of a business and the consumer, expressly or by implication, makes known to the corporation or to the person by whom any antecedent negotiations are conducted any particular purpose for which the goods are being acquired, there is an implied condition that the goods supplied under the contract for the supply of the goods are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied, except where the circumstances show that the consumer does not rely, or that it is unreasonable for him to rely, on the skill or judgment of the corporation or of that person.

[8.355]

8 Consumer Guarantees for Goods

419

In connection with this aspect of the Sale of Goods Act 1893 (UK), in Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association,214 Lord Reid suggested that, as the object of disclosure is to give the seller an opportunity to exercise its skill and judgment in making or selecting goods, the purpose must be stated with sufficient particularity to enable this to occur. For example, in Griffiths v Conway Ltd,215 the plaintiff, who had abnormally sensitive skin, contracted dermatitis from a tweed coat she purchased from the defendant. She argued that she had made known to the defendant the particular purpose for which the coat was purchased, namely for being worn. However, the Court of Appeal held that the particular purpose was the purpose of being worn by a woman suffering from an abnormally sensitive skin because, unless the seller knew of this abnormality, the requisite skill and judgment in relation to the sale could not be exercised.216 Accordingly, the plaintiff failed. In Carpet Call Pty Ltd v Chan,217 the purchasers wanted extensive areas of their nightclub to be carpeted. They disclosed to the vendor that they wanted a carpet of good quality, grey in colour, capable of withstanding heavy human traffic and generally suitable for a big nightclub catering for young patrons. The grey carpet supplied and laid by the vendor was rated as heavy duty domestic. In an action to recover the balance due for the supply and laying of the carpet, the purchasers alleged that the vendor had breached an implied condition that the carpet was reasonably fit for use in a nightclub where food and drink would be consumed and large numbers of persons would be present. Thomas J of the Supreme Court of Queensland did not consider that there was any sufficiently clear disclosure of purpose made by the purchasers such as to show that they were relying on the skill and judgment of the seller or such as to imply a warranty under s 17(1) of the Sale of Goods Act 1896 (UK) or s 71(2) of the TPA. Thomas J observed: Of course in some circumstances the mere disclosure by the buyer of his particular purpose may in itself be enough to show a reliance on the skill and judgment of the seller, but I do not think that the imprecise generalisations of the purchasers in this case demonstrated reliance on the vendor’s skill. It is true that the persons who were face to face in the dealing were not of equal competence, and that greater knowledge of carpet qualities would be expected on the part of the vendor’s agent. On the other hand the purchasers knew much more about nightclubs and about the possible extremities of users that might be encountered. Even they had no conception of the type of abuse that would occur.218 214 Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association [1969] 2 AC 31. “It is not sufficient merely to show that the seller knew of the purpose; of course he may: businessmen do not work in a vacuum, they know their trade and their customers and they are not to be saddled with conditions merely because they are competent and knowledgeable. The purpose must be made known so as to show reliance” (at 125). 215 Griffiths v Conway Ltd [1939] 1 All ER 685. 216 Griffiths v Conway Ltd [1939] 1 All ER 685 at 691. 217 Carpet Call Pty Ltd v Chan (1987) ASC 55-553. 218 Carpet Call Pty Ltd v Chan (1987) ASC 55-553.

420

The Australian Consumer Law

[8.360]

The repealed s 74B(1) of the TPA imposed strict liability on a manufacturer where goods were not fit for purpose.219 It provided: Where– (d) a corporation, in trade or commerce, supplies goods manufactured by the corporation to another person who acquires the goods for re-supply; (e) a person (whether or not the person who acquired the goods from the corporation) supplies the goods (otherwise than by way of sale by auction) to a consumer; (f) the goods are acquired by the consumer for a particular purpose that was, expressly or by implication, made known to the corporation, either directly, or through the person from whom the consumer acquired the goods or a person by whom any antecedent negotiations in connection with the acquisition of the goods were conducted; (g) the goods are not reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied; and (h) the consumer or a person who acquires the goods from, or derives title to the goods through or under, the consumer suffers loss or damage by reason that the goods are not reasonably fit for that purpose; the corporation is liable to compensate the consumer or that other person for the loss or damage and the consumer or that other person may recover the amount of the compensation by action against the corporation in a court of competent jurisdiction.

The repealed s 74B(2) provided: Sub-section (1) does not apply– (c) if the goods are not reasonably fit for the purpose referred to in that subsection by reason of: (iii) an act or default of any person (not being the corporation or a servant or agent of the corporation); or (iv) a cause independent of human control; occurring after the goods have left the control of the corporation; or (d) where the circumstances show that the consumer did not rely, or that it was unreasonable for the consumer to rely, on the skill or judgment of the corporation.

[8.360]

Actions under s 74B required proof of five elements.

First, a corporation in trade or commerce must have supplied goods manufactured by it to another who acquired the goods for re-supply.220 Secondly, a person (not necessarily the same person who acquired the goods from the manufacturer) must have supplied the goods to a consumer.221 Thirdly, the goods must have been acquired by a consumer for a particular purpose that was expressly or by implication made known to the manufacturer either directly or through the person from whom the consumer acquired the goods.222 The particular purpose was ascertained subjectively.223 219 TPA, s 82. 220 TPA, s 74B(1)(a). 221 TPA, s 74B(1)(b). 222 TPA, s 74B(1)(c). 223 Rasell v Cavalier Marketing (Australia) Pty Ltd [1991] Qd R 323 at 330; Merck Sharpe & Dohme (Aust) Pty Ltd v Peterson (2011) 196 FCR 145 at [171].

[8.360]

8 Consumer Guarantees for Goods

421

Fourthly, the test for determining whether the goods were fit for the particular purpose was objective.224 The standard of reasonable fitness for the “particular” purpose(s) was the same as the standard required by the implied condition in contracts by virtue of s 71(2). Reasonable fitness for the “particular” purpose did not require absolute fitness for that purpose. This was a question of fact and depended upon the circumstances of the case. Fifthly, the consumer must have suffered loss or damage which was caused by the goods not being fit for the particular purpose.225 In the first case which interpreted and applied these provisions, Graham Barclay Oysters Pty Ltd v Ryan,226 Ryan developed Hepatitis A as a result of consuming contaminated oysters. The trial judge held the manufacturer/grower liable under ss 74B and 74D of the TPA on the basis that it was reasonable for Ryan to have relied on the grower’s skill or judgment, and for him to have assumed that the oysters were fit for purpose and of merchantable quality in the absence of a warning to the contrary. It was no defence that the manufacturer/grower could not detect that the oysters were contaminated. Wilcox J held: I accept it would not have been possible for Barclay Oysters to test the particular oysters sold to the applicant’s father and brother. I also accept it is impossible to ensure that a particular oyster is free from viral contamination, although it is possible to minimise the risk of the oyster being contaminated at the time of sale. However, as counsel for the applicant submit in reply, the question is not whether the grower could reasonably have discovered the defect; the issue is the reasonableness of the consumer’s reliance, not the reasonableness of the manufacturer’s behaviour. The right of action created by s 74B is a statutory cause of action. Its elements must be taken from the statute itself, free of any preconceptions that might arise by reference to principles governing common law negligence.227

On appeal, Barclay Oysters argued in relation to the first limb of s 74B(2)(b) (non-reliance) that the primary judge was not entitled to conclude that Mr Ryan had in fact relied on the skill and judgment of Barclay Oysters. In relation to the second limb of s 74B(2)(b) (unreasonable reliance), Barclay Oysters argued that the trial judge erred in failing to find that it was unreasonable for Mr Ryan to have relied on the skill or judgment of Barclay Oysters. The Full Federal Court dismissed the appeal. As regards the first limb of s 74B(2)(b), the Full Court held that the trial judge was entitled to infer that Mr Ryan had in fact relied on the skill and judgment of the manufacturer/grower, even though Mr Ryan did not have direct dealings with manufacturer/grower. The buyers of the oysters were his father and his brother. In the absence of any warning by the manufacturer/grower that the oysters might not be safe to eat, Mr Ryan was entitled to assume that they were safe to eat. 224 TPA, s 47B(1)(d). 225 TPA, s 47B(1)(e). 226 Graham Barclay Oysters Pty Ltd v Ryan (1999) ATPR (Digest) ¶46-191. On appeal, Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307. 227 Graham Barclay Oysters Pty Ltd v Ryan (1999) ATPR (Digest) ¶46-191 at 52,337.

422

The Australian Consumer Law

[8.360]

As regards the second limb of s 74B(2)(b), Barclay Oysters submitted that the phrase “unreasonable for the consumer to rely on the skill or judgment of the corporation” imported an objective element so that one must hypothesise a consumer who knew all relevant facts. Lindgren J, (with whom Lee and Kiefel JJ agreed in relation to Barclays’ liability under the TPA) rejected Barclay Oysters’ construction of the unreasonable reliance limb of s 74B(2)(b).228 His Honour held: Against this background, in what circumstances, it may be asked, might the consumer’s actual reliance on the skill or judgment of the manufacturer have been unreasonable? It might be if, for example, the manufacturer had notified the particular consumer that it could not guarantee the goods’ fitness for the consumer’s particular purpose or if the particular consumer’s knowledge or means of knowledge was equal to or exceeded that of the manufacturer. Perhaps, in addition, for the purpose of the application of the provision, there should be imputed to the particular consumer the knowledge that “a reasonable consumer” would have. Perhaps the particular consumer should also be treated as having taken any steps for his or her own protection that “a reasonable consumer” would have taken, having regard to the nature of the goods and the circumstances of the case. Be this as it may, in my view, ordinarily, there should not be imputed to the consumer special technical knowledge touching the process of manufacture of the goods.229

The next case which sought to rely on these provisions was Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd.230 It concerned the implant of a mechanical or prosthetic mitral valve in the applicant’s heart and her subsequent development of thromboembolisms with serious consequences, including the need for further surgery to replace the valve with a tissue or bio-prosthetic valve. The applicant’s case was brought against the first respondent in its capacity as the supplier in Australia. Kiefel J held that the claim based on s 74B was not made out: The question whether goods which have a use are reasonably fit for it must be assessed not only by reference to the fact that they failed to accomplish their purpose, but also by reference to what a consumer could reasonably expect from the goods. The evidence here clearly establishes that the risk in question was well known to medical practitioners. The applicant was advised of this risk, as I later discuss. In my view, for the reasons I give later it could not therefore have been reasonable for the applicant to expect that there was no prospect that the valve would cause the development of thrombi. This claim is not made out.231

Finally, in Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd,232 Peterson alleged that the consumption of a medication for the relief of arthritic pain called Vioxx sold by Merck between late 2000 and September 2004 when it was withdrawn from the 228 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 at [526]. 229 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 at [524]. 230 Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd (2004) ATPR ¶42-100. 231 Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd (2004) ATPR ¶42-100 at [212]-[213]. 232 Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd (2010) 184 FCR 1.

[8.360]

8 Consumer Guarantees for Goods

423

market, contributed to the onset of various kinds of cardiovascular disease. Peterson started taking Vioxx in 2001 and had a heart attack in 2003 which he alleged Vioxx contributed to. Vioxx was the commercial embodiment of the rofecoxib molecule. The relationship between the consumption of Vioxx and cardiovascular disease was an unsettled question during this period. Peterson alleged that well before September 2004, the respondents knew or ought to have known that Vioxx increased the risk of cardiovascular disease. In 2000 the VIGOR trial suggested a link between Vioxx and cardiovascular disease. However, arthritis does not lend itself easily to placebocontrolled trials, because patients with arthritis require some medication for pain relief and the use of placebo, especially for long durations, was considered unethical. Vioxx’s risk of causing heart attack did not become apparent until it had been used by a large population for a prolonged period, ie, until September 2004. The applicant argued that Merck, and/or its Australian subsidiary and importer MSDA, were liable under an action based on ss 74B and 74D in Pt V Div 2A of the TPA. In relation to s 74B, Jessup J held: In my view, in a case such as the present where there is no express or clearly implicit expression of purpose that the consumer requires a product that is free of risk (or of increased risk, or materially increased risk, etc), the point at which the absence of risk becomes relevant is where the existence of the presumptively dangerous tendency of the goods in question compromises their fitness for the purpose in fact made known to the manufacturer. For example, a sunscreen lotion that was coincidentally attractive to wasps would be unfit for purpose as a sunscreen lotion. It would be quite artificial to enquire whether the consumer made it implicitly known to the manufacturer that he or she entertained the purpose of using a wasp-free lotion. On the facts of the present case, the applicant’s point must be that the tendency of Vioxx to contribute to the onset of cardiovascular disease justifies the conclusion that it was not reasonably fit for the purpose of providing relief from arthritic pain.233

The Full Federal Court upheld the appeal on the substantive ground that by having a prescription filled by a pharmacist, Mr Peterson implicitly made it known that he was acquiring Vioxx for the purpose of use as a medication for treatment of arthritic pain without gastrointestinal sides-effects.234 However, that purpose did not include as a negative element that the Vioxx was absolutely safe and would have no adverse side-effects.235 The trial judge found Mr Peterson’s claim based on TPA, s 74B should succeed because Vioxx approximately doubled the risk of heart attack. However, the Full Court upheld the appeal for the following reasons. First, the evidence did not support the finding that Vioxx approximately doubled the risk of heart attack. Secondly, the question whether Vioxx was reasonably fit for purpose as a prescription medication was a complex question that could not be answered simply 233 Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd (2010) 184 FCR 1 at [944]. 234 Merck Sharpe & Dohme (Aust) Pty Ltd v Peterson [2011] FCAFC 128 at [171]. 235 Merck Sharpe & Dohme (Aust) Pty Ltd v Peterson (2011) 196 FCR 145; [2011] FCAFC 128 at [172].

424

The Australian Consumer Law

[8.365]

by a “mathematical comparison of relative risk”.236 Prescription medications are rarely risk free. Thirdly, the issue of causation was not determined in Mr Peterson’s favour. The Court did not consider that it was more probable than not that the consumption of Vioxx was a necessary precondition of Mr Peterson’s heart attack. It had not been proven that Mr Peterson would not have had the heart attack but for the consumption of Vioxx.237 Disclosing the consumer’s purpose

[8.365]

Case law in relation to the Sale of Goods Acts which implies a condition into contracts that goods will be fit for a particular purpose made known to the seller, may be of assistance in interpreting s 55 of the ACL. In some cases the consumer’s purpose will be obvious from the nature of the transaction and there will be no need for this to be shown. Thus, for example, it was unnecessary for Dr Grant to say why he purchased underwear;238 or for the plaintiff in Frank v Grosvenor Motor Auctions Pty Ltd,239 to say why he was purchasing a car. On the other hand, if the goods are required for some special purpose, or if they could be used for several purposes, then the consumer’s purpose must be made known to the supplier. It is not necessary for the consumer’s purpose to be stated expressly, or for it to be made a term of the contract. However, what is less clear is the amount of detail that the consumer must disclose in order to satisfy this precondition. In connection with this aspect of the United Kingdom Sale of Goods Act 1893, in Henry Kendall & Sons v William Lillico & Sons Ltd240 Lord Reid suggested that, as the object of disclosure is to give the seller an opportunity to exercise its skill and judgment in making or selecting goods, the purpose must be stated with sufficient particularity to enable this to occur. This explains why the plaintiff failed in Griffiths v Conway Ltd.241 See [8.355].

Nature of the supplier’s statutory duty

[8.370]

The statutory duty imposed on suppliers by ACL, s 55(1) is to supply goods that are “reasonably fit” for purpose, not absolutely fit. The Second Explanatory Memorandum states: “This guarantee will ordinarily require a higher standard of quality that the guarantee of acceptable quality.”242

The following example is provided by the Second Explanatory Memorandum: A lawnmower that is sold to a consumer who does not mention the purpose for which it is to be used might be expected to mow the lawn of an ordinary suburban house once per week for several years without any significant problems to satisfy the guarantee of 236 Merck Sharpe & Dohme (Aust) Pty Ltd v Peterson (2011) 196 FCR 145; [2011] FCAFC 128 at [174]. 237 Merck Sharpe & Dohme (Aust) Pty Ltd v Peterson (2011) 196 FCR 145; [2011] FCAFC 128 at [175]. 238 See Grant v Australian Knitting Mills Ltd [1936] AC 85. 239 Frank v Grosvenor Motor Auctions Pty Ltd [1960] VR 607. 240 Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31. 241 Griffiths v Conway Ltd [1939] 1 All ER 685. 242 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.43].

[8.375]

8 Consumer Guarantees for Goods

425

acceptable quality. If a consumer indicates to a supplier that he or she wants a lawnmower to mow a 4 hectare block of land each week, the standard that the lawnmower would need to meet to be fit for that disclosed purpose would be higher than that required by the guarantee of acceptable quality for a domestic lawnmower.243

It is unclear for how long the goods must remain reasonably fit for purpose after delivery to the buyer. It seems that they must continue to be fit for a reasonable length of time after delivery, taking into account the circumstances of the contract and the nature of the goods. For example, it is also unclear whether the words “reasonably fit for any disclosed purpose, and for any purpose for which the supplier represents that they are reasonably fit” provide scope for arguing a “state of the art” defence. It is arguable that it would not be “reasonable” to hold manufacturers and suppliers liable for defects which could not be detected given the state of scientific and technical knowledge at the time goods were manufactured. Prior negotiations

[8.375]

The guarantee in ACL, s 55(1) also applies where a particular purpose is made known to a person other than the supplier during any “prior negotiations”, or “arrangements in relation to the acquisition of the goods were conducted or made” or where the consumer makes known the purpose to the manufacturer either directly or through the supplier. The Second Explanatory Memorandum states: This is intended to cover the categories of people that a consumer most often deals with when purchasing goods. In any of these cases, the consumer will receive the benefit of the guarantee if he or she makes their purpose known to the relevant person.244

The following example is provided by the Second Explanatory Memorandum: a consumer tells a checkout operator at a discount department store that he or she wants goods to achieve a particular purpose. In such circumstances, a court might find that it was not reasonable for the consumer to rely the skill or judgment of the supplier and the guarantee of fitness for purpose would not apply.245

On the other hand, in a linked credit contract involving a motor vehicle, the motor vehicle may be delivered, direct by the authorised distributor, to the consumer although the lease may be entered into between the consumer and the linked credit provider. The linked credit provider could be liable for a breach of the s 55(1) guarantee if the vehicle is not suitable for a particular purpose made known to a sales person working for the authorised distributor who conducted the antecedent negotiations, unless the circumstances show that the consumer did not rely, or that it was unreasonable for the consumer to rely, on that person’s skill or judgment. 243 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, Example 7.5, p 189. 244 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.41]. 245 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, Example 7.4, p 189.

426

The Australian Consumer Law

[8.380]

Statutory proviso to the guarantee

[8.380] Unlike the position under the Sale of Goods Acts, consumers seeking to rely on s 55(1) guarantee do not have to prove that they relied on the seller’s skill or judgment. However, the guarantee will not apply if the consumer did not do so, or if this was unreasonable in the circumstances. In effect, the section presumes reliance but leaves it open to a supplier to prove that there was no reliance, or that this was unreasonable. This exception is important in at least two respects. First, suppliers may be able to avoid the guarantee through using a “no reliance clause” in contracts of supply, although ACL, s 64 will limit the scope of this opportunity. Secondly, it provides a defence where the supplier genuinely disclaims skill where it would otherwise, because of s 64, be unable to protect itself by an exclusion clause. The ACL “Guide on Consumer Guarantees” provides the following example: • A consumer tells a fellow customer at a discount department store that he wants a television capable of showing all available digital channels. The other customer tells the consumer that a particular television “looks like one my dad bought, which I think does what you want”. After buying the television, the consumer discovers that it is analogue and will not capture digital signals. • The consumer did not rely on the supplier when buying the goods, so is not entitled to a remedy.246 In Cary Boyd v Agrison Pty Ltd,247 the applicant disclosed to Agrison’s sales representative that he required a tractor that was suitable for his work as a slashing contractor, and that it must be capable of travelling long distances on open roads to and from contract slashing jobs. He told the sales representative that the tractor needed to be fast, but stable. The sales representative advised Mr Boyd that the Agrison tractor he examined could achieve 35 to 38 km/hour. The Agrison tractor was not technically capable of achieving that speed. The court held that pursuant to s 55(2)(a) of the ACL, Mr Boyd expressly made known to Agrison the purpose for which he required the tractor and that speed was necessary for him to achieve that purpose. The tractor was unable to maintain safe driving at a speed of 33 kph, and accordingly Agrison failed to comply with the guarantee in s 55(1) of the ACL.248

Guarantee: correspondence with description [8.385] Section 56 of the ACL imposes a guarantee of correspondence with description. It provides: (1) If: (a) a person supplies, in trade or commerce, goods by description to a consumer; and (b) the supply does not occur by way of auction; there is a guarantee that the goods correspond with the description. (2) A supply of goods is not prevented from being a supply by description only because, having been exposed for sale or hire, they are selected by the consumer. 246 ACL, “Guide on Consumer Guarantees”, p 15. 247 Cary Boyd v Agrison Pty Ltd [2014] VMC 23. 248 Cary Boyd v Agrison Pty Ltd [2014] VMC 23 at [105].

[8.385]

8 Consumer Guarantees for Goods

427

(3) If goods are supplied by description as well as by reference to sample or demonstration model, the guarantee in this section and in s 57 both apply.

Section 70 of the TPA implied a condition as to correspondence with description as does the Sale of Goods legislation. The key questions that arise for consideration are: what is a supply by description; and what is the nature of the obligation it imposes? As regards, the nature of a “supply by description”, s 56(2) of the ACL expressly provides a supply of goods is not prevented from being a supply by description only because, having been exposed for sale or hire, they are selected by the consumer. This is intended to resolve any doubts as to whether a person selecting an item in a supermarket from a number of similar goods could be said to be buying by description. Where the consumer relies on the description of the goods supplied by the supplier, for example, on the packaging of the goods displayed in a supermarket, or a photograph in relation to an on-line sale, this will constitute a sale by description. As regards, the nature of the obligation imposed, s 56 of the ACL provides that the supplier’s obligation is to supply goods that correspond with the description given to them. What then, constitutes the contract description? The application of the corresponding provision of the Sale of Goods legislation has given rise to considerable difficulties as to what will be held to be part of the description. There are two views as to what constitutes the contract description. Under the narrow view words referring to the quality of goods will not be held to be part of the description. The broader view is that in appropriate circumstances, a contract description can include a reference to quality where they can be said to have been used to identify the goods.249 Like the Sale of Goods Acts, the ACL provides separate guarantees for compliance with the description by which goods are sold and their acceptable quality, under s 54. It is likely that the courts in construing s 56 of the ACL, will adopt the Ashington Piggeries approach and hold that statements about quality will only form part of the description to the extent that they go towards identifying the goods. Thus, it will need to be demonstrated that the existence of a specific quality was so important in the minds of the parties that it formed part of the description, and that the failure to supply goods of that quality would amount to supplying different goods. In Cary Boyd v Agrison Pty Ltd,250 Mr Boyd agreed to a “brand new” Agrison ST448 Tractor. He was shown a 2012 demonstration model Agrison tractor, but was told by the sales representative that the 2011 model that he would be purchasing would operate in precisely the same way as the 2012 model. The description applied to it was “brand new”. The Court held that Agrison failed to comply with the guarantee in s 56(1) of the ACL: Without being exhaustive, the tractor exhibited strong indications that it was not a new piece of machinery. There were signs that it had been re-sprayed suggested by evidence of overspray, the presence of paint and gaps at the headlight covers, the gas struts were 249 See Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441. 250 Cary Boyd v Agrison Pty Ltd [2014] VMC 23.

428

The Australian Consumer Law

[8.390]

inoperative and needed to be re-gassed, the steering was faulty, it suffered from hydraulic oil leaks and of course there is the evidence of corrosion incompatible with the time during which the tractor was exposed to the elements.251

Guarantee: supply by sample [8.390]

A consumer may request a sample and then order goods on the basis of the sample. Section 57 of the ACL imposes a guarantee that the goods supplied will comply with the sample provided, and that the consumer will have a reasonable opportunity of comparing the goods supplied with the original sample. The goods supplied should have no defects which were not apparent from a reasonable examination of the sample. Section 57 of the ACL provides: (1) If: (a) a person supplies, in trade or commerce, goods to a consumer by reference to a sample or demonstration model; and (b) the supply does not occur by way of auction; there is a guarantee that: (c) the goods correspond with the sample or demonstration model in quality, state or condition; and (d) if the goods are supplied by reference to a sample – the consumer will have a reasonable opportunity to compare the goods with the sample; and (e) the goods are free from any defect that: (i) would not be apparent on reasonable examination of the sample or demonstration model; and (ii) would cause the goods not to be of acceptable quality. (2) If goods are supplied by reference to sample or demonstration model as well as by description, the guarantees in section 56 and in this section both apply.

The following example is provided by the Second Explanatory Memorandum: a sample of fabric is used to sell a couch and the couch supplied to a consumer is a different colour to the sample.252

The repealed s 72 of the TPA implied a condition as to compliance with sample, as does the Sale of Goods legislation.253 Section 57(1)(e) of the imposes a higher duty of care on the consumer than the general guarantee of acceptable quality under s 54 of the ACL. A consumer who fails to examine the goods before agreeing to the supply of them is not prevented from relying on the guarantee of acceptable quality, even if the defects in the goods would be apparent on a reasonable examination. By contrast, s 57(1)(e) provides that the guarantee will not apply in relation to a sale by sample if there are defects that would be apparent on a reasonable examination of the sample. 251 Cary Boyd v Agrison Pty Ltd [2014] VMC 23 at [109]. 252 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, Example 7.6, p 190. 253 See eg, Sale of Goods Act 1923 (NSW), s 20. See LG Thorne & Co Pty Ltd v Thomas Borthwick & Sons (Australasia) Ltd (1956) 56 SR (NSW) 81 at 87 (Street CJ with whom Roper CJ in Equity agreed).

[8.395]

8 Consumer Guarantees for Goods

429

Guarantee: repair and spare parts [8.395]

The ACL provides consumers with a guarantee that spare parts and repair facilities will be reasonably available for a reasonable period it time. This is similar to the obligation imposed by the repealed s 74F of the TPA. Section 58 of the ACL provides: (1) If: (a) person supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the manufacturer of the goods will take reasonable action to ensure that facilities for the repair of the goods, are reasonably available for a reasonable period after the goods are supplied. (2) This section does not apply if the manufacturer took reasonable action to ensure that the consumer would be given written notice, at or before the time when the consumer agrees to the supply of the goods, that: (a) facilities for the repair of the goods would not be available or would not be available after a specified period; or (b) parts for the goods would not be available or would not be available after a specified period.

The guarantee is imposed on a “manufacturer”, rather than a “supplier”. Since the definition of “manufacturer” in s 7 of the ACL includes an “importer”, where the foreign manufacturer does not have a place of business in Australia, the Australian importer will need to establish a facility for repair and the supply of spare parts in order to comply with the guarantee imposed by s 58 of the ACL, unless the importer can rely on the proviso in s 58(2). The guarantee applies irrespective of whether the manufacturer supplies goods directly to a consumer or indirectly through a dealer or distribution network. The guarantee relating to repairs and spare parts is based on reasonableness. The test is to be applied from the manufacturer’s point of view rather than the consumer’s point of view. In other words, whether it is reasonable for the manufacturer to place the consumer in a position in which repairs or spare parts are not available. Each case will turn on its particular facts and circumstances, including the nature of the goods concerned, industry practice and the reason for the lack repair facilities or spare parts. As regards the nature of the goods, the Second Explanatory Memorandum states: The test of reasonability that apply to this guarantee allow for the fact that what is reasonable will depend on the nature of the goods supplied. For example, it would be reasonable to expect that tyres for a new car will be available for many years after its purchase. It may not be reasonable to expect that spare parts for an inexpensive children’s toy are available at all.254

It is unclear what is meant by the words “reasonably available” in s 58(1) of the ACL; however, it would seem that in the case of some goods, such as motor vehicles, white goods and high technology products such as personal computers 254 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.52].

430

The Australian Consumer Law

[8.400]

that need to be serviced periodically, service centres should be available at a number of different geographic locations, so as not to cause consumers undue costs and inconvenience. Manufacturers are able to exempt themselves from liability in relation to this guarantee. Section 58(2) of the ACL provides that the guarantee relating to repairs and spare parts will not apply if the manufacturer/importer took “reasonable action” to ensure that the consumer, at or before the time of sale, was given “written notice” that spare parts would not be available in relation to the goods or will only be available for a specified time. This proviso is likely to be construed strictly by the courts, and a high standard imposed with regard to what constitutes “reasonable action” on the part of manufacturers to bring to the attention of consumers any restriction or limitation on parts and service to ensure that consumers were fully informed prior to accepting this risk.

Guarantee: manufacturer’s and supplier’s express warranty [8.400]

Section 59(1) of the ACL includes a guarantee that any express warranty provided by a manufacturer will be complied with. Manufacturers often provide a “voluntary” warranty to consumers, also called an “express warranty”, even though there is no contractual nexus between the manufacturer and the consumer. They may be oral, or in writing, and may be supplied in the packaging with the item purchased, or advertised by the retailer on the manufacturer’s behalf where the goods are displayed in-store. They may be subject to time limits and other conditions. Section 271(5) of the ACL creates a direct right of action for failure to comply with the s 59(1) guarantee relating to manufacturers’ express warranties. This obviates the need to establish a collateral contract with the manufacturer. Section 59(2) of the ACL creates a guarantee that the supplier of the goods will comply with any express warranty given or made by the supplier. An “express warranty” is defined broadly in s 2 of the ACL to mean representations “whose natural tendency is to induce persons to acquire goods”. It is not necessary for the consumer to prove that they were intended to be relied upon, or that they were in fact relied upon by the consumer. The term “express warranty” is broadly defined in s 2 of the ACL to mean: In relation to goods, means an undertaking, assertion or representation: (a) that relates to: (i) the quality, state, condition, performance or characteristics of the goods; or (ii) the provision of services that are or may at any time be required for the goods; or (iii) the supply of parts that are or may at any time be required for the goods; or (iv) the future availability of identical goods, or of goods constituting or forming part of a set of which the goods, in relation to which the undertaking, assertion or representation is given or made, form part; and (b) that is given or made in connection with the supply of the goods, or in connection with the promotion by any means of the supply or use of the goods; and (c) the natural tendency of which is to induce persons to acquire the goods.

It is clear from para (c) of the definition that it is not necessary to prove that the manufacturer intended to induce persons to acquire the goods by making the

[8.400]

8 Consumer Guarantees for Goods

431

express warranty, or that the express warranty actually induced the consumer to acquire the goods. It seems that the test is objective rather than subjective and that it is only necessary to prove that the representation would have a “natural tendency to induce” a reasonable person to acquire the goods. The guarantee as to express warranties is potentially very significant, and its ramifications may not at first be appreciated: it fundamentally changes the common law position. An express warranty or representation made by a manufacturer will only be enforceable at common law by a consumer who acquires the goods from a retailer or distributor, if the consumer can establish the existence of a collateral contract with the manufacturer and suing for breach of that contract. In order to establish a collateral contract, it would first be necessary to prove that the manufacturer has agreed with the ultimate consumer, that in consideration of the latter entering into a contract with the retailer for the purchase of the goods concerned, the manufacturer will promise to repair or replace the goods if they are faulty. It would be necessary to prove that the consumer was aware of the existence of manufacturer’s offer before the consumer entered into the contract with the retailer. For example, if the manufacturer’s express warranty was displayed as part of the advertising or promotion in the retailer’s store, or on the outside of the packaging. If the express warranty as to repair or replacement is contained inside the packaging this will not be the case. It would also be necessary to prove that the representation by the manufacturer was intended to be relied on, in the sense that the manufacturer guaranteed truth of the statement, and it was, in fact, relied on by the consumer. Section 59 of the ACL circumvents these common law problems of proof. It provides: (1) If: (a) person supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the manufacturer of the goods will comply with any express warranty given of made by the manufacturer in relation to the goods. (2) If: (a) a person supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the supplier will comply with any express warranty given or made by the supplier in relation to the goods.

The definition of “express warranty” would cover all representations made by the manufacturer in advertisements and promotional literature made prior to the consumer entering into the contract. Representations made in promotional literature by manufacturers have a tendency to induce the making of the contract. If they are relied upon and turn out to be untrue, the consumer does not need to rely on a cause of action for misrepresentation, or to prove the existence of a collateral contract with the manufacturer. It would not seem to matter how the consumer came by the promotional literature so long as the consumer became aware of it prior to entry into the contract.

432

The Australian Consumer Law

[8.405]

Warranties against defects [8.405]

The ACL draws a distinction between “express warranties” considered earlier in this chapter and “warranties against defects”. A “warranty against defects” is a subset of “express warranties” in s 59. A “warranty against defects” is defined in s 102(3) to mean: (3) A warranty against defects is a representation communicated to a consumer in connection with the supply of goods or services, at or about the time of supply, to the effect that a person will (unconditionally or on specified conditions): (a) repair or replace the goods or part of them; or (b) provide again or rectify the services or part of them; or (c) wholly or partly recompense the consumer; if the goods or services or part of them are defective, and includes any document by which such a representation is evidenced.

The purpose of s 102 is set out in the Second Explanatory Memorandum: Suppliers and manufacturers often provide promises to consumers that goods or services supplied will be free from defects for a certain period of time. Consumers may experience difficulties seeking to have suppliers or manufacturers fulfil such promises if they lack access to basic details, such as the name and address of the supplier. The ACL provides for regulations to be made prescribing requirements relating to the content and form of such warranties against defects.255

The s 59 guarantee as to express warranties applies in relation to “warranties against defects”. Thus, a failure by a manufacturer to comply with a warranty against defects is a failure to comply with an express warranty under s 59. When goods covered by a warranty against defects fail to meet a consumer guarantee, the consumer has a choice. The consumer can insist that the warranty be honoured, or rely on s 271(5) of the ACL which creates a statutory cause of action for failure to comply with the consumer guarantee. It might be thought that s 59 will have the effect of discouraging manufacturers from providing warranties against defects. However, in many cases it will be to the manufacturer’s advantage to provide an express warranty against defects. The reason for this is that manufacturers generally prefer to repair or replace defective goods. Section 271(6) of the ACL provides that if a manufacturer provides an express warranty, and the consumer requires the manufacturer to remedy a failure to comply with a guarantee of acceptable quality by repairing or replacing the goods, the consumer is not entitled to commence an action for damages under s 272(1) of the ACL, unless the manufacturer has refused or failed to remedy the failure, or has failed to remedy the fault within a reasonable time. Thus, unless manufacturers provide an express warranty specifying that they will remedy a fault by repair or replacement of the goods, they could be obliged to pay monetary damages if a consumer guarantee of acceptable quality applies. 255 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.73].

[8.405]

8 Consumer Guarantees for Goods

433

The manufacturer’s express warranty against defects should state that it is in addition to the guarantee provided under the ACL, to avoid any suggestion that the manufacturer is trying to exclude the consumer guarantees contrary to s 64 of the ACL. Section 102(2) provides: (2) A person must not, in connection with the supply, in trade or commerce, of goods or services to a consumer: (a) give to the consumer a document that evidences a warranty against defects that does not comply with the requirements prescribed for the purposes of subsection (1); or (b) represent directly to the consumer that the goods or services are goods or services to which such a warranty against defects relates. A maximum pecuniary penalty payable for a contravention of this subsection is $50,000 for a body corporate, and $10,000 for an individual.

Section 192(1) of the ACL provides that a person commits an offence if they fail to comply with s 102(2) of the ACL. The maximum fine payable is the same as the civil penalties. The offence is one of strict liability. Section 102(1) of the ACL provides that the regulations may prescribe requirements relating to the form and content of warranties against defects. Suppliers and manufacturers often provide promises to consumers that goods or services will be free from defects for a certain period of time. Consumers may experience difficulties seeking to have suppliers or manufacturers fulfil such promises if they lack access to basic details, such as the name and address of the supplier. Regulation 90 of the Trade Practices (Australian Consumer Law) Amendment Regulations 2010 (No 1) prescribes certain requirements for warranties against defects. Regulation 90(1) provides: • a warranty against defects must be in a document that is transparent – ie, it is expressed in reasonably plain language, legible and presented clearly; • a warranty against defects must concisely state what the person who gives the warranty must do so the warranty may be honoured – eg, the supplier will repair the goods, or replace the goods within a certain time period; • a warranty against defects must concisely state what the consumer must do to entitle the consumer to claim the warranty – eg, contact the supplier or manufacturer and point to the defect; • a warranty against defects must include the statement prescribed in subreg 90(2) regarding consumer guarantees; • a warranty against defects must prominently state the name, business address, telephone number and email address (if any) of the person who gives the warranty; • a warranty against defects must state the period of the warranty; • a warranty against defects must set out the procedure for the consumer to claim the warranty, including the address to which claims may be sent; • a warranty against defects must state who will bear the expense of claiming the warranty; and

434

The Australian Consumer Law

[8.405]

• a warranty against defects must state that the benefits are in addition to other rights and remedies available to the consumer. Regulation 90(2) provides the text is: Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and for compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure.

The commencement date for reg 90 was 1 January 2012.

9

Consumer Guarantees for Services [9.05] INTRODUCTION ................................................................................................................ 435

[9.10] Services acquired as a consumer ..................................................................... 436 [9.15] PART I – SERVICES PROTECTED ................................................................................... 437

[9.20] Financial services ................................................................................................ 437 [9.25] Services of architects and engineers ................................................................ 437 [9.30] Transportation or storage services ................................................................... 437 [9.35] Contracts of insurance ....................................................................................... 438 [9.40] Building services ................................................................................................. 438 [9.50] Industry specific regulation .............................................................................. 440 [9.55] PART II – CONSUMER GUARANTEES; SUPPLIER SERVICES ................................ 440

[9.60] Guarantee of due care and skill ....................................................................... 440 [9.95] Guarantee as to fitness for a particular purpose or desired result ........... 446 [9.115] Guarantee as to reasonable time for supply ................................................ 449 [9.120] Offences relating to consumer transactions ................................................. 450 [9.125] Miscellaneous provisions ................................................................................. 450

INTRODUCTION [9.05] The history and background leading to the adoption of the consumer guarantees law in the ACL is explained in Chapter 8. The consumer guarantees law in the ACL employs some of the language of the repealed provisions in relation to statutory implied terms in consumer contracts with suppliers in Pt V Div 2 and Div 2A of the former TPA.1 Thus, the jurisprudence relating to these terms will also be relevant to the interpretation and understanding of the ACL where the same language is adopted in the ACL.2 In relation to the scope of the protection provided by the consumer guarantees themselves, Parliament only intended to repeat and clarify the previous law relating Pt V Div 2 and Div 2A of the TPA rather than to expand those provisions. For example, as regards the guarantee of due care and 1 For example, s 60 of the ACL imposes a statutory guarantee that services will be rendered with “due care and skill”. This mirrors the statutory implied warranty in s 74(1) of the TPA that services will be rendered with “due care and skill”. 2 See eg, Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [3.34] in relation to the meaning of “related bodies corporate”; [2.36] in relation to the meaning of “manufactured”; [2.52] in relation to the meaning of “acquisition”, “supply and re-supply”.

436

The Australian Consumer Law

[9.10]

skill that applies to services, the Second Explanatory Memorandum provides examples of the application of this guarantee. It refers to Mayne Nickless v Crawford,3 where a supplier installed a burglar alarm that was easily by-passed by burglars, and Dillon v Baltic Shipping Co,4 where personal luggage was lost in the course of negligent transportation by a cruise ship operator. Second Explanatory Memorandum states: Whilst the cases cited here were heard under the comparable implied warranty provision of the TPA, the intention is that the guarantee applies to such services in a similar way.5

Part 3-2, Div 1, subdiv B of the ACL imposes four consumer guarantees in relation to the supply of services: • s 60 – a guarantee that services will be rendered with due care and skill; • s 61(1) – a guarantee that services will be fit for a particular purpose made known to the supplier; • s 61(2) – a guarantee that services will achieve a result made known to the supplier or a person by whom any prior negotiations in relation to the acquisition of the services was conducted; • s 63 – a guarantee that the services will be completed in a reasonable time. These guarantees mirror the warranties that were implied into contracts for the supply of services by the repealed s 74 of the TPA. The consumer guarantees in relation to services arise independently of contract and it is not possible to exclude, restrict, or modify liability in relation to them. This chapter is divided into two parts. Part I – considers what services are protected by consumer guarantees; and, Part II – considers the guarantees that apply to services.

Services acquired as a consumer [9.10] A person is taken to have acquired services as a consumer if the amount paid or payable for the services did not exceed a prescribed amount (currently $40,000), or where the amount paid or payable exceeds the prescribed amount, they are of a kind ordinarily acquired for personal, domestic or household use or consumption. See [8.70]-[8.115]. There is no non-consumer use exception equivalent to ACL, s 3(2) in cases where a person acquires services, or holds himself or herself out as acquiring the services for re-supply. See [8.110]. The personal nature of many services means that they cannot be re-supplied. However, some electronic and telecommunications services are acquired by wholesalers for the purposes of re-supply to retailers.6 Where a wholesaler acquires such services for re-supply and the amount paid or payable does not exceed $40,000, the wholesaler will be taken to be a consumer. 3 Mayne Nickless v Crawford (1992) 59 SASR 490. 4 Dillon v Baltic Shipping Co (1989) 21 NSWLR 614. 5 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.59]. 6 See Pont Data Australia Pty Ltd v ASX Operations Pty Ltd (1990) 21 FCR 385.

[9.30]

9 Consumer Guarantees for Services

437

PART I – SERVICES PROTECTED [9.15] The term “services” is widely defined in s 2 of the ACL to include “any rights (including rights in relation to, and interests in, real or personal property), benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce” (see [8.120]). Services which are ordinarily acquired for personal, domestic or household use include home building and renovation services; electrical, plumbing, and house-painting services; motor vehicle repair services; a variety of personal services such as haircutting and dry cleaning; as well as professional services such as educational,7 legal, accounting and tax agent’s services. However, a number of services are excluded from this apparently broad coverage. Financial services [9.20] The ACL is intended to be a generic law which applies to all sectors of the economy; however, financial products and services are separately regulated under the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) and the Corporations Act 2001 (Cth). Section 131A of the CCA provides that despite s 131, the ACL as a law of the Commonwealth does not apply to the supply or possible supply of financial services, or of financial products. To this general exclusion there is one exception, namely, financial services or financial products known as “linked credit contracts” which are subject to the consumer guarantees regime under Pt 5-5 of the ACL. At the Commonwealth level there is only an implied warranty in relation to financial services (excluding insurance). Section 12ED of the ASIC Act implies warranties of due care and skill and fitness for purpose into contracts for the supply of financial services to a consumer in the course of a business.8

Services of architects and engineers [9.25] Section 61(4) of the ACL provides that the guarantee as to fitness for a particular purpose does not apply to the supply of professional services by a qualified architect or engineer. However, the guarantees of due care and skill9 and reasonable time for supply,10 apply equally to the supply of professional services by a qualified architect or engineer. Transportation or storage services [9.30] Section 63 of the ACL excludes services that are, or are to be supplied under a contract for or in relation to the transportation or storage of goods for the purpose of a business, trade or occupation carried on by the person for whom the 7 Corones, “Consumer Guarantees and Re-supply of Educational Services by Higher Education Providers” (2012) 35(1) University of NSW Law Journal 1. 8 There have been very few cases in which a party has sought to rely on a breach of these implied warranties. See, eg, St George Bank Ltd v Wright [2009] QSC 337 at [54]-[59] (McMurdo J); and Transmarket Trading Pty Ltd v Sydney Futures Exchange Ltd (2010) 188 FCR 1 at [113]-[116] (Perram J). 9 ACL, s 60. 10 ACL, s 62.

438

The Australian Consumer Law

[9.35]

goods are transported or stored. The repealed s 74(3)(a) of the TPA excluded services in relation to transportation or storage of goods for the purposes of a business, trade or occupation carried on by the person for whom the goods are transported or stored. Thus, for example, in Comalco Aluminium Ltd v Mogal Freight Services Pty Ltd,11 the applicant’s claim based on s 74 failed because the aluminium coils being transported were to be used in its business. In Wallis v DownardPickford,12 the appellant was a member of the Queensland Police Force who was transferred in the course of his employment from one station to another. In connection with this transfer, the Commissioner of Police entered into a contract with the respondent to transport the appellant’s personal goods to the new location. In the course of transit the goods were damaged due to the respondent’s failure to exercise due care and skill. A defence raised by the respondent was that the contract was of a kind that fell within the exception in s 74(3)(a). While Wallis carried on the occupation of a police officer, the actual transportation itself did not answer the description of being “for the purposes of purposes of a business, trade or occupation”. The purpose of the transportation was for the transport of private property, not for the transport of police property.

Contracts of insurance [9.35] Section 63 of the ACL excludes services that are, or are to be supplied under a contract of insurance. A contract of insurance is a financial product pursuant to s 12BAA(7)(d) of the ASIC Act, excluding health insurance provided as part of a health insurance business. It seems s 63 was inserted to cover those forms of insurance excluded from the definition of “financial product” in s 12BAA(7)(d) of the ASIC Act, and therefore not covered by the s 131A, CCA exclusion. Building services [9.40] Contracts for the supply of mixed goods and services are considered at [8.130]. A building contract for the construction of a domestic residence will be a contract for both the supply of goods and for the supply of services, so that both sets of guarantees will apply to the contract. The consumer will be able to bring an action against the builder if there is a failure to comply with any of the guarantees imposed by ss 60, 61 and 62 of the ACL in relation to the provision of building services. The contract will not be precluded from being a contract for the supply of services, even though the materials used in the building work involve the supply of goods. “Services” are defined in s 2(b)(i) of the ACL to include: “a contract for or in relation to the performance of work (including work of a professional nature), whether with or without the supply of goods”. Contracts for the supply of fixtures are considered at [8.145]. Section 8 of the ACL provides that chattels affixed to land or premises retain their character as “goods” for the purposes of the definition in s 2 of the ACL. The consumer guarantees in relation to goods will apply to chattels if the supply was “in trade or commerce” and the supply was to a “consumer”. 11 Comalco Aluminium Ltd v Mogal Freight Services Pty Ltd (1993) ATPR (Digest) ¶46-106. 12 Wallis v Downard-Pickford (1994) 179 CLR 388.

[9.45]

9 Consumer Guarantees for Services

439

Section 2 of the Consumer Guarantees Act 1993 (NZ) defines “service” in the same way as s 2 of the ACL. In Jackson v McClintock,13 a contract for the purchase of a partially completed home unit from the respondent vendor provided that the builder/vendor was to complete the construction of the property, driveways, paths, landscaping, and fencing. McClintock did not complete the work or failed to complete it to an appropriate trade standard. Laurenson J held that the contract in so far as it related to driveways, paths, landscaping, and fencing was for the supply of services. Residential dwelling

[9.45] A residential dwelling does not fall within the definition of “goods” (see [8.150] or within the definition of “services” in s 2 of the ACL, which includes “any rights (including rights in relation to, and interests in real or personal property)”. The focus of the definition of services in s 2 of the ACL is on “rights” and “interests” in real property, and not on the buildings affixed to the land. The consumer guarantees as to services would be confined to those rights and interests, and would not extend to any dwelling on the land. If a leasehold or freehold interest is supplied to a consumer, in trade or commerce, the consumer guarantees in relation to services will apply and cannot be excluded. For example, if a purchaser makes it known during pre-contractual negotiations that a particular freehold interest is being acquired for a particular purpose, such as grazing cattle, and there are restrictions imposed in relation to the interest in real property, for example, the property does not have water rights under the Water Acts or is subject to vegetation management restrictions, or an easement is necessary to obtain access to a major road, there will be a failure to comply with the ACL, s 61 guarantee of fitness for purpose in relation to the “rights” or “interests” acquired. Other State and Territory legislation provides for consumer protection in relation the sale and purchase of residential dwellings.14 The definition of services is confined in this narrower sense to rights or interests in real property. The ACL consumer guarantees are confined to defects such as encumbrances on the title, third party rights, or restrictions or limitations that affect the ability of the acquirer to use the interest acquired for some particular purpose made known expressly or by implication to the other party. However, the definition of “services” in s 2 of the ACL would include building services The protections afforded by the ACL consumer guarantees to domestic chattels (goods), and interests and rights in real property (services) will be in addition to any rights the purchaser may have for misleading conduct in breach of s 18 and/or s 30(1) of the ACL. 13 Jackson v McClintock (1997) 8 TCLR 161. 14 See the Domestic Building Contracts Acts of New South Wales, Victoria and Queensland which contain various requirements, obligations and warranties in connection with the sale of domestic buildings.

440

The Australian Consumer Law

[9.50]

Industry specific regulation [9.50] The ACL is intended to be a generic consumer law. However, it is recognised that industry-specific regulation may be necessary to deal with industry-specific problems. The Second Explanatory Memorandum states: Special policy considerations apply to supplies of gas, electricity and telecommunications. Since these goods and services are usually supplied via an interconnected system of wires or pipes, disruption to the supply can affect many consumers. These services are also crucial to many areas in human activity such that the consequential losses experienced by consumers can in some instances be substantial. Further, disruptions to the supply can be the result of factors beyond the control of the supplier.15

Gas and electricity are included in the definition of “goods” set out at [8.120]-[8.125]. Under the ACL, retailer electricity suppliers who contract with consumers are supplying goods and the consumer has a statutory guarantee that the electricity will be of acceptable quality. Consumers also have a statutory guarantee that line function services will be supplied with due care and skill. Section 65 of the ACL provides that the relevant Commonwealth Minister may provide by regulation that Div 1 of Pt 3-2 of the ACL does not apply to the supply of gas, electricity or a telecommunication service. However, the Trade Practices (Australian Consumer Law) Amendment Regulations 2010 (No 1) did not do so. There are other State and Territory laws providing for redress in relation to the supply of electricity and gas.16

PART II – CONSUMER GUARANTEES; SUPPLIER SERVICES [9.55] These consumer guarantees in relation to services overcome the perceived failures of the common law to provide adequate protection for consumers of services. First, it is possible to avoid liability under the law of contract by inserting a term excluding liability. Secondly, under the law of tort it is necessary to prove fault on the part of the supplier which can be a difficulty evidentiary matter for the consumer. The consumer guarantees in relation to services arise independently of contract and it is not possible to exclude, restrict, or modify liability in relation to them.

Guarantee of due care and skill [9.60] The scheme of ACL, Pt 3-2, Div 1, subdiv B mirrors Pt 3-2, Div 1, subdiv A: • s 60 deals with the general suitability of services; • s 61(1) deals with the suitability of services for a particular purpose for which the services are being acquired made known by the consumer to the supplier; 15 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.65]. 16 For example, in Victoria see Electricity Industry Act 2000 (Vic), ss 35, 36, 39; Gas Industry Act 2001 (Vic), ss 42, 43, 46; and the Energy Retail Code.

[9.65]

9 Consumer Guarantees for Services

441

• s 61(2) deals with the suitability of services, where the consumer makes known to the supplier, or a person by whom any prior negotiations or arrangements in relation to the acquisition of the services were conducted or made, the result the consumer wishes the services to achieve; and • s 62 deals with the supply of services within a reasonable time if the time of supply is not fixed by contract. Due care and skill: TPA, s 74(1)

[9.65] The Joint Communiqué issued by the Ministerial Council on Consumer Affairs (MCCA) when it met in Perth on 4 December 2009 stated that the single national law guaranteeing consumer rights in relation to their acquisition of goods and services would be based on the existing implied conditions and warranties in the TPA.17 The repealed s 74(1) of the TPA provided: In every contract for the supply by a corporation in the course of a business of services to a consumer there is an implied warranty that the services will be rendered with due care and skill and that any materials supplied in connection with those services will be reasonably fit for the purpose for which they are supplied.

The term “due care” in the repealed s 74(1) of the TPA was construed to mean that the services must be of a standard and quality that could reasonably be expected from a competent person in the particular trade or profession, and that the warranty would be breached if work was carried out in a careless and unskilful manner. The implication of a warranty by s 74(1) was a question of fact to be determined by the courts after an examination of what was said or done in relation to the supply of those services. A breach of the term implied by s 74(1) could occur without any negligence on the part of the defendant. For example, in Gharibian v Propix Pty Ltd t/as Jamberoo Recreational Park,18 the appellant was injured when using a toboggan run at the respondent’s recreational park. Using a toboggan when the tracks upon which it ran were wet was dangerous as the toboggan’s brakes would then have no traction and be unable to slow or stop it. For this reason, the respondent had a system in place to prevent their use during rain. When the appellant visited the park there were signs warning that the toboggan run would be closed when wet and customers were warned, verbally, that should it start raining they should stop the toboggan within 10 seconds and get off the track. When the appellant commenced her toboggan run it was cloudy but not raining. However, during her run, a sudden heavy shower occurred and she was unable to stop the toboggan from which she was then thrown and injured. The appellant claimed damages relying on a breach of the warranty implied by s 74(1) of the TPA and the tort of negligence. The primary judge concluded that the toboggan and the track were fit for the purpose for which they were supplied 17 See The MCCA Joint Communiqué (2009), p 4 at http://www.consumerlaw.gov.au/files/2015/09/ Meeting_22_4_Dec_09.pdf. 18 Gharibian v Propix Pty Ltd t/as Jamberoo Recreational Park [2007] NSWCA 151 (New South Wales Court of Appeal).

442

The Australian Consumer Law

[9.65]

The New South Wales Court of Appeal held that by s 74(1) of the TPA the respondent impliedly warranted that any materials supplied by it in connection with the recreational services would be reasonably fit for the purpose for which they were supplied. The materials supplied were the toboggan and the toboggan run, and the purpose for which they were supplied was to enable customers to undertake the toboggan run safely. Ipp JA (with whom Mason P and Tobias JA agreed) concluded: In my opinion, recreational equipment, intended for general use by the public, should not depend for its safeness on the ability of members of the public to react, as soon as they detect rain, by operating a brake within a few seconds. As I have mentioned, regard must be had to the fact that a number of potential users may be inexperienced, react slowly, and panic.19

The duty imposed by s 74(1) was similar to the common law duty of care and skill in negligence cases as expressed by the High Court in Rogers v Whitaker.20 The scope of the duty of care at common law is objective and based on what is expected of the “reasonable” person or service provider. The care and skill required of a professional will be objectively assessed by the standards and procedures adopted in the relevant field. In the case of a medical practitioner it extends to “the examination, diagnosis and treatment of the patient and the provision of information in an appropriate case…”.21 For a professional who is held out as being a specialist in a particular field, the standard will be pitched at a higher level. The specialist will be required to attain the ordinary level of skill, competence and diligence of those who specialise in the same field.22 There is also an implied term by operation of law in a contract for the supply of services that the supplier will exercise reasonable care and skill in the provision of those services.23 In Read v Nerey Nominees Pty Ltd,24 in a case involving a contract for repairs to a motor vehicle which had been extensively damaged in a road accident, it was alleged that there was a warranty that the repairs would be rendered with due care and skill, and that this warranty was implied by s 74(1) of the TPA. Marks J held that that s 74 of the applied to the repair contract.25 Marks J also held that the common law implied into the repair contract a term that “the repairs would be carried out in a workmanlike manner and with reasonable skill and ability”.26 It was found that a breach of that implied warranty under s 74 of the might be constituted by a failure to diagnose correctly the fault in the safety system, or because of careless and unskilful work, namely incorrect wiring. 19 Gharibian v Propix Pty Ltd t/as Jamberoo Recreational Park [2007] NSWCA 151 at [57]. 20 Rogers v Whitaker (1992) 175 CLR 479 (Mason CJ, Brennan, Dawson, Toohey and McHugh JJ). 21 Rogers v Whitaker (1992) 175 CLR 479 at 483, 484. 22 Rogers v Whitaker (1992) 175 CLR 479 at 487. 23 Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095 at 1100 (Lord Denning); Voli v Inglewood Shire Council (1963) 110 CLR 74 at 85. Applied in Council of the Shire of Noosa v Farr [2001] QSC 060 at [61]-[62] (Chesterman J). See also Kovacevic v Holland Park Holdings Pty Ltd [2010] QDC 279 (15 July 2010) at [31] (McGill J). 24 Read v Nerey Nominees Pty Ltd [1979] VR 47. 25 Read v Nerey Nominees Pty Ltd [1979] VR 47 at 48. 26 Read v Nerey Nominees Pty Ltd [1979] VR 47 at 49.

[9.75]

9 Consumer Guarantees for Services

443

In Kovacevic v Holland Park Holdings Pty Ltd,27 the plaintiff fractured her ankle when she slipped as a result of perspiration of the persons taking part in the exercise class falling on the floor. McGill DCJ held that “it was negligent to cause or permit an exercise class to be conducted … without taking precautions to prevent contamination of the floor from perspiration prior to the commencement of that particular form of exercise”.28 McGill DCJ also held that there was an implied warranty pursuant to s 74(1) of the TPA, and that the services were not rendered with due care and skill: it seems to me that there was a failure to recognise and make proper allowance for the hazards associated with slipping when exercising on a wooden floor in this particular way and as vigorously as was required by this particular exercise programme, and hence a breach of this warranty.29

NZ and UK provisions

[9.70] While the guarantee of acceptable quality in relation to goods is the same as that adopted in the NZ CGA, the wording of the guarantee in ACL, s 60 differs from its New Zealand counterpart. Section 28 of the NZ CGA imposes a guarantee of “reasonable care and skill” in relation to services supplied to a consumer. The intention of the New Zealand Parliament was not to change the common law standard for negligence.30 For reasons of clarity and consistency it was decided to follow s 13 of the Supply of Goods and Services Act 1982 (UK).31 However, the NZ CGA goes further than the common law by providing a system of redress. Hawes summarises the position under the NZ CGA: The requirement of reasonable care and skill in s 28 is the same as that found in s 13 of the Supply of Goods and Services Act 1982 (UK), of which has been said that the standard required would appear to be that which the common law demanded, and the statute codified the existing law. The case law indicates that the supplier must exercise the ordinary skill of an ordinary competent person exercising the particular art, the standard being an objective one.32

Due care and skill: s 60, ACL

[9.75] Section 60 of the ACL provides: If a person supplies, in trade or commerce, services to a consumer, there is a guarantee that services will be rendered with due care and skill.

There is no definition of “due care and skill” in the ACL. 27 Kovacevic v Holland Park Holdings Pty Ltd [2010] QDC 279 (15 July 2010). 28 Kovacevic v Holland Park Holdings Pty Ltd [2010] QDC 279 at [21]. 29 Kovacevic v Holland Park Holdings Pty Ltd [2010] QDC 279 at [41]. 30 Report of the Department of Justice on the Consumer Guarantees Bill (1992), Pt II. 31 Section 13 provides: In a contract for the supply of a service where the supplier is acting in the course of a business there is an implied term that the supplier will carry out the service with reasonable care and skill. 32 See Borrrowdale (ed), Butterworths Commercial Law in New Zealand (4th ed, Butterworths, 2000), (ch 18 by Cynthia Hawes), at [18.3.1].

444

The Australian Consumer Law

[9.80]

According to the Second Explanatory Memorandum, two requirements must be met: • first, the provider of the service must have “an acceptable level of skill” in the area of activity covered by the service; and • secondly, the provider must exercise due care in supplying the service.33 It is submitted that the test to be applied in relation to s 60 of the ACL is the same test that applied in relation to s 74(1) of the TPA. The test is an objective one for the court or tribunal which must decide what standard and quality could reasonably be expected from a competent person in the particular trade or profession, and there will be a failure to comply with the guarantee if the work was carried out in a careless and unskilful manner. First requirement: an acceptable level of skill

[9.80] Under the first requirement, the consumer would be able to cancel the contract, even before any work was performed if the consumer discovered that the supplier was not properly qualified before the services are supplied. It seems that an acceptable level of skill is the level of skill necessary to complete the contract in an acceptable way. It will be necessary to have regard to the nature of the services, the cost of the services (if relevant), any statements made about the services, any representations made about the services by the provider and other relevant circumstances. For example, if a supplier informs a consumer about his or her lack of skill to perform a particular task and the consumer decides to contract on that basis, what is an acceptable level of skill may be lower than would otherwise be the case. On the other hand, if a supplier holds himself or herself out as having specialist skills and expertise, what is an acceptable level of skill would be higher than in normal circumstances. In Cheryl Foster v Mahamudur Rahman t/as Smarty Web Solutions,34 the applicant engaged the respondent to produce an interactive e-commerce site with limited functionality to enable users to sell their handmade items and receive a commission on their sales. The contract stipulated that the website would be developed within 42 days. In fact, it took 225 days to develop. When completed the site was workable but it did not include a number of the functions that had been agreed in the original contract. The respondent admitted that the website was difficult to create and “new” to him. The Tribunal member held that he failed to comply with the guarantee of providing due skill to the services: I am satisfied that he applied what care he could to making good his obligations once he became aware of the level of difficulty. However, he did not have the requisite skill to

33 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.59]. 34 Cheryl Foster v Mahamudur Rahman t/as Smarty Web Solutions [2014] NSWCATCD 17.

[9.85]

9 Consumer Guarantees for Services

445

develop the site for which he quoted. He was making amendments as the project progressed due to the lack of such skill. He charged extra for items clearly envisaged in the original agreement.35

Second requirement: due care

[9.85] No guidance is provided as to what the standard, “due care”, means. The Macquarie Dictionary defines “due” in this context to mean “rightful, proper, adequate”.36 Thus, it does not impose strict liability. Under strict liability, suppliers of services would be responsible for any loss or damage arising from the provision of services whether it was caused by a failure to exercise proper or adequate care or not. The term “due care” was used in the implied warranty provision in the repealed s 74(1) of the TPA. In that context it was construed to mean that the services be carried out in a workmanlike manner and that the warranty would be breached if work was carried out in a careless and unskilful manner. The Second Explanatory Memorandum provides as an example of the application of the guarantee of due care and skill a fact scenario in which a supplier installs a burglar alarm that is easily bypassed by burglars.37 This is taken from Mayne Nickless Ltd v Crawford,38 In that case the appellant installed an intruder alarm system in the respondent’s shop. The alarm system failed to work during a burglary because the wiring between the system’s control box and the Telecom cord was severed. A large quantity of the respondent’s stock was stolen. The respondent sued the appellant for breach of warranty implied by s 74 of the TPA. Bollen J of the Supreme Court of South Australia held that s 74 applied. The appellant appealed to the Full Court. Mohr J (who gave the principal judgment) stated: There remains the question that this installation was covered by s 74(1) and/or (2). There can be no doubt that the respondent wished to make her premises more secure … What she bargained for was an alarm system which would operate both on the premises by the sounding of the siren and by automatically telephoning the appellant’s control room so that a wider alarm could be raised both to the police and the appellant’s own patrols if appropriate. From the passage of her evidence set out earlier she quite clearly saw what she regarded as a potential weakness in the system and that was that if the telephone line was cut there would be no notification to the control room. On this the appellant was reassured by Mr Rooney when he told her “Don’t worry about that. There is a battery back-up, the alarm will still go off. If anyone tampers with the alarm it will still activate in the control room.” As events turned out this was not so. The telephone line was severed and the system did not automatically dial the control room. Thus the very purpose that the respondent wished to achieve was made known to the appellant and in my opinion this brings the matter squarely within the terms of s 74 of the TPA.39 35 Cheryl Foster v Mahamudur Rahman t/as Smarty Web Solutions [2014] NSWCATCD 17 at [45]. 36 Macquarie Dictionary (4th ed., Macquarie University, Sydney, 2005), 440. 37 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.59]. 38 Mayne Nickless Ltd v Crawford [1992] ASC 56-188. 39 Mayne Nickless Ltd v Crawford [1992] ASC 56-188 at 57,915.

446

The Australian Consumer Law

[9.90]

Due care: motor vehicle repair services

[9.90] In assessing whether mechanical work is inadequate or defective, an important consideration will be establishing the scope of work to be performed. In TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic,40 the applicant operated a transport business and made use of a Nissan truck as part of that business. The respondent was a motor vehicle repairer. The applicant’s truck broke down twice in 2013 and each time it was repaired by the respondent. The first breakdown was caused by the failure of the turbo. The cause of the second failure was the failure of the camshaft. The camshaft and bearings were old and worn and had undergone 450,000 kms of use. The applicant alleged that the second breakdown was the result of the failure to remove and replace the camshaft at the time of the first repair. The applicant alleged that respondent should have inspected the camshaft and bearings at the time of the first repair of the turbo. The Tribunal member stated: The respondent is a licenced repairer, therefore is deemed to have and be capable of exercising the requisite skills.41

The Tribunal found that the respondent’s failure to inspect and replace the camshaft and bearings in the first repairs constituted acting without due care and skill.42 The scope of the work for which the respondent was engaged was influential in determining whether the repairs were carried out with due care and skill. The respondent asserted a narrow scope of work (limited to get the truck working). The applicant asserted a broader scope of work (assessing the problem and undertaking repairs). The Tribunal accepted the applicant’s submissions on this point: its mechanical ignorance precluded it issuing explicit instructions regarding the exact parts to be replaced or checked. This is a common situation faced by mechanics and repairers, and is no excuse for not performing work in a thorough and timely manner. Moreover, the respondent should have addressed any uncertainty by clarifying the scope of work to be undertaken…43

Guarantee as to fitness for a particular purpose or desired result [9.95] The guarantees imposed by s 61 of the ACL are expressed in similar terms to the warranties implied by the repealed s 74(2) of the TPA; however, the reference to materials in s 74(2) is replaced by “product” in s 61(1) of the ACL. Section 61(1) provides: If: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and 40 TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147. 41 TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147 at [109]. 42 TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147 at [126]. 43 TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147 at [120].

[9.100]

9 Consumer Guarantees for Services

447

(b) the consumer, expressly or by implication, makes known to the supplier any particular purpose for which the services are being acquired by the consumer there is a guarantee that the services, and any product resulting from the services, will be reasonably fit for that purpose.

Section 61(2) provides: If: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and (b) the consumer makes known, expressly or by implication, to (i) the supplier; or (ii) a person by whom any prior negotiations or arrangements in relation to the acquisition of the services were conducted or made; the result that the consumer wishes the services to achieve; there is a guarantee that the services, and any product resulting from the services, will be of such a nature, and quality, state or condition, that they might reasonably be expected to achieve that result.

The guarantees in s 61(1) and (2) are not expressed in absolute terms. Whether the services or the finished product might reasonably be expected to achieve that result is a question of fact.44 The courts are likely to apply a common sense approach in determining what was the particular purpose made known or the result the consumer desires the service to achieve. Furthermore, s 61(1) and (2) only require the services to be reasonably fit for that purpose, or of such a nature and quality that they might reasonably be expected to achieve that result. Section 61(3) provides that the guarantees in s 61(1) and (2) do not apply “if the circumstances show that the consumer did not rely on, or that it was unreasonable for the consumer to rely on the skill or judgment of the supplier”. Section 61(4) of the ACL provides that the guarantee as to fitness for a particular purpose does not apply to the supply of professional services by a qualified architect or engineer. Fitness for a particular purpose: TPA, s 74(2)

[9.100]

The repealed s 74(2) of the TPA provided:

Where a corporation supplies services (other than services of a professional nature provided by a qualified architect or engineer) to a consumer in the course of a business and the consumer, expressly or by implication, makes known to the corporation any particular purpose for which the services are required or the result he desires the services to achieve, there is an implied warranty that the services supplied under the contract for the supply of the services and any materials supplied in connection with those services will be reasonably fit for that purpose or are of such a nature and quality that they might reasonably be expected to achieve that result, except where the circumstances show that the consumer does not rely, or that it is unreasonable for him to rely, on the corporation’s skill or judgment.

Section 74(2) was based on the warranty of fitness for purpose that is implied by the common law in contracts for the sale of goods, and in contracts for the supply 44 See Warnock v Australian and New Zealand Banking Group Ltd (1989) ATPR ¶40-928.

448

The Australian Consumer Law

[9.105]

of work and materials, including those provided by professionals.45 Section 74(2) was not expressed in absolute terms; the statutory warranty implied is that the services would be reasonably fit for that purpose. The implication of a warranty by s 74(2) was a question of fact to be determined by the courts after an examination of what was said or done in relation to the supply of those services. A breach of the term implied by s 74(2) could occur without any negligence on the part of the defendant. Section 74(2) did not imply any warranty where it was unreasonable for the consumer to rely on the corporation’s skill or judgment. Making known the purpose

[9.105]

In TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic46 (considered at [9.90]), the applicant operated a transport business and made use of a Nissan truck as part of that business. The first and second repairs each took two months to complete. The Tribunal found that the applicant had expressly made known the particular purpose for which the services were being acquired, namely to have repaired the truck so that it was fit to be driven and conduct a transportation business.47 Given that both repairs were inadequate or defective there was a failure to comply with the guarantee in ACL, s 61(1).48 In Ueda v Ecruising Pty Ltd and Southern Cross Safaris Australia Pty Ltd,49 the first respondent was a tour company which produced a brochure which advertised the “The Migration Tour” as an “unparalleled once in a lifetime experience” to see the wildebeest migration in Africa’s Maasai Mara National Park and the Serengeti National Park. In small print at the bottom of the page was a paragraph that stated: “Commencement of the gathering of the animals before the migration is subject to weather conditions”. The applicants’ tour took place in April, which was the wettest month of the year in Tanzania which made the roads hazardous, and the country was plagued with insects. The respondent failed to warn the applicants of this. Parts of the itinerary did not eventuate. In particular, the tour party did not see vast herds of animals in the Maasai Mara or the Serengeti. The preponderance of evidence was that vast herds were never likely to be seen at that time of year. The Tribunal held the purpose of witnessing the mass migration was not made known to the respondent by the applicants, either expressly or by implication: They simply came to their own understanding as to what the tour would involve from the e-mail of 12 January, and the brochure. They did not communicate their desire to see, for instance, “The Migration” to the first respondent. Therefore that particular section does not come into play, and no adverse findings are made under that section.50

The statutory causes of action for failure to comply with the consumer guarantees as to services are in addition to the other rights and remedies the consumer may 45 See Samuels v Davis (1943) 1 KB 526 at 527. 46 TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147. 47 TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147 at [144]. 48 TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147 at [145]. 49 Ueda v Ecruising Pty Ltd and Southern Cross Safaris Australia Pty Ltd [2014] NSWCATCD 30. 50 Ueda v Ecruising Pty Ltd and Southern Cross Safaris Australia Pty Ltd [2014] NSWCATCD 30 at [158].

[9.115]

9 Consumer Guarantees for Services

449

have, so there is scope for overlap, where, for example, the supplier engages in misleading conduct with respect to the attributes of services supplied contrary to ss 18, 29(1)(m) and 34 of the ACL. The Tribunal found that the respondent made representations that induced the applicants into believing that they would see the migration and that these representations were misleading in contravention of s 18 of the ACL.51 Will the desired result be achieved?

[9.110]

Whether the services might reasonably be expected to achieve that result for the purposes of s 61(2) of the ACL is a question of fact. Suppliers of services must be careful not to lead consumers to believe a particular result is achievable when they ought to know that such a result is unlikely. The difference between the guarantees provided by ss 60 and 61 can be explained by reference to an example. Suppose a consumer takes her car, which has been damaged in a hailstorm, to be repaired by a car body works and spray painter. After the work is completed, the dents in the bodywork are still visible. The consumer may not have a remedy against the car body works for failure to comply with the guarantee of due care and skill in s 60 of the ACL. However, if she asked the car body works to restore the car to its original condition, she may have a remedy for failure to comply with the guarantee imposed by s 61(2) of the ACL.

Guarantee as to reasonable time for supply [9.115]

Contracts for the supply of services generally stipulate the time for providing the service. Section 62 imposes a guarantee as to the time of completion. It provides: If: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and (b) the time within which the services are to be supplied: (i) is not fixed by the contract for the supply of the services; or (ii) is not to be determined in a manner agreed to by the consumer and supplier; there is a guarantee that the services will be supplied within a reasonable time.

The Second Explanatory Memorandum states: The time period that is reasonable will vary significantly depending on the nature of the services to be provided. The reasonable time to build a house will obviously be much longer than what is reasonable for providing a tree-lopping service. Accordingly, it is not possible to set out in the ACL what is reasonable and the courts and tribunals will need to consider all the circumstances that apply to a particular case to determine the time period that is reasonable.52

In TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic53 (considered at [9.90]), the time taken to effect the first repairs (approximately two 51 Ueda v Ecruising Pty Ltd and Southern Cross Safaris Australia Pty Ltd [2014] NSWCATCD 30 at [152]. 52 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.64]. 53 TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147.

450

The Australian Consumer Law

[9.120]

months) far exceeded the original estimate (two weeks). The Tribunal found that there was a failure to comply with the guarantee in s 62 of the ACL: the respondent delayed to commence work on the truck for a week after receiving the parts, and then took a further seven business days to address the problems. Given the amount of time which had already been lost, and the applicant’s pressing need to recover the vehicle – a fact known to the respondent – it seems unreasonable for the respondent to have delayed to commence work for this amount of time. This is particularly so as the respondent knew the date on which the parts would arrive by, and so could have scheduled the truck repairs to occur accordingly.54

Offences relating to consumer transactions Consumer guarantees

[9.120]

Section 169 of the ACL makes it a criminal offence not to display a notice that complies with a determination by the Commonwealth Minister pursuant to s 66 of the ACL regarding specified information that must be provided to consumers at the point of sale relating to the consumer’s right under the consumer guarantees regime. Section 169 provides: (1) A person commits an offence if: (a) the person makes a supply to a consumer to which: (i) guarantees apply under Division 1 of Part 3-2; and (ii) a determination under subsection 66(1) applies; and (b) a notice that meets the requirements of the determination is not, in accordance with the determination: (i) if the consumer takes delivery of the goods or services at the supplier’s premises – displayed at those premises; or (ii) otherwise – drawn to the consumer’s attention before the consumer agrees to the supply of the goods.

The maximum fine payable for a contravention of them is $50,000 for a body corporate and $10,000 for any other person. The offences are ones of strict liability so that it is not necessary to consider the intent of the person committing the offence.

Miscellaneous provisions Proof of transaction

[9.125]

Section 100(1) of the ACL imposes a mandatory requirement on suppliers of goods and services to consumers, where the total price (excluding GST) is $75, to provide a “proof of transaction”: (1) If: (a) a person (the supplier), in trade or commerce, supplies goods or services to a consumer; and

54 TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147 at [164].

[9.130]

9 Consumer Guarantees for Services

451

(b) the total price (excluding GST) of the goods or services is $75 or more; the supplier must give the consumer a proof of transaction as soon as practicable after the goods or services are so supplied. (2) If: (a) a person (the supplier), in trade or commerce, supplies goods or services to a consumer; and (b) the total price (excluding GST) of the goods or services is less than $75; the consumer may request a proof of transaction from the supplier as soon as practicable after the goods or services are so supplied. (3) If a request is made under subsection (2), the supplier must give the proof of transaction within 7 days after the request is made.

A “proof of transaction” is defined in s 100(4): (4) A proof of transaction for a supply of goods or services to a consumer is a document that: (a) identifies the supplier of the goods or services; and (b) if the supplier has an ABN – states the supplier’s ABN; and (c) if the supplier does not have an ABN but has an can – states the supplier’s ACN; and (d) states the date of the supply; and (e) states the goods or services supplied to the consumer; and (f) states the price of the goods or services.

The following examples provided of a proof of transaction: (a) a tax invoice within the meaning of the A New Tax System (Goods and Services Tax) Act 1999 (Cth); (b) a cash register receipt; (c) a credit card or debit card statement; (d) a handwritten receipt; (e) a lay-by agreement; (f) a confirmation or receipt number provided for a telephone or internet transaction. This provision is similar to s 161A of the repealed Fair Trading Act 1999 (Vic), which imposed an obligation on business to provide a “proof of transaction” for purchases of more than $50, and the right for a consumer to request this proof if the transaction was valued at $50 or less. Its inclusion in the ACL was agreed by the MCCA on 4 December 2009. Enforcement powers and remedies

[9.130]

A person contravening s 100(1) or (3) of the ACL is liable to pay a civil pecuniary penalty of up to: • $15,000 for a body corporate; • $3,000 for other persons. The following enforcement powers and remedies apply in relation to a contravention of s 100(1) or (3) of the ACL:

452

The Australian Consumer Law

[9.135]

• undertakings;55 • substantiation notices;56 • public warning notices;57 • infringement notices;58 • injunctions;59 • damages;60 • compensatory orders;61 • orders for non-party consumers;62 • non-punitive orders;63 • adverse publicity orders;64 and • orders disqualifying a person from managing corporations.65 No criminal liability attaches to a contravention of s 100(1) or (3) of the ACL. Itemised bills for consumer services

[9.135]

Section 101 of the ACL provides that a consumer is entitled to ask for an itemised bill from a supplier of consumer services. An itemised bill may assist in resolving disputes since it ensures that suppliers are required to stipulate precisely what has been provided, and how the price for the services was arrived at. The consumer has a written record which can be relied upon as evidence in the event of a dispute. The itemised bill must provide certain minimum information specified in s 101(1) which provides: (1) If a person (the supplier), in trade or commerce, supplies services to a consumer, the consumer may request that the supplier give the consumer an itemised bill that: (a) specifies how the price of the services was calculated; and (b) includes, if applicable, the number of hours of labour that related to the supply of the services and the hourly rate for that labour; and (c) includes, if applicable, a list of the materials used to supply the services and the amount charged for those materials.

55 ACL, s 218. 56 ACL, s 219. 57 ACL, s 223. 58 ACL, s 134A. 59 ACL, s 232. 60 ACL, s 236. 61 ACL, s 237. 62 ACL, s 239. 63 ACL, s 246. 64 ACL, s 247. 65 ACL, s 248.

[9.135]

9 Consumer Guarantees for Services

453

A request for an itemised bill must be made within 30 days after the consumer receives a bill or account from the supplier,66 and the supplier must provide the itemised bill within seven days after the request is made.67 The supplier must not charge the consumer for the itemised bill.68

66 ACL, s 101(2). 67 ACL, s 101(3). 68 ACL, s 101(4).

10

Consumer Agreements [10.05] INTRODUCTION .............................................................................................................. 455 [10.10] PART I: UNSOLICITED CONSUMER AGREEMENTS .............................................. 457

[10.10] Definition ............................................................................................................ 457 [10.15] Exemptions ......................................................................................................... 460 [10.45] Express dealer obligations imposed .............................................................. 462 [10.55] Express consumer rights and obligations ..................................................... 466 [10.80] Post-contractual behaviour .............................................................................. 466 [10.85] Regulations ......................................................................................................... 467 [10.100] PART II: LAY-BY AGREEMENTS ................................................................................. 471

[10.100] Introduction ..................................................................................................... 471 [10.105] Definition .......................................................................................................... 472 [10.110] Termination by consumer .............................................................................. 473 [10.115] Termination by supplier ................................................................................. 473 [10.120] Effect of termination ....................................................................................... 474 [10.125] Enforcement powers and remedies ............................................................. 474 [10.130] Offences relating to lay-by transactions ...................................................... 475 [10.135] Defences ............................................................................................................ 475

INTRODUCTION [10.05]

Part 3-2, Div 2 of the ACL creates specific protections that apply to unsolicited consumer agreements. Unsolicited sales, sometimes referred to as “door-to-door sales”, were previously regulated by State and Territory legislation.1 The underlying policy rationale for such regulation is that high pressure sales techniques play on human weaknesses and that consumers may suffer detriment if they are not given an opportunity for rational re-consideration. On 4 December 2009, the Ministerial Council on Consumer Affairs (MCCA) agreed to include a single national law covering unsolicited sales practices in the ACL to replace the State and Territory regulatory regimes. These rules impose disclosure requirements and grant termination rights that apply that apply when a person sells goods or services to a consumer outside the usual retail environment. It was also agreed at the MCCA meeting on 4 December 2009 to regulate lay-by agreements as part of the ACL. 1 Fair Trading Act 1987 (NSW), Pt 4, Div 3; Fair Trading Act 1999 (Vic), Pt 4, Div 2; Fair Trading Act 1989 (Qld), Pt 3, Div 4; Fair Trading Act 1987 (SA), Pt III; Fair Trading Act 1990 (Tas); Door to Door Trading Act 1987 (WA); Door-to-Door Trading Act 1991 (ACT); Consumer Affairs and Fair Trading Act (NT), Pt III.

456

The Australian Consumer Law

[10.05]

According to the Regulatory Impact Statement (RIS) prepared by the MCCA and set out in the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010: The objective of regulation in this area is to promote the operation of fair and efficient markets by providing appropriate consumer protection in situations where the consumer is subject to an added vulnerability or disadvantage due to the nature of the sales process. This is achieved by giving consumers additional rights and protections that are not available in other retail contexts and providing specific obligations for businesses engaged in these sales practices. This may be warranted where aggressive selling techniques (such as high pressure sales) are employed in a non-retail environment, especially where consumers do not have the option of walking away from the situation, such as in their own home, and may feel threatened to agree to an offer simply to put the situation at an end, or where it is unclear that they are entering into a contract, as can occur over the phone.2

Part 3-2, Div 2 of the ACL regulates unsolicited sales practices and lay-by agreements. The unsolicited sales practices regulations are premised on the view that consumers are more vulnerable when confronted by sales representatives who door-knock households to sell products or services, or phone households to sell products or services, leading the consumer to make purchases that, in a cooler or more rational state, they would not make. Mandating a cooling-off period gives consumers an opportunity for rational re-consideration to overcome the influence of making an impulsive choice. However, while the ACL regulates unsolicited sales and makes provision for the manner in which consumers may be approached, including disclosure obligations and mandating express consumer rights such as cooling-off periods, these provisions do not apply to in-home sales where the consumer invites the sales person into their home. The lay-by sales regulations are premised on the view that sellers may try to make the purchases less “painful” by allowing consumers to spread the payment into the future through lay-by schemes and thereby avoid the emotionally unpleasant experience of having to pay in full at the time of purchase. Consumers may suffer detriment if they are induced to acquire goods or services they cannot afford, and should not be penalised if they terminate a lay-by agreement. The evidence of consumer detriment that results from unsolicited selling practices is considered in the RIS.3 On 17 August 2012, the ACCC released a comprehensive research report into the door-to-door sales industry in Australia, which provides further evidence of significant consumer detriment arising from unsolicited selling practices.4 In 2011 the ACCC took action against Advanced Lifestyle International Retail Pty Ltd (which sold vibrating massage therapy products) and one of its former sales 2 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, Regulatory Impact Statement, at [23.52]. 3 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, Regulatory Impact Statement, at [23.60]-[23.68]. 4 Research into the Door-to-Door Sales Industry in Australia, Report by Frost & Sullivan for the ACCC (August 2012), at http://www.accc.gov.au/system/files/Research%20into%20the%20door%20to %20door%20sales%20industry%20in%20Australia%20August%202012.pdf.

[10.10]

10 Consumer Agreements

457

agents. The company was issued with three infringement notices totalling $19,800 and the company and one of its sales agents provided court-enforceable undertakings for making false or misleading representations to consumers during in-home sales presentations.5 On 17 August 2012, the ACCC released a comprehensive research report into the door-to-door sales industry in Australia.6 The Report revealed: The scale and scope of the door to door sales industry in Australia – In 2011 over 1.3 million sales were conducted through this sales channel and of these, approximately 1 million sales related to energy services. On average every home in Australia is door knocked eight times a year. Industry structure– companies usually engage third party sales agents to deliver door to door sales services, with remuneration typically based on commission. This model may encourage agents to adopt tactics that are not fully compliant in order to secure more sales. Non-compliance – some research participants reported preying on vulnerable “easy targets”, using false pretexts to hook consumers in such as pretending to have lost their dog, or failing to provide consumers with certain information as required by under the Australian Consumer Law.7

On 27 September 2012, the Federal Court ordered Neighbourhood Energy Pty Ld and Australian Green Credits Pty Ltd to pay a total of $1 million for door-to-door selling practices that contravened ss 74 and 75 of the ACL.8 This chapter is divided into two parts: • Part I considers the protections in the ACL relating to unsolicited consumer agreements; and • Part II considers the protections in the ACL relating to lay-by agreements

PART 1: UNSOLICITED CONSUMER AGREEMENTS Definition [10.10]

The term “unsolicited consumer agreement” is defined in s 69(1), which

provides: (1) An agreement is an unsolicited consumer agreement if: (a) it is for the supply, in trade or commerce, of goods or services to a consumer; and (b) it is made as a result of negotiations between a dealer and the consumer: 5 See ACCC News Release No 159/11, “Door to Door Seller Admits Misleading Conduct”, available at http://www.accc.gov.au/content/index.phtml/itemId/1005664/fromItemId/966100. 6 Research into the Door-to-Door Sales Industry in Australia, Report by Frost & Sullivan for the ACCC (August 2012), at http://www.accc.gov.au/system/files/Research%20into% 20the%20door%20to%20door%20sales%20industry%20in%20Australia%20August%202012.pdf. 7 See ACCC publication, Knock! Knock! Who’s There? Door to door sales, at http://www.accc.gov.au/ content/index.phtml/itemId/1070506/fromItemId/815215/fromAll. 8 See ACCC v Neighbourhood Energy Pty Ltd, Unpublished Orders by consent No (P) VID268/2012 dated 27 September 2012 (Marshall J).

458

The Australian Consumer Law

[10.10]

(i) in each other’s presence at a place other than the business or trade premises of the supplier of the goods or services; or (ii) by telephone; whether or not they are the only negotiations that precede the making of the agreement; and (c) the consumer did not invite the dealer to come to that place, or to make a telephone call, for the purposes of entering into negotiations relating to the supply of those goods or services (whether or not the consumer made such an invitation in relation to a different supply); and (d) the total price paid or payable by the consumer under the agreement: (i) is not ascertainable at the time the agreement is made; or (ii) if it is ascertainable at that time – is more than $100 or such other amount prescribed by the regulations. It contains four elements. First, the agreement must in trade or commerce, for the supply of goods or services to a consumer.9 Secondly, the agreement must be made as a result of negotiations between “a dealer” and the consumer, either: • in each other’s presence at a place other than the business or trade premises of the supplier of the goods or services; or • over the telephone.10 A dealer does not need to be the supplier of the goods or services. The term “dealer” is defined in s 71 to mean: • a person who, in trade or commerce: (a) enters into negotiations with a consumer with a view to making an agreement for the supply of goods or services to the consumer; or (b) calls on, or telephones, a consumer for the purpose of entering into such negotiations; • whether or not that person is, or is to be, the supplier of the goods or services. The term “negotiation” is broadly defined in s 72 of the ACL to include: “any discussion or dealing directed towards the making of the agreement or proposed agreement (whether or not the terms of the agreement or proposed agreement are open to any discussion or dealing)”. The ACL Guide on Sales Practices states that unsolicited consumer agreements may result from: • door-knocking households to sell products or services, or to ask consumers to switch to a different service provider • telephoning consumers to sell products or services 9 The terms “trade or commerce”, “supply”, “goods”, “services” and “consumer” are all defined in ss 2 – 3 of the ACL and considered in Chapter 8. 10 ACL, s 69(1)(b).

[10.10]

10 Consumer Agreements

459

• approaching consumers in the common area of a shopping mall centre to sell products or services.11 The third element requires that the consumer did not invite the dealer to come to that place, or to make a telephone call, for the purposes of entering into negotiations relating to the supply of those goods or services.12 Section 69(1A) clarifies s 69(1)(c). It provides: (1A) The consumer is not taken, for the purposes of subsection (1)(c), to have invited the dealer to come to that place, or to make a telephone call, merely because the consumer has: (a) given his or her name or contact details other than for the predominant purpose of entering into negotiations relating to the supply of the goods or services referred to in subsection (1)(c); or (b) contacted the dealer in connection with an unsuccessful attempt by the dealer to contact the consumer. Section 69(2) provides that an invitation merely to quote a price for a supply is not taken for the purposes of s 69(1)(c) to be an invitation to enter into negotiations for a supply. The ACL Guide on Sales Practices provides the following examples to illustrate what constitutes an invitation by the consumer: • A consumer enters a competition sponsored by a supplier. It is a condition of entry that the consumer agrees to be contacted by the supplier to provide product information. If the supplier contacts the consumer about anything other than the competition, the contact is considered “unsolicited”. • A supplier leaves a quote for the consumer to consider. The consumer approaches the supplier to accept the quote or negotiate different terms, which leads to an agreement. This is not an unsolicited consumer agreement.13 The fourth element requires the total price paid or payable by the consumer under the agreement either is not ascertainable at the time the agreement is made; or if it is ascertainable at that time – is more than $100 or such other amount prescribed by the regulations.14 In relation to civil proceedings, s 70 creates a rebuttable presumption that an agreement or proposed agreement is an unsolicited consumer agreement. According to the Secondary Explanatory Memorandum, Questions about whether an agreement falls within the scope of the unsolicited selling provisions, which are likely to focus on the issue of solicitation, may be the subject of potential dispute between the parties to a proceeding. This will place claimants at a significant disadvantage should they be required to prove that this is the case. The 11 Australian Consumer Law, Sales Practices, A Guide for Business and Legal Practitioners (2010), at [2.3], at http://www.consumer.tas.gov.au/__data/assets/pdf_file/0006/157848/ACL_Sales_Practices_ Guide.pdf. 12 ACL, s 69(1)(c). 13 ACL, Sales Practices (2010), at [2.6]. 14 ACL, s 69(1)(d).

460

The Australian Consumer Law

[10.15]

rebuttable presumption has been included to ensure that the potential for a successful action by a claimant under this provision is not impeded.15

Exemptions [10.15]

Section 69(4) of the ACL provides an agreement is not an “unsolicited selling agreement” if it is exempt by regulation. Certain types of selling practices are considered to be less likely to cause harm to consumers and have been exempted from the ACL requirements relating to unsolicited consumer agreements by the ACL Amendment Regulations.16

Regulation 81 provides that the following agreements are not unsolicited consumer agreements: • • • • •

a business contract; a discontinued negotiations agreement; an agreement made in the course of a party plan event; a renewable agreement of the same kind; and a subsequent agreement of the same kind.

Each will be examined in turn. Business contract

[10.20]

A “business contract” is defined by ACL, reg 81(2) to mean: “an agreement for the supply of goods or services not of a kind ordinarily acquired for personal, domestic or household use or consumption”. Section 3 of the ACL provides that a person is taken to be a “consumer” if they acquire goods or service for a price that did not exceed $40,000 or they acquired goods or services of a kind that are ordinarily acquired for personal, domestic or household use or consumption. Accordingly, the unsolicited consumer agreement provisions would apply to all business transactions, to the extent that the goods or services were acquired for a price that did not exceed $40,000. Regulation 81(1) limits the application of the unsolicited consumer agreement provisions to transactions entered into by businesses by limiting them only to goods or services ordinarily acquired for personal, household or domestic use or consumption. The Attachment to the Explanatory Statement to the ACL Amendment Regulations states that reg 81 allows “a bookshop to accept an unsolicited supply of cash-register docket paper, or a doctor to accept an unsolicited supply of medical equipment”.17

Discontinued negotiations agreement

[10.25]

Regulation 81 provides that an agreement is not an unsolicited consumer agreement if a consumer discontinues negotiations with a supplier but,

15 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [8.23]. 16 Available at http://www.comlaw.gov.au/Details/F2010L03014. 17 Attachment to the Explanatory Statement to the ACL Amendment Regulation, p 6.

[10.35]

10 Consumer Agreements

461

subsequently, initiates negotiations with the same supplier. This break in negotiations allows a consumer time to consider whether they wish to initiate negotiations to purchase goods or services, and to seek out the supplier. Regulation 81(2) defines a “discontinued negotiations agreement” as an agreement made when a consumer discontinues negotiations, but subsequently initiates negotiations with a supplier for the unsolicited consumer agreement. Party plan event

[10.30]

Regulation 81(2) defines a “party plan event” as:

• an event for the purpose of negotiating the supply of goods and/or services to one or more persons; and • before the event, a person (the “inviter”) invites three or more other persons to the event; and • during the event, the inviter and those invited are in the same premises as the inviter or the inviter’s representative. Regulation 81(2) also defines “inviter” as a person who invites another person to a party plan event. Regulation 81(2) also defines “invitation” to mean an express or implied statement that the persons invited to the party plan event are invited to the event for the purpose of negotiating for the supply of goods or services to one or more persons. If a statement is implied, a reasonable consumer must be able to understand that the invitation is for the purpose of supplying goods or services. An invitation to a party plan event may be either oral or written. A “party plan” is a method of supplying goods or services by demonstrating them to consumers at an event that takes the ostensible form of a social occasion involving, for example, family members, friends and acquaintances or work colleagues, which may occur in the home of a consumer, at a person’s place of work or at another place. Where a person is invited to attend an event and the invitation expressly or impliedly indicates that the purpose of the event is for the supply of goods and/or services, it is not appropriate that all of the consumer protections that apply to unsolicited consumer agreements apply. Renewable agreement of the same kind

[10.35]

Regulation 81(2) defines a “renewable agreement of the same kind” to mean that an agreement is already in force between a consumer and a supplier and the consumer enters into another agreement for supply of goods or services that are of the same kind as those supplied under the existing contract. Where consumers acquire goods or services, such as contracts for telecommunication services and contracts for utilities such as electricity and gas, which are expressed to be for a fixed term, the suppliers may contact consumers to ask if they would like to renew their contract. In such circumstances, the same protections that apply to unsolicited consumer agreements are not appropriate, as a consumer will have had an opportunity to use the goods or services, usually for a considerable period of time.

462

The Australian Consumer Law

[10.40]

Subsequent agreement of the same kind

[10.40]

Regulation 81(2) defines a “subsequent agreement of the same kind” to

mean: … an agreement made in the following circumstances: (a) a consumer and a supplier are parties to an agreement for the supply of goods or services; (b) the goods or services are supplied; (c) within 3 months of the supply of the goods or services: (i) the consumer and supplier enter 1 or more other agreements for the supply of goods or services of the same kind as the goods or services supplied under the agreement; and (ii) the total value of the other agreements is an amount of $500 or less.

For the exemption to apply, the total cumulative value of the other agreements needs to be $500 or less. Consumers who purchase the same or very similar goods from a dealer or supplier at regular intervals are aware of the products and have an ongoing relationship with the dealer or supplier. In such circumstances, the requirement to provide the full range of information and other rights in relation to each transaction is not appropriate.

Express dealer obligations imposed Way in which consumers approached

[10.45]

The term “dealer” is defined in s 71 to mean:

a person who in trade or commerce: (a) enters into negotiations with a consumer with a view to making an agreement for the supply of goods or services to the consumer; or (b) calls on, or telephones, a consumer for the purpose of entering into such negotiations; whether or not that person is, or is to be, the supplier of the goods or services.

Section 73 sets out the permitted hours of visiting consumers. A dealer must not call on a person for the purpose of negotiating an unsolicited consumer agreement at any time on a Sunday or public holiday or before 9 am on any other day or after 6 pm on any other day (or after 5 pm if the other day is a Saturday).18 Section 74 imposes three duties on a dealer who calls on a person for the purpose of negotiating an unsolicited consumer agreement: (a) to clearly advise the consumer at the outset of an approach that their purpose is to seek the person’s agreement to the supply of goods or services;19 (b) to clearly advise the person that the dealer is obliged to leave the premises immediately on request; and 18 ACCC v Origin Energy Electricity Ltd [2015] FCA 278 at [23]. 19 ACCC v Australian Power and Gas Company Ltd [2013] FCA 1358 at [9].

[10.45]

10 Consumer Agreements

463

(c) to display or produce identification containing information prescribed by the regulations.20 Regulation 82 of the ACL Amendment Regulations,21 requires a dealer to provide their name and address. A dealer may provide a post office box, business or workplace address. If the dealer is not the supplier of the goods or services, the dealer must provide the supplier’s name and address (not being a post office box). A supplier is not permitted to use a post office box address, to ensure that a consumer, or a consumer law enforcement agency, is able to readily contact a supplier in the event that a problem arises with goods or services supplied under an unsolicited consumer agreement.22 In ACCC v Neighbourhood Energy Pty Ltd,23 Neighbourhood Energy, as a supplier of retail electricity was held liable under s 77 of the ACL for contraventions of s 74(a), (b) and (c) of the ACL by its dealers. Section 75(1) imposes a duty on the dealer to leave a consumer’s premises on request.24 Section 75(2) provides that if such a request is made by the consumer, the consumer must not be contacted for a similar purpose for at least 30 days after the request was made.25 In ,26 the ACCC was successful in its argument that a “do not knock” sticker can constitute a request to leave the customer’s premises under the ACL. Middleton J held: the Do Not Knock Sign conveyed a request for the salesperson to leave Ms Plant’s premises for the purposes of s 75(1) of the ACL. By directing the salesperson not to knock and stating that the salesperson was not welcome on the premises, it conveyed a clear direction that the salesperson was not authorised to carry out the purpose for which he had entered the premises and therefore that he should immediately leave the premises. If the occupier of the premises had made similar oral statements to the salesperson, it would have constituted a “request” for the salesperson to leave. No different result should follow by reason of the fact that the statements were contained in a sign displayed on the front door of the premises.27

The Do Not Call Register Act 2006 (Cth) (DNCR Act) and Telecommunications (Do Not Call Register) (Telemarketing and Research Calls) Industry Standard 2007 (Telecommunications Industry Standard) regulates telemarketing, but not the formation of sales contracts by telephone.

20 ACCC v Origin Energy Electricity Ltd [2015] FCA 278 at [23]. 21 Available at http://www.comlaw.gov.au/Details/F2010L03014. 22 Attachment to the Explanatory Statement to the ACL Amendment Regulation, p 8. 23 ACCC v Neighbourhood Energy Pty Ltd [2012] FCA 1357 (Marshall J). See also ACCC v Neighbourhood Energy Pty Ltd [2012] FCA 1357 at [13]; ACCC v Australian Power and Gas Company Ltd [2013] FCA 1358 at [9]; and ACCC v Origin Energy Electricity Ltd [2015] FCA 278 at [23]. 24 ACCC v Australian Power and Gas Company Ltd [2013] FCA 1358 at [9]. 25 ACCC v Australian Power and Gas Company Ltd [2013] FCA 1358 at [9]. 26 ACCC v AGL Sales Pty Ltd (2013) ATPR ¶42-449 (Middleton J). 27 ACCC v AGL Sales Pty Ltd (2013) ATPR ¶42-449 at [33].

464

The Australian Consumer Law

[10.50]

The express supplier obligations relating to permitted calling hours, disclosing purpose and identity, and ceasing to negotiate on request do not apply to telemarketing as these areas are regulated under the Telecommunications Industry Standard. All other express supplier obligations in the unsolicited selling provisions apply to telemarketing to the extent that they are not inconsistent with and do not duplicate the requirements of the Telemarketing Industry Standard, as these areas are not covered by the Telemarketing Industry Standard. Disclosure obligations

[10.50]

A dealer must not make an unsolicited consumer agreement without first disclosing certain matters. Section 76(a) imposes a duty on the dealer to inform the consumer prior to making the agreement of their rights to terminate the agreement, and such other matters as are prescribed by the regulations.28

Regulation 83 of the ACL Amendment Regulations provides that a consumer must be provided with information about the 10 day cooling off period prohibition provided for by s 86 of the ACL.29 Regulation 83 does not prescribe the exact words that must be used, to provide businesses with flexibility about the way in which they comply. Section 76(d) provides that the form in which, and the way in which, the person is given the information must comply with the regulations. Regulation 84 of the ACL Amendment Regulations provides that the information given in writing must be: (a) attached to the agreement or agreement document for the goods or services; (b) transparent, that is, it is expressed in reasonably plain language, legible and presented clearly; and (c) in text that is the most prominent text in the document other than the text setting out the dealer’s or supplier’s name or logo. Regulation 84 of the Amendment Regulations does not prescribe the exact words that must be used to provide businesses with flexibility about the way in which they comply. Sections 78(1) and (2) impose duties on the dealer to provide the consumer with a copy of the agreement: • if the agreement was made in person, a copy of the agreement after it has been signed by the consumer; or • if the agreement was made by telephone, a copy within five business days after the agreement was made. 28 ACCC v Origin Energy Electricity Ltd [2015] FCA 278 at [23]. 29 Section 86 of the ACL prohibits a supplier from supplying goods or services under an unsolicited consumer agreement or from accepting or requiring payment or any other consideration for a period of 10 business days from the time that the consumer receives the relevant agreement or agreement document.

[10.50]

10 Consumer Agreements

465

Sections 79, 80 and 81 of the ACL set out the formal requirements for a valid agreement arising from a supplier approaching a consumer by telephone or otherwise, including a termination notice (containing prescribed information) and supplier information. A valid agreement will need to comply with clarity requirements and will need to be given to the consumer. Section 79 provides: The supplier under an unsolicited consumer agreement must ensure that the agreement, or (if the agreement was negotiated by telephone) the agreement document, complies with the following requirements: (a) it must set out in full all the terms of the agreement, including: (i) the total consideration to be paid or provided by the consumer under the agreement or, if the total consideration is not ascertainable at the time the calculated; and (ii) any postal or delivery charges to be paid by the consumer; (b) its front page must include a notice that: (i) conspicuously and prominently informs the consumer of the consumer’s right to terminate the agreement; and (ii) conspicuously and prominently sets out any other information prescribed by the regulations; and (iii) complies with any other requirements prescribed by the regulations; (c) it must be accompanied by a notice that: (i) may be used by the consumer to terminate the agreement; and (ii) complies with any requirements prescribed by the regulations; (d) it must conspicuously and prominently set out in full: (i) the supplier’s name; and (ii) if the supplier has an ABN – the supplier’s ABN; and (iii) if the supplier does not have an ABN but has an can – the supplier’s ACN; and (iv) the supplier’s business address (not being a post box) or, if the supplier does not have a business address, the supplier’s residential address; and (v) if the supplier has an email address – the supplier’s email address; and (vi) if the supplier has a fax number – the supplier’s fax number; (e) it must be printed clearly or typewritten (apart from any amendments to the printed or typewritten form, which may be handwritten); (f) it must be transparent.

In relation to s 79(b)(ii) and (iii), reg 85 provides that the front page of an agreement must include: (a) the text “Important Notice to the Consumer”; (b) the text “You have a right to cancel this agreement within 10 business days from and including the day after you signed or received this agreement”; and (c) the text “Details about your additional rights to cancel this agreement are set out in the information attached to this agreement”. Regulation 86 provides that: (a) the front page of an agreement must be signed and dated by the consumer; and (b) the front page of an agreement must include the day on which the consumer signed the document.

466

The Australian Consumer Law

[10.55]

In relation to s 79(c)(ii), reg 87 provides for the Commonwealth Minister approving a form that can be used by consumers to terminate an unsolicited consumer agreement.

Express consumer rights and obligations [10.55]

The ACL provides for the following express rights and obligations.

Ten day cooling off period

[10.60]

The unsolicited consumer agreement provisions deal with situations in which a consumer may otherwise succumb to unacceptable pressure-selling tactics employed by a supplier. This risk is the greatest when a consumer is approached by a supplier and is not provided with sufficient time (in particular, time spent away from the influence of the seller) to consider whether to purchase the goods or services offered. Section 82(1) of the ACL deals with this risk by providing for a 10-day cooling off period during which a consumer may change his or her mind and cancel the contract. The 10 day termination right is exercisable by the consumer providing the supplier with a termination notice (containing prescribed information) via a wide range of delivery methods.30

Right to cancel

[10.65]

Section 82 provides that consumers may cancel the contract within three or six months after the termination period in various circumstances related to breaches by the supplier of certain supplier obligations specified in the regime.31

Effect of termination

[10.70]

Section 83 provides that if an unsolicited consumer agreement is terminated in accordance with s 82, the agreement is taken to have been rescinded by mutual consent, and any related contract or instrument is void.32

Passing of property

[10.75]

Section 87 provides that, on termination, if the consumer notifies the supplier where to collect any goods received under the agreement, and the supplier does not collect the goods within 30 days, the goods become the property of the consumer.33

Post-contractual behaviour [10.80]

The ACL provides for additional rights and obligations of consumers upon the termination of the agreement:

30 ACL, s 82(3)(a), (b). 31 ACL, s 82(3)(c), (d). 32 ACL, s 83(1), (2). 33 ACL, s 85(2).

[10.85]

10 Consumer Agreements

467

• A prohibition during the termination period against a supplier supplying goods or services, or accepting trade-in goods; and requiring or accepting payment for goods or services to be supplied.34 • A requirement that a supplier immediately repay money received under the agreement if the agreement is terminated.35 • A prohibition against a supplier taking action against a consumer under a terminated agreement, including for the purpose of recovering amounts allegedly payable.36 • A prohibition against a supplier from seeking to avoid provisions concerning a termination right or operation of the regime.37

Regulations [10.85]

Section 94 contains a broad regulation-making power to exempt certain kinds of circumstances from the scope of the unsolicited selling regime or certain provisions of the regime. This regulation-making power does not apply to the permitted calling hours provisions (s 73 of the ACL). It provides: This Division (other than s 73) does not apply, or provisions of this Division (other than s 73) that are specified in the regulations do not apply, to or in relation to: (a) circumstances of a kind specified in the regulations; or (b) agreements of a kind specified in the regulations; or (c) the conduct of businesses of a kind specified in the regulations.

Regulation 88 allows for the provision of goods or services without a 10 business day cooling-off period or a prohibition on supply and payment for 10 business days, to allow suppliers to approach consumers on an unsolicited basis to offer to supply goods or services on an urgent basis after a natural disaster, such as repairs to roofing after a cyclone. Regulation 88 is limited to emergency repairs where: (a) “… as a result of an earthquake, fire, flood, storm or similar event a state of emergency has been declared under a law of the Commonwealth, a State or a Territory for an area in which a person’s property is located”; and (b) the person enters into an emergency repair contract with a supplier for the urgent work to rectify a property hazard, protect people’s health and safety, or prevent substantial property damage; and (c) the supplier under the emergency repair contract also needs to hold a licence that is in force in the relevant jurisdiction. Paragraph 94(b) of the ACL contains a regulation-making power to exempt certain kinds of agreements from the scope of the unsolicited selling regime or certain provisions of the regime. 34 ACL, s 86(1). 35 ACL, s 87. 36 ACL, s 88. 37 ACL, s 89(1), (2).

468

The Australian Consumer Law

[10.90]

Section 86 of the ACL provides that a supplier who has entered into an unsolicited consumer agreement must not supply goods or services, or accept or require any payment for those goods or services, for 10 business days. Regulation 89 allows the supply of electricity or gas to premises where these supplies are not connected or, where they are connected, and no electricity or gas is being supplied, to ensure that circumstances do not exist in which consumers would need to either initiate contact with an energy supplier or wait 10 business days before being supplied with energy. It is difficult to see why there should not be a carve-out for other utilities such as telephone and internet connections. Enforcement powers and remedies

[10.90]

A person contravening ss 73 to 76, 78 to 81, 84, 86 to 95 of the ACL is liable to pay a civil pecuniary penalty of up to: • $50,000 for a body corporate; • $10,000 for other persons.38

The ACCC has brought enforcement proceedings against energy retailers for unlawful door-to-door selling practices in four cases. In the first case, ,39 the Federal Court ordered Neighbourhood Energy Pty Ltd by consent to pay a total penalty of $1 million for multiple illegal door-to-door selling practices, including a breach of s 75(1) of the ACL by the conduct of two sales representative who called on consumers for the purpose of negotiating unsolicited electricity supply agreements, and did not leave the premises immediately on the requests of the occupiers, including a request by the display of a visible sign with the words ‘do not knock’. Neighbourhood Energy was taken to have contravened s 75(1) by the operation of s 77 of the ACL, which provides that if a dealer contravenes the unsolicited consumer agreements provisions, and the dealer is not the supplier of the goods or services, the supplier of the goods or services is also taken to have contravened the provision.40 In the second case, ACCC v Neighbourhood Energy Pty Ltd,41 the Federal Court ordered AGL Sales Pty Ltd by consent to pay a total penalty of $ 1.555 million for multiple illegal door-to-door selling practices. AGL engaged CPM Australia Pty Ltd (CPM) to conduct door-to-door sales calls to solicit new business. CPM was ordered to pay $200,000 for its role in the conduct. In the third case, ACCC v Australian Power and Gas Company Ltd,42 the Federal Court imposed a total penalty of $1.1 million for door-to-door sales conduct that breached the ACL. APG sales representatives made false and misleading representations to consumers that they were affiliated with the consumers’ current energy company; that APG was affiliated with the government and that APG offered discounts on energy that did not exist, in contravention of s 29 of the ACL. The court also 38 ACL, s 224. 39 ACCC v Neighbourhood Energy Pty Ltd [2012] FCA 1357 (Marshall J). 40 ACCC v Neighbourhood Energy Pty Ltd [2012] FCA 1357 at [13]. 41 ACCC v Neighbourhood Energy Pty Ltd (2013) ATPR ¶42-449 (Middleton J). 42 ACCC v Australian Power and Gas Company Ltd [2013] FCA 1358 at [9].

[10.90]

10 Consumer Agreements

469

declared that APG engaged in unconscionable conduct when its sales representatives dealt with a non-English speaking customer in contravention of s 21 of the ACL. The conduct also contravened: • s 74(a) of the ACL when its sales representatives called on consumers for the purpose of negotiating an unsolicited consumer agreement for APG and did not as soon as practicable or before starting to negotiate advise consumers that its purpose was to seek their agreement to a supply of retail electricity; • s 74(b) of the ACL when its sales representatives called on consumers for the purpose of negotiating an unsolicited consumer agreement for APG and did not advise consumers that they were obliged to leave the premises immediately on request; • s 74(c) of the ACL, when its sales representatives called on consumers for the purpose of negotiating an unsolicited consumer agreement for APG and did not provide consumers with such information relating to APG’s identity as prescribed by the Regulations; • s 75(1) of the ACL when its sales representative failed to leave the premises immediately on request by the consumer; • s 75(2) of the ACL when the sales representative returned to the consumer’s premises for the purposes of negotiating an unsolicited consumer agreement within 30 days of being asked to leave the premises by the consumers when previously attending for the same purpose; and • s 76 of the ACL by making an unsolicited consumer agreement without giving the consumer, before the agreement was made, information as to the consumer’s right to terminate during the cooling off period The total penalty comprised: $200,000 for the contravention of s 21 of the ACL; $679,500 for the 15 contravention of s 29 of the ACL; and $220,500 for the 42 contraventions of s 74 of the ACL. In the fourth case, ACCC v Origin Energy Electricity Ltd,43 Origin Energy Electricity Ltd (Origin) and its marketing company, Sales Force Australia Pty Ltd (Sales Force) admitted negotiating unsolicited consumer agreements in contravention of Pt 3-2 of the ACL: (a) Calling on a person for the purpose of negotiating an unsolicited consumer agreement outside the permitted hours for doing so, contrary to s 73(1) of the ACL (4 contraventions); (b) Failing to provide information required to be provided to a person who is called upon for the purpose of negotiating as unsolicited consumer agreement before entering into negotiations, contrary to s 74 of the ACL (18 contraventions); (c) Calling on a person for the purpose of negotiating an unsolicited consumer agreement or for an incidental or related purpose but not leaving the person’s premises immediately on the request of the occupier, contrary to s 75 of the ACL (3 contraventions); and 43 ACCC v Origin Energy Electricity Ltd [2015] FCA 278 (Katzmann J).

470

The Australian Consumer Law

[10.95]

(d) Making unsolicited consumer agreements without informing the consumers in writing of their rights to terminate the agreements during the termination period, contrary to s 76 of the ACL (4 contraventions).44

The conduct was also found to have contravened the unconscionable conduct, undue harassment or coercion, false or misleading representations provisions of the ACL. The Federal Court ordered Origin to pay $2 million in penalties and Sales Force to pay $325,000 in penalties. Criminal liability

[10.95]

Part IV, Div 2 of the ACL creates equivalent criminal offences for the provisions of Pt 3-2 of the ACL:

• permitted hours for negotiating unsolicited selling Agreements;45 • disclosing purpose and identity when making unsolicited approaches to consumers;46 • ceasing to negotiate an unsolicited consumer agreement on request;47 • informing a person of their right to terminate an unsolicited consumer agreement;48 • providing certain documents when negotiating an unsolicited consumer agreement;49 • requirements for the content of an unsolicited consumer agreement;50 • additional requirements for unsolicited consumer agreements not negotiated by telephone;51 • requirements for amendments of unsolicited consumer agreements;52 • obligation of suppliers on termination of an unsolicited consumer agreement;53 • prohibition on supplying goods or services under an unsolicited consumer agreement within the first 10 days;54 • repayment of payments received after termination of an unsolicited consumer agreement;55 • prohibition on recovering amounts after termination of an unsolicited consumer agreement;56 44 ACCC v Origin Energy Electricity Ltd [2015] FCA 278 at [23]. 45 ACL, s 170. 46 ACL, s 172. 47 ACL, s 172. 48 ACL, s 174. 49 ACL, s 175. 50 ACL, s 176. 51 ACL, s 177. 52 ACL, s 178. 53 ACL, s 179. 54 ACL, s 180. 55 ACL, s 181. 56 ACL, s 182.

[10.100]

10 Consumer Agreements

471

• voiding of certain provisions of unsolicited consumer agreements;57 • waiver of rights.58 The ACL also makes void certain provisions that attempt to exclude or modify the consumer’s rights under this Division.59 The maximum fine payable for a contravention of them is $50,000 for a body corporate and $10,000 for any other person. The offences are ones of strict liability so that it is not necessary to consider the intent of the person committing the offence. Part 4-6 of the ACL provides defences applicable to criminal proceedings of: • a reasonable mistake of fact;60 • where the contravention was caused by the act or default of another person or an accident or cause beyond the person’s control, and where the person took reasonable precautions and exercised due diligence to avoid the contravention;61 and • where an advertiser publishes an advertisement in the ordinary course of business and does not know and had no reason to suspect the advertisement amounted to a contravention.62

PART II: LAY-BY AGREEMENTS Introduction [10.100] Part 3-2, Div 3 of the ACL creates basic rules that apply to lay-by agreements. Lay-by sales were previously regulated by State and Territory legislation.63 On 4 December 2009, the MCCA agreed to include a single national law covering lay-by sales practices to replace the State and Territory regulatory regimes. These new rules replace lay-by sales laws in New South Wales, Victoria and the Australian Capital Territory and provide simple national rules to assist business and consumers. The underlying policy rationale for such regulation is that consumers may suffer detriment if they are induced by lay-by schemes to acquire goods and services they cannot afford. The MCCA at its meeting on 4 December 2009 decided to adopt a principles based approach to regulating lay-by sales that avoids the more prescriptive requirements of some State and Territory models, such those in Victoria and the Australian Capital Territory. The key principles underpinning lay-by sales under this model would be: • Agreements must be in writing. This would provide a minimum level of evidence of an agreement and reduce the potential for dispute. 57 ACL, s 183. 58 ACL, s 184. 59 ACL, s 89. 60 See [13.115]. 61 See [13.120]. 62 See [13.125]. 63 Fair Trading Act 1987 (NSW), Pt 5B; Fair Trading Act 1999 (Vic), Pt 5; and Lay-by Sales Agreement Act 1953 (ACT).

472

The Australian Consumer Law

[10.105]

• Consumers can cancel before delivery of the goods. This would provide a clear statement of a consumer’s cancellation rights, but would be counter-balanced by the potential of cancellation charges. • Businesses can cancel before final payment is received. This would make it clear that there is a reciprocal cancellation right for businesses. • In the event of cancellation by either party, the consumer is entitled to a full refund of amounts paid. This would provide an explicit right that businesses may not withhold money from a consumer. • In the event of cancellation by the consumer, the consumer may be required to pay a cancellation charge reflecting the business’s reasonable costs. Businesses may incur costs in commencing a lay-by sales agreement.64

Definition [10.105] A lay-by agreement is defined in s 96(3) to mean: an agreement between a supplier of consumer goods and a consumer for the supply, in trade or commerce, of consumer goods on terms (whether express or implied) which provide that: (a) the goods will not be delivered to the consumer until the total price of the goods has been paid; and (b) the price of the goods is to be paid by: (i) 3 or more instalments; or (ii) If the agreement specifies that it is a lay-by agreement – 2 or more instalments.

The proper construction of s 96(3) was considered by the Federal Court in ACCC v Chrisco Hampers Australia Ltd.65 The terms of the lay-by agreement allowed the consumer to vary the order for the Christmas hamper until the last change date. Chrisco submitted that the definition of a lay-by agreement in ACL, s 96(3) was only concerned with an agreement for the supply of particular goods, and not with an agreement which provided for the possibility of the supply of alternative goods. The court rejected this submission and held that the term was one which permitted a variation of the contract rather than a term which was concerned with the parties’ obligations in relation to the goods.66 The term “consumer” is defined in s 3 of the ACL and is considered at [8.70]-[8.115]. Section 96(1) provides that a supplier of consumer goods who is a party to a lay-by agreement must ensure that the agreement is in writing and that a copy is provided to the consumer to whom the goods are to be delivered. Section 96(2) provides that a lay-by agreement must be “transparent” which is defined in s 96(3) to mean “expressed in reasonably plain language, legible and presented clearly”. 64 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, Regulatory Impact Statement, at [23.357]. 65 ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204. 66 ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204 at [155].

[10.115]

10 Consumer Agreements

473

Termination by consumer [10.110] Section 97(1) provides that a consumer who is party to a lay-by agreement may terminate the agreement at any time before the goods to which the agreement relates are delivered to the consumer under the agreement. Section 97(2) provides that the supplier must not require the consumer to pay a termination charge unless the agreement is terminated by the consumer and the supplier has not breached the agreement. Section 97(3) provides that a supplier of goods who is party to a lay-by agreement “must ensure that” any termination charge must not exceed the supplier’s reasonable costs in relation to the agreement, such as storage and administration costs, and the loss in value of the goods between the time when the lay-by agreement was entered into and when it was terminated.67 The proper construction of s 97(3) was considered by the Federal Court in ACCC v Chrisco Hampers Australia Ltd.68 The court had to consider whether the cancellation charges inserted by Chrisco Hampers Australia Ltd (Chrisco) into its lay-by contracts with consumers contravened s 97(3) of the ACL. The terms allowed Chrisco to charge a cancellation fee of 20% if the order was cancelled prior to 1 August and a cancellation fee of 50% if the order was cancelled after 1 August. The ACCC submitted that Chrisco contravened s 97(3) because it did not have a system in place that would enable it to calculate whether its cancellation charge exceeded its reasonable costs. The ACCC did not have any information that would enable it to calculate Chrisco’s reasonable costs, but it submitted that the words “must ensure” in s 97(3) imposed an obligation on the supplier to adopt a system which the court considers (not the supplier) would ensure that a cancellation charge will not exceed reasonable costs. Edelman J did not accept the ACCC’s submission. Instead, his Honour preferred Chrisco’s submission that s 97(3) could only be contravened if, in a particular case, the cancellation charge exceeded the supplier’s reasonable costs in relation to the agreement. Edelman J observed: The effect of Chrisco’s construction is that at the time of termination a supplier must not charge a termination charge which exceeds its reasonable costs. At the time of termination the supplier will be in a position to make an accurate assessment of its reasonable costs in relation to the agreement. If the contractual term permits the supplier to charge a greater amount than its reasonable costs in relation to the agreement then the supplier contravenes s 97(3) if it imposes the contractual charge.69

Termination by supplier [10.115] Section 98 provides that a supplier must not terminate a lay-by agreement unless: • the consumer has breached a term of the agreement; or 67 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [9.20]. 68 ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204. 69 ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204 at [124].

474

The Australian Consumer Law

[10.120]

• the supplier is no longer engaged in trade or commerce; or • the consumer goods to which the agreement relates are no longer available.

Effect of termination [10.120] Section 99(1) of the ACL provides that in the event of termination, the supplier must refund to the consumer all the amounts paid by the consumer other than any termination charge that is payable under the agreement. The supplier is not entitled to damages, or to enforce any other remedy against the consumer. Enforcement powers and remedies [10.125] A person contravening ss 96 – 99 of the ACL is liable to pay a civil pecuniary penalty of up to: • $30,000 for a body corporate; • $6,000 for other persons.70 The following enforcement powers and remedies apply in relation to a contravention of ss 96 – 99 of the ACL: • undertakings;71 • substantiation notices;72 • public warning notices;73 • infringement notices;74 • injunctions;75 • damages;76 • compensatory orders;77 • orders for non-party consumers;78 • non-punitive orders;79 • adverse publicity orders;80 and • orders disqualifying a person from managing corporations.81 70 ACL, s 224. 71 ACL, s 218. 72 ACL, s 219. 73 ACL, s 223. 74 CCA, s 134A. 75 ACL, s 232. 76 ACL, s 236. 77 ACL, s 237. 78 ACL, s 239L. 79 ACL, s 246. 80 ACL, s 247. 81 ACL, s 248.

[10.135]

10 Consumer Agreements

475

Offences relating to lay-by transactions [10.130] Criminal offences are provided in respect of contraventions of the following provisions: • • • •

lay-by agreements must be in writing;82 termination charges;83 termination of lay-by agreements by suppliers;84 refund of amounts paid under a lay-by agreement.85

The maximum fine payable for a contravention of them is $30,000 for a body corporate and $6,000 for any other person. The offences are ones of strict liability so that it is not necessary to consider the intent of the person committing the offence.

Defences [10.135] Part 4-6 of the ACL provides for a number of defences that are applicable to criminal proceedings: • a reasonable mistake of fact;86 • where the contravention was caused by the act or default of another person or an accident or cause beyond the person’s control, and where the person took reasonable precautions and exercised due diligence to avoid the contravention;87 and • where an advertiser publishes an advertisement in the ordinary course of business and does not know and had no reason to suspect the advertisement amounted to a contravention.88

82 ACL, s 188. 83 ACL, s 189. 84 ACL, s 190. 85 ACL, s 191. 86 See [13.115]. 87 See [13.120]. 88 See [13.125].

11

Product Recall, Safety Standards, Safety Bans and Notices [11.05] INTRODUCTION .............................................................................................................. 477 [11.15] PART I: ISSUING AND ENFORCING PRODUCT RECALLS .................................. 481

[11.20] Definitions .......................................................................................................... [11.50] Compulsory recall of consumer goods ......................................................... [11.90] Voluntary recall of consumer goods .............................................................. [11.140] Product safety website ...................................................................................

481 483 488 493

[11.145] PART II: SAFETY STANDARDS, SAFETY BANS, SAFETY WARNING NOTICES AND MANDATORY WARNING ................................................................................. 493

[11.150] [11.170] [11.185] [11.210] [11.215]

Mandatory product safety standards .......................................................... Mandatory information standards ............................................................... Safety bans: interim and permanent ........................................................... Safety warning notices ................................................................................... Mandatory reporting of accidents ................................................................

493 496 498 500 500

INTRODUCTION [11.05]

Specific protections for unsafe and defective products are the subject of Pt 3-3 of the ACL. Part 3-3, Div 1 regulates safety standards for consumer goods and related services. Part 3-3, Div 2 provides for the imposition of bans, including interim bans, on consumer goods of a kind that may cause injury. Part 3-3 provides for compulsory and voluntary recall of unsafe consumer goods. Part 3-3, Div 4 provides for safety warning notices about consumer goods and product-related services. Part 3-3, Div 5 provides for statutory causes of action where defective consumer goods, or product-related services, cause death, serious injury or illness. The Productivity Commission conducted a review of Australia’s consumer product safety system and released its report on 7 February 2006.1 The Commission found that market forces, product liability laws, media scrutiny and organised consumer advocacy provided reasonable incentives to encourage most businesses to supply safe products. However, it noted that significant regulatory inconsistencies between Commonwealth, State and Territory governments reduced the overall efficiency and effectiveness of the system. 1 Productivity Commission, Review of the Australian Consumer Product Safety System: Research Report (7 February 2006), pp xlii-xlix, at http://www.pc.gov.au/projects/study/productsafety/docs/ finalreport.

478

The Australian Consumer Law

[11.05]

The Productivity Commission made the following recommendations to improve the operation of the national product safety regime: • introducing a single national product safety law administered by the ACCC or, if this is not achievable, harmonisation of core legislative provisions across jurisdictions. • introducing nationally applied threshold tests for product bans and mandatory recalls that include notions of “reasonably foreseeable conditions of use”; and “reasonably necessary to prevent or reduce risk” for mandatory safety standards. • developing a broadly-based hazard identification system based on information and analysis of consumer product incidents that is disseminated to all jurisdictions. • establishing a national system for the exchange of complaints information. • mandatory reporting by suppliers of products associated with serious injury or death. • provision of better regulatory information to consumers and businesses through a “one-stop-shop” internet portal. • adoption of a hazard-based approach to mandatory safety standards and streamlining of the standards-making process to improve timeliness. • undertaking a review of existing product recall guidelines to improve their effectiveness. • establishing a national clearinghouse for relevant information and analysis, complemented by a comprehensive study of consumer product-related injuries.2 In July 2008, the Council of Australian Governments (COAG) approved the recommendations made by the PC in its Report and requested the Ministerial Council on Consumer Affairs (MCCA) to develop options for a national system for product safety regulations and to recommend an approach. In May 2008, MCCA agreed to a new model for the regulation of product safety in Australia, which was endorsed by COAG at its July 2008 meeting. COAG agreed that the Australian Government should assume greater responsibility for regulating product safety. Following its meeting on 3 July 2008 COAG, it was announced: COAG today took a significant step in streamlining the processes associated with ensuring the safety of consumer products. COAG has agreed that the Commonwealth will assume responsibility for the making of permanent product bans and standards under the Trade Practices Act 1974. States will retain powers to issue interim product bans.3

One of the PC’s recommendations in its 2006 Report was that a review of the existing consumer product recall guidelines be conducted to ensure that recalls are conducted in the most effective manner. In 2010, the ACCC conducted a review of recall effectiveness pursuant to the PC recommendation.4 2 Productivity Commission, Review of the Australian Consumer Product Safety System: Research Report (7 February 2006), pp xlii-xlix, at http://www.pc.gov.au/inquiries/completed/product-safety. 3 Council of Australian Governments’ Meeting, 3 July 2008, at http://www.coag.gov.au/node/291. 4 ACCC, Review of the Australian Products Safety Recalls System (2010), at https://www.accc.gov.au/ system/files/Review%20of%20the%20Australian%20product%20safety%20recalls%20system.pdf.

[11.10]

11 Product Recall, Safety Standards, Safety Bans and Notices

479

The Productivity Commission revisited the issue of regulating product safety in its 2008 Inquiry into Australia’s consumer policy framework. Its Report contained two recommendations regarding product safety: RECOMMENDATION 8.2 Consistent with the recommendations in the Productivity Commission’s Review of the Australian Consumer Product Safety System, Australian Governments should: • develop a hazard identification system for consumer product incidents; • introduce mandatory reporting requirements for voluntary product recalls; and • require suppliers to report products associated with serious injury or death or products which have been the subject of a successful product liability claim or multiple out-of-court settlements. Ideally, these measures should be implemented as part of the development of the new national generic consumer law (see Recommendation 4.1). RECOMMENDATION 8.3 Drawing on the mechanisms proposed in Recommendation 8.2 and on the baseline study examining product related accidents prepared for the Ministerial Council on Consumer Affairs, Australian Governments should monitor trends in product safety, including any impacts of the civil liability reforms, with a view to assessing whether the incentives to supply safe products continue to be adequate.5

These PC recommendations have been largely taken up in the new national product safety regime which forms part of the ACL, which will create a consistent national approach to product safety standards, bans, recall and reporting and notification requirements. There are a number of useful publications and Guidelines which explain the product safety provisions of the ACL: • the ACCC, Consumer Product Safety Recall guidelines.6 • the ACCC, A Guide to the Mandatory Reporting Law in Relation to Consumer Goods.7 • the Australia’s Consumer Protection Agencies, General Guide to the Product Safety Provisions of the ACL.8 The new Product Safety and Information Standards9 are based on a recommendation of the PC. The PC recommended that the existing regime for safety standards, interim bans, permanent bans, voluntary recalls, compulsory recalls, safety warning notices and information standards, be supplemented by a new reporting requirement for incidents occasioning death and serious injury:

[11.10]

Consistent with the recommendations in the Productivity Commission’s Review of the Australian Consumer Product Safety System, Australian Governments should: 5 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), p 188, at http://www.pc.gov.au/inquiries/completed/consumer-policy. 6 ACCC, Consumer Product Safety Recall Guidelines (July, 2010), at http://www.recalls.gov.au/content/ index.phtml/itemId/1000105. 7 A guide to the mandatory reporting law in relation to consumer goods (December 2010), at http://www.productsafety.gov.au/content/index.phtml/itemId/984082/fromItemId/982086. 8 Australian Consumer Law, Product Safety, A Guide for Businesses and Legal Practitioners, at http://consumerlaw.gov.au/files/2015/09/product_safety_guide.pdf. 9 ACL, Pts 3-3, 3-4.

480

The Australian Consumer Law

[11.10]

• develop a hazard identification system for consumer product incidents; • introduce mandatory reporting requirements for voluntary product recalls; and • require suppliers to report products associated with serious injury or death or products which have been the subject of a successful product liability claim or multiple out-of-court settlements. Ideally, these measures should be implemented as part of the development of the new national generic consumer law.10

The policy objects for adopting a national product safety law are summarised in the RIS set out in the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010: Product safety regulation plays a necessary and important role in identifying and removing unsafe products from the market through recalls, bans, safety standards and public warnings. Consumers should be able to purchase goods and services that meet their safety expectations. Unsafe products should be readily detected, reported, and, if necessary, removed from the market and consumers should be able to obtain redress and compensation where appropriate. Product safety regulation should not hinder the efficient operation of markets in safe consumer products by imposing unnecessary costs on businesses or unduly limiting the ability of businesses to supply products with varying price/quality levels demanded by consumers. The primary objective of product safety regulation is to promote consumer confidence in the market through eliminating risks that cannot be mitigated by market forces alone and, in doing so, to enhance demand. There are also savings in health and welfare costs for individuals and the community associated with improved product safety regulation, which impacts broadly across the community since most citizens and businesses regularly engage in consumer transactions. Accordingly, product safety regulation can be most effective when regulators are able to act proactively in a nationally consistent and clear manner.11

This chapter and Chapter 12 are concerned with product safety – with dangerous or unsafe products, rather than product quality or misleading or unfair conduct relating to the supply of products.12 This chapter is divided into two Parts: • Part I – issuing and enforcement of product recalls; • Part II – safety standards, safety bans, safe warning notices and mandatory reporting of accidents.

10 Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, 2008 Canberra), vol 2, p 188. 11 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, Regulatory Impact Statement, at [24.16]-[24.17]. 12 For an analysis of the interrelationship between the product liability regime of the ACL and other parts of the ACL, see Kellam, Clark and Glavac, “Theories of Product Liability and the Australian Consumer Law” (2013) 21(1) Competition & Consumer Law Journal 1. See also Nottage and Kellam, “Product Liability and Safety Regulation”, in Malbon and Nottage, Consumer Law & Policy in Australian & New Zealand (Federation Press, Sydney, 2013), Ch 8.

[11.25]

11 Product Recall, Safety Standards, Safety Bans and Notices

481

PART I: ISSUING AND ENFORCING PRODUCT RECALLS [11.15] Chapter 3, Pt 3-3 of the ACL creates a national scheme for the issuing and enforcement of product recalls. It mirrors the TPA provisions13 with changes to implement agreed COAG reforms. Broadly there are two ways in which a recall can be initiated: by the supplier taking action on its own initiative (voluntary recall), or the regulator issuing a recall notice (compulsory recall). The ACL aligns the Commonwealth and State and Territory consumer product safety laws. The regime is jointly administered by the ACCC and by State and Territory regulators. All States and Territories are able to order compulsory recalls within their jurisdiction. The ACCC, as the Commonwealth regulator, initiates and manages compulsory recalls occurring over three or more jurisdictions.14 Part 3-3, Divs 2, 3 and 4 of the ACL set out the triggers under which recalls may be issued in respect of particular consumer goods. These triggers apply only to consumer goods where the “reasonably foreseeable use (including a misuse)” of such goods may cause injury to any person.

Definitions Reasonably foreseeable use or misuse

[11.20] The concept of “reasonably foreseeable use or misuse” is not defined in the CCA, Sch 2; however, it is part of the product safety laws of New South Wales,15 and is a concept used in duty of care cases at common law.16 According to the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010: A reasonably foreseeable use of a good includes using the goods for its primary, normal or intended purpose, using goods for an unintended purpose, or misusing the goods. Use (or misuse) of the goods can be by the person who suffered the loss or damage in question, or by a different person.17

It expands the trigger for the recall of consumer goods to include common uses that may present a safety risk, even if they are not the intended or normal use. Suppliers are required to have regard to how goods might be used by consumers rather than simply ensuring that they are free from defects. Consumer goods

[11.25]

The recall provisions of the ACL only relate to consumer goods. The term “consumer goods” is defined in s 2 of the ACL to mean: 13 TPA, ss 65B, 65C, 65D, 65E, 65F, 65G, 65H, 65R, and 65T. 14 ACCC, Review of the Australian Products Safety Recalls System, p 14. 15 Fair Trading Act 1987 (NSW), s 42(1) and s 4(1) definition of “unsafe consumer goods”. 16 See, for example, Donoghue v Stevenson [1932] AC 562; Grant v Australian Knitting Mills [1936] AC 85; and Wyong Shire Council v Shirt (1980) 146 CLR 40. 17 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [10.41].

482

The Australian Consumer Law

[11.30]

goods that are intended to be used, or are of a kind likely to be used, for personal, domestic or household use or consumption, and includes any such goods that have become fixtures since the time they were supplied if: (a) a recall notice for the goods has been issued; or (b) a person has voluntarily taken action to recall the goods.

This adopts a hybrid approach defining “consumer goods” by reference to the intentions of the supplier (subjective approach) and the kinds of goods supplied (objective approach) based on the definition of consumer in s 3 of the ACL.18 It includes fixtures, for example, where consumer goods become attached to or form part of a building. Other goods are the responsibility of other specialist Commonwealth agencies and departments: • food products – Food Standards Australia New Zealand (FSANZ),19 • motor vehicles – the Department of Infrastructure, Transport, Regional Development and Local Government (Infrastructure),20 • therapeutic goods – the Therapeutic Goods Administration (TGA),21 • agricultural and veterinary products – the Australian Pesticides and Veterinary Medicines Authority (APVMA),22 • electrical products – the State and Territory regulators,23 and • gas appliance products – the State and Territory regulators.24 Where consumer goods fall into one of these other specialist categories, they are “normally not considered by the ACCC for direct action under the TPA”.25 The law of negligence imposes a general duty of care on manufacturers and suppliers of all goods (not just consumer goods) to take appropriate steps to minimise the risk of personal injury or property damage caused by defective or unsafe goods. Where a risk is discovered after products are supplied, the duty may require the issue of a post-supply warming, product repair, the cessation of supply or voluntary recall action. The obligation will depend on the circumstances and, in particular, whether the risk to persons and property is imminent. Product-related services

[11.30]

The term “Product-related services” is defined in s 2 of the ACL to mean:

a service for or relating to: (a) the installation of consumer goods of a particular kind; or 18 See [8.70]–[8.115]. 19 At http://www.foodstandards.gov.au. 20 At https://infrastructure.gov.au/vehicles/recalls/contacts.aspx. 21 At https://infrastructure.gov.au/vehicles/recalls/contacts.aspx. 22 At http://apvma.gov.au/node/1081. 23 The addresses are available from the Electrical Regulatory Councils Agency website at http:// www.erac.gov.au. 24 The addresses are available from the Gas Technical Regulators Committee at http://www.gtrc.gov.au. 25 ACCC, Review of the Australian Products Safety Recalls System (2010), p 12.

[11.50]

483

11 Product Recall, Safety Standards, Safety Bans and Notices

(b) the maintenance, repair or cleaning of consumer goods of a particular kind; or (c) the assembly of consumer goods of a particular kind; or (d) the delivery of consumer goods of a particular kind; and, without limiting paragraphs (a) to (d), includes any other service that relates to the supply of consumer goods of that kind.

Supplier

[11.35]

The term “supplier” is broadly defined in s 2 of the ACL.26

Thus, anyone in the supply chain can be a supplier, and there will often be more than one “supplier” responsible for a product including importers, manufacturers, wholesale distributors, and retailers. The ACCC states in its Consumer Product Safety Recall Guidelines,27 that: Where the ACCC detects or becomes aware of a safety related hazard it will attempt to identify the supplier at the highest level in the supply chain in order to assist the supplier to ensure all relevant suppliers from within the supply chain, including international recipients, are identified and advised of the safety related hazard relating to the product.28

Serious injury or illness

[11.40]

The term “serious injury or illness” is defined in s 2 to mean:

an acute physical injury or illness that requires medical or surgical treatment by, or under the supervision of, a medical practitioner or a nurse (whether or not in a hospital, clinic or similar place), but does not include: (a) an ailment, disorder, defect or morbid condition (whether of sudden onset or gradual development); or (b) the recurrence, or aggravation, of such an ailment, disorder, defect or morbid condition.

Responsible Minister

[11.45]

The term “responsible Minister” is defined in s 2 to mean:

(a) the Commonwealth Minister; or (b) the Minister of a State who administers the application law of the State; or (c) the Minister of a Territory who administers the application law of the Territory.

“Commonwealth Minister” is defined in s 2 to mean: the Minister who administers Part XI of the Competition and Consumer Act 2010.

Compulsory recall of consumer goods [11.50] Consumer goods can be recalled compulsorily by the responsible Minister, where the requirements of s 122(1)(b) are satisfied. Recall notices are expected to be used almost exclusively by the Commonwealth for national recalls. Clauses 39 – 42 of the Intergovernmental Agreement for the Australian Consumer Law 26 See [8.160]. 27 Available at ACCC, Consumer Product Safety Recall www.recalls.gov.au/content/index.phtml/itemId/1000105. 28 Consumer Product Safety Recall Guidelines, p 2.

Guidelines

(July,

2010),

at

http://

484

The Australian Consumer Law

[11.55]

(IGA) state that only the Commonwealth may require a supplier to conduct a mandatory recall where it is likely that the recall would affect three or more States or Territories. Section 122 provides: (1) A responsible Minister may, by written notice published on the internet, issue a recall notice for consumer goods of a particular kind if: (a) a person, in trade or commerce, supplies consumer goods of that kind; and (b) any of the following applies: (i) it appears to the responsible Minister that such goods will or may cause injury to any person; (ii) it appears to the responsible Minister that a reasonably foreseeable use (including a misuse) of such goods will or may cause injury to any person; (iii) a safety standard for such goods is in force and the goods do not comply with the standard; (iv) an interim ban, or a permanent ban, on such goods is in force; and (c) it appears to the responsible Minister that one or more suppliers of such goods have not taken satisfactory action to prevent those goods causing injury to any person. (2) It is not necessary for the purposes of subsection (1)(c) for the responsible Minister to know the identities of any of the suppliers of the consumer goods of that kind. (3) A recall notice for consumer goods may be issued under subsection (1) even if the consumer goods have become fixtures since the time they were supplied.

This mirrors s 65F of the TPA. Triggering events

[11.55] Section 122(1)(b) and (c) set out the triggering events in which the Minister may issue a recall notice for the compulsory recall of consumer goods. They are: • the goods may cause injury to any person; • a reasonably foreseeable use or misuse of the goods may cause injury to any person; • a safety standard is in force for the goods and the goods do not comply with the standard; • an interim or permanent ban is in place for the goods. However, the responsible Minister must first be satisfied that one or more suppliers have not taken satisfactory action to prevent those goods causing injury to someone. Conference requirement before compulsory recall

[11.60] Section 132A(1) of Pt XI of the CCA, provides that the Commonwealth Minister, through the ACCC, must issue a “proposed recall notice” if the Minister proposes to issue a compulsory recall notice to give suppliers an opportunity to call a conference with the ACCC. However, ACL, s 132A(1) does not apply if the Commonwealth Minister has issued a notice under s 132J, and has formed the view that consumer goods of a particular kind create an imminent risk of death, serious illness or serious injury.

[11.75]

11 Product Recall, Safety Standards, Safety Bans and Notices

485

It is clear that the intention of the compulsory recall provisions is to limit the damage to the supplier’s reputation and financial position by making the occurrence of a compulsory recall contingent upon the supplier’s failure to undertake voluntary preventative and remedial action. However, the over-riding objective is to protect consumers. It is not necessary for the responsible Minister to form the view that the goods in question create an imminent risk of death, serious illness or serious injury, for the Minister to decide to issue a recall notice. The Administrative Decisions (Judicial Review) Act 1977 (Cth) will apply to decisions made by the Commonwealth Minister under the product safety provision of the ACL. Mandatory recall by State or Territory

[11.65] Under the ACL of a State or Territory, the Minister may require a supplier to conduct a mandatory recall where the recall is likely to affect no more than two States or Territories. Clauses 39 – 42 of the IGA requires the parties to endeavour to notify the Ministerial Council on Consumer Affairs of a decision to issue a recall notice. The State and Territory FTAs do not establish a process of appeal. However, relevant State and Territory judicial review legislation will apply to recall notices made under State or Territory applied ACLs.29 Commonwealth override

[11.70] If a Commonwealth recall notice is issued, s 126 provides that any State or Territory recall notice in force ceases to have effect. Consequently, while recalls can be ordered by State and Territory Ministers, in practice it is possible for the Commonwealth to override the original State or Territory recall notice and require that the recall be undertaken by the ACCC. Contents of the notice

[11.75] The compulsory recall notice may require suppliers to undertake any of the following actions: • recall the goods; • disclose the nature of the defect; • disclose the dangerous characteristic of the goods; the circumstances in which a reasonably foreseeable use or misuse of the of the goods is dangerous; • disclose procedures for disposing of the goods; • repair the consumer goods; • replace the consumer goods; • refund the price of the consumer goods. Section 123(1) provides: 29 See Supreme Court Act 1970 (NSW); Supreme Court Act 1986 (Vic); Supreme Court Act 1935 (SA); Supreme Court Act 1935 (WA); Supreme Court of Queensland Act 1991 (Qld) and Judicial Review Act 1991 (Qld); Supreme Court Act 1856 (Tas) and Judicial Review Act 2000 (Tas); Supreme Court Act 1933 (ACT) and Administrative Decision (Judicial Review) Act 1989 (ACT); and Supreme Court Act (NT).

486

The Australian Consumer Law

[11.75]

(1) A recall notice for the consumer goods may require one or more suppliers of the goods, or (if no such supplier is known to the responsible Minister who issued the notice) the regulator, to take one or more of the following actions: (a) recall the goods; (b) disclose to the public, or to a class of persons specified in the notice, one or more of the following: (i) the nature of a defect in, or a dangerous characteristic of, the goods as identified in the notice; (ii) the circumstances as identified in the notice in which a reasonably foreseeable use or misuse of the goods is dangerous; (iii) procedures as specified in the notice for disposing of the goods; (c) if the identities of any of those suppliers are known to the responsible Minister – inform the public, or a class of persons specified in the notice, that the supplier undertakes to do whichever of the following the supplier thinks is appropriate: (i) unless the notice identifies a dangerous characteristic of the goods – repair the goods; (ii) replace the goods; (iii) refund to a person to whom the goods were supplied (whether by the supplier or by another person) the price of the goods. (2) The recall notice may specify: (a) the manner in which the action required to be taken by the notice must be taken; and (b) the period within which the action must be taken. (3) If the recall notice requires the regulator to take action to recall the consumer goods, the responsible Minister may specify in the notice that the regulator must retain, destroy or otherwise dispose of the goods. (4) If the recall notice requires a supplier of the consumer goods to take action of a kind referred to in subsection (1)(c), the responsible Minister may specify in the notice that, if: (a) the supplier undertakes to refund the price of the goods; and (b) a period of more than 12 months has elapsed since a person (whether or not the person to whom the refund is to be made) acquired the goods from the supplier; the amount of a refund may be reduced by the supplier by an amount calculated in a manner specified in the notice that is attributable to the use which a person has had of the goods.

As an alternative to, or in combination with the recall of the products, the responsible Minister may require the supplier to disclose to the public the nature of the defect or dangerous characteristic, the circumstances in which a foreseeable use or misuse of the goods is dangerous and the procedures for disposing of the goods.30 Section 123(1)(c) also provides as an alternative or additional requirement, that suppliers may be required to undertake, where the supplier considers appropriate, repair, replacement or refund of the price of the goods. Where the supplier chooses to refund the price of the goods and a period of more than 12 months has elapsed 30 ACL, s 123(1)(b).

[11.85]

11 Product Recall, Safety Standards, Safety Bans and Notices

487

since such goods were acquired from the supplier, the amount refundable may be reduced to recognise the amount of use which the consumer has had from the goods.31 Section 123(1)(c) must be read in conjunction with s 124 which provides: (1) This section applies if a recall notice for consumer goods requires a supplier to take action of a kind referred to in section 123(1)(c). (2) If the supplier undertakes to repair the consumer goods, the supplier must cause the goods to be repaired so that: (a) any defect in the goods identified in the recall notice is remedied; and (b) if a safety standard for the goods is in force–the goods comply with that standard. (3) If the supplier undertakes to replace the consumer goods, the supplier must replace the goods with similar consumer goods which: (a) if a defect in, or a dangerous characteristic of, the goods to be replaced was identified in the recall notice–do not contain that defect or have that characteristic; and (b) if a safety standard for the goods to be replaced is in force–comply with that standard. (4) If the supplier undertakes: (a) to repair the consumer goods; or (b) to replace the consumer goods; the cost of the repair or replacement, including any necessary transportation costs, must be paid by the supplier.

If the supplier cannot be found, the Minister can direct the relevant consumer agency to recall the goods. Notification where consumer goods are supplied outside Australia

[11.80] If a compulsory recall notice is issued for goods that have been exported to a person outside Australia, s 125(1) provides that the supplier must give the person outside Australia a written notice informing the person that the consumer goods are subject to a recall, and the nature of the defect in, or dangerous characteristic of, the goods. Section 125(4) provides that the supplier must also report the notification to the responsible Minister within 10 days after giving the notice. Penalties for failure to comply

[11.85]

If a recall notice is in force, s 127(2) provides that a person must not, in trade or commerce, supply consumer goods of the kind to which the notice relates. A pecuniary penalty may be imposed for a contravention of s 127(2).32 Civil penalties of up to $1.1 million for a body corporate and up to $220,000 for individuals may be imposed for failure to comply with a recall notice, or for the supply of dangerous or defective consumer goods to which the notice relates. 31 ACL, s 123(4). 32 See ACL, s 224(1)(a)(viii).

488

The Australian Consumer Law

[11.90]

In addition, it is a criminal offence under Pt IV of the ACL if a person fails to perform one or more of the actions required to be undertaken by a recall notice for consumer goods.33 It is also an offence to supply consumer goods of the kind to which the notice relates which contain a defect or have a dangerous characteristic.34 It is also a criminal offence under Pt IV of the ACL to fail to notify a person outside Australia of a recall.35 The maximum fine is $16,650 for a body corporate, and $3,330 for an individual.

Voluntary recall of consumer goods [11.90] A voluntary recall of consumer goods occurs when the supplier initiates the recall voluntarily, or a recall is negotiated with the ACCC following a compliance or enforcement action. The circumstances in which a recall notice for the voluntary recall of consumer goods can be issued are regulated by s 128. Section 128 provides: (1) This section applies if a person voluntarily takes action to recall consumer goods of a particular kind (including consumer goods that have become fixtures since being supplied) because: (a) the consumer goods will or may cause injury to any other person; or (b) a reasonably foreseeable use (including a misuse) of the consumer goods will or may cause injury to any other person; or (c) a safety standard for the consumer goods is in force and they do not, or it is likely that they do not, comply with the standard; or (d) an interim ban, or a permanent ban, on the consumer goods is in force. (2) The person must, within 2 days after taking the action, give the Commonwealth Minister a written notice that complies with subsection (7). (3) The Commonwealth Minister may publish a copy of the notice on the internet. (4) A person who has supplied or supplies consumer goods of that kind to another person outside Australia must give the other person a written notice that complies with subsection (7). (5) The notice under subsection (4) must be given as soon as practicable after the supply of the consumer goods to the person outside Australia. (6) A person who is required to give a notice under subsection (4) must, within 10 days after giving the notice, give a copy of the notice to the Commonwealth Minister. (7) A notice given under subsection (2) or (4) must: (a) state that the consumer goods are subject to recall; and (b) if the consumer goods contain a defect or have a dangerous characteristic – set out the nature of that defect or characteristic; and (c) if a reasonably foreseeable use or misuse of the consumer goods is dangerous – set out the circumstances of that use or misuse; and (d) if the consumer goods do not, or it is likely that they do not, comply with a safety standard for the goods that is in force – set out the nature of the non-compliance or likely non-compliance; and 33 ACL, s 199(1). 34 ACL, s 199(2). 35 ACL, s 200(1).

[11.105]

11 Product Recall, Safety Standards, Safety Bans and Notices

489

(e) if an interim ban, or a permanent ban, on the consumer goods is in force – state that fact.

This mirrors s 65R of the TPA. The initiation of a voluntary recall will generally not have consequences under the consumer guarantees provisions. It is not an admission that the goods are unsafe. See [8.245]. Triggering events

[11.95]

Section 128 applies if a supplier voluntarily takes action to recall consumer goods because: • the consumer goods may cause injury to any person; or • a reasonably foreseeable use (including a misuse) of the goods may cause injury to any other person; or • a safety standard for the consumer goods is in force, and the goods do not comply with the safety standard; or • an interim ban, or a permanent ban, on the consumer goods is in force. There is uncertainty surrounding the extent of a supplier’s duty to recall goods in circumstances where a defect is discovered or is discoverable after sale and no negligence is shown to exist on the part of the supplier. Does the supply of goods carry with it a duty to withdraw products from the market when subsequent advances in research reveal dangers or defects? It would be prudent for suppliers to undertake a voluntary recall and issue warnings in respect of its use for the benefit of those who have already purchased the product. It is open to the responsible Minister to order a compulsory recall in such circumstances. Notification requirement

[11.100]

Prior to the ACL reforms, suppliers who undertook voluntary recalls were required under State and Territory legislation to notify State and Territory product safety regulators.36 Section 128(2) provides that only notification to the Commonwealth Minister is required. A voluntary recall of consumer goods must be notified to the Commonwealth Minister within two days. Contents of the notice

[11.105]

The information contained in the notice will vary according to the reasons for the recall. Section 128(7) provides that the written notice must: • state that the consumer goods are subject to recall; and • if the consumer goods contain a defect or dangerous characteristic, set out the nature of any defect or dangerous characteristic; and • if a reasonably foreseeable use or misuse of the goods is dangerous, set out the circumstances of any dangerous reasonably foreseeable use or misuse; and

36 See Fair Trading Act 1987 (NSW), s 36D(1); Fair Trading Act 1999 (Vic), s 49(1); Trade Standards Act 1979 (SA), s 27C; Consumer Affairs Act 1971 (WA), s 54(10); Fair Trading (Consumer Affairs) Act 1973 (ACT), s 37(1); and Consumer Affairs and Fair Trading Act (NT), s 36(2). There were no notification requirements for Queensland and Tasmania.

490

The Australian Consumer Law

[11.110]

• if the consumer goods do not comply with a safety standard, set out the nature of non-compliance or likely non-compliance with a safety standard for the goods that is in force, if the consumer goods do not comply; and • if an interim or permanent ban on the consumer goods is in force, state that fact. Section 128(3) provides that the Minister may publish on the internet a copy of the voluntary recall notice. The Recalls Australia website is available at http:// www.recalls.gov.au. The Commonwealth Minister through the ACCC will advise State and Territory consumer protection agencies of any voluntary recalls within their jurisdiction. ACCC Consumer Product Safety Recall Guidelines

[11.110] The ACCC has issued Consumer Product Safety Recall Guidelines,37 setting out: • the legal requirements for suppliers in relation to a consumer product recall specified in the TPA; • the role and responsibilities of suppliers and government agencies when a recall is necessary; and • the requirements for conducting a recall. According to the ACCC, a supplier has the following general responsibilities in relation to a recall: • conduct a comprehensive risk analysis of the safety related hazard; • stop distribution of a product that has been identified for recall; • cease production or modify the manufacturing process for a product that has been identified for recall; • remove the unsafe product from the marketplace; • notify the relevant regulator/s; • notify the public; • notify international product recipients; • notify others in the domestic supply chain; • facilitate the return of recalled products from consumers; • store and dispose of recalled products safely; • have a written recall strategy/plan; • maintain records and establish procedures that will facilitate a recall (records should be in a form that can be quickly retrieved); • provide progress reports on the conduct of the recall to relevant regulators.38 Recall strategy

[11.115] The Consumer Product Safety Recall Guidelines state that a supplier is required to notify the ACCC of its “written recall strategy/plan”, that is, a 37 ACCC, Consumer Product Safety Recall Guidelines (July, 2010), at http://www.recalls.gov.au/content/ index.phtml/itemId/1000105. 38 ACCC, Consumer Product Safety Recall Guidelines, pp 2-3.

[11.115]

11 Product Recall, Safety Standards, Safety Bans and Notices

491

documented process for the management of the product safety risk, and “should negotiate the content of the overall recall strategy with the ACCC prior to submitting it”.39 According to the ACCC, this legal requirement is implicit in the requirement to notify the Commonwealth Minister of measures taken by suppliers to address unsafe products. According to the ACCC, a supplier’s recall strategy must include: • an explanation of the problem, including the hazard associated with the product and the supplier’s assessment of the risk posed by the product; • the number of units supplied to consumers and others in the supply chain; • information about any known injuries or incidents associated with the product; • information about the life cycle of the product; • information about the proposed communication with consumers, including the method of communication, frequency with which the communication will be repeated and details of the message. This should be negotiated with the ACCC. Guidance as to the types of factors that a supplier should consider when developing a communication plan is provided in attachment A; • information about the way in which the supplier will manage contact from consumers about the recalled product, including any complaint handling procedures; • information about the manner in which the recalled product will be collected, destroyed or rectified; • contact details of the manufacturer and/or importer of the product; • contact details of other entities in the supply chain to whom the recalling supplier has supplied the product; • contact details of international product recipients; • action taken by the supplier to identify and correct the cause of the hazard, including the outcome of any root cause analysis or the time period in which such analysis will occur.40 The recall strategy will vary according to the nature of the risk, the type of consumer for whom the product was intended and the geographical distribution of the product. The Commonwealth Minister must be advised within two days of the methods adopted to deal with the product safety risk.41 There are essentially three options that may be adopted by a supplier: • issuing a safety warning notice; • a trade-level recall;42 • a consumer-level recall.43 39 ACCC, Consumer Product Safety Recall Guidelines, p 7. 40 ACCC, Consumer Product Safety Recall Guidelines, pp 7-8. 41 ACL, s 128(2). 42 Withdrawing goods from all entities in the supply chain. 43 Retrieving or modifying goods in the hands of consumers.

492

The Australian Consumer Law

[11.120]

Communication plan

[11.120]

The success of the recall strategy will largely depend on the ability to communicate and inform the particular consumer demographic who are likely to have acquired the consumer goods in question. According to the ACCC, there are some minimum requirements for a written communication. A written recall notice must include: • product description – a clear description of the product, including the name, make and model and any distinguishing features, batch or serial numbers. Include dates the product was available for sale; • picture of the product – a photograph or drawing of the product will provide the consumer a visual representation of the product; • description of the defect – a clear description of what the defect is. The defect should be described in simple terms so that the average consumer can understand. Refrain from using technical specifications wherever possible; • a statement of the hazard – describe the maximum potential hazard and associated risk. Where available a appropriate hazard symbol should be included; • a section titled “What to do”, which explains the immediate action the consumer is to take, for example, cease use immediately and return product to the place of purchase for a full refund. It should be clear that the consumer should return the product and not dispose of it. The supplier must ensure it minimises the inconvenience to consumers to encourage consumer compliance with the recall notice; and • a section titled “Contact details”, which explains who consumers should contact to receive a refund or have the product repaired or replaced. Include business and after hours telephone numbers, preferably toll free and email and website addresses.44

ACCC’s assessment of supplier’s strategy

[11.125]

If a voluntary recall strategy is undertaken, the ACCC will be in a position to assess whether the supplier’s recall strategy is adequate to deal with the perceived level of risk. The ACCC will assess whether the supplier has ceased distribution or supply of the product, and whether the supplier has taken steps to mitigate the product safety risk to consumers. The ACCC will act if the proposed action is inadequate in the light of the risk to consumers. According to the ACCC: … implicit in the requirement to notify the Commonwealth Minister of measures taken by suppliers to address unsafe products is the expectation that the Commonwealth Minister will act in the event that the intended action is insufficient. In the majority of cases, this will take the form of advice to the supplier about various aspects of the proposed action – for example, refinement of the communication with consumers – and will reflect the cooperative relationship between the supplier and the regulator, and the regulator’s role in providing advice about the quick, thorough and efficient removal of product safety

44 ACCC, Consumer Product Safety Recall Guidelines, pp 8-9.

[11.150]

11 Product Recall, Safety Standards, Safety Bans and Notices

493

hazards. However, in cases where the regulator is not satisfied that the proposed action will adequately address the risk, it may recommend that the Commonwealth Minister consider ordering a compulsory recall.45

Notification where consumer goods are supplied outside Australia

[11.125]

If the recalled goods have been exported, s 128(4) provides that the supplier must provide written notice to the overseas consumers. Section 128(6) provides that a copy of this notice must provide a copy of the notice to the Commonwealth Minister within 10 days.

Penalties for failure to comply

[11.135]

Pecuniary penalties may be imposed for contraventions of ACLs 128(2) or s 128(6).46 The maximum pecuniary penalty is $16,500 for a body corporate and $3,300 for an individual. It is also a criminal offence under Pt IV of the ACL if a person fails to notify the Commonwealth Minister under s 128(2)47 or s 128(6).48 The maximum fine is $16,650 for a body corporate, and $3,330 for an individual.

Product safety website [11.140]

The new Product Safety Australia website: http:// www.productsafety.gov.au, allows consumers and businesses to obtain regulatory information about the safety of consumer products and services including consumer goods that are the subject of compulsory and voluntary recalls.

PART II: SAFETY STANDARDS, SAFETY BANS, SAFETY WARNING NOTICES AND MANDATORY WARNING [11.145]

In addition to the product recall provisions, Pt 3-3 Divs 1 and 2 of the ACL creates a consistent national approach to safety standards, safety bans, and notices. The new regime applies not just to consumer goods, but also to “product-related services”. See [11.30].

Mandatory product safety standards [11.150]

The national product safety regime in the ACL creates a single national approach to making safety standards for consumer goods and product-related services.

Section 104(1) provides that mandatory safety standards can be made for consumer goods of a particular kind or product-related services of a particular kind, only by the Commonwealth Minister. They can be made in relation to goods,49 or services,50 if they are “reasonably necessary to prevent the risk of injury to any person”. 45 ACCC, Review of the Australian Products Safety Recalls System, p 27. 46 ACL, s 224(1)(a)(viii). 47 ACL, s 201(1). 48 ACL, s 201(2). 49 ACL, s 104(2).

494

The Australian Consumer Law

[11.155]

It is the supplier’s responsibility to ensure that goods comply with the relevant mandatory safety standard. Information about relevant mandatory standards can be obtained from the Product Safety Australia website: http:// www.productsafety.gov.au. Content of the standard

[11.155]

Section 104(2) sets out the matters that may be the subject of a standard for consumer goods: A safety standard for consumer goods of a particular kind may consist of such requirements about the following matters as are reasonably necessary to prevent or reduce risk of injury to any person: (a) the performance, composition, contents, methods of manufacture or processing, design, construction, finish or packaging of consumer goods of that kind; (b) the testing of consumer goods of that kind during, or after the completion of, manufacture or processing; (c) the form and content of markings, warnings or instructions to accompany consumer goods of that kind.

Thus, for example, the mandatory standard for consumer goods can specify the way the goods are to be made, their contents, and the warnings or instructions to accompany them. Section 104(3) sets out the matters that may be the subject of a standard for product-related services: (3) A safety standard for product related services of a particular kind may consist of such requirements about the following matters as are reasonably necessary to prevent or reduce risk of injury to any person: (a) the manner in which services of that kind are supplied (including, but not limited to, the method of supply); (b) the skills or qualifications of persons who supply such services; (c) the materials used in supplying such services; (d) the testing of such services; (e) the form and content of warnings, instructions or other information about such services. Thus, for example, the mandatory standard for a product-related service can specify the method of supply and the skills or qualifications that must be possessed by the person supplying the services. This mirrors Pt V, Div 1A of the TPA. Nominating a standard

[11.160]

In cases where a mandatory safety standard allows the supplier to choose a standard to comply with, they must do so and give the regulator a written notice to that effect. Section 108 provides: If:

50 ACL, s 104(3).

[11.165]

11 Product Recall, Safety Standards, Safety Bans and Notices

495

(a) a safety standard for consumer goods of a particular kind is in force; and (b) the standard specifies, as alternative methods of complying with the standard (or part of the standard), 2 or more sets of requirements relating to goods of that kind; and (c) the regulator gives to a supplier of goods of that kind a written request that the supplier nominate which of those sets of requirements the supplier intends to comply with as the supplier’s method of complying with the standard; the supplier must, within the period specified in the request, give to the regulator a written notice specifying which of those sets of requirements the supplier intends to comply with as the supplier’s method of complying with the standard.

Penalties for non-compliance

[11.165]

Section 106(1) provides:

A person must not, in trade or commerce, supply consumer goods of a particular kind if: (a) a safety standard for consumer goods of that kind is in force; and (b) those goods do not comply with the standard.

Section 106(3) provides that a person must not “manufacture, possess or have control of consumer goods the supply of which is prohibited by s 106(1)”. Pecuniary penalties can be imposed for contraventions of these provisions.51 Section 194 provides that it is a criminal offence to supply, or offer to supply, in trade or commerce, particular kinds of consumer goods unless they comply with any relevant product safety standard in force for those kinds of consumer goods. For example, in ACCC v Skippy Australia Pty Ltd,52 the ACCC commenced proceedings against the defendant for selling baby walkers on the internet site, eBay, that did not comply with the Trade Practices (Consumer Product Safety Standard) (Baby Walkers) Regulations 2002 (“the regulations”) under s 65C of the TPA. The defendant was convicted of offences under s 75AZS(1) of the TPA: If a corporation, in trade or commerce, supplies goods; and (b) the goods are intended to be used, or are of a kind likely to be used, by a consumer; and (c) the goods are of a kind: (i) in respect of which there is a consumer product safety standard prescribed by regulations made for the purposes of section 65C and which do not comply with that standard the corporation is guilty of an offence punishable on conviction by a fine not exceeding 10,000 penalty units.

The maximum penalty that could be imposed on a corporation in respect of an individual offence was 10,000 penalty units, one penalty unit being worth $100. In relation to the s 75AZS offence Tracey J stated: The product safety standards applying to baby walkers were developed in the light of experience of the use of such walkers in the United States. Young children using walkers had been injured, sometimes seriously, and died as a result of accidents which occurred whilst they were using the walkers. On occasions, injury occurred when children in the walkers fell down stairs or manoeuvred them so that they came in contact with hot surfaces. The various warnings which form part of the standard were directed to alerting 51 ACL, s 224(1)(a)(viii). 52 ACCC v Skippy Australia Pty Ltd [2006] FCA 1343 (18 October 2006) (Tracey J).

496

The Australian Consumer Law

[11.170]

those supervising the children to the type of risk which experience had shown was associated with use of such walkers. The warnings were intended to lessen the risk of harm befalling vulnerable young children. The failure to provide the cautionary notices meant that parents and carers were deprived of essential warnings and advice. The walkers also failed the stability tests prescribed in the relevant standard. This meant that they were more likely to capsize when being used by a child who had yet to learn to walk. For these reasons these offences are, in my view, extremely serious.53

A fine of $450,000 was imposed. Section 195(1) creates similar offences where there are safety standards for product-related services regulating how services provided with consumer goods must be provided. The failure to comply with safety standards is a strict liability offence subject to maximum fines of $1.1 million for a body corporate and $220,000 for individuals. Section 196(1) creates an offence if a person refuses or fails to comply with a request given to them under ACL, s 108. The failure to comply is a strict liability offence subject to maximum fines of $22,000 for a body corporate and $4,400 for individuals.

Mandatory information standards [11.170]

The national product safety regime in the ACL creates a single national approach to making new information standards for consumer goods and services. Section 134(1) provides that information standards can be made for goods of a particular kind or services of a particular kind, only by the Commonwealth Minister. The policy objects of adopting information standards in the ACL are summarised in the RIS set out in the Second Explanatory Memorandum: Information standards are an example of regulatory intervention to address the market failure associated with information asymmetry. Lack of information on which to base purchasing decisions can lead consumers to make decisions which are not in their best interests. This can apply to services as well as goods. The service sector accounts for a significant share of economic activity in Australia and covers a wide variety of categories including financial services, property and business services, telecommunications, health services, travel and tourism, cultural and recreational services and personal services. Some services are subject to industry-specific regulation whereas others are subject only to the general fair trading laws. The misleading and deceptive conduct laws in Australia set a minimum acceptable standard of commercial behaviour. They are reactive, providing for sanctions (for example prosecution and injunctions) and remedies (for example compensation orders) to protect the public when misled or deceived. Information standards, on the other hand, are proactive, requiring a positive standard of information disclosure that the market, on its own, has not provided.54

53 ACCC v Skippy Australia Pty Ltd [2006] FCA 1343 at [21]. 54 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [23.180]-[23.181].

[11.180]

11 Product Recall, Safety Standards, Safety Bans and Notices

497

Content of the standard

[11.175]

Section 134(2) provides:

Without limiting subsection (1), an information standard for goods or services of a particular kind may: (a) make provision in relation to the content of information about goods or services of that kind; or (b) require the provision of specified information about goods or services of that kind; or (c) provide for the manner or form in which such information is to be provided; or (d) provide that such information is not to be provided in a specified manner or form; or (e) provide that information of a specified kind is not to be provided about goods or services of that kind; or (f) assign a meaning to specified information about goods or services.

Thus, for example, an information standard for goods can specify the content, manner or form in which information is to be provided about the goods or services. Section 135 provides that the Commonwealth Minister can declare an existing standard for goods or services to be a national information standard. The ACL recognises the following mandatory information standards: • fibre content labelling of textile products; • care labelling for clothing and textile products; • ingredient labelling for cosmetics and toiletries. Section 136 provides: (1) A person must not, in trade or commerce, supply goods of a particular kind if: (a) an information standard for goods of that kind is in force; and (b) the person has not complied with that standard. (2) A person must not, in trade or commerce, offer for supply goods the supply of which is prohibited by subsection (1). (3) A person must not, in or for the purposes of trade or commerce, manufacture, possess or have control of goods the supply of which is prohibited by subsection (1). (4) In a proceeding under Part 5-2 in relation to a contravention of subsection (3), it is a defence if the defendant proves that the defendant’s manufacture, possession or control of the goods was not for the purpose of supplying the goods. (5) Subsections (1), (2) and (3) do not apply to goods that are intended to be used outside Australia.

Section 137 prohibits the supply of services that do not comply with an information standard. Penalties for non-compliance

[11.180]

Pecuniary penalties can be imposed for contraventions of ss 136 and

137.55 Sections 203 and 204 of the ACL provide that it is a criminal offence not to comply with information standards in relation to goods and services respectively. 55 ACL, s 224(1)(a)(ix).

498

The Australian Consumer Law

[11.185]

The failure to comply with information standards is a strict liability offence subject to maximum fines of $1.1 million for a body corporate and up to $220,000 for individuals.

Safety bans: interim and permanent [11.185]

The ACL creates a single national approach to making interim bans and permanent bans on certain consumer goods or product-related services where through reasonably foreseeable use or misuse they pose a safety risk. This replaces the scheme provided for in s 65C of the TPA. Section 114 provides that new permanent safety bans can only be made by the Commonwealth Minister. Interim bans in relation to consumer goods can be made by Commonwealth and State and Territory Ministers. A list all Commonwealth permanent and interim product safety bans and state or territory interim bans is available at http://www.productsafety.gov.au/content/ index.phtml/itemId/970715#toc3.

Interim bans

[11.190]

Interim bans in relation to consumer goods can be made by Commonwealth and State and Territory Ministers. Section 109(1) provides: A responsible Minister may, by written notice published on the internet, impose an interim ban on consumer goods of a particular kind if: (a) it appears to the responsible Minister that: (i) consumer goods of that kind will or may cause injury to any person; or (ii) a reasonably foreseeable use (including a misuse) of consumer goods of that kind will or may cause injury to any person; or (b) another responsible Minister has imposed, under paragraph (a), an interim ban: (i) on consumer goods of the same kind; or (ii) on consumer goods of a kind that includes those goods; and that ban is still in force.

Section 109(2) makes a similar provision in relation to product-related services. Section 111(1) provides that interim bans can be imposed for a period of 60 days by a responsible State or Territory Minister, and s 111(2) provides that they can be extended for a further period of up to 30 days. Section 111(4) provides that the Commonwealth Minister can extend the extended ban period for a further period of up to 30 days. By applying the ACL as a law of a State or Territory, s 109 includes the ability for the responsible State or Territory Minister to make interim bans. The ACL does not provide for a process of appeal given the limited time period of interim bans. Permanent bans

[11.195]

Section 114(1) provides:

The Commonwealth Minister may, by written notice published on the internet, impose a permanent ban on consumer goods of a particular kind if:

[11.205]

11 Product Recall, Safety Standards, Safety Bans and Notices

499

(a) one or more interim bans on consumer goods of that kind (the banned goods), or on consumer goods of a kind that include the banned goods, are in force; or (b) it appears to the Commonwealth Minister that: (i) consumer goods of that kind will or may cause injury to any person; or (ii) a reasonably foreseeable use (including a misuse) of consumer goods of that kind will or may cause injury to any person.

Section 114(2) makes a similar provision in relation to product-related services. A permanent ban comes into force on the day specified in the instrument imposing the ban,56 and applies in all States and Territories.57 The Commonwealth Minister may, by written notice published on the internet, revoke the ban at any time.58 Conference requirement before ban

[11.200]

Section 132(1) of Pt XI of the CCA, provides that the Commonwealth Minister must issue a “proposed ban notice” if the Minister proposes to impose an interim ban or a permanent ban on consumer goods of a particular kind, or on product-related services to give suppliers an opportunity to call a conference with the ACCC. However, s 132(1) does not apply if the Commonwealth Minister has issued a notice under s 132J and has formed the view that consumer goods of a particular kind create an imminent risk of death, serious illness or serious injury.

Penalties for non-compliance

[11.205]

Section 118(1) and (2) provide that a person must not supply, or offer to supply, consumer goods if they are subject to an interim or permanent bans. Section 119(1) and (2) provide that a person must not supply, or offer to supply, particular kinds of product-related services if they are subject to an interim or permanent bans. Pecuniary penalties can be imposed for contraventions of ACL, ss 118 and 119.59

Section 197(1) provides that it is a criminal offence to supply goods of a particular kind if they are the subject of an interim or permanent ban. Section 197(5) provides that it is an offence if a person exports consumer goods and the supply of the goods would be prohibited by s 197(1). However, s 197(6) provides that the Commonwealth Minister may, by written notice, grant approval to export the goods under s 197(5). Section 198(1) provides that it is a criminal offence to supply product-related services of a particular kind if they are the subject of an interim or permanent ban. The failure to comply with interim or permanent bans is a strict liability offence subject to maximum fines of $1.1 million for a body corporate and of $220,000 for individuals. 56 ACL, s 116. 57 ACL, s 115. 58 ACL, s 117. 59 ACL, s 224(1)(a)(viii).

500

The Australian Consumer Law

[11.210]

In addition, the regulators have the following discretionary powers: • the power to issue infringement notices;60 • the power to issue substantiation notices;61 and • the power to issue public warnings.62 For example, the permanent ban on smokeless tobacco products came into effect on 4 June 1991.63 The ACCC issued an infringement notice against Bajaria Global Pty Ltd on 9 December 2010 for supplying banned chewing tobacco which the ACCC had reasonable grounds to believe was a contravention of s 65C(1)(c) of the TPA.64

Safety warning notices [11.210]

Part 3-3, Div 4 of the ACL creates a single national approach to publishing safety warning notices about certain consumer goods or product-related services, where their reasonably foreseeable use or misuse poses a safety risk. Section 129(1) provides that a responsible Minister can publish on the internet a safety warning notice about consumer goods, setting out the possible risks involved in the use of consumer goods. Section 129(2) provides that a responsible Minister can publish on the internet a safety warning notice about product-related services, setting out the possible risks involved in the use of product-related services.

The issuing of a safety warning notice may be accompanied by an investigation into the relevant consumer goods or product-related services. The investigating Minister may issue a ban notice65 or a recall notice.66 If a ban notice or recall notice is not issued, the Minister must “… as soon as practicable after the completion of the investigation, announce, by written notice published on the internet, the results of the investigation”.67 When a safety warning notice is issued, suppliers do not have to stop supplying those goods or services. However, they will need to be vigilant and follow developments on the Product Safety Australia website (http:// www.productsafety.gov.au) since they are responsible for complying with any bans or recalls that may follow the investigation.

Mandatory reporting of accidents [11.215]

This mandatory reporting requirement implements Productivity Commission Recommendation 8.2 set out at [11.05] and is triggered by the

60 CCA, s 134A. 61 ACL, s 219. 62 ACL, s 223. 63 At http://www.productsafety.gov.au/content/index.phtml/itemId/974275. 64 Release # NR 002/11, issued 4 January 2011, at http://www.accc.gov.au/content/index.phtml/ itemId/965769. 65 ACL, s 132. 66 CCA, s 132A. 67 ACL, s 130(1).

[11.215]

11 Product Recall, Safety Standards, Safety Bans and Notices

501

supplier’s actual awareness of a causal link between the consumer goods and a death, or serious injury or illness arising from the use or foreseeable misuse of the consumer goods. It is not enough the supplier ought to have known that there was such a causal link. The mandatory reporting requirements apply to any person in the supply of consumer goods or product-related services, not just to the manufacturer of the goods.68 Section 131 of the ACL provides: (1) If: (a) a person (the supplier), in trade or commerce, supplies consumer goods; and (b) the supplier becomes aware of the death or serious injury or illness of any person and: (i) considers that the death or serious injury or illness was caused, or may have been caused, by the use or foreseeable misuse of the consumer goods; or (ii) becomes aware that a person other than the supplier considers that the death or serious injury or illness was caused, or may have been caused, by the use or foreseeable misuse of the consumer goods; the supplier must, within 2 days of becoming so aware, give the Commonwealth Minister a written notice that complies with subsection (5). (2) Subsection (1) does not apply if: (a) it is clear that the death or serious injury or illness was not caused by the use or foreseeable misuse of the consumer goods; or (b) it is very unlikely that the death or serious injury or illness was caused by the use or foreseeable misuse of the consumer goods; or (c) the supplier, or another person, is required to notify the death or serious injury or illness in accordance with a law of the Commonwealth, a State or a Territory that is a law specified in the regulations; or (d) the supplier, or another person, is required to notify the death or serious injury or illness in accordance with an industry code of practice that: (i) applies to the supplier or other person; and (ii) is specified in the regulations. (3) Subsection (1) applies whether or not the consumer goods were being used before or at the time the death or serious injury or illness occurred. (4) Without limiting subsection (1), the ways in which the supplier may become aware as mentioned in subsection (1)(b) include receiving the relevant information from any of the following: (a) a consumer; (b) a person who re-supplies the consumer goods; (c) a repairer or insurer of the goods; (d) an industry organisation or consumer organisation. (5) The notice must: (a) identify the consumer goods; and (b) include information about the following matters to the extent that it is known by the supplier at the time the notice is given: 68 See Nottage and Kellam, “Product Liability and Safety Regulation”, in Malbon and Nottage, Consumer Law & Policy in Australian & New Zealand (Federation Press, Sydney, 2013), pp 212-232.

502

The Australian Consumer Law

[11.220]

(i) when, and in what quantities, the consumer goods were manufactured in Australia, supplied in Australia, imported into Australia or exported from Australia; (ii) the circumstances in which the death or serious injury or illness occurred; (iii) the nature of any serious injury or illness suffered by any person; (iv) any action that the supplier has taken, or is intending to take, in relation to the consumer goods. (6) The giving of the notice under subsection (1) is not to be taken for any purpose to be an admission by the supplier of any liability in relation to: (a) the consumer goods; or (b) the death or serious injury or illness of any person.

The term “consumer goods” is defined in s 2 of the ACL (see [11.25]). The term “serious injury or illness” is defined in s 2 of the ACL: see [11.40]. In ACCC v Woolworths Ltd,69 Woolworths offered for sale a house brand Select Drain Cleaner for use in a domestic environment to unblock drains. It was sold in bottles that appeared to have a child resistant cap. On one occasion a baby girl obtained access to a bottle of Select Drain Cleaner and removed the cap. The contents spilled onto the girl’s leg and she received a serious chemical burn to her right knee. The girl had surgery including a skin graft and was required to keep her leg in a cast for four weeks and had weekly visits to a burns clinic for seven weeks. On 3 June 2014, Woolworths was notified of the incident by a letter sent by the girl’s mother dated 26 May 2014. On 5 June 2014 Woolworths submitted a mandatory report to the ACCC; however, the report did not include details of the injury as required by s 131(5). This meant that the ACCC was not aware of the seriousness of the girl’s injury. In addition to pecuniary penalties, the court ordered by consent, that Woolworths implement an upgraded product safety compliance program,that Woolworths publish on its websites a link to information detailing how to report a product safety incident including information as to its hotline, online forms, and describing how Woolworths will deal with the report.70 Product-related services

[11.220]

Section 132 of the ACL imposes a similar reporting requirement for “product-related services”. It does not apply to services generally, or consumer services. Consider the facts of Skerbic v McCormack.71 In that case the plaintiff was standing in the open doorway under a roller door, waiting for her husband to drive the family car out of the garage, after which she intended to lower and then lock the roller door. While she was standing under it, one of the brackets supporting it came away from the surrounding brick wall. The roller door fell and struck her on the head. The plaintiff commenced proceedings against Gliderol International Pty Ltd, the manufacturer and supplier of the roller door under Pt VA of the TPA. If this fact situation were to occur after 17 January 2011, under the mandatory reporting requirements Gliderol would be required to report the serious injury that

69 ACCC v Woolworths Ltd [2016] FCA 44 (Edelman J). 70 ACCC v Woolworths Ltd [2016] FCA 44 at [187]-[188]. The power to make such publication orders is contained in s 246(a) and (c) of the ACL. 71 Skerbic v McCormack [2007] ACTSC 93 (Harper M). On appeal Skerbic v McCormack [2007] ACTSC 93.

[11.230]

11 Product Recall, Safety Standards, Safety Bans and Notices

503

was associated with the roller door, even though the Gliderol could prove that the roller door was not defective, and even though it considered that the injury was caused by the door being inadequately installed. Mandatory reporting guidelines

[11.225]

The ACCC has issued A Guide to the Mandatory Reporting Law in Relation to Consumer Goods72 which sets out its interpretation of ss 131 and 132 of the ACL. Triggering events

[11.230]

Sections 131 and 132 introduce new notification requirements for suppliers that become aware that the use (or foreseeable misuse) of consumer goods or product-related services has caused (or may have caused) serious injury, illness or death. The elements that need to be satisfied before a mandatory reporting obligation arises are: • the goods are consumer goods; • the supplier of the consumer goods or product-related services “becomes aware” of a death or serious injury or illness; and • the supplier considers (or becomes aware that another person considers) that there is a causal link between consumer goods, or product-related services and, the death or serious injury or illness. The term “becoming aware” is not statutorily defined; however, s 131(4) provides a non-exhaustive list of the ways in which a supplier may “become aware” of a death or serious injury or illness: Without limiting subsection (1), the ways in which the supplier may become aware as mentioned in subsection (1)(b) include receiving the relevant information from any of the following: (a) (b) (c) (d)

a consumer; a person who re-supplies the consumer goods; a repairer or insurer of the goods; an industry organisation or consumer organisation.73

There are two separate triggering events. First, if the supplier of consumer goods, or services related to them, becomes aware of the death or serious injury or illness of any person; and the supplier considers that the death or serious injury or illness was caused or may have been caused by the use or foreseeable misuse of the consumer goods. Secondly, if the supplier of consumer goods, or services related to them, becomes aware that another person considers that the death or serious injury or illness was caused or may have been caused by the use or foreseeable misuse of the consumer goods. Importantly, it is not necessary that supplier forms the view that it was responsible for the death or serious injury or illness. 72 ACCC, A guide to the mandatory reporting law in relation to consumer goods (December 2010), at http://www.productsafety.gov.au/content/index.phtml/itemId/984082/fromItemId/982086. 73 See also ACCC, A guide to the mandatory reporting law in relation to consumer goods (December 2010) at [1.6].

504

The Australian Consumer Law

[11.235]

According to the ACCC, Mandatory Reporting Guidelines, for the purposes of the reporting requirements, a serious injury or illness can include: • an external physical injury, such as a serious burn, deep cut, broken bone, choking or serious fracture; • an internal injury, such as internal bleeding; • an illness, such as poisoning.74 The death, injury or illness may have occurred to a person in Australia or elsewhere. Upon whom does the obligation fall?

[11.235]

The obligation falls upon a supplier of the consumer goods. Anyone in the supply chain can be a supplier, and there will often be more than one “supplier” responsible for a product including, importers, exporters, manufacturers, wholesale distributors, retailers, installers and repairers. Sections 131(1) and 132(1) of the ACL provide that the supplier must notify the Commonwealth Minister (via the ACCC) within two days of becoming aware that the consumer goods or product-related services have caused, or may have caused a death, or serious injury or illness. The requirement to report the incident within two days applies regardless of whether the relevant days fall on weekends or public holidays. The obligation to report can be satisfied by sending a notice to the ACCC using the online from available at www.productsafety.gov.au/mandatoryreporting.

Contents of the notice

[11.240]

The reportable information in relation to consumer goods is set out in s 131(5) of the ACL. The supplier is required to report the following information by way of written notice to the Commonwealth Minister: The notice must: (a) identify the consumer goods; and (b) include information about the following matters to the extent that it is known by the supplier at the time the notice is given: (i) when, and in what quantities, the consumer goods were manufactured in Australia, supplied in Australia, imported into Australia or exported from Australia; (ii) the circumstances in which the death or serious injury or illness occurred; (iii) the nature of any serious injury or illness suffered by any person; (iv) any action that the supplier has taken, or is intending to take, in relation to the consumer goods.

Section 131(6) provides that the giving of a notice is not to be taken as an admission by the supplier of any liability. The reportable information in relation to product-related services is set out in s 132(5) of the ACL. The supplier is required to report the following information by way of written notice to the Commonwealth Minister: The notice must: 74 ACCC, A Guide to the Mandatory Reporting Law in Relation to Consumer Goods (December 2010) at [1.5].

[11.250]

11 Product Recall, Safety Standards, Safety Bans and Notices

505

(a) identify the product related services and the consumer goods to which the services relate; and (b) include information about the following matters to the extent that it is known by the supplier at the time the notice is given: (i) when the services have been supplied; (ii) the circumstances in which the death or serious injury or illness occurred; (iii) the nature of any serious injury or illness suffered by any person; (iv) any action that the supplier has taken, or is intending to take, in relation to the services.

Confidentiality of notices

[11.245]

Section 132A(1) of the ACL imposes confidentiality requirements in relation to such notices. It provides: A person must not disclose to any other person a notice given under this Division, or any part of or information contained in such a notice, unless the person who gave the notice has consented to the notice, or that part or information, not being treated as confidential.

Section 132A(2) provides an exemption from the confidentiality obligation. The exemption includes the sharing of the information between the Commonwealth Minister and another responsible Minister, or staff of the regulator or associate regulator. Disclosure is also allowed if the Commonwealth Minister considers that the disclosure is: • in the public interest;75 or • required or authorised by or under law;76 or • reasonably necessary for the enforcement of the criminal law or of a law imposing a pecuniary penalty.77 Exemption from reporting obligations

[11.250]

Subsections 131(2)(c) and 132(2)(c) provide that the requirement to report death, serious injury or serious illness does not apply if the supplier, or another person, is required to notify the death, serious injury or serious illness under a law of the Commonwealth, a State or a Territory that is a law specified in the regulations.

Regulation 92 of the ACL Amendment Regulations78 specifies the following laws of the Commonwealth and the States and Territories that include requirements to report death, serious injury or serious illness: 1 2

Agricultural and Veterinary Chemicals Act 1994 (Cth) National Health Security Act 2007 (Cth)

75 ACL, s 132A(2)(b). 76 ACL, s 132(2)(d). 77 ACL, s 132A(2)(e). 78 At http://www.comlaw.gov.au/Details/F2010L03014.

506 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

The Australian Consumer Law

[11.250]

Therapeutic Goods Act 1989 (Cth) Coroners Act 2009 (NSW) Public Health Act 1991 (NSW) Road Transport (Safety and Traffic Management) Act 1999 (NSW) Coroners Act 2008 (Vic) Public Health and Wellbeing Act 2008 (Vic) Road Safety Act 1986 (Vic) Coroners Act 2003 (Qld) Motor Accident Insurance Act 1994 (Qld) Public Health Act 2005 (Qld) Transport Operations (Road Use Management – Road Rules) Regulation 2009 (Qld) Coroners Act 1996 (WA) Food Regulations 2009 (WA) Health Act 1911 (WA) Road Traffic Act 1974 (WA) Coroners Act 2003 (SA) Public and Environmental Health Act 1987 (SA) Road Traffic Act 1961 (SA) Coroners Act 1995 (Tas) Public Health Act 1997 (Tas) Traffic Act 1925 (Tas) Coroners Act 1997 (ACT) Public Health Act 1997 (ACT) Road Transport (Safety and Traffic Management) Act 1999 (ACT) Coroners Act (NT) Notifiable Diseases Act (NT) Traffic Act (NT) Regulations made under an Act mentioned in items 1 to 12, 14 and 16 to 29

This ensures that duplication of reporting requirements is avoided, when another law includes a similar reporting requirement. The following summary of the laws specified is provided by the Attachment to the Explanatory Statement to the ACL Amendment Regulations: • the Agricultural and Veterinary Chemicals Act 1994 (Cth) – this Act applies the Code set out in the Agricultural and Veterinary Chemicals Code Act 1994 (the Code) as a law of the participating Territories. The Code requires certain persons to report matters related to agricultural and veterinary chemicals to the Australian Pesticides and Veterinary Medicines Authority (APVMA). To the extent that a matter must be reported to APVMA, a person is not required to also report that matter to the Minister under ss 131 or 132 of the ACL. • the National Health Security Act 2007 (Cth), the Public Health Act 1991 (NSW), the Public Health and Wellbeing Act 2008 (Vic), the Public Health Act 2005 (Qld), Health Act 1911 (WA), the Public Health Act 1997 (Tas) and the Notifiable Disease Act (NT), the Public and Environmental Health Act 1987 (SA) and the Public Health Act 1997 (ACT) – these Acts require certain persons to notify health authorities of

[11.255]

11 Product Recall, Safety Standards, Safety Bans and Notices

507

notifiable diseases. To the extent that a notifiable disease is food-borne, or otherwise the cause of death, serious injury or serious illness, a supplier is not required to report the notifiable disease to the Minister under ss 131 or 132 of the ACL. • the Therapeutic Goods Act 1989 (Cth) – this Act requires certain matters related to therapeutic goods to be reported to the Secretary to the Commonwealth Department of Health and Ageing. To the extent that a report is required to the Secretary to the Department of Health and Ageing, the same matter is not reportable under ss 131 or 132 of the ACL. • the Coroners Acts of each State and Territory – these Acts require reportable deaths to be notified to the relevant State or Territory Coroner. To the extent that a death must be notified to a Coroner, a death is not reportable under ss 131 or 132 of the ACL. • the Road Transport (Safety and Traffic Management) Act 1999 (NSW), the Road Safety Act 1986 (Vic), the Motor Accident Insurance Act 1984 (Qld), the Transport Operations (Road Use Management – Road Rules) Regulation 2009 (Qld), the Road Traffic Act 1974 (WA), the Road Traffic Act 1961 (SA), the Traffic Act 1925 (Tas), the Road Transport (Safety and Traffic Management) Act 1999 (ACT) and the Traffic Act (NT) – these Acts require that persons involved in certain accidents on public roads report those accidents to relevant authorities. To the extent that an accident involving death, serious injury or serious illness must be reported to the relevant authorities under the specified laws, there is no requirement to also report that accident to the Minister under ss 131 or 132. • the Food Regulations 2009 (WA) – these Regulations require proprietors of food businesses to notify certain pathogens identified in persons. These pathogens are also a likely cause of serious illness or death. To the extent that notification is required under the Regulations, a death or serious illness is not also reportable under ss 131 or 132 of the ACL.79 Penalties for non-compliance

[11.255]

A pecuniary penalty may be imposed for a contravention of ss 131 or 132.80 The maximum pecuniary penalty is $16,500 for a body corporate and $3,300 for an individual. A supplier who fails to notify the Commonwealth Minister within two days of becoming aware of the death or serious injury or illness of any person may be found guilty of a criminal offence.81

The failure to notify is a strict liability offence subject to maximum fines of $16,650 for a body corporate and up to $3,300 for individuals. Manufacturers and retailers will need to put in place compliance systems and procedures to ensure that there is adequate reporting and record keeping of information received in relation to deaths, injuries and illnesses associated with 79 Attachment to the Explanatory Statement to the ACL Amendment Regulation, pp 10-11. 80 See ACL, s 224(1)(a). 81 ACL, s 202.

508

The Australian Consumer Law

[11.255]

consumer goods, to ensure that reporting obligations are met within the two day time limit.

12

Liability of Manufacturers for Goods with Safety Defects [12.05] INTRODUCTION .............................................................................................................. 510 [12.10] ACTUAL AND DEEMED MANUFACTURERS .......................................................... 512 [12.15] UNIDENTIFIED MANUFACTURER ............................................................................. 514 [12.20] SUPPLY ............................................................................................................................... 515 [12.25] GOODS ................................................................................................................................ 515 [12.30] TRADE OR COMMERCE ................................................................................................ 516 [12.35] SAFETY DEFECT .............................................................................................................. 516

[12.40] [12.45] [12.50] [12.55] [12.60] [12.65] [12.70]

Marketing of the goods ................................................................................... Presentation of the goods ................................................................................ Reasonably expected uses ............................................................................... Time when the goods were supplied ............................................................ Other relevant circumstances ......................................................................... Subsequent safer goods ................................................................................... Compliance with mandatory standards .......................................................

517 517 520 520 520 521 521

[12.75] ACTION FOR PERSONAL INJURIES ........................................................................... 522

[12.80] Persons who can claim .................................................................................... 522 [12.85] Causation ............................................................................................................ 522 [12.90] Measure of damages ........................................................................................ 523 [12.95] ACTION FOR LOSS OR DAMAGE SUFFERED BY DEPENDANTS ..................... 523

[12.100] Persons who can claim .................................................................................. 524 [12.105] ACTION FOR CONSUMER GOODS DESTROYED OR DAMAGED .................. 525 [12.110] ACTION FOR LAND, BUILDINGS OR FIXTURES DAMAGED .......................... 525 [12.115] DEFENCES ........................................................................................................................ 526

[12.120] No defect at time of supply defence ........................................................... 527 [12.125] Compliance with a mandatory standard defence ..................................... 528 [12.130] State of the art defence .................................................................................. 529 [12.140] Component defence ........................................................................................ 530 [12.145] INDIVIDUAL’S SHARE IN RESPONSIBILITY FOR LOSS OR DAMAGE .......... 531 [12.150] TIME FOR COMMENCING ACTIONS ...................................................................... 532 [12.155] JOINT AND SEVERAL LIABILITY .............................................................................. 532 [12.160] REPRESENTATIVE ACTIONS BY THE REGULATOR ............................................ 533 [12.165] APPLICATION OF PROVISIONS NOT TO BE EXCLUDED OR MODIFIED .... 533

510

The Australian Consumer Law

[12.05]

[12.170] SCOPE FOR OVERLAP ................................................................................................. 533

INTRODUCTION [12.05]

Four possible models have been identified for imposing liability on manufacturers who release defective goods into the supply chain: first, a scheme based on negligence with proof of fault on the part of the manufacturer as a requirement; secondly, the imposition of strict liability; thirdly, the imposition of strict liability, with a state of the art defence; and finally, no-fault schemes.1

Part 3-5, Div 1 of the ACL adopts the third model. It contains a statutory product liability law under which consumers who suffer loss or damage because of defects in a manufacturer’s goods may recover that loss or damage from the manufacturer. Part 3-5 provides for a “state of the art” defence under which manufacturers can escape liability if they can prove that the defect in their product could not have been discovered given the state of scientific and technical knowledge at the time the goods were supplied. It is intended to be a restatement of Pt VA of the TPA which has been repealed. Part V Div 2A of the TPA has also been repealed. Part VA was introduced into the TPA by the Trade Practices Amendment Act 1992 (Cth). It was based on a report Product Liability prepared by the Australian Law Reform Commission.2 That report recommended a new regime for product liability based on the European Product Liability Directive,3 whereby “producers” of goods were made liable for personal and property damage caused by any “defect” in the goods, irrespective of fault or the existence of any contractual relationship between the producer and the person suffering the loss.4 Part 3-5, Div 1, provides that compensation can be obtained from manufacturers for loss or damage because of the product safety defect including: • injuries are suffered by an individual because of the safety defect;5 • loss or damage suffered by a person other than an injured individual;6 • loss or damage has been suffered because other consumer goods have been destroyed or damaged as a result of the safety defect;7 or

1 Galitsky, “Manufacturers’ Liability: An Examination of the Policy and Social Cost of a New Regime” (1979) 3 New South Wales Law Journal 146 at 147. 2 Australian Law Reform Commission Report, No 51. 3 European Community Council Directive, No 85/374 of 1985 of the European Economic Community [1985] OJ L 210/29. For a comparative assessment see Stapleton, “Product Liability: Comparing Australia with the EU and US” (2000) 28 International Business Lawyer 195. 4 Australian Law Reform Commission Report, No 51, at [10.47]-[10.50]. In Glendale Chemical Products Pty Ltd v ACCC (1999) ATPR ¶41-672 at 42,592, the Full Court observed that Pt VA permits recovery irrespective of the existence of any contractual relationship between the manufacturer and the person injured. 5 ACL, s 138. 6 ACL, s 139. 7 ACL, s 140.

[12.05]

12 Liability of Manufacturers for Goods with Safety Defects

511

• loss or damage has been suffered by a person if land, buildings or fixtures acquired for private use are destroyed or damaged as a result of the safety defect.8 The product liability provisions of the TPA were contained in Pt V, Div 2A (liability for unsatisfactory goods) and Pt VA (liability for defective goods). Their policy object drew, in part, on economic theory and they sought to impose liability in a way that would enhance economic efficiency. Part VA was drafted on the premise that in relation to most consumer goods it is the manufacturer rather than the consumer who can most easily avoid losses because the manufacturer has control of the process of manufacture and has superior information about the risks associated with using the product. The Australian Law Reform Commission’s report preceded the adoption of Pt VA of the TPA. In its report the ALRC stated: The same argument applies in the case of “defective” or “unsuitable” goods, because the cost of compensation which should be imposed by defects and the cost of defect prevention is a cost to society regardless of who bears the burden – manufacturer, importer, retailer, consumer, government or some combination of these parties … However, the size of the total cost to society of defects and their consequences depends on whether their incidence (that is, who is liable to pay the cost) provides an operational incentive that will lead to the minimisation of that cost/burden by reducing the occurrence of injuries or other product related losses. Where, at least to some extent, both parties can avoid loss, if liability is to be assigned to one party, it should fall on the best – or cheapest – loss avoider. In the case of most modern consumer goods this is generally held to be manufacturers, who can prevent the occurrence of losses more cheaply than consumers by increasing quality controls and who have superior information sources to identify and hence avoid potential problems. In the case of imported goods importers may have to bear this cost in default for overseas manufacturers. The only difficulty with this policy is that the incentive for consumers to take care may be removed and this may then lead to more injuries or losses and hence more claims for compensation … it depends on the relative extent to which the various parties can or cannot prevent injury or loss from occurring. The channelling of liability onto only one party, for example, the manufacturer, the importer or the consumer, is likely to produce an efficient result where that party is the one which is best able to avoid or prevent the loss occurring.9

The same policy object of providing a loss allocation mechanism between manufacturers, importers, suppliers and consumers applies in relation to Pt 3-5 of the ACL – Manufacturer’s liability for safety defects.10 8 ACL, s 141. 9 Australian Law Reform Commission, Product Liability (Research Paper No 2, January 1989, Product Liability: Economic Impacts), p 10. 10 For critical commentaries on the lack of a coherent theory of product liability in Australia, see Kellam, Clark and Glavac, “Theories of Product Liability and the Australian Consumer Law” (2013) 21(1) Competition & Consumer Law Journal 1 and Kellam and Nottage, “Happy 15th Birthday! Australia’s Product Liability Morass” (2007) 15(1) Competition & Consumer Law Journal 26. See also Nottage and Kellam, “Product Liability and Safety Regulation”, in Malbon and Nottage, Consumer Law & Policy in Australian & New Zealand (Federation Press, Sydney, 2013), Ch 8.

512

The Australian Consumer Law

[12.10]

ACTUAL AND DEEMED MANUFACTURERS [12.10]

Section 7 of the ACL provides for an extended definition of the word “manufacturer” that draws on s 74A of the former TPA. The extended definition of “manufacturer” provided for in s 74A of Div 2A of Pt V of the TPA applied equally to Pt VA of the TPA.11

Section 7 of the ACL provides: (1) A manufacturer includes the following: (a) a person who grows, extracts, produces, processes or assembles goods; (b) a person who holds himself or herself out to the public as the manufacturer of goods; (c) a person who causes or permits the name of the person, a name by which the person carries on business or a brand or mark of the person to be applied to goods supplied by the person; (d) a person (the first person) who causes or permits another person, in connection with: (i) the supply or possible supply of goods by that other person; or (ii) the promotion by that other person by any means of the supply or use of goods; to hold out the first person to the public as the manufacturer of the goods; (e) a person who imports goods into Australia if: (i) the person is not the manufacturer of the goods; and (ii) at the time of the importation, the manufacturer of the goods does not have a place of business in Australia. (2) For the purposes of subsection (1)(c): (a) a name, brand or mark is taken to be applied to goods if: (i) it is woven in, impressed on, worked into or annexed or affixed to the goods; or (ii) it is applied to a covering, label, reel or thing in or with which the goods are supplied; and (b) if the name of a person, a name by which a person carries on business or a brand or mark of a person is applied to goods, it is presumed, unless the contrary is established, that the person caused or permitted the name, brand or mark to be applied to the goods. (3) If goods are imported into Australia on behalf of a person, the person is taken, for the purposes of paragraph (1)(e), to have imported the goods into Australia.

Manufacturers of component parts of a finished good are also manufacturers under Pt 3-5 of the ACL. The defence which has been made available specifically for component part manufacturers will be discussed below. The term “manufacturer” includes: (a) a corporation that manufactures the goods; (b) a corporation that holds itself out to the public as the manufacturer; (c) a corporation that supplies “home brand” that were manufactured for it under licence; (d) a corporation that permits someone to promote the goods as its goods; and 11 TPA, s 75AB.

[12.10]

12 Liability of Manufacturers for Goods with Safety Defects

513

(e) a corporation that imports goods. The scheme imposes concurrent liability on actual and deemed manufacturers who can all be joined as respondents in the one action. For example, in Leeks v FXC Corporation,12 FXC was incorporated in the United States and had its principal place of business there. It manufactured a device known as an “Astra Expert Automatic Activation Device” (“Astra”) the function of which was to automatically deploy a parachutist’s reserve canopy when the conditions for activation were met. Mr Leeks purchased an Astra from the second and/or third Respondent for use when parachuting. In a strike out application, FXC argued that having invoked the provisions of s 74A of the TPA (now s 7(1)(e) of the ACL) so as to render the second, and/or third and/or fourth respondents the deemed manufacturers of the goods, the applicant could not make parallel claims against FXC as the actual manufacturer. Finn J rejected this argument, holding that the actual manufacturer was concurrently liable with the deemed manufacturers.13 The consumer is not required to make a choice between the actual and deemed manufacturers. Section 7(1)(c) of the ACL provides that a person who caused or permitted the name, brand or mark by which they carry on business to be applied to the goods will be a deemed manufacturer of the goods. For example, in Glendale v ACCC,14 Glendale was not the manufacturer of the caustic soda at issue, but it bore the label: “Packed by Glendale Chemicals Pty Ltd”. The court held that Glendale was a deemed manufacturer for the purposes of s 74AD of the TPA (now s 138 of the ACL), since this was the clear meaning and intent of the definition.15 The court held that intention was to attach the term “manufacturer” to the “widest class of persons who have an involvement with the goods”.16 Section 7(1)(e) of the ACL provides that a person who imports goods into Australia who is not the actual manufacturer, and at the time of the importation the manufacturer of the goods does not have a place of business in Australia, will be a deemed manufacturer of the goods. For example, in Mayes v Australian Cedar Pty Ltd,17 the plaintiff purchased defective decking from the Pine Shack. The plaintiff did not bring the action against the Pine Shack (his direct supplier). The plaintiff claimed damages from the importer under Pt VA of the TPA on the basis that the defendant was a deemed manufacturer. The court found that the decking was defective and caused the plaintiff’s injury and that the particular piece was imported by the defendant and acquired by the plaintiff from Pine Shack. Repairers who carry out work on goods but do not supply them are not manufacturers for the purposes of s 7 of the ACL. In James Spittles v Michael’s Appliance Services Pty Ltd,18 the defendant was engaged by Maytag Australia to fix stainless steel panels to the refrigerators before they were delivered to retailers. The 12 Leeks v FXC Corporation [2002] FCA 72. 13 Leeks v FXC Corporation [2002] FCA 72 [17]. 14 Glendale v ACCC (1998) 90 FCR 40. 15 Glendale v ACCC (1998) 90 FCR 40 at 46. 16 Glendale v ACCC (1998) 90 FCR 40 at 44. 17 Mayes v Australian Cedar Pty Ltd (2006) ATPR ¶42-119. 18 James Spittles v Michael’s Appliance Services Pty Ltd [2008] NSWCA 76.

514

The Australian Consumer Law

[12.15]

defendant did not acquire title to the panels of the refrigerators. The defendant carried out the work at the premises of M3 Logistics and left the premises when it was completed. The trial judge found that the defendant was a manufacturer within the meaning of s 75AA of the TPA because “manufactured includes ‘assembled’”. See now s 7(1)(a) of the ACL. The defendant assembled the refrigerator in its final form by fixing the panels to it. However, on appeal, Handley AJA (with whom Bell JA and Barr J agreed) held that s 75AD of the TPA did not require the manufacturer to supply the goods directly to the plaintiff, but the section only applies to a manufacturer who “supplies” the goods to a person in the contractual chain. The defendant supplied services under its contract for work and labour, but s 75AD of the TPA only applied to a supply of goods.

UNIDENTIFIED MANUFACTURER [12.15]

Where the plaintiff acquires the goods from a supplier who was not the manufacturer, it may not be apparent who the actual manufacturer was. In such circumstances s 147(1) of the ACL greatly facilitates the task of the plaintiff in identifying the actual manufacturer of the goods. It provides: (1) A person who: (a) wishes to institute a defective goods action; but (b) does not know who is the manufacturer of the goods to which the action would relate; may, by written notice given to a supplier, or each supplier, of the goods who is known to the person, request the supplier or suppliers to give the person particulars identifying the manufacturer of the goods, or the supplier of the goods to the supplier requested. (2) If, 30 days after the person made the request or requests, the person still does not know who is the manufacturer of the goods, then each supplier: (a) to whom the request was made; and (b) who did not comply with the request; is taken, for the purposes of the defective goods liability action (but not for the purposes of section 142(c)), to be the manufacturer of the goods. Section 147 of the ACL mirrors s 75AJ of the TPA. The Explanatory Memorandum accompanying the Trade Practices Amendment Bill (No 2) 1991 (Cth) sheds further light on the circumstances when this defence will be available: Section 75AJ(1) permits a potential claimant to serve a written request to any or all known suppliers of the action goods requesting them to identify the manufacturer of the goods, or (if the supplier does not know the name of the manufacturer) the name of the party which supplied it with the goods. It should be noted that it is the manufacturer for the purposes of s 75AB which is referred to in this context, as it would be of little assistance to a consumer if a foreign manufacturer was identified rather than the Australian importer. The “service” of the request should be conducted in accordance with s 28A of the Commonwealth Acts Interpretation Act 1901. Under that provision, service of a document on a corporation can be effected by either sending the document by pre-paid post to, or leaving it at, the head office, a registered office or a principal office of the corporation.

[12.25]

12 Liability of Manufacturers for Goods with Safety Defects

515

Where the potential claimant still cannot identify the manufacturer after 30 days, s 75AJ(2) provides that each supplier which did not respond to such requests is deemed to have manufactured the goods. In these circumstances, the claimant will be in a position to take action against the supplier of the action goods which is best placed to meet the claim. This is not considered unduly harsh, as a supplier can easily avoid being made liable by virtue of this section by simply providing the claimant with the name of its supplier or of the manufacturer.19

The limitation period or “repose period” for defective goods actions under the ACL is 10 years from the date of supply by the manufacturer of the action goods.20 Therefore, any supplier of goods would be well advised to retain sufficient records to comply with a s 147 request for goods which may have been supplied by the company as long as a decade ago. A company which fails to comply with a notice issued under s 147 will be liable as the manufacturer of the goods for the full loss, but it will find it very difficult, if not impossible, to rely on any of the defences provided for defective goods actions. See [12.115]-[12.140].

SUPPLY [12.20]

The meaning of “supplied” is considered at [8.160]. It is not necessary that the manufacturer supplied the goods to the plaintiff; only that the manufacturer “supplied” the goods to a person in the supply chain.21 Section 2 of the ACL extends the meaning to include supply by way of sale, lease, hire or hire-purchase. However, it appears that the initial supply of goods must be in return for some form of consideration. Section 5 of the ACL extends the meaning of supply to donations that are for promotional purposes, but not otherwise. The plaintiff does not need to be a “consumer”. Where goods are acquired not for the use or consumption of the person paying for them, but for a family member or friend, that family member or friend has the same rights as the person who acquired originally them. However, there must first have been a “supply” of goods for consideration before the recipient of the goods acquires any rights.22

GOODS [12.25]

The meaning of “goods” is considered at [8.120]-[8.150]. It extends to include gas and electricity, computer software and any component part of or accessory to goods.

19 Explanatory Memorandum to the Trade Practices Amendment Bill 1992, Senate Hansard, 26 May 1992, [41]-[45]. 20 ACL, s 143. 21 James Spittles v Michael’s Appliance Services Pty Ltd [2008] NSWCA 76 at [17]. 22 In Ryan v Great Lakes Council [1999] FCA 177 a claim was brought under Pt VA of the TPA in relation to contaminated oysters that were acquired by a father, but consumed by a family member. On appeal, Graham Barclay Oysters Pty Ltd v Ryan (2000) 177 ALR 18.

516

The Australian Consumer Law

[12.30]

TRADE OR COMMERCE [12.30]

The meaning of “in trade or commerce” is considered at [2.75]-[2.105]. The phrase “trade or commerce” is expressly defined to include “any business or professional activity”. It will not be possible to bring an action for defective goods acquired by means of a private sale, or a “garage sale” of personal effects.

SAFETY DEFECT [12.35]

Central to the liability provisions is the meaning of the term “safety defect”. The term “safety defect” is defined in s 9 of the ACL to mean: (1) For the purposes of this Schedule, goods have a safety defect if their safety is not such as persons generally are entitled to expect. (2) In determining the extent of the safety of goods, regard is to be given to all relevant circumstances, including: (a) the manner in which, and the purposes for which, they have been marketed; and (b) their packaging; and (c) the use of any mark in relation to them; and (d) any instructions for, or warnings with respect to, doing, or refraining from doing, anything with or in relation to them; and (e) what might reasonably be expected to be done with or in relation to them; and (f) the time when they were supplied by their manufacturer.

Section 9(1), (2), (3), and (4) mirror the definitions of safety defect in s 75AC(2), (3) and (4) of the former TPA.23 The following points should be noted. First, the test is objective, based on the reasonable expectations of the community (persons generally); rather than the subjective expectations of the injured party, or the expectations of persons with specialist knowledge or expertise. In Graham Barclay Oysters Pty Ltd v Ryan,24 Lindgren J had to construe s 74D(3) of the former TPA (actions in respect of goods of unmerchantable quality), which refers to goods being of “merchantable quality” within the meaning of the section “if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect”. His Honour stated that the provision was to be construed as a consumer protection measure, and that “it would be wrong to measure the reasonable expectations of the hypothetical reasonable consumer against the specialist technical knowledge of oyster growers…”.25 The same approach is likely to be taken in relation to s 9(1) of the ACL. The question is: are the goods as safe as persons generally are entitled to expect? the Secondly, the definition does not require the goods to be absolutely free from risk. The level of safety required is that which the community is entitled to expect. There 23 For critical commentary on the defect test in relation to TPA, s 75AC see Hammond, “The Defect Test in Part VA: Defectively Designed?” (1998) 6 Torts Law Journal 1; Stapleton, “The Conceptual Imprecision of ’Strict’ Product Liability” (1998) 6 Torts Law Journal 260; Travers, “Australia’s New Product Liability Law” (1993) 67 Australian Law Journal 516 at 518-9; Kellam and Nottage, “Happy 15th Birthday! Australia’s Product Liability Morass” (2007) 15(1) Competition & Consumer Law Journal 26 at 47-52. 24 Graham Barclay Oysters Pty Ltd v Ryan (2000) 177 ALR 18. 25 Graham Barclay Oysters Pty Ltd v Ryan (2000) 177 ALR 18 at [536].

[12.45]

12 Liability of Manufacturers for Goods with Safety Defects

517

may be some risk to safety without the goods having a safety defect. The extent of safety expected will vary according to the factors specified in ACL, s 9(2). Some of these factors overlap with the factors in s 54(3) of the ACL in relation to the definition of “acceptable quality”, such as any statements made about the goods on the packaging or label.26 Thirdly, in assessing “safety”, the potential risk of damage to property is to be taken into account as well as the risk of personal injury or death. There are a number of different types of potential defects. Design defects relate to matters such as the form, structure and composition of the goods. Manufacturing defects are those related to matters such as the process of construction and assembly. Instructional defects are those caused by incorrect or inadequate warnings and instructions. All these categories of “defect” fall within the meaning of “safety defect” in ACL, s 9(1). Fourthly, the applicant does not need to establish negligence on the part of the manufacturer. Section 9(2) provides assistance in the application of the general principle set out in s 9(1). It provides that while all relevant circumstances must be taken into account the following specific matters must be considered.

Marketing of the goods [12.40]

Section 9(2)(a) provides that the manner, and the purposes, for which they have been marketed must be considered. Where the goods are marketed for professional or trade use by people who have specialist training, the level of warnings and instructions required could be expected to be less because the manufacturer can assume a certain amount of pre-existing knowledge on the part of the purchaser.

Presentation of the goods [12.45]

Section 9(2)(b) – (d) provides that the presentation of the goods, including their packaging, marks, instructions and warnings must be considered. Where goods are known by the manufacturer to be potentially hazardous, great care needs to be taken by the manufacturer in drafting instructions and warnings. It is by these means that the manufacturer can explain the nature and extent of the potential hazard and provide adequate instructions to assist consumers to avoid it.

In ACCC v Glendale,27 the ACCC sought orders that Glendale pay compensation to Mr Barnes who had suffered injury as a result of a defect of the product within the meaning of s 75AC. Mr Barnes had purchased the product to unblock a drain in his shower recess. He poured boiling water down the drain first, and then tipped the caustic soda down the drain. He was injured when a column of water rushed up the drain and hit him in the face. The label on the product stated that the product was corrosive and that contact with eyes and skin should be avoided. The user was advised to wear rubber gloves 26 See [8.270]-[8.300]. 27 ACCC v Glendale (1998) 40 IPR 619.

518

The Australian Consumer Law

[12.45]

and safety glasses when handling the product, and to dissolve it in water before pouring it down the drain. It did not contain a warning not to use hot water. Regarding the adequacy of the warning label in that it failed to warn of the dangers of using caustic soda with hot water, Emmett J concluded: it was generally well known, or at least ought to have been well known, to a supplier of caustic soda that mixing of caustic soda with water produces heat and splashing and that such reactions would be exaggerated by an increase in the temperature of water. There is, of course, no suggestion that, as caustic soda, the Product as used by Mr Barnes was defective. However, s 75AC deals with a different question. Goods will not be safe even if, having regard to the goods, they operate as intended. Section 75AC(2) makes it clear that the section applies even if there is no inherent defect in the goods in question. Thus, it is clear that a substance which is, for example, marketed as being suitable for a particular purpose without warnings as to the particular way in which that purpose should be achieved may have a defect because use in some ways would not be safe.28

His Honour held: Persons generally are entitled to expect to be warned of a danger or lack of safety in respect of a use to which goods might reasonably be expected to be put. The description of the method for using caustic soda to make a cleaning liquid for the removal of grease from drain pipes and gully traps contains no hint of warning that caustic soda should only be used in that way for cleaning drains. While there is a warning that the contents of the container are corrosive and that contact with eyes and skin should be avoided, that is not adequate having regard to the nature of caustic soda and the purpose for which it was marketed.29

This finding was upheld on appeal by the Full Federal Court: Counsel for Glendale contend this conclusion failed to have regard to certain matters, first amongst them that “the label was in concise clear language”, multi-coloured and “gave adequate directions for use”. They argue that, if Mr Barnes had complied with the directions for use, the Product would have been safe. In particular, they say, if Mr Barnes had worn safety glasses when handling the Product, his eyes would have been saved from injury. We see the force of this submission but do not think it vitiates Emmett J’s conclusion. Safety glasses may have reduced the extent of the injury sustained by Mr Barnes, but it is unlikely they would totally have saved him from harm. More fundamentally, the instruction about safety glasses was inadequate to bring home to an ordinary reader the risk of being injured in the way in which Mr Barnes was injured. The instruction said “Always wear rubber gloves and safety glasses when handling caustic soda”. We think the conjunction of rubber gloves and safety glasses, especially when limited by the words “when handling”, would cause the average reader to understand that the relevant risk was that of dry caustic soda coming into contact with the handler’s skin; the words would not alert a reader to the extreme inadvisability of allowing any part of the body to be in the vicinity of hot water to which caustic soda had been added. The lack of such a warning was a “defect” in the Product, within the meaning of s 75AC of the Act.30

28 ACCC v Glendale (1998) 40 IPR 619 at 631. 29 ACCC v Glendale (1998) 40 IPR 619 at 632. 30 Glendale Chemical Products Pty Ltd v ACCC (1998) 90 FCR 40 at 48.

[12.45]

12 Liability of Manufacturers for Goods with Safety Defects

519

In Skerbic v McCormack,31 the plaintiff was standing in the open doorway under the roller door, waiting for her husband to drive the car out of the garage, after which she intended to lower and lock the roller door. While she was standing under it, one of the brackets supporting it came away from the surrounding brick wall. The roller door fell and struck her on the head. The plaintiff commenced proceedings against Gliderol International Pty Ltd, the manufacturer and supplier of the roller door. Harper M held that while there was no defect in the door, its safety was compromised by the defective installation instructions: The present case might be seen as a little outside what the legislature had in mind in its reference in s 75AC to instructions. One suspects that the intended reference was to instructions to consumers as to how the goods were to be used. In the present case, there was no issue about the manner in which the garage door was to be used. The problem was with the instructions as to how it was to be installed. Nevertheless, it seems to me that the inadequacy of the instructions falls within the words of s 75AC. The safety of the garage door, in its everyday use, was compromised by the fact that the manufacturer supplied it with inadequate installation instructions. An inadequately installed garage door represented a danger to the safety of persons using it or standing under it. It seems to me that the garage door must be taken to have had a defect for the purposes of s 75AC and s 75AD of the Act. It follows that the plaintiff is entitled to succeed against Gliderol on the statutory count.32

The judge, Harper M, acknowledged that the instructions were addressed to installers rather than consumers. They were defective because they failed to state that steel or metal plugs should have been used rather than plastic plugs when attaching the garage door to concrete masonry. In the circumstances of the case, one might have thought it was reasonable to assume some basic knowledge on the part of a competent installer, and that accordingly it was unnecessary to state this in the instructions to the installer. It seems to follow from this finding that even though the manufacturer’s instructions are directed at intermediaries who have a higher level of skill and knowledge than consumers, the adequacy of the instructions will be assessed from the point of view of their effect on the average consumer. The product liability scheme places strict liability on the manufacturer of the goods, not the installer of the goods. If the manufacturer is responsible for the defective installation because of the inadequacy of the manufacturer’s instructions, the consumer will have a remedy against the manufacturer under s 138 of the ACL. The consumer would also have a cause of action against the installer for breach of the guarantee of due care and skill in the supply of services, but not under the product liability regime. In Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd,33 a mechanical or prosthetic mitral valve had been implanted into the applicant’s heart. She subsequently developed thromboembolisms with serious consequences including the need for further surgery to replace the valve with a tissue or bio-prosthetic valve. The applicant’s 31 Skerbic v McCormack [2007] ACTSC 93. 32 Skerbic v McCormack [2007] ACTSC 93 at [41]. 33 Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd (2004) ATPR ¶42-014 (Kiefel J).

520

The Australian Consumer Law

[12.50]

case relied upon instructional defects in the Patient Booklet, namely a failure to warn about the risk of thromboembolisms developing. Kiefel J held: The evidence shows that the product has been made available to many persons. The incidence of complications shows that many people have benefited from it. The valve is not particularly prone to the development of thrombus and it was described by one witness as relatively thrombus-resistant and perhaps even more so than other valves. The risk cannot be eliminated, even with optimal anticoagulation. The risk which is present is, and was at the relevant time, well known by cardiologists and surgeons even without the Physician’s Reference Manual. They were in a position to convey information concerning the risk in a meaningful way to their patients. In these circumstances I do not see how it is possible to conclude generally that the St Jude Medical valve was defective. The fact that it was the cause of thromboembolisms in the applicant establishes only that she unfortunately fell within a small number of persons who suffer such a complication. In any event the applicant’s case, apart from reliance upon the chip, is not based upon the general quality of the valve but upon what she was told about it after implant. In some cases a failure to warn might render a product defective in the sense spoken of in the subsection. Without a warning or instruction its use might be unsafe. A warning might be necessary to remove some inherent dangerous quality. A warning of the risk and rate of risk of thromboembolism despite anticoagulation could have no such effect here. Assuming however that the concept of goods being defective is much wider, and extends to any warning relevant to a person’s informed choice, this does not avail the applicant. The decision to have the valve has been made at the point when she receives the booklet. The applicant does not and cannot allege that the failure to warn afterwards was causally connected to the injuries she sustained save that she may have sought further advice.34

Reasonably expected uses [12.50]

Section 9(2)(e) provides that a further factor which must be taken into account is the use to which the product could reasonably be expected to be put. This “use” includes likely potential misuse. If the injury or loss suffered results partly from misuse, the manufacturer will be able to reduce the amount of compensation payable to reflect that part of the damage caused by contributory acts by the injured person, but this does not relieve the manufacturer of the obligation to warn. See [12.145].

Time when the goods were supplied [12.55]

Section 9(2)(f) provides that a final factor which must be taken into account is the time at which the goods were supplied. The critical time is when the goods which caused the injury or loss were put into circulation by its manufacturer. Goods which met community expectations at that time are not defective if at a later time the safety expectations of persons generally have increased.

Other relevant circumstances [12.60]

Section 9(2) provides that all relevant circumstances must be taken into account, not just the specific matters listed. The nature of the product and community knowledge of that product will be relevant circumstances. In relation to

34 Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd (2004) ATPR ¶42-014 at [198]-[199].

[12.70]

12 Liability of Manufacturers for Goods with Safety Defects

521

products, such as guns and knives which are inherently dangerous and known to be such, community expectations would include an understanding of the risk associated with their use. Where the risk is not widely known appropriate warnings will be required. The price of the goods may also be relevant. Persons generally do not expect cheaper products to contain any additional special safety features which are normally associated with more expensive products. However, persons are generally entitled to expect that goods will not dangerous simply because they are cheaper. In relation to inherently dangerous goods, they are not necessarily defective simply because they cause injury, although if the danger is not well known to the general community, they would need to be accompanied by appropriate warnings and instructions as to their safe use. The role intermediaries played in the sale of the product was a relevant consideration in Laws v GWS Machinery Pty Ltd.35 Rothman J held that Motokov, the importer and distributor of a tractor tyre (and therefore a manufacturer within the meaning of s 74A) was liable under the provision of s 75AD: … Because Motokov marketed the goods without any warning as to the fitting process and given: the manner in which the tyres would be marketed (including through dealers, such as GWS, who were not tyre specialists) for sale to consumers; the packaging of the tyres (and particularly the absence of any accompanying and attached warnings); and that the tyre might reasonably be expected to be fitted to rims; the safety of the tyre was not such as persons generally are entitled to expect. There is a defect in the tyre as described in s 74AC of the Trade Practices Act and Motokov is liable under s 75AD to compensate Laws Senior and Laws Junior for their loss caused by the defect.36

Subsequent safer goods [12.65]

A product is not defective solely because a safer product is subsequently put on the market. Section 9(3) provides: An inference that goods have a safety defect is not to be made only because of the fact that, after they were supplied by their manufacturer, safer goods of the same kind were supplied.

While this factor may be considered by a court, it should not be the only basis for concluding that goods are defective.

Compliance with mandatory standards [12.70]

It is recognised that the state of the art is constantly changing, and that there may be some delay between the making of some scientific invention or technological innovation and the incorporation of it into a Commonwealth mandatory standard. Section 9(4) provides: An inference that goods have a safety defect is not to be made only because: (a) there was compliance with a Commonwealth mandatory standard for them; and

35 Laws v GWS Machinery Pty Ltd (2007) 209 FLR 53. 36 Laws v GWS Machinery Pty Ltd (2007) 209 FLR 53 at [164].

522

The Australian Consumer Law

[12.75]

(b) that standard was not the safest possible standard having regard to the latest state of scientific or technical knowledge when they were supplied by their manufacturer. While this factor may be considered by a court, it should not be the only basis for concluding that goods are defective.

ACTION FOR PERSONAL INJURIES [12.75]

Section 138 of the ACL provides:

(1) A manufacturer of goods is liable to compensate an individual if: (a) the manufacturer supplies the goods in trade or commerce; and (b) the goods have a safety defect; and (c) the individual suffers injuries because of the safety defect. (2) The individual may recover, by action against the manufacturer, the amount of the loss or damage suffered by the individual. (3) If the individual dies because of the injuries, a law of a State or a Territory about liability in respect of the death of individuals applies as if: (a) the action were an action under the law of the State or Territory for damages in respect of the injuries; and (b) the safety defect were the manufacturer’s wrongful act, neglect or default.

The elements of this cause of action are: • there must be a manufacturer,37 which, in trade or commerce, supplies goods manufactured by it; • those goods must have a safety defect; and • an individual dies or suffers injuries caused by the safety defect.

Persons who can claim [12.80]

Defective goods actions can be brought not only by the owners of goods, but also by individuals who are innocent bystanders who are injured by defective goods.

Causation [12.85]

It is necessary to establish a causal link between the defect and the injury

suffered. In Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd,38 considered at [12.45] Kiefel J held: An issue arises in this case concerning whether the applicant is obliged to prove, as part of her case concerning the chip, that it was present when the valve was implanted. The first respondent submits that the applicant cannot establish, as s 75AD(c) requires, that she suffered injury “because of the defect” unless she establishes this fact. The applicant counters that the legislature could not be taken to have intended that an injured person be required to prove the existence of the defect at the time of the supply. The applicant’s submission must be correct, in my view. A person bringing a claim under s 75AD is to establish the existence of a defect in the goods and the fact of their injury. Additionally they must prove causation, which is to say that the injury came about 37 See [12.10]. 38 Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd (2004) ATPR ¶42-014 (Kiefel J).

[12.95]

12 Liability of Manufacturers for Goods with Safety Defects

523

“because of” the defect… It would not be consistent with the requirements of the defence provisions, such as s 75AK(1), to require an applicant to establish the existence of the defect at a point before injury. If the necessary link between defect and injury is established it is to be inferred that the defect was present at the time of the injury, unless the manufacturer shows otherwise.39

In ACCC v Glendale,40 the defect was an inadequate warning label. However, Mr Barnes admitted in cross-examination that he had acted on the advice of a friend who advised him to pour hot water down the drain first, and then tip the whole of the contents of the product down the drain, rather than anything written on the label. Nevertheless, Emmett J found that on the evidence causation was established. The Full Court agreed: However, Emmett J accepted Mr Barnes’ evidence that, if the label had contained an instruction not to use hot water, or a warning about hot water, he would not have used the Product with hot water; at least without making further inquiries about the safety of doing this. It follows from this finding that his Honour was justified in finding a causal relationship between the defect in the Product and Mr Barnes’ injuries.

The issue of causation needs to be considered in conjunction with the defence in s 142 of the ACL at [12.120].

Measure of damages [12.90]

There is no statutory guidance as to the measure of damages. It has been held that it is the same as the damages recoverable for negligence under the common law.41

ACTION FOR LOSS OR DAMAGE SUFFERED BY DEPENDANTS [12.95]

Section 139(1) and (2) of the ACL provide:

(1) A manufacturer of goods is liable to compensate a person if: (a) the manufacturer supplies the goods in trade or commerce; and (b) the goods have a safety defect; and (c) an individual (other than the person) suffers injuries because of the safety defect; and (d) the person suffers loss or damage because of: (i) the injuries; or (ii) if the individual dies because of the injuries – the individual’s death; and (e) the loss or damage does not come about because of a business or professional relationship between the person and the individual. (2) The person may recover, by action against the manufacturer, the amount of the loss or damage suffered by the person.

The elements of this cause of action are: • there must be a manufacturer which, in trade or commerce; 39 Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd (2004) ATPR ¶42-014 at [190]-[191]. 40 ACCC v Glendale (1998) 40 IPR 619. 41 Skerbic v McCormack [2007] ACTSC 93 at [41] (Harper M).

524

• • • •

The Australian Consumer Law

[12.100]

supplies goods manufactured by it; those goods must have a safety defect; an individual suffers injury caused by the safety defect; and the dependants of the injured party suffer their own loss except where the loss comes about because of a business relationship.

The legislation is a consumer protection measure. Thus, if the loss arises out of a business relationship between the injured person and the potential plaintiff, s 139 will not apply. This restates s 75AE of the TPA.

Persons who can claim [12.100] The person who suffers the loss or damage as a result of the injury must be an individual, not a corporation. In Stegenga v J Corp Pty Ltd,42 Wespine Industries Pty Ltd (Wespine), was the manufacturer of timber roofing joints. It sold timber joints to Regal Tower Pty Ltd (Regal), which in turn sold the joints to J Corp Pty Ltd (J Corp), the defendant. J Corp engaged the plaintiff’s firm of roofing contractors to build a roof using the timber joints. As the plaintiff was standing on it, the joint snapped, he suffered injuries and sued J Corp relying on TPA, s 75AD. J Corp commenced third party proceedings against Regal, and Regal instituted proceedings against, Wespine. J Corp claimed that Regal had contracted to provide timber joists of adequate strength for the roof construction. In the alternative, J Corp claimed that Regal was liable to compensate Mr Stegenga for his damages under s 75AD of the TPA. Regal joined Wespine claiming Wespine was liable to compensate Regal for the amount of Regal’s loss suffered as a result of Mr Stegenga’s injuries, pursuant to s 75AE of the TPA. Regal argued that a plain and literal meaning should be applied to s 75AE and that as it was a “person” relief should be available to it. Regal acknowledged that if the relief it sought depended on commercial rights then it would not be available to it under s 75AE, because the section prohibits relief being granted where there is a business relationship between the party claiming relief and the person who suffered injury as a result of the defective product. Regal argued that it did not have a business relationship with the plaintiff. Deane J held: Losses caused, for example, by the injury of a business partner or injury of a director of a company are therefore excluded. Subsection 75AE(2) makes it clear that, for the purposes of this regime, a profession is a business. It also provides that an employer/employee relationship (or one of a similar nature) is a “business relationship”. The obvious meaning that these two paragraphs give to s 75AE is that it is intended to benefit dependants of a person, being a natural person, who is either injured or dies as a result of injuries sustained.43

Deane J did not accept that the plain and literal interpretation was the correct interpretation of s 75AE. Rather, in keeping with the clear intent of the remainder of 42 Stegenga v J Corp Pty Ltd (1999) ATPR ¶41-695. 43 Stegenga v J Corp Pty Ltd (1999) ATPR ¶41-695.

[12.110]

12 Liability of Manufacturers for Goods with Safety Defects

525

Pt VA, it was “… confined to creating a strict, liability regime for the benefit of individuals, being those persons having a claim for loss of dependency through death or injury of the person upon whom they had a degree of dependency”.44

ACTION FOR CONSUMER GOODS DESTROYED OR DAMAGED [12.105] Section 140(1) provides: A manufacturer of goods is liable to compensate a person if: (a) the manufacturer supplies the goods in trade or commerce; and (b) the goods have a safety defect; and (c) other goods of a kind ordinarily acquired for personal, domestic or household use or consumption are destroyed or damaged because of the safety defect; and (d) the person used or consumed, or intended to use or consume, the destroyed or damaged goods for personal, domestic or household use or consumption; and (e) the person suffers loss or damage as a result of the destruction or damage.

The elements of this cause of action are as follows: • there must be a manufacturer which, in trade or commerce, supplies goods manufactured by it; • those goods must have a safety defect; • other consumer goods (not the defective goods) are destroyed or damaged because of the safety defect; and • those other damaged goods were used or consumed (objective test), or intended to be used or consumed (subjective test) for personal, domestic or household use or consumption. Section 140 excludes damage to the defective goods themselves. In relation to s 75AF of the TPA, of the Explanatory Memorandum (para 57) states that if a defective component is incorporated in the finished goods, those finished goods will also be defective. According to one commentator this can produce “inconsistent results”: If a battery originally supplied with a car explodes, no compensation can be recovered for damage to the vehicle itself. If a replacement battery explodes, damage to the vehicle itself is recoverable.45

The owner of the vehicle with the original battery could sue for breach of the statutory guarantees as to fitness for purpose or acceptable quality, but not under s 140 of the ACL.

ACTION FOR LAND, BUILDINGS OR FIXTURES DAMAGED [12.110] Section 141(1) provides: A manufacturer of goods is liable to compensate a person if: (a) the manufacturer supplies the goods in trade or commerce; and 44 Stegenga v J Corp Pty Ltd (1999) ATPR ¶41-695. 45 Kellam, “Liability of Manufacturers and Importers for Defective Products in Australia under Part VA of the Trade Practices Act” [1994] Consumer Law Journal 87 at 93.

526

The Australian Consumer Law

[12.115]

(b) the goods have a safety defect; and (c) land, buildings or fixtures are destroyed or damaged because of the safety defect; and (d) the land, buildings or fixtures are ordinarily acquired for private use; and (e) the person used, or intended to use, the land, buildings or fixtures for private use; and (f) the person suffers loss or damage as a result of the destruction or damage.

The elements of this cause of action are: • there must be a manufacturer, which, in trade or commerce, supplies goods manufactured by it; • those goods must have a safety defect; • land, buildings or fixtures are destroyed or damaged because of the safety defect; • the land, buildings or fixtures are ordinarily acquired for private use; and • the person used (objective test), or intended to use (subjective test) the land, buildings or fixtures for private use.

DEFENCES [12.115] Section 142 provides: In a defective goods action, it is a defence if it is established that: (a) the safety defect in the goods that is alleged to have caused the loss or damage did not exist: (i) in the case of electricity – at the time at which the electricity was generated, being a time before it was transmitted or distributed; or (ii) in any other case – at the time when the goods were supplied by their actual manufacturer; or (b) the goods had that safety defect only because there was compliance with a mandatory standard for them; or (c) the state of scientific or technical knowledge at the time when the goods were supplied by their manufacturer was not such as to enable that safety defect to be discovered; or (d) if the goods that had that safety defect were comprised in other goods–that safety defect is attributable only to: (i) the design of the other goods; or (ii) the markings on or accompanying the other goods; or (iii) the instructions or warnings given by the manufacturer of the other goods.

There are four types of defences available to manufacturers in actions involving safety defects: • the alleged defect did not exist at the time the product was supplied by the manufacturer; • the goods were only defective because of compliance with a mandatory standard; • the defect could not have been discovered in the light of the state of scientific and technical knowledge at the time the goods were supplied by the manufacturer; and • a component manufacturer will not be liable if the defect is attributable only to the design of the finished goods, or to the markings, instructions or warnings given by the manufacturer of the finished goods.

[12.120]

12 Liability of Manufacturers for Goods with Safety Defects

527

The manufacturer will not be liable if it can prove one of these defences.

No defect at time of supply defence [12.120] Section 142(a) provides that the manufacturer will not be liable to compensate the claimant if it can prove that the alleged defect did not exist at the time the product was supplied by the manufacturer. The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 states: It is a defence to a safety defective goods action if the manufacturer can establish that the good alleged to have caused the loss or damage in question, did not contain a safety defect at the time they were supplied by the actual manufacturer. An actual manufacturer of a good is a person who was involved in the actual manufacture of the goods, such as growing, extracting, producing, processing or assembling the good. It does not include a person who holds themselves out (or is held out) to be the manufacturer of the good nor does it include an importer of the good, where the person has not been actually involved in manufacturing the good (for instance, not involved in growing, extracting, producing, processing or assembling the good). Where the good alleged to have caused the loss or damage suffered is electricity, it is a defence if the manufacturer can establish that no safety defect existed at the time the electricity was generated (being a time before the electricity was transmitted or distributed).46

The manufacturer would need to show, on the balance of probabilities, that the defective goods were defect free when they left the manufacturer’s control. Depending on the nature of the defect, the manufacturer may need to provide detailed evidence on the manufacturing process and quality control to which the goods were subjected, in order to show that the particular goods in question were not defective when they left the manufacturer’s control. In Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd,47 the defective mitral valve implant was surgically removed from the plaintiff on 26 June 1997.48 Four years later a scanning electron microscope exposed a chip on the valve. There was no evidence as to how the chip occurred; however, the manufacturer of the valve presented detailed records of the valve’s manufacturing process, so that the court was able to conclude that the defence applied, absolving the manufacturer of liability. Kiefel J held: The defence under s 75AK(1)(a) requires that it be shown that the defect found in the goods did not exist at the time they passed from the manufacturer’s control. It does not require the manufacturer to establish that it occurred at a later time, although if this were possible it would obviously deny the earlier existence of the defect. The first respondent cannot establish as a fact that the chip occurred during or subsequent to Ms Smentek’s examination, although they would appear to be the most likely of the scenarios. The 46 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 at [12.37]-[12.39]. 47 Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd (2004) ATPR ¶42-014 (Kiefel J). 48 Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd (2004) ATPR ¶42-014 at [10].

528

The Australian Consumer Law

[12.125]

number of examinations prior to the scanning electron microscope examination, at which such a chip would have been visible under the magnifications used, strongly suggests the absence of a chip up to this point. The evidence of the examinations of the valve’s component parts prior to assembly establishes the likelihood that any chip present would have been detected. The prospect of a chip being created in the reworking process is only a hypothesis. The evidence concerning a does not point to it as a very likely prospect. In any event it cannot stand the detailed records of examinations after the rework and the many examinations undertaken after explant. The first respondent would therefore succeed on its defence.49

In Effem Foods Ltd v Nichols,50 the claimant manufactured a chocolate-coated confectionery item sold under the name of “Snickers” bar. The opponent purchased one of these bars in a shop but when she attempted to eat it she bit into a concealed safety pin and was injured. She brought proceedings in the District Court against the manufacturer for under s 75AD of the TPA. The primary judge, Phegan DCJ, held that the manufacturer had not established that the defect occurred after the bar had left its control and did not exist when it was supplied by the manufacturer. His Honour found that the chances of a safety pin accidentally entering the product line, surviving and then passing the metal detector at the end were very remote but such a result was not impossible. He also found that the safety pin could have been deliberately inserted in the bar while it was in the retail shop. Damages were awarded and the manufacturer sought leave to appeal. It claimed that proof of the possibility of sabotage in the shop was enough to discharge its onus of proving the statutory defences. Handley JA (with whom Tobias JA and Palmer J agreed) held that under the statutory defence the manufacturer had to establish on the civil onus that the defect occurred after the bar had left its control and did not exist when it was supplied by the manufacturer. It had only proved that deliberate sabotage in the retailer’s shop was a possibility. Since any such act would be a criminal offence the presumption of innocence applied.51 The manufacturer had not discharged the onus of proof.

Compliance with a mandatory standard defence [12.125] Section 142(b) provides that the manufacturer will not be liable to compensate the claimant if it can prove that the goods were only defective because of compliance with a mandatory standard. Mandatory standard is defined in s 2 to mean a standard: (a) for the goods or anything relating to the goods; and (b) that, under a law of the Commonwealth, a State or a Territory, must be complied with when the goods are supplied by the manufacturer, being a law creating an offence or liability if there is such non-compliance. Section 142(b) must be read in conjunction with ACL, s 148. Section 148(1) provides that where a manufacturer intends to rely on this defence, it must give the Commonwealth as soon as possible, the following information: 49 Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd (2004) ATPR ¶42-014 at [207]-[208]. 50 Effem Foods Ltd v Nichols [2004] NSWCA 332 (17 September 2004). 51 Briginshaw v Briginshaw (1938) 60 CLR 336 at 362-3.

[12.130]

12 Liability of Manufacturers for Goods with Safety Defects

529

• notice about the safety defective goods action being brought against them; • notice about the defence it is proposing to rely on; and • a copy of the defence it is proposing to rely on. Section 148(2) provides that the giving of the above notices makes the Commonwealth a defendant in the safety defective goods action. Section 148(3) provides that if, but for this defence, the action is successful, then it is the Commonwealth (and not the manufacturer) who is liable to pay for the amount of loss or damage suffered as a result of the safety defect. In addition, the court may make cost orders against the Commonwealth where it is considered just to do so. The compliance with the standard must have been the sole cause of the defect. If compliance with the standard is a partial cause of the defect the manufacturer is still liable.

State of the art defence [12.130] Section 142(c) provides that the manufacturer will not be liable to compensate the claimant if it can prove that the defect could not have been discovered in the light of the state of scientific and technical knowledge at the time the goods were supplied by the manufacturer. Without such a defence it is argued that product liability regimes would act as a disincentive to a manufacturer engaging in innovative research and development.52 The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 states: The time to assess whether the state of scientific and technical knowledge was such as to enable the safety defect to be discovered, is the time when the relevant good in question was supplied by the manufacturer. This may not necessarily be the first time that goods of that kind were supplied by that manufacturer. Further, the good in question does not have to be directly supplied to or acquired by the person who suffered the loss or damage.53

It is the objective state of scientific and technical knowledge which is to be taken into account, not the subjective knowledge of the individual manufacturer. It is only if the defect could not have been discovered by anybody that the manufacturer will be able to rely on the defence in ACL, s 142(c). Manufacturer should ensure that there have been no further technical advances which affect the safety of the goods before they are put into circulation. Manufacturers must keep up to date with advances in knowledge after first putting goods into circulation to ensure that new information is taken into account in the manufacture of subsequent goods. The crucial time is therefore, when the goods in question which caused the injury were supplied by the manufacturer, not the time at which the manufacturer first supplied goods of that type. 52 Boykett, “State of the Art: Advancement or Regression? Economic Justification for the Product Liability Defence” (1996) 4 Trade Practices Law Journal 111 at 113. See also, Arenson, “The Evolution of Products Liability in Australia: A Critical Analysis” (1994) 2 Trade Practices Law Journal 4 at 17-8. 53 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [12.43]-[12.44].

530

The Australian Consumer Law

[12.140]

In Ryan v Great Lakes Council,54 Ryan developed Hepatitis A as a result of consuming contaminated oysters. In relation to the s 75AD claim the trial judge Wilcox J held: s 75AK(1)(c) provides a defence to an action under s 75AD (amongst other sections) “if it is established that … the state of scientific or technical knowledge at the time when they were supplied by their actual manufacturer was not such as to enable that defect to be discovered”. The paragraph obviously intends the defence be unavailable if the goods were supplied notwithstanding the possibility of discovery of the defect. Conversely, the defence is available if the defect was not capable of discovery before supply. In the present case, discovery and supply were mutually exclusive; the only test that would reveal the defect would destroy the goods. Accordingly, it seems to me the defence applies to the s 75AD claim fails.55

In, Graham Barclay Oysters Pty Ltd v Ryan,56 Mr Ryan cross-appealed, arguing that Wilcox J erred in allowing the defence under s 75AK(1)(c). His Honour treated “the goods” as referring to the individual oysters. If each individual oyster were tested it would be destroyed and could not be supplied. Ryan argued that the expression “to be discovered” should not have been construed to mean “a physical verification of each and every oyster”. It may have been legitimate to test by sample. Lindgren J dismissed the cross-appeal: His Honour treated “the goods” as referring to the individual oysters: if an individual oyster were tested, it would be destroyed in the process and so supply of it to an individual would have become an impossibility. In my opinion his Honour was entitled to find that Barclay Oysters had discharged the onus of establishing that in December 1996, when it supplied the oysters, the state of scientific or technical knowledge was not such as to enable the presence of the HAV in them to be discovered.57

Component defence [12.140] The definition of “goods” in s 2 includes “any component part of, or accessory to, goods”. Component manufacturers are therefore liable to compensate those who are injured by defective goods where the defective component is included in the finished goods. However, the component manufacturer should not be liable if the finished product is defective solely due to an act or omission of the manufacturer of the finished product. Section 142(d) provides that the component manufacturer will not be liable if the defect is attributable only to the design of the finished goods, or to the markings, instructions or warnings given by the manufacturer of the finished goods. Section 142(d) makes it clear that a defect in a component cannot be attributed to the component manufacturer if the defect is due to an activity of the ultimate manufacturer, such as careless assembly, using an unsuitable component or 54 Ryan v Great Lakes Council (1999) ATPR (Digest) ¶46-191. 55 Ryan v Great Lakes Council (1999) ATPR (Digest) ¶46-191 at 52,339. 56 Graham Barclay Oysters Pty Ltd v Ryan (2000) ATPR (Digest) ¶46-207. 57 Graham Barclay Oysters Pty Ltd v Ryan (2000) ATPR (Digest) ¶46-207 at [541]-[542].

[12.145]

12 Liability of Manufacturers for Goods with Safety Defects

531

incorrect or inadequate instructions. The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 states: It is a defence to a safety defective goods action where the manufacturer can establish that the good alleged to have caused the loss or damage in question was comprised in another good, and the safety defect only existed because of: • the design of that other good; • a marking on or which accompanied that other good; or • an instruction or warning given by the manufacturer of that other good. A good can be “comprised in” another good if, for instance, it is part of, an ingredient of or component of, another good.58

INDIVIDUAL’S SHARE IN RESPONSIBILITY FOR LOSS OR DAMAGE [12.145] Section 137A of the CCA provides: (1) If the loss or damage to which a defective goods action under section 138 or 139 of the Australian Consumer Law relates was caused by both: (a) an act or omission of: (i) the individual who suffers the injuries referred to in that section; or (ii) a person for whom that individual is responsible; and (b) a safety defect of the goods to which the action relates; the amount of the loss or damage is to be reduced to such extent (which may be to nil) as the court thinks fit having regard to that individual’s share in the responsibility for the loss or damage. (2) If the loss or damage to which a defective goods action under section 140 or 141 of the Australian Consumer Law relates was caused by both: (a) an act or omission of: (i) the person who suffered the loss or damage; or (ii) another person for whom that person is responsible; and (b) a safety defect of the goods to which the action relates; the amount of the loss or damage is to be reduced to such extent (which may be to nil) as the court thinks fit having regard to the person’s share in the responsibility for the loss or damage.

The repealed s 75AN of the TPA made express provision for contributory acts or omissions to reduce compensation in relation to claims made under Pt VA of the TPA. The scope of that provision was considered in ACCC v Glendale Chemical Products Pty Ltd.59 Glendale contended that Mr Barnes read the label on the container of the product in the store. He read the warning that the product was corrosive and he read the direction stating users must avoid contact with eyes and skin. He also read the notation “Always wear rubber gloves and safety glasses when handling caustic soda.” He read it again at home shortly prior to the use of the product. Mr Barnes did not wear rubber gloves and safety glasses. His explanation for not doing so was because he was not mixing it and he did not think 58 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [12.45]-[12.46]. 59 ACCC v Glendale Chemical Products Pty Ltd (1998) ATPR ¶41,632.

532

The Australian Consumer Law

[12.150]

he was going to get splashed with the substance. On the other hand he conceded that he was “handling caustic soda”. Further, he knew what safety glasses were and that, although he did not have a pair of safety glasses he could quite easily have made searches at the Woolworths store or at the hardware store on the way home and got some safety glasses. However, in relation to liability Emmett J concluded that there was a defect, having regard to the manner in which and the purposes for which the product was marketed and what might reasonably be expected to be done in relation to it. The defect under s 75AC was the failure to warn against use of the Product with hot water in a confined space. Emmett J held: Even if Mr Barnes had been wearing safety glasses, he could be excused for having taken them off in order to peer down the drain to see the result of his efforts. The direction did not say that safety glasses should be worn even after the handling of the Product was complete by being put into the drain. That is to say, the failure to wear safety glasses did not cause the loss suffered by Mr Barnes. The loss occurred because of the consequences of putting the Product in the drain.60

Emmett J did not consider that the failure to wear safety glasses in the act of examining the drain to see whether the treatment was effective was an omission which would attract the operation of s 75AN.61

TIME FOR COMMENCING ACTIONS [12.150] The time for commencing actions is limited by ACL, s 143 which provides: (1) Subject to subsection (2), a person may commence a defective goods action at any time within 3 years after the time the person became aware, or ought reasonably to have become aware, of all of the following: (a) the alleged loss or damage; (b) the safety defect of the goods; (c) the identity of the person who manufactured the goods. (2) A defective goods action must be commenced within 10 years of the supply by the manufacturer of the goods to which the action relates.

JOINT AND SEVERAL LIABILITY [12.155] If two or more persons are liable for the same loss or damage in a defective goods action, their liability is joint and several.62

60 ACCC v Glendale Chemical Products Pty Ltd (1998) ATPR ¶41,632 at 40,974. 61 See also Mayes v Australian Cedar Pty Ltd (2006) ATPR ¶42-119 at [50] (Grove J). 62 ACL, s 144.

[12.170]

12 Liability of Manufacturers for Goods with Safety Defects

533

REPRESENTATIVE ACTIONS BY THE REGULATOR [12.160] The regulator can also bring a defective goods action on behalf of one or more persons who suffer loss or damage, but only if it has obtained their prior written consent.63 APPLICATION OF PROVISIONS NOT TO BE EXCLUDED OR MODIFIED [12.165] It is not possible to exclude liability for a cause of action under Pt 3-5 of the ACL. Any attempt to do so may give rise to civil liability for a contravention of s 29(1)(m) of the ACL, or criminal liability under ACL, s 151(m). Section 150 of the ACL provides: (1) Any term of a contract (including a term that is not set out in the contract but is incorporated in the contract by another term) that purports to exclude, restrict or modify, or has the effect of excluding, restricting or modifying, any of the following is void: (a) the application of all or any of the provisions of this Part; (b) the exercise of a right conferred by any of those provisions; (c) any liability under any of those provisions. (2) A term of a contract is not taken to exclude, restrict or modify the application of a provision of this Part unless the term does so expressly or is inconsistent with that provision.

SCOPE FOR OVERLAP [12.170] Section 15 of the ACL provides: Conduct is not taken, for the purposes of this Schedule, to contravene a provision of this Schedule merely because of the application of: (c) a provision of Part 3-5.

While, conduct consisting of a failure to meet obligations under the provisions dealing with the liability of manufacturers for goods with safety defects will not constitute a contravention of the ACL. However, it is important to note the word “merely” in s 15. There may be other surrounding circumstances such as misleading promotional material as to product safety that constitutes a contravention of s 18 of the ACL, or a contravention of s 29(1)(g), a false or misleading representation as to the performance characteristics of the goods. There is clearly scope for overlap with the consumer guarantees law and the voluntary product recall regime. It appears that vehicles subject to a voluntary recall by a manufacturer are not deemed to be unsafe for the purposes of the guarantee of acceptable quality. Vehicle recalls occur where there is the possibility of a safety concern with one or more of the parts used in vehicles that are part of the recalled model range. A recall applies to all vehicles and models that use the part. Generally, the majority of the vehicles the subject of a voluntary recall will be safe, but there may be a possibility that some of them will contain a defective part. A recall is not evidence that any particular vehicle that is part of a recalled model is 63 ACL, s 149.

534

The Australian Consumer Law

[12.170]

unsafe or defective. The pre-ACL product liability law in Australia was described as a “legal morass”.64 The position since the introduction of the ACL, still leaves considerable scope for overlap. Depending on the circumstances, if a defective product causes loss, a claim for compensation against the manufacturer may be formulated in one or more of the following ways under the ACL: Depending on the circumstances, if a defective product causes loss, a claim for compensation against the manufacturer may be formulated in one or more of the following ways under the ACL: • Breach of ACL (ss 18 and 29(1)(g)), if the manufacturer makes a false or misleading representation about performance characteristics (safety) of the goods either on the packaging or labelling or in advertising the goods. The cause of action for damages against the manufacturer would be made under ACL, s 236. • Non-compliance with the guarantee of acceptable quality (ACL, s 54) or the guarantee of fitness for purpose (ACL, s 55). The cause of action against the manufacturer for damages would be made under ACL, s 271(1). Damages would be calculated in accordance with ACL, s 272(1)(a). • A cause of action for loss or damage based on ACL, ss 138 – 141 against the manufacturer where the goods have a safety defect as defined in s 9 of the ACL. In addition, the consumer may have a claim for damages for breach of implied conditions as to merchantable quality or fitness for purpose implied into the contract under the Sale of Goods regime,65 and a common law claim for negligence based on a breach of the duty of care;66 A claim under Pt 3-5 Div 2 of the ACL (defective goods actions) has a number of advantages over a claim in negligence. First and foremost, it is a strict liability scheme which absolves the plaintiff of the need to establish the defendant’s negligence. Secondly, it allows for representative actions to be brought by the regulator with the consent of those injured. The principal disadvantage is that s 87E of the CCA provides that Pt VIB of the CCA applies to claims under Pt 3-5 of the ACL, in which the plaintiff is seeking an award for personal injury damages. Part VIB, which took effect on 13 July 2004, imposes caps on damages, thresholds to liability, and the introduction of proportionate liability. From the consumer’s perspective a claim based on a breach of ACL, s 18 for misleading conduct gives rise to strict liability, as does a claim against the manufacturer for failure to comply with the guarantees of acceptable quality and fitness for purpose. Unlike a claim under ACL, Pt 3-5, there is no equivalent 64 See Kellam and Nottage, “Happy 15th Birthday! Australia’s Product Liability Morass” (2007) 15(1) Competition & Consumer Law Journal 26 at 64. See also Kellam, Clark and Glavac, “Theories of Product Liability and the Australian Consumer Law” (2013) 21(1) Competition & Consumer Law Journal 1. 65 See, eg, ACCC v Glendale (1998) 40 IPR 619; Laws v GWS Machinery Pty Ltd (2007) 209 FLR 53 and Drew v Makita (Australia) Pty Ltd [2009] 2 Qd R 219. 66 Donoghue v Stevenson (1932) AC 562; Grant v Australian Knitting Mills (1935) 54 CLR 49; Wyong Shire Council v Shirt (1980) 146 CLR 40 at 47 (Mason J).

[12.170]

12 Liability of Manufacturers for Goods with Safety Defects

535

defence in ACL, s 142(c) for defects that were not discoverable because of the state of scientific or technical knowledge at the time when the goods were supplied. A case that illustrates this scope for overlap is Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd.67 In that case it was held that the tendency of Vioxx to contribute to the onset of cardiovascular disease justified the conclusion that it was not reasonably fit for the purpose of providing relief from arthritic pain.68 The claim based on a safety defect in the goods using TPA, s 75AD (now ACL, ss 138 – 141) was unsuccessful because the state of the art defence in TPA, s 75AK(1)(c) (now ACL, s 142(c)) applied. Jessup J held that the scientific knowledge was not such as to allow Vioxx’s defect to be discovered. However, Vioxx was held not to be of merchantable quality because consumers could reasonably expect not to be put at risk of cardiovascular events when they purchased a painkiller. Accordingly, Vioxx fell short of ordinary consumer expectations. Since there was no state of the art defence in relation to a claim in contract for breach of the implied condition of merchantable quality, MSDA were liable.69 A cause of action against a manufacturer based on a breach of the consumer guarantees of acceptable quality and fitness for purpose differs from a cause of action against the manufacturer based on ss 138 – 141 of the ACL. The consumer guarantees impose strict liability, and there is no state of the art defence equivalent to s 142(c). This may have serious implications for the suppliers of pharmaceutical products which can have negative side-effects that cannot be avoided.70 It was noted in the Explanatory Memorandum accompanying the Trade Practices Amendment Bill in relation to the definition to defective goods in s 75AC of the TPA: the court must take all relevant circumstances into account in determining the safety of goods. Safety expectations may also depend on matters such as the nature of the product and community knowledge of that product. For example, there are a number of known negative side effects associated with certain pharmaceuticals and vaccines. It is also generally accepted and known that these side effects cannot be avoided. Such products are known to confer substantial benefits which flow to the wider community at large. The small statistical chance of injury associated with them does not of itself mean that they are “defective”.71

It may be possible to argue that the words “reasonably fit for any disclosed purpose, and for any purpose for which the supplier represents that they are reasonably fit” in s 55(1) of the ACL provide scope for arguing a state of the art defence on the basis that it would not be “reasonable” to hold manufacturers liable for defects which could not be detected given the state of scientific and technical knowledge at the time goods were put into circulation. However, this has yet to be 67 Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd (2010) 184 FCR 1. 68 Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd (2010) 184 FCR 1 at [944]. 69 See [8.360]. 70 See Newman-Martin, “Manufacturers’ Liability for Undiscoverable Design Flaws in Prescription Drugs: A Merck-Y Area of the Law” (2011) 19 Torts Law Journal 26. 71 Senate, Hansard, 26 May 1992, p 6.

536

The Australian Consumer Law

[12.170]

determined by the courts. In Medtel v Courtney,72 it was common ground both before the primary judge and on appeal that facts known at the time of the trial could be relied on in determining whether Mr Courtney’s pacemaker was of merchantable quality even though they were not known or their significance was not appreciated at the time the pacemaker was manufactured.

72 See Medtel Pty Ltd v Courtney (2003) 130 FCR 182 at [57] (Branson J with whom Jacobson J agreed). See [8.215].

13

Public Enforcement [13.05] INTRODUCTION .............................................................................................................. 538

[13.10] Regulators enforcement priorities .................................................................. 539 [13.15] ACL regulators’ enforcement strategies ........................................................ 540 [13.20] PART I – PUBLIC ENFORCEMENT: CRIMINAL PROSECUTION ......................... 541

[13.20] Liability of corporations for ACL (Cth) offences ........................................ 541 [13.25] Liability to pay .................................................................................................. 544 [13.30] Aiding and abetting an offence ...................................................................... 544 [13.35] Conspiracy to commit an offence .................................................................. 544 [13.40] Jurisdiction ......................................................................................................... 545 [13.45] Onus of proof .................................................................................................... 545 [13.50] Time limits for prosecution ............................................................................. 547 [13.55] Assessing the amount of the fine .................................................................. 547 [13.60] Specific deterrence and general deterrence .................................................. 549 [13.65] Parity principle .................................................................................................. 549 [13.70] Totality principle ............................................................................................... 550 [13.75] Multiple offences: loss or damage ................................................................. 551 [13.80] Enforcement and recovery of fines ................................................................ 551 [13.85] Preference must be given for victims ............................................................ 551 [13.90] Multiple contraventions ................................................................................... 552 [13.95] Previous convictions ......................................................................................... 552 [13.100] Costs .................................................................................................................. 552 [13.105] Defences relating to information providers ............................................... 552 [13.110] Defences in relation to criminal prosecutions ........................................... 553 [13.115] Reasonable mistake of fact ............................................................................ 553 [13.120] Act or default of another person ................................................................. 556 [13.125] Publisher’s defence ......................................................................................... 556 [13.130] Non-compliance with safety or information standard ............................ 557 [13.135] Injunctions and other orders for offences ................................................... 558 [13.140] PART II – PUBLIC ENFORCEMENT: CIVIL PROCEEDINGS ............................... 558

[13.145] Declarations ..................................................................................................... 558 [13.150] Declarations: unfair terms ............................................................................. 560 [13.155] Civil pecuniary penalties ............................................................................... 561

538

The Australian Consumer Law

[13.175] [13.190] [13.195] [13.200] [13.205] [13.210] [13.215] [13.220] [13.230] [13.235] [13.240] [13.245] [13.250] [13.285] [13.290] [13.315] [13.320] [13.330] [13.335] [13.340]

[13.05]

Mandatory factors ........................................................................................... Non-mandatory factors .................................................................................. Totality principle ............................................................................................. Parity principle ................................................................................................ Joint submissions on civil penalties ............................................................ Contravention of two or more provisions .................................................. Accessorial liability ......................................................................................... Attempt and attempt to induce ................................................................... Principal offender ceases to exist ................................................................. Protection against double jeopardy ............................................................. Honest and reasonable conduct ................................................................... Indemnification of officers ............................................................................. Injunctions ........................................................................................................ Orders for preservation of property ............................................................ Non-punitive orders ....................................................................................... Adverse publicity orders ............................................................................... Orders disqualifying a person from managing corporations ................. Publisher’s defence ......................................................................................... Undertakings ................................................................................................... Administrative powers for the regulator ...................................................

565 567 568 570 570 572 574 575 577 577 578 579 579 583 585 589 590 593 594 597

[13.405] PART III – COUNTRY OF ORIGIN DEFENCES ....................................................... 608

[13.410] [13.415] [13.420] [13.425] [13.430]

Made in Australia representations ............................................................... Product of/produce of representations ....................................................... Prescribed logo representations .................................................................... Grown in representations .............................................................................. Grown in representations regarding ingredients or components ..........

609 611 611 612 612

INTRODUCTION [13.05]

A contravention of a consumer protection provision of the Australian Consumer Law (ACL) can be pursued in two ways. First, by means of public enforcement by the Australian Competition and Consumer Commission (ACCC) and/or the Commonwealth Director of Public Prosecutions (CDPP) at the Commonwealth level, or a State or Territory regulator and/or State or Territory Director of Public Prosecutions in relation to the State or Territory application laws. Secondly, by means of private enforcement by persons who have suffered loss or damage as a result of conduct that contravenes the ACL.1 The relevant agencies responsible for enforcing the ACL (the ACL regulators) are set out at [1.145]. The importance of the distinction between public and private enforcement is that the ACL regulators will seek to recover remedies that will benefit consumers in the 1 See Chapter 14.

[13.10]

13 Public Enforcement

539

public interest, whereas a private litigant will only be concerned with recovering the loss or damage they have actually suffered. This chapter is concerned with public enforcement and the Court’s powers to impose fines and pecuniary penalties, and to make other orders and enforce undertakings, in response to actions commenced by the ACL regulators. The ACL provides the ACL regulators with a range of enforcement options that will allow them to adopt an enforcement response that is more proportionate to the harm being caused by the conduct. This chapter is divided into three parts: • Part I – criminal enforcement by the Commonwealth Director of Public Prosecutions and the relevant State and Territory officers in relation to offences in Ch 4 of the ACL. • Part II – civil enforcement by the ACL regulators in relation to contraventions of the provisions of Chs 2 or 3 of the ACL. • Part III – country of origin defences.

Regulators enforcement priorities [13.10]

Compliance and enforcement with the ACL involves a “one law, multiple regulators” model. The Compliance and Enforcement Guide states that a core issue for regulators is minimising consumer detriment which is defined as: • the direct financial or material loss or disadvantage from a trader not complying with the law (for example, goods damaged or not delivered) • cost incurred in seeking a remedy to the loss (for example, time lost in repeated trips to a trader to seek a refund).2

A major function of the regulators is to ensure compliance with the ACL. The ACL regulators are required to investigate complaints relating to alleged breaches of the ACL. However, only the courts have the power to make orders concerning remedies in relation to alleged breaches of the ACL. The ACL regulators cannot make findings that conduct contravenes the ACL and cannot impose sanctions, except to in relation to infringement notices. The Compliance and Enforcement Guide, states that the ACL regulators will: target areas of strategic priority, and incidents with evidence or likelihood of consumer detriment. The ACL regulators cannot pursue all complaints. They consider complaints carefully and exercise discretion, directing resources to matters that provide the greatest overall benefit to consumers. As these matters may vary within a jurisdiction or between jurisdictions, priorities for enforcement action differ accordingly.3

The Compliance and Enforcement Guide, states that the ACL regulators will give enforcement priority to matters that demonstrate one or more of the following factors: • conduct of public interest or concern; 2 Australian Consumer Law, Compliance and Enforcement, How Regulators Enforce the Australian Consumer Law, p 7. 3 Australian Consumer Law, Compliance and Enforcement, How Regulators Enforce the Australian Consumer Law, p 8.

540

The Australian Consumer Law

[13.15]

• conduct resulting in significant consumer detriment; • conduct affecting disadvantaged or vulnerable consumer groups; • conduct that suggests a pattern of non-compliance by the trader or is indicative of a risk of future misconduct; • conduct involving a significant new or emerging market issue; • conduct that is industry-wide or is likely to become so; • a significant impact on market integrity; • whether action is likely to have a worthwhile educative or deterrent effect; • conduct demonstrating a blatant disregard for the law.4 The Compliance and Enforcement Guide, states that the ACL regulators are less likely to pursue matters that: • are one-off, isolated events; • are more appropriately resolved directly between the parties under an industry code (for example, by mediation or an industry dispute resolution body); • involve issues more effectively dealt with by another agency; or • are best dealt with by private parties (the provides complainants with a private right of action in these circumstances).5 The Compliance and Enforcement Guide states: The ACL is one national law with multiple regulators. Each regulator is independent, has its own enabling legislation and exercises its powers and functions accordingly. ACL regulators have put in place systems to create a national approach to compliance and enforcement. They agree to: • have regard to this compliance and enforcement document; • regularly consult and communicate about priorities, markets, compliance and enforcement; • general principles for handling and managing complaints and market intelligence under the ACL; • general principles for compliance and enforcement action to bring about trader compliance for serious breaches of the ACL.6

All ACL regulators participate in Standing Committee of Officials of Consumer Affairs (SCOCA) which has agreed to produce an annual report on compliance and enforcement of the ACL.

ACL regulators’ enforcement strategies [13.15]

Having investigated and found evidence of a breach of the ACL, the ACL regulators have a number of enforcement strategies they can pursue in order to secure compliance. These include:

4 Australian Consumer Law, Compliance and Enforcement, How Regulators Enforce the Australian Consumer Law, p 10. 5 Australian Consumer Law, Compliance and Enforcement, How Regulators Enforce the Australian Consumer Law, p 10. 6 Australian Consumer Law, Compliance and Enforcement, How Regulators Enforce the Australian Consumer Law, p 12.

[13.20]

13 Public Enforcement

541

• administrative resolution; • infringement notices; • s 218 enforceable undertakings; and • litigation. Where the potential risk of consumer detriment flowing from the conduct is low, the relevant ACL regulator may decide to settle the matter administratively. Administrative resolutions generally involve the trader under investigation agreeing to cease engaging in the conduct; compensating those who have suffered loss or detriment because of it; and taking whatever compliance measures are necessary to ensure that the conduct does not recur. If the conduct recurs court action is likely. Where the conduct does not involve significant consumer detriment, but a more formal sanction is required, the ACCC (but not the other ACL regulators) may issue an infringement notice. If the penalty is paid, the matter is closed without proceeding to court. The ACL regulators can have recourse to other enforcement powers. These include accepting undertakings under s 218 of the ACL. Undertakings are designed to prevent a recurrence of the offending conduct and, where possible, to secure compensation for injured consumers. The undertaking is likely to require that the trader carry out the following remedial measures: • remedy the mischief; • accept responsibility for their actions; • establish or review and improve their consumer law compliance programs and culture. The last enforcement strategy is litigation. The Compliance and Enforcement Guide states that because of the cost involved, litigation is only appropriate where there is a blatant disregard of the law and significant public detriment.7 Litigation can result in the ACL regulators seeking non-party redress orders to compensate victims, adverse publicity orders, non-punitive orders, declarations and injunctions. In more serious cases the ACL regulators may seek the imposition of civil pecuniary penalties and disqualification orders. In the most serious cases, the ACL regulators will seek criminal convictions and fines. Each of these enforcement options will now be examined, beginning with criminal prosecution.

PART I – PUBLIC ENFORCEMENT: CRIMINAL PROSECUTION Liability of corporations for ACL (Cth) offences [13.20]

Chapter 4 of the ACL provides for offences that replicate most, but not all, of the conduct obligations in Ch 3 of the ACL. Where the offences and conduct obligations overlap, the ACL regulators have a choice: whether to proceed criminally or civilly.

7 Australian Consumer Law, Compliance and Enforcement, How Regulators Enforce the Australian Consumer Law, p 10.

542

The Australian Consumer Law

[13.20]

At a Commonwealth level, the ACCC is responsible for investigation and gathering evidence and bringing proceedings for breaches of the civil prohibitions. The ACL provides no guidance as to when contraventions of the conduct obligations should be pursued criminally, and when they should be pursued civilly. At a Commonwealth level the matter is left to the Commonwealth Director of Public Prosecutions (CDPP), in consultation with the ACCC. A contravention of Ch 4 of the ACL gives rise to criminal liability and the procedures under the Criminal Code (Cth) apply.8 Prosecutions for a contravention of Ch 4 are conducted by the CDPP, although prosecutions are bought in the name of the ACCC pursuant to s 163(4)(a) of the CCA. In ACCC v Oceana Commercial Pty Ltd,9 the Full Federal Court observed: Section 163(4) of the Trade Practices Act contemplates prosecutions by the Commission for alleged offences against that Act, although the Trade Practices Act does not expressly confer power to prosecute. However s 13 of the Crimes Act 1914 (Cth) (the Crimes Act) authorizes “any person” to institute a prosecution for an alleged offence against a law of the Commonwealth which is punishable summarily. See also s 4H of the Crimes Act (summary offences) and s 22 of the Acts Interpretation Act 1901 (Cth) (“person” includes a corporation).10

The CDPP has full control over the case even though it is brought in the name of the ACCC. As the offences in Chapter 4 of the ACL are summary offences under the Criminal Code (Cth) there is no entitlement to a jury trial. The liability and punishment of corporations for ACL (Cth) offences is regulated Criminal Code Act 1995 (Cth). Section 12.2 of the Criminal Code (Cth), which is a Schedule to the Criminal Code Act 1995 (Cth), provides that conduct will be attributed to a corporation where the conduct is committed by an employee, agent or officer of a body corporate acting within the actual or apparent scope of his or her employment, or within his or her actual or apparent authority. Where intention is a fault element, s 12.3(1) provides that element is attributed to the corporation where it “expressly, tacitly or impliedly authorised or permitted the commission of the offence”. Section 12.3(2) sets out the means by which such authorisation or permission can be established. These include where a “high managerial agent” expressly, tacitly or impliedly authorised or permitted commission of the offence – s 12.3(2)(b).11 For suspected breaches of the State and Territory ACLs, the relevant State or Territory regulator will be responsible for the investigation and gathering evidence.

8 Section 6AA of the CCA provides that Ch 2 of the Criminal Code (Cth) applies to all offences against the CCA. Ch 2 of the Criminal Code sets out the general principles of criminal responsibility. 9 ACCC v Oceana Commercial Pty Ltd (2004) ATPR (Digest) ¶46-255 (Heerey, Sundberg and Dowsett JJ). 10 ACCC v Oceana Commercial Pty Ltd (2004) ATPR (Digest) ¶46-255 at [141]. 11 See Grain Sorghum Marketing Board v Supastok Pty Ltd [1964] Qd R 98 (Jeffriess, Stable, Gibbs JJ).

[13.20]

13 Public Enforcement

543

The State and Territory Application Acts separately make provision for the interpretation of the offence provisions,12 and the prosecution of offences under their ACLs.13 Criminal proceedings represent only a small proportion of the consumer protection actions taken by the ACCC. These cases represent the most serious breaches of the law and the ACCC remains concerned to ensure that criminal sanctions are reserved for only the most blatant, harmful or dishonest conduct. The availability of criminal sanctions is necessary to deter the most serious offenders. Each agency has regard to its own enforcement priorities and resources in determining whether it is appropriate to pursue a matter in the criminal justice system. There is a Commonwealth Prosecution Policy which sets the factors to be taken into account by the CDPP in deciding whether to prosecute, including the prospects of obtaining a conviction and the public interest.14 In its Annual Report 2005-06 the ACCC noted that it: has been giving more serious consideration to criminal prosecutions for breaches of the consumer protection provisions. This is particularly where we can see consumers have been deliberately defrauded, and where we believe it is appropriate to elevate the level of prosecution. The choice to prosecute criminally affects the process of investigation undertaken, in terms of the admissibility of evidence, and involves collaboration with the Commonwealth Director of Public Prosecutions (CDPP). In close collaboration at the most senior levels of the CDPP, we have established protocols for working well to ensure the efficiency of taking matters through to the criminal prosecution stage.15

For example, in ACCC v Carrerabenz Diamond Industries Pty Ltd,16 the ACCC brought proceedings against Carrerabenz for knowingly participating in conduct amounting to false or misleading representations in connection with the supply or possible supply of goods. The misleading price comparisons in advertising diamond clearance sales were held to contravene s 75AZC(1)(g) of the TPA in that the jewellery was not offered to the general public at the advertised “usual marked price”. Logan J imposed a fine of $220,000 against the corporate defendant. In ACCC v Skippy Australia Proprietary Ltd,17 the defendant was convicted of offences under s 75AZS(1) of the TPA, for a failure to comply with mandatory consumer product safety standards for baby walkers, and a fine of $450,000 was imposed. 12 See, eg, Fair Trading Act 1989 (Qld), s 53 which declares that Ch 2 of the Criminal Code (Cth) does not apply to the offences against the ACL (Qld), Ch 4, and the Criminal Code of Queensland applies for the purposes offences against the ACL (Qld), Ch 4. Section 23(2) of the Criminal Code of Queensland applies to make it immaterial the result intended to be caused by an act or omission constituting an offence unless intention to cause the result is expressly declared to be an element of the offence. 13 See eg, Fair Trading Act 1987 (NSW), s 68 provides that proceedings for an offence may be taken and prosecuted only by the Director-General or, in the name of the Director-General, by a person acting with the authority of the Director-General. 14 See https://www.cdpp.gov.au/sites/g/files/net391/f/Prosecution-Policy-of-the-Commonwealth_ 1.pdf. 15 ACCC, Annual Report 2005-06 (2006), p 5. 16 ACCC v Carrerabenz Diamond Industries Pty Ltd (2008) ATPR ¶42-248 (Logan J). 17 ACCC v Skippy Australia Proprietary Ltd [2006] FCA 1343.

544

The Australian Consumer Law

[13.25]

Liability to pay [13.25]

The liability to a fine extends to persons (including corporations) who aid, abet, procure, induce or attempt to induce or are in any way directly or indirectly knowingly concerned in or a party to a contravention of ACL, Ch 4.

Aiding and abetting an offence [13.30]

Section 11.2(1) – (6) of the Criminal Code (Cth) provide:

(1) A person who aids, abets, counsels or procures the commission of an offence by another person is taken to have committed that offence and is punishable accordingly. (2) For the person to be guilty: (a) the person’s conduct must have in fact aided, abetted, counselled or procured the commission of the offence by the other person; and (b) the offence must have been committed by the other person. (3) For the person to be guilty, the person must have intended that: (a) his or her conduct would aid, abet, counsel or procure the commission of any offence (including its fault elements) of the type the other person committed; or (b) his or her conduct would aid, abet, counsel or procure the commission of an offence and have been reckless about the commission of the offence (including its fault elements) that the other person in fact committed. (4) Subsection (3) has effect subject to subsection (6). (5) A person cannot be found guilty of aiding, abetting, counselling or procuring the commission of an offence if, before the offence was committed, the person: (a) terminated his or her involvement; and (b) took all reasonable steps to prevent the commission of the offence. (6) A person may be found guilty of aiding, abetting, counselling or procuring the commission of an offence even if the principal offender has not been prosecuted or has not been found guilty.

Conspiracy to commit an offence [13.35]

Liability to pay a fine extends to those who conspire with others to contravene a provisions of Ch 4 of the ACL in the same way that they apply to the offence of conspiracy under s 11.5(1) of the Criminal Code (Cth).

Sections 11.5(2) – (7A) of the Criminal Code (Cth) provide: (2) For the person to be guilty: (a) the person must have entered into an agreement with one or more other persons; and (b) the person and at least one other party to the agreement must have intended that an offence would be committed pursuant to the agreement; and (c) the person or at least one other party to the agreement must have committed an overt act pursuant to the agreement. (2A) Subsection (2) has effect subject to subsection (7A). (3) A person may be found guilty of conspiracy to commit an offence even if: (a) committing the offence is impossible; or (b) the only other party to the agreement is a body corporate; or (c) each other party to the agreement is at least one of the following: (i) a person who is not criminally responsible;

[13.45]

13 Public Enforcement

545

(ii) a person for whose benefit or protection the offence exists; or (d) subject to paragraph (4)(a), all other parties to the agreement have been acquitted of the conspiracy. (4) A person cannot be found guilty of conspiracy to commit an offence if: (a) all other parties to the agreement have been acquitted of the conspiracy and a finding of guilt would be inconsistent with their acquittal; or (b) he or she is a person for whose benefit or protection the offence exists. (5) A person cannot be found guilty of conspiracy to commit an offence if, before the commission of an overt act pursuant to the agreement, the person: (a) withdrew from the agreement; and (b) took all reasonable steps to prevent the commission of the offence. (6) A court may dismiss a charge of conspiracy if it thinks that the interests of justice require it to do so. (7) Any defences, procedures, limitations or qualifying provisions that apply to an offence apply also to the offence of conspiracy to commit that offence. (7A) Any special liability provisions that apply to an offence apply also to the offence of conspiracy to commit that offence.

These provisions will be relied upon to impose liability on the directors, servants, agents or individual employees of corporations who engage in conduct on behalf of corporations, and assist corporations to contravene a provision of the ACL.18

Jurisdiction [13.40]

Section 163(2) of the CCA confers jurisdiction on the Federal Court to hear and determine prosecutions for offences against the CCA.

Onus of proof [13.45]

The prosecution bears the onus of proving each of the physical elements (the conduct, the circumstances in which it occurs, and the result of the conduct).19 The defendant does not have any onus of demonstrating innocence of the conduct alleged to have occurred.20 For example, in ACCC v Ascot Four Pty Ltd,21 the former owner of the jewellery retailer was fined $380,000 after it was found guilty of making false and misleading representations about the price of 11 jewellery items advertised in its Christmas 2005 catalogue contrary to s 75AZC(1)(g) of the TPA which prohibited false or misleading representations being made in relation to the price of goods. Following an investigation by the ACCC, the CDPP laid charges against the jewellery retailer. The prosecutor alleged that the defendant, by means of the Christmas catalogue, represented: 18 In relation to accessorial liability under s 79 for contraventions of the repealed Pt VC of the TPA, see ACCC v Santo Pennisi and Dojoo Pty Ltd (2007) ATPR ¶42-209 (Logan J); and ACCC v Carrerabenz Diamond Industries Pty Ltd (2008) ATPR ¶42-248 (Logan J). 19 See Luxton v Vines (1952) 85 CLR 352 at 358 (Dixon CJ, Fullagar and Kitto JJ). 20 Knight v R (1992) 175 CLR 495 at 503. 21 ACCC v Ascot Four Pty Ltd (2008) ATPR ¶42-251 (Mansfield J).

546

The Australian Consumer Law

[13.45]

(a) the defendant had sold each of the 11 jewellery items at the strike through price within a reasonable time prior to the sale period; or (b) the purchase of each of the 11 jewellery items during the sale period would result in a saving to the purchaser of the difference between the sale price and the strike through price.22

Mansfield J stated: In substance, in this case, the issue is a straightforward one: it is whether the content of the Christmas sale catalogue, as relevant to the 11 counts, and in all the circumstances, conveys or would convey to ordinary or reasonable members of the public who may seek to acquire the 11 jewellery items from the defendant either of the two representations.

Ascot Four was found to have falsely represented that the purchase of each of the 11 items during the sale period would have resulted in a saving of the difference between the sale price and the strike through price. Ascot had not sold any of the 11 jewellery items for the strike through price for at least four months prior to the sale period. Mansfield J held: I am satisfied beyond reasonable doubt that the defendant made a representation about the price of each of the 11 jewellery items by its publication of the Christmas catalogue. The strike through price had a purpose. It was to convey to the consumer or potential consumer some relationship between the sale price and the strike through price. That is why the two prices appeared in juxtaposition. The presentation was to represent something about the catalogue sale price, that is about the sale price of the 11 jewellery items by reference to the strike through price. The representation, in my judgment, was that by purchasing the several jewellery items in which there was a catalogue sale price and a strike through price, there would be a saving of the difference between the catalogue sale price and the strike through price. It was to encourage the purchase of the 11 jewellery items at the catalogue sale price, by representing to the consumer or potential consumer that during the sale period, the consumer would be saving a difference between the catalogue sale price and the strike through price. I reach that conclusion beyond reasonable doubt.23

In order to satisfy the criminal standard of proof, Mansfield J held that it was not necessary to prove that all ordinary or reasonable prospective purchasers would have so understood the Christmas catalogue; for some the strike through price would have been of no real relevance. It was only necessary to establish that the representation was made to “a significant section of the ordinary and reasonable consumers who potentially would or might purchase one or more of the 11 jewellery items”.24 By way of contrast, in Ducret v Chaudhary’s Oriental Carpet Palace Pty Ltd,25 the proprietor of Chaudhary’s Oriental Carpet Palace was charged under s 79 of the Act with being knowingly concerned in the commission of an offence under the Act by the company. It was alleged that in contravention of s 53(e) of the Act, the company had made misleading statements in a Melbourne newspaper with respect 22 ACCC v Ascot Four Pty Ltd (2008) ATPR ¶42-251 at [82]. 23 ACCC v Ascot Four Pty Ltd (2008) ATPR ¶42-251 at [99]-[100]. 24 ACCC v Ascot Four Pty Ltd (2008) ATPR ¶42-251 at [106]. 25 Ducret v Chaudhary’s Oriental Carpet Palace Pty Ltd (1987) 76 ALR 182 (Ryan J).

[13.55]

13 Public Enforcement

547

to the price of certain carpets. One of the statements was that the price of one type of carpet was “usually $4,675; sale price $1,759; now only $497”. It was alleged that the statement with respect to the price was misleading in that the statement indicated that the usual retail price of the carpets in Melbourne was $4,675, which was not the case. In fact, the usual retail price in Melbourne was between $300 and $520. The prosecution’s case was summarily dismissed. Ryan J held that there was no evidence on which the Court could find that any of the advertisements contained a statement which indicated the usual retail price in Melbourne. The only interpretation which could reasonably be placed on the two figures which had been crossed out in the advertisement was that they represented the price at which carpets of that size and description had been offered for sale in the usual way of business by the company and the lower price at which such carpets had been offered in the course of some previous sale at reduced prices by the company. As no evidence had been presented by the TPC as to the company’s prior sale prices for carpets of that size and description, the TPC had not established its case.

Time limits for prosecution [13.50]

Criminal prosecutions must be commenced within three years of the commission of the offence.26

Assessing the amount of the fine [13.55]

The maximum fine payable for each offence in Pt 4-1 is specified in the

offence. Section 16A(2) of the Crimes Act 1914 (Cth) sets out a checklist of factors which may be taken into account in assessing fines: In addition to any other matters, the court must take into account such of the following matters as are relevant and known to the court: (a) the nature and circumstances of the offence;27 (b) other offences (if any) that are required or permitted to be taken into account;28 (c) if the offence forms part of a course of conduct consisting of a series of criminal acts of the same or a similar character – that course of conduct; (d) the personal circumstances of any victim of the offence;29 (e) any injury, loss or damage resulting from the offence; (f) the degree to which the person has shown contrition for the offence: 26 ACL, s 212. 27 For example, whether the conduct occurred over a lengthy period; whether it was known at senior management level; and whether it was a serious departure from the standards o commercial probity and a serious exploitation of the consumer. See Ducret v Nissan Motor Co (Australia) Pty Ltd (1979) ATPR ¶40-111 at 18,153 (Northrop J). 28 Has the defendant transgressed in the past? 29 Were the victims in a position of vulnerability and unable to protect themselves?

548

The Australian Consumer Law

[13.55]

(i) by taking action to make reparation for any injury, loss or damage resulting from the offence;30 or (ii) in any other manner; (g) if the person has pleaded guilty to the charge in respect of the offence – that fact; (h) the degree to which the person has co-operated with law enforcement agencies in the investigation of the offence or of other offences;31 (i) the deterrent effect that any sentence or order under consideration may have on the person; (j) the need to ensure that the person is adequately punished for the offence; (k) the character, antecedents, age, means and physical or mental condition of the person; (l) the prospect of rehabilitation of the person;32 (m) the probable effect that any sentence or order under consideration would have on any of the person’s family or dependants.

The list of factors is not exhaustive of the matters that may be considered in assessing a fine for a Federal offence.33 Some of the factors will not be relevant to corporate offenders. In ACCC v Nationwide News Pty Ltd,34 Heerey J considered the following matters in setting the fines: • It was a serious contravention of the Act by a subsidiary of a major public company and the publisher of a leading Australian metropolitan newspaper. • The economic harm is the purchase of a product, the newspaper, by persons who would not do so were it not for the misleading statement. Even though the small amount paid by any one individual as a consequence of this contravention (the 70 cents price of this newspaper), the aggregate effective loss is potentially very substantial. • The offence was committed very publicly; the penalty needs to have an element of vindication, so that the public, who saw the law broken, will see the law being enforced. • The offences were committed in disregard of specific warnings from the Commission is a factor going to severity of penalty. • There was no apology or expression of contrition.35 Counsel for Nationwide submitted that the case was appropriate for dismissal under s 19B of the Crimes Act 1914 (Cth) or at worst for the imposition of a very small fine. Heerey J disagreed and in respect of each of the six informations found proved, imposed a fine of $20,000. 30 In ACCC v Chubb Security Australia Pty Ltd (2004) ATPR ¶42-041 at [99] Bennett J took into account that Chubb had made rebates for the contraventions set out in the summonses based on an audit report that it voluntarily undertook. 31 In ACCC v Dimmeys Stores Pty Ltd (2001) ATPR ¶41-811 at 42,829 Drummond J applied a discount of about one third for Dimmeys co-operation and prompt plea of guilty. 32 In ACCC v Chubb Security Australia Pty Ltd (2004) ATPR ¶42-041 at [126] Bennett J held that the prospect of rehabilitation involved “a consideration of corrective steps taken after the offences have been discovered”. 33 ACCC v Carrerabenz Diamond Industries Pty Ltd (2008) ATPR ¶42-248 at [20] (Logan J). 34 ACCC v Nationwide News Pty Ltd (1996) ATPR ¶41-519. 35 ACCC v Nationwide News Pty Ltd (1996) ATPR ¶41-519 at 42,506-7.

[13.65]

13 Public Enforcement

549

Specific deterrence and general deterrence [13.60]

Specific deterrence is intended to deter repetition by the defendant. It requires an assessment of why the offences occurred and whether the defendant is likely to re-offend. General deterrence is intended “to serve as a warning to the community at large”.36

While s 16A(2)(j) of the Crimes Act 1914 (Cth) only refers to specific deterrence, the court will also have regard to general deterrence. In ACCC v Chubb Security Australia Pty Ltd,37 the ACCC brought proceedings against Chubb Security Australia Pty Ltd (Chubb) for 12 contraventions of s 75AZL(3) of the TPA. It alleged that at the time of entering into a number of contracts for the provision of mobile patrol security services, there were reasonable grounds, of which Chubb was aware, for believing that it would not be able to supply the services. Each contravention of s 75AZL attracted a maximum fine of 10,000 penalty units equating to $1,100,000. Bennett J held that both specific deterrence and general deterrence needed to be considered in fixing the amount of the fine.38 The penalty imposed for the s 75AZL(3) offence amounted to $1,300,000. In ACCC v Carrerabenz Diamond Industries, Logan J found that general deterrence was a “particularly pertinent consideration” in that case. His Honour observed: There is a need for a reminder to be given to those who engage in trade or commerce that an advertisement which is misleading in the representation made in respect of price is criminal conduct and will be visited with salutary penalty if proved.39

Parity principle [13.65]

The parity principle requires that persons who have been parties to the commission of the same offence should receive the same penalty. The courts have recognised that parity in the imposition of penalties is desirable in respect of contraveners involved in the same proceedings.40 According to the Full Court in NW Frozen Foods Pty Ltd v ACCC: A hallmark of justice is equality before the law, and, other things being equal, corporations guilty of similar contraventions should incur similar penalties … However, other things are rarely equal where contraventions of the Trade Practices Act are concerned … the facts of the instant case should not be compared with a particular reported case in order to derive there from the amount of the penalty to be fixed. Cases are authorities for matters of principle; but the penalty found to be appropriate, as a 36 ACCC v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238 at 240 (Goldberg J). 37 ACCC v Chubb Security Australia Pty Ltd (2004) ATPR ¶42-041. 38 ACCC v Chubb Security Australia Pty Ltd (2004) ATPR ¶42-041 at [115] citingDirector of Public Prosecutions (Cth) v Said Khodor El Karhani (1990) 21 NSWLR 370, where the New South Wales Court of Criminal Appeal held (at 377-378) that, notwithstanding the absence from the checklist of s 16A(2) of any reference to general deterrence, such a matter must be taken into account in determining the sentence to be passed. See also ACCC v Carrerabenz Diamond Industries Pty Ltd (2008) ATPR ¶42-248 at [27] (Logan J). 39 ACCC v Carrerabenz Diamond Industries Pty Ltd (2008) ATPR ¶42-248 at [27]. 40 Schneider Electric (Australia) Pty Ltd v ACCC (2003) 127 FCR 170 at [52]-[58] (Merkel J).

550

The Australian Consumer Law

[13.70]

matter of fact, in the circumstances of one case cannot dictate the appropriate penalty in the different circumstances of another case.41

Another important objective is achieving parity of penalties against contraveners in other proceedings.42 However, caution needs to be exercised in making comparisons or analogies with other cases. As Goldberg J observed: The myriad of distinctions which will arise when comparing the actions of a company in one field of economic activity with the activities of a differently structured company in another field of economic activity are such as to render the drawing of an analogy virtually useless.43

In ACCC v Chubb Security Australia Pty Ltd,44 Bennett J also recognised that “the different circumstances of each case mean that an analysis of the penalties imposed in other cases can only give a broad indication of the appropriate range”.45

Totality principle [13.70]

Where an offender has committed a number of offences, the totality principle applies.46 The totality principle requires the court to ensure that where an offender is being sentenced for a number of offences, the penalties in aggregate are just and equitable.47 Goldberg J in ACCC v Australian Safeway Stores Pty Ltd observed: The totality principle is designed to ensure that overall an appropriate sentence or penalty is imposed and that the sum of the penalties imposed for several contraventions does not result in the total of the penalties exceeding what is proper having regard to the totality of the contravening conduct involved.48

In ACCC v Chubb Security Australia Pty Ltd,49 counsel for the defendant submitted that the application of the totality principle should result in an aggregate penalty that does not exceed the maximum penalty for a single breach of that provision. Bennett J did not accept the submission.50 However, the application of the totality principle will reduce the total amount of the penalty, and the amount imposed for each individual offence.

41 NW Frozen Foods Pty Ltd v ACCC (1996) 71 FCR 285 at 295. 42 ACCC v Universal Music Australia Pty Ltd (No 2) (2002) 201 ALR 618 [34]-[39] (Hill J). 43 ACCC v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238 at 243. 44 ACCC v Chubb Security Australia Pty Ltd (2004) ATPR ¶42-041. 45 ACCC v Chubb Security Australia Pty Ltd (2004) ATPR ¶42-041 at [129]. 46 ACCC v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238 at 52 (Goldberg J). 47 Mill v The Queen (1988) 166 CLR 59 at 62-3. 48 ACCC v Australian Safeway Stores Pty Ltd (1997) ATPR ¶42-041 at 43,817. 49 ACCC v Chubb Security Australia Pty Ltd (2004) ATPR ¶42-041 (30 December 2004). 50 ACCC v Chubb Security Australia Pty Ltd (2004) ATPR ¶42-041 at [143].

[13.85]

13 Public Enforcement

551

Multiple offences: loss or damage [13.75]

A significant factor will be the amount of loss or damage caused, or the extent of the consumer detriment, resulting from the offence.

Enforcement and recovery of fines [13.80]

Imprisonment is not available as a sanction for contraventions of the offences in Ch 4 of the ACL; however, it may be imposed for a failure to pay a fine imposed for an offence.51

Section 139D of the CCA mirrors s 79A of the CCA. It empowers the Federal Court to make orders for the enforcement and recovery of fines where an offender has defaulted in paying a fine for an offence against a provision of Ch 4 of the ACL, or regulations made under s 137G of the CCA.52 It entitles the court to exercise any power it may have with respect to the enforcement and recovery of fines, or on the application of the Commonwealth Minister or the ACCC to make an order declaring that the fine may be enforced as a judgment debt.53 Where a person is given a specified time to pay the fine, or ordered to pay the fine by specified instalments,54 the enforcement order will not operate until the person has failed to pay the fine or instalments.55 Where the court imposes a term of imprisonment for the non-payment of a fine, s 139D(6) provides: (6) The term of a sentence of imprisonment imposed by an order under a law of a State or a Territory applied by s 15A of the Crimes Act 1914 (including an order described in subs 15A(1AA) of that Act) in respect of a fine is to be calculated at the rate of one day’s imprisonment for each $25 of the amount of the fine that is from time to time unpaid.

Preference must be given for victims [13.85]

If a court considers that it is appropriate to order a person convicted of an offence against the ACL to pay both a fine and compensation to a victim of the offence, and the person does not have the financial resources to pay both, the court must give preference to making an order for compensation.56

This mirrors s 79B of the CCA in relation to pecuniary penalties, which was introduced as a result of a recommendation of the Australian Law Reform

51 Crimes Act 1914 (Cth), s 15A. 52 CCA, s 139D(1)(a). 53 CCA, s 139D(1)(b). For cases in which terms of imprisonment have been imposed for non-payment of fines under s 79A of the CCA, see Wilde v Menville Pty Ltd (1981) ATPR ¶40-195 (Smithers J); Hollis v Clarke (1981) ATPR ¶40-245 (Fox J); and Reardon v Nolan (1983) ATPR ¶40-405 (Fisher J). 54 CCA, s 139D(3). 55 CCA, s 139D(4) and (5). 56 ACL, s 213. The ACLs of the States and Territories make similar provision. See eg, Fair Trading Act 1989 (Qld), s 59.

552

The Australian Consumer Law

[13.90]

Commission in 1994.57 Section 213 of the ACL is intended to insure that a victim will receive compensation. It is not intended to enable a court to reduce or waive a fine because of the defendant’s financial circumstances.

Multiple contraventions [13.90]

Where a person is convicted of multiple offences that are similar, or substantially similar, in nature and occurred at or about the same time, the court is not to impose aggregate fines on that person that exceed the maximum fine that would be applicable in respect of one offence against that provision.58

Previous convictions [13.95]

Where a person has been convicted of an offence on a previous occasion, the court is not to impose aggregate fines on that person that exceed the maximum fine that would be applicable in respect of one offence against that provision, if the previous conviction and the current contravention are similar in nature and occurred at or about the same time.59

Costs [13.100] The CCA makes no provision regarding the question of costs, and thus s 43 of the Federal Court of Australia Act 1976 applies. It provides: (1) The Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs shall not be awarded. (2) Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge.

The guiding principle is that the Court’s discretion is absolute and unfettered. Generally, if the Commission is successful, the Court will order its unsuccessful opponent to pay all or a portion of the Commission’s costs.

Defences relating to information providers [13.105] Section 160(1) of the ACL provides that a person has a defence against criminal prosecution for a contravention of the false or misleading representation offences,60 if the false or misleading representation was published in the course of carrying on a business as an information provider. The term “information provider” is defined in ss 19(5) and (6) of the ACL.61 The exemption does not apply to: • advertisements;62 57 See ALRC Report No 68, Compliance with the Trade Practices Act (1994) at [7.4]. 58 ACL, s 214. 59 ACL, s 215. 60 ACL, ss 151, 152, 155, 156 and 159. 61 See [3.235]. 62 ACL, s 160(2).

[13.115]

13 Public Enforcement

553

• a publication in connection with the supply (or promotion of the supply) of goods or services by the information provider;63 or • the publication of matter in connection with the grant of an interest in land.64

Defences in relation to criminal prosecutions [13.110] Section 131G(2) of the ACL provides that s 9.2 of the Criminal Code (Cth) (mistake of fact defence) does not apply to an offence against Ch 4 of the ACL. Part 4-6 of the provides defences applicable to criminal proceedings of: • reasonable mistake of fact;65 • where the contravention was caused by the act or default of another person or an accident or cause beyond the person’s control, and where the person took reasonable precautions and exercised due diligence to avoid the contravention;66 • where an advertiser publishes an advertisement in the ordinary course of business and does not know and had no reason to suspect the advertisement amounted to a contravention;67 and • where goods or services are acquired for the purposes of re-supply and the defendant did not know and could not with reasonable diligence have ascertained that they did not comply with a product safety standard or an information standard.68 These defences replicate those in s 85(1)(a), (1)(c), (3) and (4) of the former TPA prior to its amendment. In relation to the defences in s 85 of the TPA it was decided that the defendant need only satisfy the civil standard of proof upon the balance of probability.69

Reasonable mistake of fact [13.115] Section 207 of the ACL provides: (1) In a prosecution for a contravention of a provision of this Chapter, it is a defence if the defendant proves that the contravention was caused by a reasonable mistake of fact, including a mistake of fact caused by reasonable reliance on information supplied by another person. (2) However, subsection (1) does not apply in relation to information relied upon by the defendant that was supplied to the defendant by another person who was, at the time when the contravention occurred: (a) an employee or agent of the defendant; or (b) if the defendant is a body corporate – a director, employee or agent of the defendant.

This provision mirrors s 85(1)(a) and (b) of the TPA. 63 ACL, s 160(3). 64 ACL, s 160(4). 65 ACL, s 207. 66 ACL, s 208. 67 ACL, s 209. 68 ACL, s 210. 69 See Brown v Riverstone Meat Company Pty Ltd (1985) 60 ALR 595 at 603. See also ACCC v Murray (2002) 21 FCR 428 at [102] (Heerey J).

554

The Australian Consumer Law

[13.115]

In Adams v ETA Foods Ltd,70 the defendant successfully relied upon the defence of reasonable mistake of fact. In February 1986, ETA, in trade and commerce, in connection with the supply of particular types of beef pies, falsely represented that the goods were of a particular quality or composition. The beef pies were alleged to contain some sheep meat. The beef and sheep meat included in the pies was in the form of mince, not minced by ETA but supplied as “minced beef” to ETA by a third party (St George Meat Markets). The pies were made using mince that had been delivered to ETA over a four-month period ending in January or February 1986. ETA admitted for the purposes of these proceedings only that: • the subject pies had been sold by ETA to specified supermarket chains and were sold by retail on the dates referred to in the relevant summonses; • in each case, the subject pies were packaged in individual cartons and the cartons had been labelled by the servants or agents of ETA with words disclosing the ingredients of the pies, which disclosures did not refer to sheep meat; • in each case, the pies contained some sheep meat of not insignificant amount. ETA’s admissions were made, by arrangement between counsel, with a view to shortening the hearing and to direct attention to what both sides agreed was the real issue – the existence or otherwise of a defence under s 85(1) of the TPA. Gummow J observed that the mistake must be “reasonable”, and that reasonableness is an object matter having regard to the circumstances of the case.71 Gummow J concluded: ETA reasonably regarded St George Meat Markets as a reliable supplier of many years standing. ETA reasonably relied upon St George Meat Markets for compliance with its contractual obligations to supply beef mince. It went further and relied upon its own examination and testing procedures upon and after delivery. Although ETA checked the meat for freshness, fat, gristle and moisture levels, it did not test for meat species but that was a reasonable omission on its part. In the event, ETA used beef mince with not insignificant amounts of sheep meat in the production of what it marketed as its beef pies. In these and the other circumstances I have outlined, I find that the contraventions were due to reasonable mistake and that the defence under subs 85(1)(a) has been established.72

The defence was relied on unsuccessfully in Doolan v Waltons Ltd.73 Waltons Ltd advertised in a catalogue and in a newspaper that it was selling a “solid pine kitchen nook” and a “natural pine kitchen nook”. The seat and the table frame were made of pinus radiata, but the table top and the extension piece were made of wood veneer. Waltons was charged with three contraventions of s 53(a) of the Act. 70 Adams v ETA Foods Ltd (1987) ATPR ¶40-831. 71 Adams v ETA Foods Ltd (1987) ATPR ¶40-831 at 48,966. 72 Adams v ETA Foods Ltd (1987) ATPR ¶40-831 at 48,972. 73 Doolan v Waltons Ltd (1981) ATPR ¶40-257.

[13.115]

13 Public Enforcement

555

Lockhart J concluded that persons reading the advertisement would assume that the goods being offered for sale were made of solid pine or of natural pine. The representations were false. I turn to the submissions of counsel for Waltons that certain of the defences afforded by s 85 have been established by Waltons. First, it was submitted that the contraventions were due to “reasonable mistake” (s 85(1)(a)). Few words in the English language are susceptible to more meaning or more misuse than the word “mistake”. The Shorter Oxford English Dictionary gives a wide meaning of the word: “A misconception of the meaning of something hence; an error or fault in thought or action”. In Boyle v Wright [1969] VR 699, Smith J considered the meaning of “mistake” in a not dissimilar context to s 53(a) and said at 702: For I take the word “mistake” in the section to include an error in conduct consisting of an unintended failure to perform correctly and effectively a task intended to be duly performed … In my opinion, no mistake of any kind has been established as to the representations of 29 June and 7 July 1980. The evidence is silent as to the relevant conduct surrounding those representations. As to the representation of 20 July 1980, Mr Swann may have been “mistaken” in thinking that it was “quite OK” to authorise the relevant advertisement because there had been no complaint about the earlier (ie February 1980) advertisement (“natural pine”); but in my opinion that was not a mistake within the meaning of para (a) and, even if it were, it was not a “reasonable” mistake.74 The defence of “reasonable reliance on information supplied by another person” in s 85(1)(b) of the TPA was unsuccessfully relied on in ACCC v Murray.75 The defendant was the director of Will Writers Guild Pty Ltd (WWG) and the person who engaged in the conduct complained of. In so doing, he engaged in trade or commerce among the States and accordingly is subject to the extended operation given to s 59(2) by s 6(2) of the TPA. The business involved the provision of “will kits”, consisting of forms and descriptive and explanatory material, but also the provision of assistance to franchisees or licensees. It was an essential element of the way the business was to be run that the licensee would be present when the customer prepared and signed the will. Legislation in each State relevant to this case (that is to say every State except Queensland) prohibited the carrying on of legal practice by persons not qualified to practise as legal practitioners in that State. None of the franchisees were legally qualified and so could not lawfully conduct the business. The defendant sought to establish that he had relied upon relied on the advice of a solicitor in carrying on the business and that the solicitor had taken counsel’s advice in respect of the business. Heerey J found that the s 85(1)(b) defence was not made out. Any reliance on the solicitor’s advice was not reasonable as the 74 Doolan v Waltons Ltd (1981) ATPR ¶40-257 at 43,294-5. 75 ACCC v Murray (2002) 21 FCR 428.

556

The Australian Consumer Law

[13.120]

defendant had not provided the solicitor or counsel with full and accurate instructions about the operation of the business.76

Act or default of another person [13.120] Section 208 of the ACL provides: (1) In a prosecution for a contravention of a provision of this Chapter, it is a defence if the defendant proves that: (a) the contravention was due to the act or default of another person, to an accident or to some other cause beyond the defendant’s control; and (b) the defendant took reasonable precautions and exercised due diligence to avoid the contravention. (2) However, subsection (1) does not apply in relation to the act or default of another person who was, at the time when the contravention occurred: (a) an employee or agent of the defendant; or (b) if the defendant is a body corporate – a director, employee or agent of the defendant.

This provision mirrors s 85(1)(c) of the TPA. Unlike the defence of reasonable mistake of fact, this defence is only available if the defendant can prove that the defendant took reasonable precautions and exercised due diligence to avoid the contravention. In Adams v ETA Foods Ltd,77 the defendant unsuccessfully relied upon this defence. Gummow J concluded: ETA also would have to show it took reasonable precautions and exercised due diligence, not as a general matter in its business, but “to avoid the contravention”. The precautions and diligence must be directed at a result, the avoidance of a state of affairs. The defendant need not have in specific prospect the terms of the TPA, but a party in the position of ETA could not be said to have taken precautions and exercised due diligence to avoid the perils of species substitution in raw mince supplied to it to fill orders for minced beef when it had no cognizance of any such peril. It had procedures to deal with fat and gristle content and excessive moisture levels. But, one cannot, in my view reason from that to decide that ETA took reasonable precautions and exercised due diligence to avoid the contraventions. I conclude that ETA has not made out the defence under para (c).78

Publisher’s defence [13.125] Section 209 of the ACL provides: In a prosecution for a contravention of a provision of this Chapter that was committed by publication of an advertisement, it is a defence if the defendant proves that: (a) the defendant is a person whose business it is to publish or arrange for the publication of advertisements; and (b) the defendant received the advertisement for publication in the ordinary course of business; and 76 ACCC v Murray (2002) 21 FCR 428 at [109]. 77 Adams v ETA Foods Ltd (1987) ATPR ¶40-831. 78 Adams v ETA Foods Ltd (1987) ATPR ¶40-831 at 48,972.

[13.130]

13 Public Enforcement

557

(c) the defendant did not know, and had no reason to suspect, that its publication would amount to a contravention of such a provision.

This provision mirrors s 85(3) of the TPA. This defence prevents media providers from being convicted of an offence merely because the person, in the ordinary course of business, publishes advertisements on behalf of other persons. In order to protect a publisher from criminal liability, the publisher must have been unaware that an advertisement they published contravened the ACL, and had no reason to suspect that it did so. The scope of s 85(3) of the TPA was considered by the High Court in Google In v ACCC,79 which is considered at [13.330] in relation to the defence in s 251 of the ACL.

Non-compliance with safety or information standard [13.130] Section 210 of the ACL provides: (1) In a prosecution for a contravention of a provision of this Chapter that was committed by supplying goods in contravention of ss 194 or 203, it is a defence if the defendant proves that: (a) the goods were acquired by the defendant for the purpose of re-supply; and (b) the goods were so acquired from a person who carried on in Australia a business of supplying such goods otherwise than as the agent of a person outside Australia; and (c) in the case of a contravention of s 194 – the defendant: (i) did not know, and could not with reasonable diligence have ascertained, that the goods did not comply with the safety standard to which the contravention relates; or (ii) relied in good faith on a representation by the person from whom the defendant acquired the goods that there was no safety standard for such goods; and (d) in the case of a contravention of s 203 – the defendant: (i) did not know, and could not with reasonable diligence have ascertained, that the defendant had not complied with the information standard to which the contravention relates; or (ii) relied in good faith on a representation by the person from whom the defendant acquired the goods that there was no information standard for such goods.

This provision mirrors s 85(4) of the TPA. It is a defence for a person in proceedings concerning the supply of goods or services in contravention of a product safety standard80 or an information standard,81 if the defendant establishes that: • the goods were acquired for the purpose of resupply; • the goods were acquired from a person within Australia who acted otherwise than as an agent of a supplier outside Australia; and • the defendant did not know and could not with the exercise of due diligence have ascertained that the goods did not comply with an applicable safety or information standard. 79 Google Inc v ACCC (2013) 249 CLR 435. 80 ACL, ss 194 and 195. 81 ACL, ss 203 and 204.

558

The Australian Consumer Law

[13.135]

In Pretorius v Venture Stores (Retailers) Pty Ltd,82 it was held that a retailer’s reliance upon a supplier to ensure that products comply with mandatory standards did not discharge the retailer’s liability, under Pt V, Div 1A of the, to satisfy itself that products complied with any applicable standards. The fact that such reliance upon suppliers is a general practice in the trade is irrelevant. Furthermore, a retailer or distributor will not be able to raise a defence under s 210 by pointing to evidence that its orders for products were stamped with words requiring the supplier to ensure that products comply with statutory labelling requirements.83 What is required is evidence of precaution and due diligence carried out by the retailer or distributor designed specifically to avoid a state of affairs which could give rise to a contravention.84

Injunctions and other orders for offences [13.135] In addition to imposing a fine up to the maximum levels set out in Ch 4 of the ACL, s 216 provides that the court may grant an injunction pursuant to s 232, or non-punitive orders under s 246, or adverse publicity orders under s 247 or an order disqualifying a person from managing a corporation under s 248. These are considered in Part II of this chapter at [13.250], [13.290], [13.315] and [13.320]. PART II – PUBLIC ENFORCEMENT: CIVIL PROCEEDINGS [13.140] The Productivity Commission in its Review of Australia’s Consumer Policy Framework recommended that the new national generic consumer law should give consumer regulators the capacity to seek the imposition of civil pecuniary penalties.85 It also recommended that the regulator should have a number of additional administrative powers to enhance its ability to investigate and enforce the ACL, namely, substantiation notices, public warning notices, and infringement notices. Finally, it recommended that the regulator should be empowered to bring proceedings for non-party consumer redress. This Part will consider each of these options available to the regulator for the public enforcement of the ACL.

Declarations [13.145] The Federal Court has the express power in civil proceedings in relation to a matter in which it has original jurisdiction, to make declarations under s 21 of the Federal Court of Australia Act 1976 (Cth), whether or not any consequential relief 82 Pretorius v Venture Stores (Retailers) Pty Ltd (1992) ATPR ¶41-166. 83 Gardam v George Wills & Co Ltd (No 2) (1988) ATPR ¶40-885. 84 Adams v Eta Foods Ltd (1987) ATPR ¶40-831. 85 Productivity Commission, Review of Australia’s Consumer Policy Framework, Final Report (2008), recommendation 10.1.

[13.145]

13 Public Enforcement

559

is or could be claimed.86 Declaratory relief is discretionary. In enforcing the ACL, the ACCC generally seeks a declaration that a respondent’s conduct contravenes one or more of its substantive prohibitions. In ACCC v The Construction, Forestry, Mining and Energy Union,87 Nicholson J stated that declarations: 1. are an appropriate vehicle to record the Court’s disapproval of the contravening conduct; 2. serve to vindicate the Commission’s claim that the respondents contravened the Act; 3. are of some assistance to the Commission in the future in carrying out the duties which are conferred upon it by the Act; 4. are of assistance in clarifying the law; 5. may inform consumers of the dangers arising from a respondent’s contravening conduct; and 6. may deter corporations from contravening the Act.

In ACCC v Dimmeys Stores Pty Ltd, Gordon J stated that there are three requirements that must be satisfied for making a declaration under s 21 of the Federal Court of Australia Act 1976: • there must be a real controversy between the parties and not a hypothetical or theoretical one; • the applicant must have a real interest in raising the question and obtaining relief sought;88 and • there must be a proper contradictor.89 As regards the first requirement, the court will not grant a declaration to answer an abstract or hypothetical question. There must be a contest.90 This requirement is generally satisfied, since a dispute will exist between the ACCC and the respondent as to whether the respondent has contravened one or more of the substantive prohibitions of the ACL. The second requirement will generally be satisfied because the ACCC, as a public body, has a real interest in clarifying the law on a particular matter and informing consumers that the conduct complained of by the ACCC contravenes the law.91 86 See, eg, TPC v Santos Ltd (1993) ATPR 41-221; Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89; RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd (1993) 41 FCR 164; ACCC v Target (2001) ATPR ¶41-840 at [14]. 87 ACCC v The Construction, Forestry, Mining and Energy Union (2007) ATPR ¶42-141 at 46,726 [6] (citations omitted). See also ACCC v Kokos International Pty Ltd (No 2) (2008) ATPR ¶42-212 at 48,811-2 [48] (French J). 88 Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581-2. 89 ACCC v Dimmeys Stores Pty Ltd [2011] FCA 372 at [11]-[14]. Cited with approval by Bennett J in ACCC v Link Solutions Pty Ltd (No 3) [2012] FCA 348 at [20]. 90 BMI Ltd v Federated Clerks Union of Australia (1983) 51 ALR 401 at 425 (Keely and Beaumont JJ). 91 See Rural Press Ltd v ACCC (2003) 216 CLR 53 at 91; Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at [50]-[52]; ACCC v Midland Brick Company Pty Ltd (2004) 207 ALR 329 at 333; ACCC v Grove and Edgar Pty Ltd (2008) ATPR 42-269 at [20] (Reeves J); ACCC v Alvaton Holdings Pty Ltd [2010] FCA 760; and ACCC v Sampson [2011] FCA 1165 (17 October 2011) at [12] (Tracey J).

560

The Australian Consumer Law

[13.150]

Thirdly, there must be a “proper contradictor,” that is a party with a genuine interest in arguing against the granting of the declaration.92 Declarations should be made only on evidence and not on submissions. The court must be provided with a proper factual foundation (evidence) for making the declaration.93 Where a respondent consents to a declaration sought by the ACCC on the basis of a statement of agreed facts, the respondent does not cease to be a proper contradictor. In ACCC v MSY Technology Pty Ltd (No 2),94 the Full Court held that since the MSY parties had an intent to oppose the declaratory relief sought, that was sufficient to make them a proper contradictor even if they did not oppose the relief claimed. In ACCC v Sampson,95 Tracey J held that a statement of agreed facts which meets the requirements of s 191 of the Evidence Act 1995 (Cth) constitutes a sufficient evidentiary foundation.96 Declarations have been made by consent on the basis of an agreed statement of facts in a number of cases.97

Declarations: unfair terms [13.150] Section 250 of the ACL provides: (1) The Court may declare that a term of a consumer contract is an unfair term, on application by: (a) a party to the contract; or (b) the regulator. (2) The Court may declare that a term of a small business contract is an unfair term, on application by: (a) a party to the contract, if the party was a business of the kind referred to in paragraph 23(4)(b) at the time the contract was entered into; or (b) the regulator. (3) Subsections (1) and (2) do not apply unless the contract is a standard form contract. (4) Subsections (1) and (2) do not apply if Part 2-3 does not apply to the contract. (5) Subsections (1) and (2) do not limit any other power of the court to make declarations.

Section 237(1)(b) of the ACL provides that, on the application the regulator made on behalf of one or more injured persons, the court may make compensatory orders in favour of the injured who have suffered or are likely to suffer loss or damage because of the conduct of another person that “constitutes applying or relying on, 92 Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437-8 (Gibbs J, with whom McTiernan, Stephen and Mason JJ agreed on the issue). See also ACCC v Allergy Pathway Pty Ltd [2009] FCA 960 at [19] (Finkelstein J). 93 ACCC v Grove and Edgar Pty Ltd (2008) ATPR 42-269 at [19] (Reeves J); ACCC v Alvaton Holdings Pty Ltd [2010] FCA 760; ACCC v Sampson [2011] FCA 1165 (17 October 2011) at [11] (Tracey J); and ACCC v Turi Foods Pty Ltd (No 2) [2012] FCA 12 (23 January 2012) at [16] (Tracey J). 94 ACCC v MSY Technology Pty Ltd [2012] FCAFC 56 at [30] (Greenwood, Logan and Yates JJ). 95 ACCC v Sampson [2011] FCA 1165 (17 October 2011) at [13]-[18] (Tracey J); and ACCC v Turi Foods Pty Ltd (No 2) [2012] FCA 19 (23 January 2012) at [15]-[20]. 96 See also ACCC v Skins Compression Garments Pty Ltd [2009] FCA 710 (Besanko J). 97 ACCC v Sontax Australia (1988) Pty Ltd [2011] FCA 1202; ACCC v Harvey Norman Holdings Ltd [2011] FCA 1407; ACCC v Ticketek Pty Ltd [2011] FCA 1489; and ACCC v Turi Foods Pty Ltd (No 2) [2012] FCA 12.

[13.155]

13 Public Enforcement

561

or purporting to apply or rely on, a term of a consumer contract that has been declared under s 250 to be an unfair term”. Section 239(1) of the ACL provides that the court may, on the application of the regulator, make compensatory orders against a party to a consumer contract who is advantaged by a term of the contract in relation to which a court has made a declaration under s 250, in favour of non-party consumers who were disadvantaged by a term declared to be unfair. Section 232(3) of the ACL provides that a court may grant an injunction on the application of any person (including the ACCC or another regulator) in relation to conduct constituted by relying on, or purporting to rely on, a term of a consumer contract that has been declared to be void under s 250, as if the conduct were a contravention of a provision of Ch 2 of the ACL. Section 242 of the ACL regulates applications for compensation orders under ss 237(1) and 239(1). Section 242(1) provides that applications may be made under ss 237(1) or 239(1) even if enforcement proceedings have not been instituted in relation to the conduct at issue. Section 242(2) provides that the regulator must not make an application under s 237(1)(b) on behalf of persons who have not consented in writing to the making of the application. These remedies are considered further at [13.390]–[13.395].

Civil pecuniary penalties [13.155] The ACCC has two alternative options where it forms the view that a financial penalty is appropriate – civil pecuniary penalties and infringement notice penalties. Section 224 provides that a person who contravenes one of the substantive provisions listed in s 224(1)(a) of the ACL is liable to pay a civil pecuniary penalty. Infringement notice penalties are considered at [13.375]. A “civil penalty” is one imposed by courts applying civil rather than criminal court processes and imposed in respect of a contravention that has been proved on the balance of probabilities, not on the criminal standard of beyond reasonable doubt.98 Civil pecuniary penalties allow for a more targeted and proportionate regulatory response than was previously the case under the TPA when the ACCC could only bring criminal proceedings for the imposition of fines. They will also enhance the deterrent effect of the consumer law provisions. The introduction of civil pecuniary penalties in relation to contraventions of the ACL brings consumer protection public enforcement options into line with the public enforcement options available to the ACCC for breaches of the competition provisions of the CCA. Section 76 of the CCA is the key penalty provision in relation to breaches of the competition provisions of the and the authorities and principles adopted in relation to the application of civil pecuniary penalties for breaches of the competition provisions are likely to be applicable to the application of civil pecuniary penalties for breaches of the consumer protection provisions. 98 See Evidence Act 1995 (Cth), s 140.

562

The Australian Consumer Law

[13.160]

General and specific deterrence

[13.160] Prior to the introduction of civil pecuniary penalties on 1 July 2010, a profit maximising corporation planning its marketing strategy and contemplating engaging in misleading conduct to increase its market share would have undertaken a cost-benefit analysis. It would have first calculated the profit it expected to make from increased sales and market share at the expense of its competitors. Next, it would have calculated the risk of detection by regulators, and the likelihood that the regulator would succeed in any action for criminal proceedings for the imposition of fines. It would have taken into account that regulators were constrained in pursuing criminal actions by their cost and time-consuming nature and the higher standard of proof that applies in criminal proceedings. Consider, for example, the misleading advertising campaign at issue in ACCC v Singtel Optus Pty Ltd (No 1).99 The advertisements failed to inform consumers that their usage would be limited once their peak usage allowance was exceeded. The campaign commenced on 25 April 2010. The ACCC was granted an injunction on 29 October 2010. In relation to the conduct occurring from 25 April 2010 to 1 July 2010, the date the new enforcement powers took effect, the ACCC could only seek the imposition of fines to which the criminal standard of proof applies. Thus, the misleading advertising campaign conferred a significant economic benefit on Singtel Optus, namely all the new customers that signed up, to be weighed against the cost of an injunction. Without the additional deterrent of substantial civil pecuniary penalties to offset that economic gain, misleading advertising campaigns were a profitable strategy from the corporation’s perspective. In relation to conduct occurring after 1 July 2010, parties contemplating misleading advertising campaigns will have to factor into their cost/benefit analysis the additional cost of civil pecuniary penalties, and the lower standard of proof associated with civil proceedings. Thus, civil pecuniary penalties allow for a more targeted response by the regulator focusing on specific as well as general deterrence, and a more cost-effective and timely response. In ACCC v Singtel Optus (No 4)100 Perram J concluded that Optus in-house legal counsel were not aware of a s 87B undertaking that had been given by Optus on 14 September 2009. In it, Optus undertook to review its compliance program and to refrain from using headline advertising that was subsequently qualified by fine print terms and conditions. This “lack of basic understanding of the undertaking within the legal department” led his Honour to conclude that engaging in headline advertising again on a substantial scale required “condign sanction”.101 In Singtel Optus Pty Ltd v ACCC102 the Full Federal Court held that Perram J erred in finding that Optus in-house legal counsel were not aware of the s 87B 99 ACCC v Singtel Optus Pty Ltd (No 1) [2010] FCA 117 (29 October 2010). 100 ACCC v Singtel Optus (No 4) [2011] FCA 761 (7 July 2011). 101 ACCC v Singtel Optus (No 4) [2011] FCA 761 at [68]. 102 Singtel Optus Pty Ltd v ACCC (2012) 287 ALR 249.

[13.165]

13 Public Enforcement

563

undertaking. Because of this factual error, the penalty judgment of Perram J was set aside. The Full Federal Court was required to exercise afresh the discretion to fix the proper penalty. It imposed a pecuniary penalty of $3.61 million. In doing so it drew attention to the place of deterrence in setting the level of the penalty: The primary judge was right to proceed on the basis that the claims of deterrence in this case were so strong as to warrant a penalty that would upset any calculations of profitability... Generally speaking, those engaged in trade and commerce must be deterred from the cynical calculation involved in weighing up the risk of penalty against the profits to be made from contravention.103

The deterrent effect of a pecuniary penalty is a significant factor in determining an appropriate penalty. In Singtel Optus Pty Ltd v ACCC, the Full Court said: There may be room for debate as to the proper place of deterrence in the punishment of some kinds of offences, such as crimes of passion; but in relation to offences of calculation by a corporation where the only punishment is a fine, the punishment must be fixed with a view to ensuring that the penalty is not such as to be regarded by that offender or others as an acceptable cost of doing business.104

This statement was approved by the High Court in ACCC v TPG Internet Pty Ltd.105 The majority said: General and specific deterrence must play a primary role in assessing the appropriate penalty in cases of calculated contravention of legislation where commercial profit is the driver of the contravening conduct.106

[13.165] The civil pecuniary penalties that can be imposed under s 224 apply to: • a contravention of the unconscionable conduct provisions in Pt 2-2; • a contravention of the consumer protection provisions relating to unfair practices in Pt 3-1; • a contravention of the display notices provision in s 66(2); • a contravention of certain provisions relating to consumer transactions in Pt 3-2 (except Div 1); • a contravention of certain product safety provisions in Pt 3-3; • a contravention of certain information standards provisions in Pt 3-4; and • failure to respond to a substantiation notice or providing false or misleading information in response to a substantiation notice in ss 221 and 222. A civil pecuniary penalty cannot be imposed for a breach of s 18 of the ACL, the general misleading or deceptive conduct provision. The Productivity Commission recommended that civil pecuniary penalties should apply to breaches of s 18, despite the risk that some of the penalties imposed may be passed through to 103 Singtel Optus Pty Ltd v ACCC (2012) 287 ALR 249 at [62]-[63]. 104 Singtel Optus Pty Ltd v ACCC (2012) 287 ALR 249 at [62]. 105 ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 at [66]. 106 ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 at [65]. See also Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 at [55] (French CJ, Bell, Kiefel, Bell, Nettle, and Gordon JJ).

564

The Australian Consumer Law

[13.170]

consumers in the form of higher prices.107 However, the Government did not act on this recommendation, possibly because much litigation based on s 18 of the ACL involved unintentional and inadvertent breaches of the law, and it would be inappropriate to penalise such conduct. In relation to consumer protection breaches, the maximum penalty that can be imposed for “each act or omission” is: • $1.1 million for a body corporate; and • $220,000 for persons other than bodies corporate.108 In relation to product safety breaches, the maximum penalty that can be imposed is: • $1.1 million for a body corporate; and • $220,000 for persons other than bodies corporate.109 In relation to breaches of the mandatory reporting of death or serious injury or illness in s 131 of the ACL, the maximum penalty that can be imposed is: • $16,500 for a body corporate; and • $3,300 for persons other than bodies corporate. When the regulator institutes proceedings for the recovery of civil pecuniary penalties, its source of power to do so is s 228(1) of the ACL. Section 228(1) provides for the collection of a pecuniary penalty referred to in s 224. The regulator may recover the penalty on behalf of the Commonwealth, a State or a Territory, by instituting proceedings within six years after the contravention or conduct.110 Section 224 extends liability to any person who has attempted, aided, abetted, induced or been in any way directly or indirectly, knowingly concerned in or party to the contravention of the relevant provisions. These forms of accessorial liability are modelled on s 75B of the TPA, see [14.175]–[14.195]. Section 226 provides that if the proceedings under s 224 are against a person (other than a body corporate) it is a defence if the court is satisfied that the person acted honestly and reasonably. This defence is considered at [13.240]. Section 229 provides that a body corporate is prohibited from indemnifying, directly or indirectly, their directors and officers against their civil liability to pay a pecuniary penalty and their legal costs in defending such actions. The prohibition of indemnification is considered at [13.245]. Assessing the amount of the pecuniary penalty

[13.170] In assessing the amount of the pecuniary penalty the courts take into account mandatory and non-mandatory factors. The mandatory factors are set out in s 224(2). The court must take into account in determining the appropriate pecuniary penalty: 107 Productivity Commission, Review of Australia’s Consumer Policy Framework, Final Report (2008), Vol 2, pp 238-40. 108 ACL, s 224. 109 ACL, s 224. 110 ACL, s 228(2).

[13.175]

13 Public Enforcement

565

(a) the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission; and (b) the circumstances in which the act or omission took place; and (c) whether the person has previously been found by a court in proceedings under Ch 4 or this Part to have engaged in any similar conduct. These are the same factors set out in the former s 76E of the TPA. The courts have applied the principles, developed in the authorities under the former ss 76E and 76 of the TPA in relation to contraventions of the competition provisions, in the determination of penalties under s 224 of the ACL.111 As Katzmann J observed in ACCC v Origin Energy Electricity Ltd,112 the determination of a penalty is not an exact science. After taking into account all the relevant factors, the Court applies a process of “instinctive synthesis” in order to reach an appropriate figure.113

Mandatory factors Amount of the loss or damage caused: s 224(2)(a)

[13.175] The absence of any evidence of harm should be regarded as a mitigating factor.114 The Full Federal Court in Singtel Optus Pty Ltd v ACCC,115 held: The absence of loss or damage to consumers is a circumstance which would usually attract a less severe penalty than if substantial harm had been inflicted on consumers. We would respectfully adopt the conclusion of the primary judge that the absence of such evidence, in a case such as this, constitutes a factor in mitigation of penalty….

However, McKerracher J stated in ACCC v Reebok Australia Pty Ltd, “the inability to quantify financial loss caused to the consumers by the contraventions does not mean that no loss or harm has been suffered”.116 The court found: Given the false and misleading representations were likely to be a significant factor in consumer decisions to purchase the shoes, it is highly likely that Reebok Australia obtained sales it would not otherwise have obtained from its conduct, although the extent of these sales is unknown.117

In addition to considering the loss or damage caused to consumers, McKerracher J took into account the loss or damage suffered by competitors: The damage to fair and open competition in the footwear market in Australia cannot be quantified, but it is likely that the conduct had a significant effect because some 111 ACCC v Pepe’s Ducks Ltd (2013) ATPR 42-441 at 43,343 at [16] (Bromberg J); and ACCC v Harvey Norman Holdings Ltd [2011] FCA 1407 at [20] (Collier J). 112 ACCC v Origin Energy Electricity Ltd [2015] FCA 278 (Katzmann J). 113 ACCC v Origin Energy Electricity Ltd [2015] FCA 278 at [116] citing the Full Federal Court in ACCC v BAJV Pty Ltd [2014] FCAFC 52 at [51]. 114 ACCC v MSY Technology Pty Ltd (No 2) (2011) 279 ALR 609 at [77]-[80]. 115 Singtel Optus Pty Ltd v ACCC (2012) 287 ALR 249 at [58]-[59] approving ACCC v MSY Technology Pty Ltd (No 2) (2011) 279 ALR 609 [77]-[80] (Perram J). 116 ACCC v Reebok Australia Pty Ltd [2015] FCA 83 at [140] citing ACCC v Global One Mobile Entertainment [2011] FCA 393 at [135] (Bennett J). 117 ACCC v Reebok Australia Pty Ltd [2015] FCA 83 at [141].

566

The Australian Consumer Law

[13.180]

consumers were misled into purchasing the EasyTone shoes on the basis of credence attributes which they could not readily verify, and where they would not otherwise have made such a purchase had they known the shoes did not have such attributes.118

In ACCC v AGL South Australia Pty Ltd,119 AGL SA estimated that the loss to consumers resulting from its contraventions was $782,521. The parties agreed to orders being made under s 239 of the ACL for the redressing of that loss. White J considered that the steps taken by AGL SA to compensate consumers who had suffered loss by reason of the false or misleading statements should be regarded as a factor in mitigation, although only to a “modest” extent.120 A penalty of $700,000 was imposed which, White J observed, was “approximately proportionate to the losses to consumers which AGL’s conduct caused”.121 Circumstances in which the conduct took place: s 224(2)(b)

[13.180] Relevant circumstances would include whether the respondent cooperated fully with the regulator to reduce the time and expense of the proceeding and saved time and resources. It is also relevant to consider whether the respondent showed contrition and took steps to put an end to the infringing conduct.122 Previous contraventions: s 224(2)(c)

[13.185] A previous contravention of the ACL does not have to be a contravention of the same provision as that at issue in the later case. In ACCC v Coles Supermarkets Australia Pty Ltd,123 the conduct at issue was unconscionable conduct in breach of s 22 of the ACL (now s 21 of the ACL). Coles had previously engaged in misleading conduct contrary to ss 18, 29 and 33 of the ACL.124 These prior contraventions were taken into account in fixing pecuniary penalties totalling $10 million. In Singtel Optus Pty Ltd v ACCC125 the Full Federal Court took the following matters into account: Optus cannot be regarded as a “first offender”. It failed to observe the requirements of the Act, and not for the first time. The absence of a satisfactory explanation for the contraventions and the evident laxity in its internal compliance program mentioned by 118 ACCC v Reebok Australia Pty Ltd [2015] FCA 83 at [143] citing the Full Federal Court in Singtel Optus Pty Ltd v ACCC (2012) 287 ALR 249 at [69]. 119 ACCC v AGL South Australia Pty Ltd [2015] FCA 399 (29 April 2015). 120 ACCC v AGL South Australia Pty Ltd [2015] FCA 399 at [39]. See also TPC v CSR Ltd (1991) ATPR ¶41-076 at 52,152-3 (French J); NW Frozen FoodsPty Ltd v ACCC (1996) 71 FCR 285 at 292-4 (Burchett and Kiefel JJ, with whom Carr J agreed); J McPhee & Son (Aust) Pty Ltd v ACCC (2000) 172 ALR 532 at [150]-[151] (Black CJ, Lee and Goldberg JJ); and ACCC v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513 at [58]-[62] (Moore, Dowsett and Greenwood JJ). 121 ACCC v AGL South Australia Pty Ltd [2015] FCA 399 at [72]. 122 ACCC v MSY Technology Pty Ltd (No 2) [2011] FCA 382 at [83]. See ACCC v Metricon Homes Qld Pty Ltd [2012] FCA 797 (31 July 2012) at [38] (Collier J). 123 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405. 124 ACCC v Coles Supermarkets Australia Pty Ltd (No 2) [2014] FCA 1022. 125 Singtel Optus Pty Ltd v ACCC (2012) 287 ALR 249.

[13.190]

13 Public Enforcement

567

the primary judge mean that Optus has given the Court no reason to be confident that, in the absence of a very substantial penalty, it will not regard as acceptable the risk of a fine for contravention. The Court must fashion a penalty which makes it clear to Optus, and to the market, that the cost of courting a risk of contravention of the Act cannot be regarded as acceptable cost of doing business. It is also a circumstance of concern that a misleading advertising campaign is apt to increase the market share of the contravenor at the expense of law-abiding competitors. In this case Optus’ conduct was contrary to the undertaking in which Optus and its competitors had joined with the express intention of improving advertising standards in the telecommunications industry.126

In ACCC v AGL South Australia Pty Ltd,127 AGL SA had previously been found to have contravened ss 18(1), 74(a), 74(b) and 75(1)(a) of the ACL by reason of the conduct of its agent which had engaged in unlawful door-to-door selling practices.128 Another subsidiary of AGL Energy Ltd, AGL Sales Pty Ltd had also contravened ss 74(a) and 74(b) of the ACL. AGL Sales had been ordered to pay a penalty of $1,485,000 and AGL SA, a penalty of $70,000. White J stated that the previous contraventions by AGL SA were “very significant” factors in the imposition of a penalty.129 His Honour held that the penalty was to be assessed having regard to the following criminal law principles: AGL is not to be penalised again for its previous contraventions, but account is to be taken of its record. In particular, it is not entitled to any leniency on the grounds of a good record. Further, the previous contraventions serve to indicate that personal deterrence is particularly important in the present case.130

Non-mandatory factors [13.190] Apart from the three mandatory factors set out in ACL, s 224(2) that must be taken into account, Perram J, in ACCC v Singtel Optus Pty Ltd (No 4),131 identified the following relevant non-mandatory factors: 1) the size of the contravening company; 2) the deliberateness of the contravention and the period over which it extended; 3) whether the contravention arose out of the conduct of senior management of the contravener or at some lower level; 4) whether the contravener has a corporate culture conducive to compliance with the Act (or the new Australian Consumer Law) as evidenced by educational programmes and disciplinary or other corrective measures in response to an acknowledged contravention; 5) whether the contravener has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention; 6) whether the contravener has engaged in similar conduct in the past; 7) the financial position of the contravener; 126 Singtel Optus Pty Ltd v ACCC (2012) 287 ALR 249 at [68]-[69]. 127 ACCC v AGL South Australia Pty Ltd [2015] FCA 399 (29 April 2015). 128 ACCC v AGL Sales Pty Ltd [2013] FCA 1030. 129 ACCC v AGL South Australia Pty Ltd [2015] FCA 399 at [44]. 130 ACCC v AGL South Australia Pty Ltd [2015] FCA 399 at [47] citing R v McInerney (1986) 42 SASR 111 at 113 (King CJ); Ryan v The Queen [2001] HCA 21; (2001) 206 CLR 267 at [67] (Gummow J); and Weininger v The Queen (2003) 212 CLR 629 at [32] (Gleeson CJ, McHugh, Gummow and Hayne JJ). 131 ACCC v Singtel Optus Pty Ltd (No 4) (2012) 282 ALR 246 .

568

The Australian Consumer Law

[13.195]

8) whether the contravening conduct was systematic, deliberate or covert.132

On appeal, no objection was raised to this list of factors.133 However, the Full Federal Court held that Perram J had made a factual error and was required to exercise afresh the discretion to fix the proper penalty. The size of the contravenor is a significant factor in assessing an appropriate penalty because it will determine the deterrent that penalty represents.134 In ACCC v Lux Distributors Pty Ltd (No 2),135 Jessup J imposed a penalty of $370,000 on Lux Distributors Pty Ltd (Lux) for engaging in unconscionable conduct during the sale of vacuum cleaners to elderly women in their homes. This represented about 90% of Lux’s pre-tax profit over the five years to 20 June 2014.136 As regards the deliberateness of the contravening conduct, in ACCC v Reebok Australia Pty Ltd,137 McKerracher J regarded it as “significant” that Reebok Australia had continued to import and supply retailers with its shoes and promotional materials containing the false representations concerning the toning and strengthening benefits of its shoes despite becoming aware that the shoes were the subject of a settlement following enforcement action taken by the Federal Trade Commission in the USA against Reebok International. A penalty of $350,000 was imposed.

Totality principle [13.195] The purpose of the totality principle is to ensure that when considering multiple penalties, the total penalty imposed is just and equitable, and does not exceed what it is proper for the entire contravening conduct involved.138 In ACCC v Australian Safeway Stores Pty Ltd, Goldberg J considered the application of the “totality principle” and stated: The totality principle is designed to ensure that overall an appropriate sentence or penalty is appropriate and that the sum of the penalties imposed for several contraventions does not result in the total of the penalties exceeding what is proper having regard to the totality of the contravening conduct involved. But that does not mean that a court should commence by determining an overall penalty and then dividing it among the various contraventions. Rather the totality principle involves a final overall consideration of the sum of the penalties determined. …

132 ACCC v Singtel Optus Pty Ltd (No 4) (2012) 282 ALR 246. 133 Singtel Optus Pty Ltd v ACCC (2012) 287 ALR 249 at [37] (Keane CJ, Finn and Gilmour JJ). The Perram J factors have been applied in subsequent cases. See ACCC v Pepe’s Ducks Ltd (2013) ATPR ¶42-441 at 43,343-4 at [17] (Bromberg J); ACCC v Harvey Norman Holdings Ltd [2011] FCA 1407 at [20] (Collier J); ACCC v AGL South Australia Pty Ltd [2015] FCA 399 at [22] (White J). 134 ACCC v BAJV Pty Ltd [2014] FCAFC 52 at [41]. 135 ACCC v Lux Distributors Pty Ltd (No 2) [2015] FCA 903 (21 August 2015). 136 ACCC v Lux Distributors Pty Ltd (No 2) [2015] FCA 903 at [31]. 137 ACCC v Reebok Australia Pty Ltd [2015] FCA 83 at [145]-[147]. 138 Mill v The Queen (1988) 166 CLR 59 at 62-3.

[13.195]

13 Public Enforcement

569

It is explicit in this statement that a sentencer or penalty fixer must, as an initial step, impose a penalty appropriate for each contravention and then as a check, at the end of the process, consider whether the aggregate is appropriate for the total contravening conduct involved. (citations omitted)139

This passage was cited with approval by McKerracher J in ACCC v Reebok Australia Pty Ltd who observed: In particular, this approach is to be contrasted with the inappropriate approach of pointing to a single global total penalty and dividing it among the individual contraventions in order to derive separate penalties.140

In ACCC v Singtel Optus (No 4)141 Perram J proceeded to fix the penalty on the basis that there were 11 separate contraventions. He took as his starting point the maximum penalty of $12.1 million which would apply in the worst case. His Honour arrived at a total penalty of $5.26 million and concluded: The totality principle requires one to reflect upon whether the sum of $5.26 million adequately captures the total wrong-doing implicit in the contraventions. In my opinion, it does.142

In ACCC v Origin Energy Ltd,143 White J stated: There are different aspects to the totality principle. The first is that when an offender is sentenced for a number of offences, the Court must ensure that “the aggregation of the sentences appropriate for each offence is a just and appropriate measure of the total criminality involved”: Postiglione v The Queen (1997) 189 CLR 295 at 307-8 (McHugh J). The second aspect is that there may be cases in which, while the individual sentences imposed in respect of the separate offences are appropriate, the aggregate of all those sentences will be so “crushing” as to call for some reduction in the aggregate: see King CJ in R v Rossi (1988) 142 LSJS 451, cited by McHugh J in Postiglione at 308.144

In that case the same conduct gave rise to separate contraventions of s 29(1)(g) and (i) of the ACL by three related companies, Origin Energy Ltd, Origin Energy Electricity Ltd, and Origin Energy Retail Ltd. A single penalty was imposed on each company for both contraventions. Since it was not contemplated that there would be separate penalties for each contravention there was no scope for the application of the first aspect of the totality principle. It was argued by the respondent that the totality principle could be applied by reference to the aggregate of penalties imposed on the respondents since they were members of the one economic group. White J held that the imposition of separate penalties on each respondent did not involve an element of “double punishment” on any of them.145 In ACCC v Safe Breast Imaging Pty Ltd (No 2), Barker J considered the declarations, the injunctions, the pecuniary penalties, the publication orders and the 139 ACCC v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 at 53. 140 ACCC v Reebok Australia Pty Ltd [2015] FCA 83 at [125]. 141 ACCC v Singtel Optus (No 4) [2011] FCA 761 (7 July 2011). 142 ACCC v MSY Technology Pty Ltd (No 2) [2011] FCA 382 at [80]. 143 ACCC v Origin Energy Ltd [2015] FCA 55 (9 February 2015). 144 ACCC v Origin Energy Ltd [2015] FCA 55 at [59]. 145 ACCC v Origin Energy Ltd [2015] FCA 55 at [64].

570

The Australian Consumer Law

[13.200]

disqualification order together constituted a “just and appropriate penalty outcome that responds to the seriousness of the contravening conduct overall”.146

Parity principle [13.200] In determining the appropriate pecuniary penalty it is also relevant to take into account the “parity principle”. The parity principle recognises that all other things being equal, similar contraventions should incur similar penalties. The courts have recognised that parity in the imposition of penalties is desirable in respect of respondents involved in the same proceedings, whose circumstances are comparable.147 The courts have also recognised that corporations guilty of similar contraventions should incur similar penalties. According to the Full Court in NW Frozen Foods: A hallmark of justice is equality before the law, and, other things being equal, corporations guilty of similar contraventions should incur similar penalties … However, other things are rarely equal where contraventions of the Trade Practices Act are concerned … the facts of the instant case should not be compared with a particular reported case in order to derive therefrom the amount of the penalty to be fixed. Cases are authorities for matters of principle; but the penalty found to be appropriate, as a matter of fact, in the circumstances of one case cannot dictate the appropriate penalty in the different circumstances of another case.148

In ACCC v AGL South Australia Pty Ltd,149 White J had regard to the common law of sentencing for criminal offences, and expressed the view that the parity principle is “concerned, primarily, with the sentencing of co-offenders”.150 Counsel for the respondent argued that the penalties imposed should be comparable with those imposed by the court in ACCC v Origin Energy Ltd.151 However, White J declined to apply the parity principle because there were no co-contravenors and the contraventions by the respondents in the Origin Energy case were not identical with those of AGL.

Joint submissions on civil penalties [13.205] It is clear from s 224 of the ACL that it is for the court to determine whether a contravention has occurred and what an appropriate penalty should be.152 However, in exercising its independent judgment the court may have regard to any submission by the parties as to what they think an appropriate penalty should be. A practice developed whereby the parties were able to reach a negotiated settlement that encompassed admissions by the respondent on the basis 146 ACCC v Safe Breast Imaging Pty Ltd (No 2) (2014) ATPR ¶42-481 at [90]. 147 Schneider Electric (Australia) Pty Ltd v ACCC (2003) 127 FCR 170 at [52]-[58] (Merkel J). See also ACCC v CC (NSW) Pty Ltd (No 9) (2000) ATPR ¶41-756 at 40-821 [24] (Lindgren J). 148 NW Frozen Foods Pty Ltd v ACCC (1996) 71 FCR 285 at 295 (Burchett and Kiefel JJ). See also ACCC v Universal Music Australia Pty Ltd (No 2) (2002) ALR 618 at 626. 149 ACCC v AGL South Australia Pty Ltd [2015] FCA 399 (29 April 2015). 150 ACCC v AGL South Australia Pty Ltd [2015] FCA 399 at [65] citing Green v The Queen (2011) 244 CLR 462 at [28]-[30] (French CJ, Crennan and Kiefel JJ). 151 ACCC v Origin Energy Ltd [2015] FCA 55 (9 February 2015). 152 ACCC v Turi Foods Pty Ltd (No 2) [2012] FCA 12 at [28].

[13.205]

13 Public Enforcement

571

of an agreed statement of facts and admissions, and a joint submission to the court on the appropriate penalty. The rationale for the Court having regard to the joint submission of the parties was explained by Burchett J in TPC v TNT Australia Pty Ltd: So long as a negotiated sum is not outside the range within which a court would fix a penalty, there is no good reason why parties should not be at liberty to reach an agreement about what will be submitted to the court. If they were to attempt to go outside the range, the purposes of the law would be in danger of frustration, and it would be incumbent upon the Court to insist upon its function of determining the matter, irrespective of the agreement of the parties. But, subject to that, the public interest was obviously served by what was done in the present case, insofar as great expense to a public authority was avoided, as well as the inevitable unavailability of its human and material resources for other tasks. At the same time, considerable further cost to the community in other ways was averted, including the clogging effect of very lengthy litigation upon the Court lists.153

The same point was made in the joint judgment of Burchett and Kiefel JJ in NW Frozen Foods Pty Ltd v ACCC: There is an important public policy involved. When corporations acknowledge contraventions, very lengthy and complex litigation is frequently avoided, … At the same time, a negotiated resolution in the instant case may be expected to include measures designed to promote, for the future, vigorous competition in the particular market concerned. These beneficial consequences would be jeopardised if corporations were to conclude that proper settlements were clouded by unpredictable risks. A proper figure is one within the permissible range in all the circumstances. The Court will not depart from an agreed figure merely because it might otherwise have been disposed to select some other figure, or except in a clear case.154

In having regard to any submission by the parties as to what they think an appropriate penalty should be, “the Court is not merely giving effect to the wishes of the parties, it is exercising a public function and must have regard to the public interest in doing so”.155 In 2014, the High Court held in Barbaro v The Queen,156 that in criminal proceedings, the prosecution should not be permitted to make a submission as to the specific penalty or the range of penalties which would be appropriate, because it amounted to no more than an expression of opinion and was therefore inadmissible. In Director, Fair Work Building Industry Inspectorate v CFMEU,157 the Full Federal Court held that this principle in Barbaro was equally applicable in relation to civil penalty 153 TPC v TNT Australia Pty Ltd (1995) ATPR ¶41-375 at 40,164-5. See also the TPC v Allied Mills Industries Pty Ltd (No 5) (1981) 60 FLR 38 at 41 (Sheppard J); Commerce Commission v New Zealand Milk Corporation Ltd [1994] 2 NZLR 730; TPC v CC (New South Wales) Pty Ltd (1994) ATPR ¶41-363; TPC v Axive Pty Ltd (1994) ATPR ¶41-368; TPC v Hymix Industries Pty Ltd (1995) ATPR ¶41-369; ACCC v Woolworths (South Australia) Pty Ltd (t/as Mac’s Liquor) (2003) 198 ALR 417 at [20]-[23] (Mansfield J). 154 NW Frozen Foods Pty Ltd v ACCC (1996) 71 FCR 285 at 291 (Burchett and Kiefel JJ, with whom Carr J agreed). Applied in ACCC v Korean Air Lines Co Ltd (2011) ATPR ¶42-382 at [24] (Stone J). See also ACCC v Target Australia Pty Ltd (2001) ATPR ¶41-840 at [24] (Lee J). 155 ACCC v Metricon Homes Qld Pty Ltd [2012] FCA 797 (31 July 2012) at [27] (Collier J). 156 Barbaro v The Queen (2014) 253 CLR 58. 157 Director, Fair Work Building Industry Inspectorate v CFMEU (2015) 229 FCR 331.

572

The Australian Consumer Law

[13.210]

proceedings. However, in Commonwealth v Director, Fair Work Building Industry Inspectorate,158 the High Court unanimously rejected the Full Court’s reasoning and confirmed that a court is not precluded from receiving and, if appropriate, accepting, an agreed submission on penalties. The High Court made a number of observations in relation to joint submissions on agreed penalties. First, the plurality stated that joint penalty submissions increase the predictability of outcomes for the regulator and the wrongdoer: As was recognised in Allied Mills and authoritatively determined in NW Frozen Foods, such predictability of outcome encourages corporations to acknowledge contraventions, which, in turn, assists in avoiding lengthy and complex litigation and thus tends to free the courts to deal with other matters and to free investigating officers to turn to other areas of investigation that await their attention.159

Secondly, the plurality stated that the court must exercise its independent judgment: “the court is not bound by the figure suggested by the parties … the court must satisfy itself that the submitted penalty is appropriate”.160 Thirdly, the plurality provided guidance on the role of the regulator: “it is the function of the relevant regulator to regulate the industry in order to achieve compliance and, accordingly, it is to be expected that the regulator will be in a position to offer informed submissions as to the effects of contravention on the industry and the level of penalty necessary to achieve compliance”.161 The High Court identified a number of differences between a criminal prosecution and civil penalty proceedings which justified excluding the application of Barbaro from civil penalty proceedings: • a criminal prosecution is accusatorial, while civil penalty proceedings are adversarial;162 • civil penalty proceedings are calculated to avoid the notion of criminality;163 • civil penalty proceedings are aimed at compliance and deterrence rather than retribution or rehabilitation;164 and • criminal proceedings are a “uniquely judicial exercise”, whereas in civil penalty proceedings “there is generally very considerable scope for the parties to agree on the facts and upon consequences”.165

Contravention of two or more provisions [13.210] Section 224(4) provides: 158 Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 (9 December 2015). 159 Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 at [46] (French CJ, Bell, Kiefel, Bell, Nettle, and Gordon JJ). 160 Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 at [48]. 161 Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 at [60]. 162 Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 at [52]-[53]. 163 Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 at [54]. 164 Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 at [55]. 165 Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 at [56]-[57].

[13.210]

13 Public Enforcement

573

If conduct constitutes a contravention of two or more of the provisions referred to in s 224(1)(a): (a) a proceeding may be instituted under this Schedule against a person in relation to the contravention of any one or more of the provisions, but (b) a person is not liable to more than one pecuniary penalty under this section in respect of the same conduct.

This provision replicates s 76(3) of the CCA in relation to the imposition of pecuniary penalties for contraventions of the competition provisions of the CCA. The meaning of the expression “the same conduct” in s 76(3) was considered by Franki J in the Simpson Pope case.166 The conduct in question contravened s 48 which prohibits the practice of resale price maintenance. Resale price maintenance is defined in s 96(3) of Pt VIII and the same conduct can fall within more than one definition of the practice. His Honour stated: It is not entirely clear whether a single act, which contravenes s 48 because it is conduct which falls within more than one category in s 96(3), for example, s 96(3)(a) and s 96(3)(f), constitutes more than one contravention of s 48 but in any event I would regard such an act as being appropriately treated as a single contravention of s 48 for the purpose of the fixation of a penalty. I proceed upon the basis that different acts of a supplier, each of which is in contravention of s 48 because it falls within one or more of the categories of acts set out in s 96(3), which take place at different times and in relation to three different customers, are not to be regarded as “the same conduct” within s 76(3).The words “the same conduct” in s 76(3) must be more limited in scope than the words “any similar conduct” which appear at the end of s 76(1).167

Since the acts took place at different times and in relation to different outcomes they were not regarded as the “same conduct” within the meaning of s 76(3) of the CCA. In ACCC v Turi Foods Pty Ltd (No 2),168 Tracey J treated four representations on posters and delivery vehicles that contravened three separate provisions of the and the as a “single course of conduct” since they formed part of the same advertising campaign.169 In Singtel Optus Pty Ltd v ACCC,170 the Full Federal Court had to consider an Optus advertising campaign that deployed five different media: television, metropolitan and local newspapers, billboards, online internet, and direct marketing with brochures. The Full Court held: While Optus’ campaign may have been informed by a single strategy, that strategy was implemented in different ways. It is simply not the case that the same conduct gave rise to all the contraventions or to all of the 11 categories of contravention identified by his Honour: different conduct was involved in each category of contravention; and Optus 166 TPC v Simpson Pope Ltd (1980) 30 ALR 544. See also TPC v Bata Shoe Co Pty Ltd (1980) ATPR ¶40-161 where Lockhart J accepted a submission that seven contraventions arose out of one pattern or course of conduct. His Honour regarded the seven contraventions as falling into three categories for the purpose of determining a penalty since contraventions involving resale price maintenance activities occurred at three different times. 167 TPC v Simpson Pope Ltd (1980) 30 ALR 544 at 556. 168 ACCC v Turi Foods Pty Ltd (No 2) [2012] FCA 12. 169 ACCC v Turi Foods Pty Ltd (No 2) [2012] FCA 12 at [38]. 170 Singtel Optus Pty Ltd v ACCC [2012] FCAFC 20 (7 March 2012).

574

The Australian Consumer Law

[13.215]

engaged in different acts of contravention within each medium. For example, each of the three television advertisements promoted a different product and did so with different advertising content. Of the “moose” advertisements, one advertised a 120 GB broadband service for $49.99 and the other, a 150 GB broadband service for $59.99. The moose commercials were broadcast from 25 April 2010 until 14 June 2010. They were then replaced by the “ostrich” commercial promoting the 120 GB broadband service. It used a voiceover and visual images that were different from the moose commercials. That the underlying objective of each message in each medium was the same does not alter the fact that the content of each message was different. No doubt the difference in content kept the message fresh, this being a feature of such an extensive campaign. It is open in the sound exercise of the discretion under s 76E of the Act, [now s 224 of the ACL] to regard each advertisement in each medium in this extensive campaign as sufficiently distinct to constitute a separate contravention.171

Accessorial liability [13.215] Section 224(1)(b), (c), (d), (e) and (f) of the ACL provides that a civil pecuniary penalty can be imposed not just on a person who has contravened one of the consumer protection provisions listed, but also on a person who: (b) has attempted to contravene such a provision; or (c) has aided, abetted, counselled or procured a person to contravene such a provision; or (d) has induced, or attempted to induce, a person, whether by threats or promises or otherwise, to contravene such a provision; or (e) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or (f) has conspired with others to contravene such a provision.

This provision can be relied upon to impose liability on the directors, servants, agents or individual employees of corporations who engage in conduct on behalf of corporations. Section 224(1)(b), (c), (d), (e) and (f) of the ACL is modelled on s 75B of the TPA, and the jurisprudence in relation to s 75B considered at [14.175]–[14195] will be relevant in relation to it. Because of the serious and deliberate nature of the misleading health and therapeutic claims in the cases set out above, the ACCC joined the natural persons who were involved in the contraventions as accessories. In ACCC v Breast Check Pty Ltd (No 2),172 Barker J held that: “[t]he potential for serious harm to flow from the representations found to have contravened the consumer laws, is the key issue”.173 Barker J observed: The key issue is the potential to divert consumers from using a medically recognised form of breast imaging and the harm or potential harm caused by that. Thus, I accept that even if only one consumer has been so diverted to their detriment, the consequences to a person’s health may be very serious and at worst, fatal.174

Dr Boyd, by the nature of her involvement in the preparation of the pamphlets, was knowingly concerned in the contravention by Breast Check Pty Ltd. However, 171 Singtel Optus Pty Ltd v ACCC [2012] FCAFC 20 at [52]-[53]. 172 ACCC v Breast Check Pty Ltd (No 2) [2014] FCA 1068. 173 ACCC v Breast Check Pty Ltd (No 2) [2014] FCA 1068 at [102]. 174 ACCC v Breast Check Pty Ltd (No 2) [2014] FCA 1068 at [29]-[30].

[13.220]

13 Public Enforcement

575

because of the limited period of publication and the limited number of persons to whom the pamphlet was distributed, Breast Check was ordered to pay a penalty of $75,000, and Dr Boyd was ordered to pay $25,000.175 In ACCC v Safe Breast Imaging Pty Ltd (No 2),176 the service was marketed widely through the internet. A penalty of $200,000 was imposed on SBI and a penalty of $50,000 on Ms Firth who was found to be knowingly concerned in the contraventions of SBI.177 In addition, the court ordered that Ms Firth be disqualified from managing corporations for a period of four years pursuant to s 248 of the ACL.178 Finally, in ACCC v Homeopathy Plus! Australia Pty Ltd (No 2),179 a penalty of $115,000 was imposed on Homeopathy Plus! Australia Pty Ltd, and a penalty of $23,000 on its director Ms Frances Sheffield. The offending articles were published on the internet in order to promote its online store. In setting the penalty, Perry J observed: The key issue here, in my view, in considering the significance of loss and damage, is not the question of the effect of the conduct on other “competitors”, but the potential to divert consumers from immunising themselves and those in their care, with potential risks to their health and to the broader community.180

Attempt and attempt to induce [13.220] Section 224 of the ACL is sweeping in its terms: it catches an attempt to contravene a provision,181 inducing a person to contravene a provision, and attempting to induce a person to contravene a provision specified in s 224(1)(a) of the ACL.182 Where there is only an attempt falling short of an actual contravention, the directors of a company or its individual employees cannot be found to have been directly or indirectly knowingly concerned and/or party to the contravention in terms of s 224(1)(e). The drafting of s 224 is modelled on s 76(1) of the TPA. In TPC v Parkfield Operations Pty Ltd,183 the Full Federal Court confirmed the approach taken in TPC v Tubemakers of Australia Ltd in relation to the attempt provisions of s 76(1).184 It is not necessary that the attempt must have reached an advanced stage; all that is required is the 175 ACCC v Breast Check Pty Ltd (No 2) [2014] FCA 1068 at [111]. 176 ACCC v Safe Breast Imaging Pty Ltd (No 2) (2014) ATPR ¶42-481. 177 ACCC v Safe Breast Imaging Pty Ltd (No 2) (2014) ATPR ¶42-481 at [77]-[78]. 178 ACCC v Safe Breast Imaging Pty Ltd (No 2) (2014) ATPR ¶42-481 at [85]. See M Knox and A Seethor, “Disqualification Orders under the Australian Consumer Law” (2015) Australian Journal of Competition and Consumer Law 105. 179 ACCC v Homeopathy Plus! Australia Pty Ltd (No 2) [2015] FCA 1090. 180 ACCC v Homeopathy Plus! Australia Pty Ltd (No 2) [2015] FCA 1090 at [39]. 181 ACL, s 224(b). 182 ACL, s 224(d). 183 TPC v Parkfield Operations Pty Ltd (1985) 7 FCR 534. 184 TPC v Tubemakers of Australia Ltd (1983) 76 FLR 455.

576

The Australian Consumer Law

[13.220]

taking of a step towards the commission of a contravention. However, in order for an attempt to be established the relevant conduct must go beyond mere preparation. The Full Court stated: We agree that an attempt must involve the taking of a step towards the commission of the illegal act and that it is not sufficient that it be merely remotely connected or preparatory to the commission of it.185

In Tubemakers, Toohey J said in relation to a statement relied upon to found an allegation of attempt it is necessary that the statement [M]ust carry within its terms the potential for an arrangement or an understanding. A statement made quite unilaterally of intention to do something or to refrain from doing something, with no suggestion express or implied that others might act in the same way, is hard to visualise as an attempt to make an arrangement or arrive at an understanding.186

All that is required is the requisite intention to engage in conduct that contravenes the relevant provision of the ACL. In ACCC v J McPhee & Son (Australia) Pty Ltd (No 3)187 McPhee was an express freight carrier. One of its principal competitors was Discount Freight Express (DFE). One of McPhee’s major customers in Victoria was Just Jeans. McPhee gave Just Jeans a quote which was a substantial increase of the rate previously charged. Just Jeans advised McPhee that it would go to tender. A representative of McPhee telephoned a representative of DFE and told him that DFE would be contacted by Just Jeans and gave him details of the rates quoted by McPhee to Just Jeans and suggested a figure that DFE would need to quote. There was evidence that an executive of McPhee had invited DFE representatives for lunch for the purpose of discussing the Just Jeans tender and for the purpose of persuading DFE to put in a cover quote, that is, one that was not less than McPhee’s quote. In context of that matter, the giving of McPhee’s rates to a competitor was held to be totally inconsistent with normal competitive behaviour. Since intention is an essential element of attempt, the question arose as to how this was to be established in relation to the corporate respondent McPhee? Heerey J, in an earlier strike out application,188 stated that s 76(1)(b) requires the ACCC to establish an intention on the part of McPhee to contravene s 45 of the TPA. The intention must be that of a person or persons who constituted the “directing mind and will” of the company.189 Heerey J adopted the approach of the High Court in Krakowski v Eurolynx Properties Ltd190 where a majority (Brennan, Deane, Gaudron and McHugh JJ) held that the requisite state of mind of the defendant company could be established by the 185 TPC v Parkfield Operations Pty Ltd (1985) 7 FCR 534 at 538-539. 186 TPC v Tubemakers of Australia Ltd (1983) 76 FLR 455 at 472. 187 ACCC v J McPhee & Son (Australia) Pty Ltd (No 3) (1998) ATPR (Digest) ¶46-183. 188 ACCC v J McPhee & Son (Australia) Pty Ltd (1997) ATPR ¶41-570 at 43,918-43,919. Confirmed on appeal ACCC v J McPhee & Son (Australia) Pty Ltd (2000) 172 ALR 532. 189 See the TPC v Tubemakers of Australia Ltd (1983) 76 FLR 455. 190 Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563.

[13.235]

13 Public Enforcement

577

aggregation of the knowledge of several individuals. In this regard there is no distinction between the knowledge of the individuals and their intention. In the McPhee case the individuals who took part in the attempt were the “directing mind and will” of the company and were not acting in a private capacity. They sought to retain the Just Jeans account for McPhee, not for themselves. Heerey J stated: [U]nless it be the law that there has to be a board resolution or express written authority to an individual before a company can be said to have the relevant intent to engage in price-fixing arrangements or understandings arising from that individual’s conduct (a proposition which I find preposterous) it seems to me clear the intention of Messrs Forde, Morton and Holland is to be imputed to McPhee and their conduct is the conduct of McPhee. In any event, the Commission can rely on TPA, s 84(2).191

Section 139B of the CCA mirrors s 84(2) of the TPA.

Principal offender ceases to exist [13.230] Where the principal offender or contravener ceases to exist, this does not extinguish the liability of an accessory. In ACCC v Black on White Pty Ltd,192 the ACCC instituted proceedings against a corporation and three individuals involved in its administration. The company was deregistered; however, the ACCC continued its action against the three individuals on the ground that they were involved in the contravention as accessories. Spender J held: there is no reason in principle why the fact that a principal offender or contravener ceases to exist, extinguishes the liability of a party that was until that event a s 75B accessory. If a person aids, abets or is knowingly concerned in the commission of a crime, the accessorial liability of that person does not cease on the death of the principal offender.193

Protection against double jeopardy [13.235] The criminal enforcement regime considered in Part I of this chapter and the civil pecuniary penalty regime considered in Part II operate in parallel. Accordingly, it was necessary to introduce legislative safeguards to avoid double jeopardy. Section 225(1) of the ACL provides that a court must not make an order under s 224 against a person for the imposition of pecuniary penalties in relation to a consumer protection breach, if the person has been convicted of an offence for substantially the same conduct. Section 225(2) provides that proceedings for a pecuniary penalty order against a person for a contravention of the ACL must be stayed if criminal proceedings are started against the person for an offence. The pecuniary penalty proceedings may be resumed if the person is not convicted of the offence. 191 ACCC v J McPhee & Son (Australia) Pty Ltd (No 3) (1998) ATPR (Digest) ¶46-183 at 50,321. 192 ACCC v Black on White Pty Ltd (2001) 110 FCR 1. 193 ACCC v Black on White Pty Ltd (2001) 110 FCR 1 at 14.

578

The Australian Consumer Law

[13.240]

While the court must not make an order for the imposition of pecuniary penalties, there is nothing to stop the regulator bringing proceedings for other orders such as declarations, injunctions, adverse publicity, compliance orders, compensation or disqualification of directors.

Honest and reasonable conduct [13.240] Section 226 of the ACL provides that a person can be excused from liability under s 224 if they acted honestly and reasonably. It states: If, in proceedings under s 224 against a person other than a body corporate, it appears to a court that the person has, or may have: (a) engaged in conduct in contravention of a provision referred to in subs (1)(a) of that section; or (b) engaged in conduct referred to in subs (1)(b), (c), (d), (e) or (f) of that section that relates to a contravention of such a provision; but that the person acted honestly and reasonably and, having regard to all the circumstances of the case, ought fairly to be excused, the court may relieve the person either wholly or partly from liability to a pecuniary penalty under that section.

This mirrors the defence in s 85(6) of the TPA. Section 226 provides that where it appears to the court that a person, other than a body corporate, has engaged in conduct in contravention of a provision in s 224(1)(a) or is liable as an accessory under s 224(1)(b), but the person “acted honestly and reasonably and, having regard to all the circumstances of the case, ought fairly to be excused, the court may relieve the person either wholly or partly from liability to a pecuniary penalty under that section”. Section 226 does not operate as a defence to an allegation of a contravention of a provision of s 224, but constitutes a discretionary power to relieve a contravening party from all or part of a penalty or damages, where the person acted honestly or reasonably. In ACCC v Anglo Estates Pty Ltd,194 the respondent acquired a block of land with the intention of subdividing it into residential lots. It ascertained from the Shire that owned the neighbouring land that it would not be developing its land at the same time. Subsequently, the Shire decided to sell its land and the respondent believed that the Shire had engaged in misleading conduct. In seeking to negotiate a settlement of that action it was agreed that the Shire would not sell its residential lots below a minimum price or that it would refrain from selling lots for ten years. The ACCC commenced proceedings for horizontal price fixing and for an exclusionary provision. The directors of the respondent sought to rely on s 85(6). French J exercised the dispensing power under s 85(6) in favour of one of the directors who honestly believed that he had been wronged by the Shire and that his proposals put to the Shire were a lawful means of remedying that wrong. He was

194 ACCC v Anglo Estates Pty Ltd (2005) ATPR ¶42-044.

[13.250]

13 Public Enforcement

579

found to have “acted honestly and reasonably having regard to what he had been told … He received no advice or warning that what he was proposing was against the law”.195 French J observed: A person who has taken legal advice in a genuine effort to ensure that his or her conduct was within the law may be found to have acted reasonably if acting upon that advice. I say “may be found” for in some circumstances a person may be conscious of the risk of contravention and take legal advice as a matter of risk assessment rather than to ensure compliance with the law. A person who engages in contravening conduct in the face of legal advice that there is a “risk” or a “possibility” that the conduct might be found to contravene is unlikely to be found to have acted “reasonably” for the purposes of s 85(6). Game playing in the shadow of the law is not to be rewarded by penalty discounts for the losers.196

Indemnification of officers [13.245] There is a ban on corporations indemnifying their directors and officers against their civil liability to pay a pecuniary penalty and their legal costs in defending such actions. Section 229 of the ACL provides: (1) A body corporate (the first body), or a body corporate related to the first body, commits an offence if it indemnifies a person (whether by agreement or by making a payment and whether directly or through an interposed entity) against either of the following liabilities incurred as an officer (within the meaning of the Corporations Act 2001) of the first body: (a) a liability to pay a pecuniary penalty under section 224; (b) legal costs incurred in defending or resisting proceedings in which the person is found to have such a liability. Penalty: $2,750. (2) For the purposes of subsection (1), the outcome of proceedings is the outcome of the proceedings and any appeal in relation to the proceedings.

Section 230 provides: (1) Section 229 does not authorise anything that would otherwise be unlawful. (2) Anything that purports to indemnify a person against a liability is void to the extent that it contravenes section 229.

Injunctions [13.250] Section 232 of the ACL is based on s 80 of the TPA. In ICI Australia Operations Pty Ltd v TPC, Lockhart J (with whom French J agreed) stated: Section 80 is essentially a public interest provision. Conduct of the kind proscribed by Pts IV and V may be detrimental to the public interest because many persons can be affected and considerable loss or damage may be sustained by them.197 195 ACCC v Anglo Estates Pty Ltd (2005) ATPR ¶42-044 at [65]. 196 ACCC v Anglo Estates Pty Ltd (2005) ATPR ¶42-044 at [59]. 197 ICI Australia Operations Pty Ltd v TPC (1982) 38 FCR 248 at 255.

580

The Australian Consumer Law

[13.250]

Similarly, in Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd,198 Gleeson CJ and McHugh J, in a joint judgment, stated: An application for injunctive relief under s 80 is, in its nature, one for the protection of the public interest … Any public protection of the applicant’s own business or other interests is incidental or collateral. What is sought to be established by the determination of a court is a violation by the respondent of a statutory norm of conduct, and the existence of a duty or liability.199

The ACL regulators can apply for an injunction in an appropriate case. Section 232 confers the widest powers on the Court to grant injunctions to restrain contraventions or attempted contraventions of a provision of Chs 2, 3 or 4 and to deter repetition of the conduct. Section 232 provides: (1) A court may grant an injunction, in such terms as the court considers appropriate, if the court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute: (a) a contravention of a provision of Ch 2, 3 or 4; or (b) attempting to contravene such a provision; or (c) aiding, abetting, counselling or procuring a person to contravene such a provision; or (d) inducing, or attempting to induce, whether by threats, promises or otherwise, a person to contravene such a provision; or (e) being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or (f) conspiring with others to contravene such a provision. (2) The court may grant the injunction on application by the regulator or any other person. (3) Subsection (1) applies in relation to conduct constituted by applying or relying on, or purporting to apply or rely on, a term of a consumer contract that has been declared under s 250 to be an unfair term as if the conduct were a contravention of a provision of Chapter 2. (4) The power of the court to grant an injunction under subs (1) restraining a person from engaging in conduct may be exercised: (a) whether or not it appears to the court that the person intends to engage again, or to continue to engage, in conduct of a kind referred to in that subsection; and (b) whether or not the person has previously engaged in conduct of that kind; and (c) whether or not there is an imminent danger of substantial damage to any other person if the person engages in conduct of that kind. (5) Without limiting subsection (1), the court may grant an injunction under that subsection restraining a person from carrying on a business or supplying goods or services (whether or not as part of, or incidental to, the carrying on of another business): (a) for a specified period; or (b) except on specified terms and conditions. (6) Without limiting subsection (1), the court may grant an injunction under that subsection requiring a person to do any of the following: 198 Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 200 CLR 591. 199 Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 200 CLR 591 at 602.

[13.260]

13 Public Enforcement

581

(a) refund money; (b) transfer property; (c) honour a promise; (d) destroy or dispose of goods. (7) The power of the court to grant an injunction under subsection (1) requiring a person to do an act or thing may be exercised: (a) whether or not it appears to the court that the person intends to refuse or fail again, or to continue to refuse or fail, to do that act or thing; and (b) whether or not the person has previously refused or failed to do that act or thing; and (c) whether or not there is an imminent danger of substantial damage to any other person if the person refuses or fails to do that act or thing.

The condition precedent for the exercise of injunctive powers under s 232 is that a person has contravened a provision of Chs 2, 3 or 4, or is proposing to engage in conduct that constitutes or would constitute a contravention of a provision of ACL, Chs 2, 3 or 4. The power to grant injunctive relief in consequence of a contravention of a provision of Chs 2, 3 or 4 is exclusively conferred by s 232 rather than the general power conferred by ss 22 and 23 of the Federal Court of Australia Act 1976 (Cth).200 The court has very wide injunctive powers; however, there needs to be a nexus between the contravention of the which the court has found and the terms of the restraint.201 Section 232 does not prescribe a time limit within which an application for injunction must be made. The power to grant interim injunctions is considered at [14.215]. Injunctions by consent

[13.255] Where the contravening conduct is neither admitted nor proved, the court’s power to grant an injunction is contained in s 233 which provides: If an application is made under s 232, the court may, if it considers that it is appropriate to do so, grant an injunction under this section by consent of all the parties to the proceedings, whether or not the court is satisfied as required by s 232(1).

Threatened or impending conduct

[13.260] Section 232(4) removes the normal rule that an injunction is only to be granted to restrain threatened or impending conduct. It provides that the power of the court to grant an injunction restraining a person from engaging in conduct may be exercised: (a) whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of that kind; (b) whether or not the person has previously engaged in conduct of that kind; and (c) whether or not there is an imminent danger of substantial damage to any person if the first-mentioned person engages in conduct of that kind. 200 Thomson Australia Holdings Pty Ltd v TPC (1981) 148 CLR 151 at 161-2 (Gibbs CJ, Stephen, Mason and Wilson JJ); Foster v ACCC (2006) 149 FCR 135 at 145 [22] (Ryan, Finn and Allsop JJ). 201 Foster v ACCC (2006) 149 FCR 135 at [30].

582

The Australian Consumer Law

[13.265]

Section 232(4) goes beyond the traditional basis for granting an injunction in equity. Injunction for past conduct

[13.265] The terms of an injunction based on past conduct should be limited to restraining a repetition of the conduct, that is, restraining the respondents from engaging in conduct of the nature which they have admitted they engaged in and which contravened a provision of the ACL. However, in the case of an injunction based on an intention to commit future contemplated conduct the injunction can be cast more widely to catch conduct of the kind threatened or intended.202 There must be a sufficient nexus or relationship between the alleged conduct and the proposed order.203 The jurisdiction to grant an injunction depends on the alleged conduct constituting an alleged or actual contravention of a provision of the ACL. Once that condition precedent is satisfied, the court has the widest possible injunctive powers. If there isn’t a sufficient nexus between the conduct of the subject of the injunction and the conduct alleged to constitute a contravention of a provision of the ACL, an injunction would not be “appropriate”. Matters relevant to the exercise of the discretion

[13.270] The grant of an injunction for a contravention of a provision of Chs 2 or 3 of the ACL is at the discretion of the court taking into account such matters as: • whether the contravening conduct has occurred before; • whether it was an isolated, inadvertent act of a subordinate employee or a careful and deliberate act engaged in by a senior manager; and • whether, given the firm’s past history, the conduct is likely to re-occur.204 Terms of the injunction

[13.275] In ICI Australia Operations Pty Ltd v TPC, Lockhart J observed that while the traditional role of the injunction in equity is preventative, the words, “such terms as the court determines to be appropriate”, have been construed to mean that “the court should be given the widest possible injunctive powers, devoid of traditional constraints, though the power must be exercised judicially and sensibly”.205 This construction was approved by the Full Court of the Federal Court in Foster v ACCC,206 in relation to a contravention of s 52 of the TPA. In that case the Full Court held that the Court is not confined to preventing a repetition of the precise contravention found to exist in the particular case. It is only necessary that there be found the requisite nexus between the contravention of the and the terms of the restraint. 202 BMW Australia Ltd v ACCC (2004) 207 ALR 452 at [36] (Gray, Goldberg and Weinberg JJ). 203 ACCC v Z-Tek Computer Pty Ltd (1997) 78 FCR 197 at 203 (Merkel J). 204 ICI Australia Operations Pty Ltd v TPC (1992) 38 FCR 248 at 257-8 (Lockhart J with whom French J agreed). 205 ICI Australia Operations Pty Ltd v TPC (1982) 38 FCR 248 at 256. 206 Foster v ACCC (2006) 149 FCR 135 at [30]-[31] (Ryan, Finn and Allsop JJ).

[13.285]

13 Public Enforcement

583

The Full Court stated: If the court considers that a complete prohibition, whether permanently or for a specified period, on a respondent’s engaging in a particular field of commercial activity or industry is required to protect the public from conduct of the kind which constituted the contravention, s 80 is wide enough to support such a prohibition as a matter of power.207

Thus, the court could conceivably prohibit an accessory from engaging similar conduct in the same field of activity or cast it more widely to catch conduct of the kind similar to the established contravention in other fields of activity as well. The injunction could be granted for a number of years or permanently. The only limitation on the court’s discretion is that it be exercised “judicially and sensibly”. The terms of the injunction must not be vague or imprecise, and must not require supervision of the court. Corrective advertising

[13.280] In some cases, merely prohibiting future false or misleading conduct will not dispel misperceptions conveyed by past misleading conduct. In such cases the regulator may seek an order for corrective advertising. It would seem that the court has a general power under s 232(1) of the ACL to make orders for the publication of corrective advertising.208 In Hospital Contribution Fund of Australia Ltd v Switzerland Australia Health Fund Pty Ltd, Morling J observed that the power to order corrective advertising is to be used protectively and not by way of punishment.209 In cases involving misleading conduct under ACL, s 18, and false or misleading advertising under s 29 of the ACL, the court will need to consider the time that has elapsed since the last publication of the misleading advertisement, and whether there is any real purpose to be served by ordering corrective advertising.210 The regulator may seek orders for corrective advertising in cases where false or misleading claims are made regarding the effectiveness of pharmaceutical products in treating ailments, or where suppliers make unsubstantiated performance claims, or product safety claims, for commonly used consumer products. This is in addition to the specific power to order corrective advertising in s 246 of the discussed at [13.310].

Orders for preservation of property [13.285] Section 137F of the CCA provides that the ACCC may seek certain orders against a person subject to ACCC proceedings to prohibit payment, or transfer money or other property. Section 137F provides: 207 Foster v ACCC (2006) 149 FCR 135 at [34]. 208 See ACCC v Real Estate Institute of Western Australia Inc (1999) 95 FCR 114 at 132 (French J); Janssen Pharmaceutical Pty Ltd v Pfizer Pty Ltd (1986) ATPR ¶40-654 at 47,295 (Burchett J). 209 Hospital Contribution Fund of Australia Ltd v Switzerland Australia Health Fund Pty Ltd (1987) 78 ALR 483 at 491. 210 ACCC v Real Estate Institute of Western Australia Inc (1999) 95 FCR 114 at 132 (French J).

584

The Australian Consumer Law

[13.285]

(1) A court may, on the application of the Commonwealth Minister or the Commission, make an order or orders mentioned in subs (3) if: (a) proceedings of a kind referred to in subs (2) have been taken against a person, or proceedings of a kind referred to in para (2)(d) may be taken against a person; and (b) the court is satisfied that it is necessary or desirable to make the order or orders for the purpose of preserving money or other property held by, or on behalf of, the person if the person is liable, or may become liable, under the Australian Consumer Law: (i) to pay money by way of a fine, damages, compensation, refund or otherwise; or (ii) to transfer, sell or refund other property; and (c) the court is satisfied that the making of such an order or orders will not unduly prejudice the rights and interests of any other person. Kinds of proceedings taken against the person (2) For the purposes of para (1)(a), the kinds of proceedings taken against the person are: (a) proceedings against the person for an offence against a provision of Ch 4 of the Australian Consumer Law; or (b) an application under s 232 of the Australian Consumer Law for an injunction against the person in relation to: (i) a contravention of a provision of Ch 2, 3 or 4 of the Australian Consumer Law; or (ii) a term of a consumer contract in relation to which a declaration under s 250 of the Australian Consumer Law has been made; or (c) an action under subs 236 of the Australian Consumer Law against the person in relation to a contravention of a provision of Pt 2-1 or Ch 3 of the Australian Consumer Law; or (d) an application for an order under subs 237(1) or 239(1) of the Australian Consumer Law against a person in relation to: (i) a contravention of a provision of Ch 2, 3 or 4 of the Australian Consumer Law; or (ii) a term of a consumer contract in relation to which a declaration under s 250 of the Australian Consumer Law has been made. Kinds of orders that may be made (3) The court may make the following orders under subs (1) of this section in a relation to money or other property held by, or on behalf of, a person (the respondent): (a) an order prohibiting, either absolutely or subject to conditions, a person who is indebted to the respondent, or to an associate of the respondent, from making a payment, in total or partial discharge of the debt: (i) to the respondent; or (ii) to another person at the direction or request of the respondent; (b) an order prohibiting, either absolutely or subject to conditions, a person who is holding money or other property on behalf of the respondent, or on behalf of an associate of the respondent: (i) from paying all or any of the money to the respondent, or to another person at the direction or request of the respondent; or (ii) from transferring the other property to the respondent, or to another person at the direction or request of the respondent, or otherwise parting with possession of that property;

[13.290]

13 Public Enforcement

585

(c) an order prohibiting, either absolutely or subject to conditions, the taking or sending by any person of money of the respondent, or of an associate of the respondent, to a place outside the State or Territory in which the money is held; (d) an order prohibiting, either absolutely or subject to conditions, the taking, sending or transfer by any person of other property of the respondent, or of an associate of the respondent, to a place outside the State or Territory in which that property is located; (e) if the respondent is a natural person – an order appointing a receiver or trustee of the property, or of part of the property, of the respondent with such powers as are specified in the order.

This is mirrors s 87A of the former TPA.

Non-punitive orders [13.290] Section 246 of the ACL provides: (1) A court may, on application of the regulator, make one or more of the orders mentioned in subs (2) in relation to a person who has engaged in conduct that: (a) contravenes a provision of Ch 2, 3 or 4; or (b) constitutes an involvement in a contravention of such a provision. (2) The court may make the following orders in relation to the person who has engaged in the conduct: (a) an order directing the person to perform a service that is specified in the order, and that relates to the conduct, for the benefit of the community or a section of the community; (b) an order for the purpose of ensuring that the person does not engage in the conduct, similar conduct, or related conduct, during the period of the order (which must not be longer than 3 years) including: (i) an order directing the person to establish a compliance program for employees or other persons involved in the person’s business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to such conduct; and (ii) an order directing the person to establish an education and training program for employees or other persons involved in the person’s business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to such conduct; and (iii) an order directing the person to revise the internal operations of the person’s business which led to the person engaging in such conduct; (3) an order requiring the person to disclose, in the way and to the persons specified in the order, such information as is so specified, being information that the person has possession of or access to; (4) an order requiring the person to publish, at the person’s expense and in the way specified in the order, an advertisement in the terms specified in, or determined in accordance with, the order.

This provision mirrors s 86C of the TPA, the scope of which was considered by Perram J in ACCC v Singtel Optus Pty Ltd (No 3).211 His Honour noted the following points in relation to s 86C of the TPA which apply equally to s 246 of the ACL: 211 ACCC v Singtel Optus Pty Ltd (No 3) [2010] FCA 1272 (19 November 2010).

586

The Australian Consumer Law

[13.290]

• Section 246 is headed “Non-Punitive Orders”. The regulator is entitled to seek s 246 orders to protect the public interest by dispelling the false impression which has been engendered by the advertisement, rather than by way of punishment.212 • The regulator is entitled to seek s 246 orders to inform consumers of the conduct in question and the possible existence of a remedy.213 • A competitor is entitled to seek s 246 orders to correct market distortions caused by the provision of inaccurate information to consumers. Economic concepts of efficiency and the restoration of a fair and fully informed market place are also legitimate concerns under s 246.214 • In each case, the nature of the original conduct must be carefully considered and an assessment made of the continuing presence in the public’s mind of the deception.215 If there has been a significant lapse of time since the contravention occurred, or the defendant has effectively neutralized the effect of the contravention by its own advertising campaign, it may not be appropriate to grant an order under s 246. • The nature of the advertising campaign and the media utilised are relevant considerations. His Honour stated: “A long campaign, present across multiple media and of medium density may well be likely to have a more substantial or enduring impact on the public mind than a brief and intense campaign.”216 • With regard to free-to-air television advertisements, consumers are not likely to pay much attention to the delivery of complicated information, and are only likely to retain a fleeting impression.217 The ACCC will generally seek an order for a compliance program to prevent a repetition of the contravening conduct.218 The court has a discretion and will not order a compliance program where the respondent proffers evidence that it has taken adequate steps to prevent a repetition of the contravening conduct.219 Where the court orders a compliance program it must fit the circumstances of the particular case and be tailored to prevent a repetition of the particular section of the

212 ACCC v Singtel Optus Pty Ltd (No 3) [2010] FCA 1272 at [5] citing Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at 20 [49] (Stone J). 213 ACCC v Singtel Optus Pty Ltd (No 3) [2010] FCA 1272 at [5] citing Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at 20 [54] (Stone J). 214 ACCC v Singtel Optus Pty Ltd (No 3) [2010] FCA 1272 at [5] citing Concrete Constructons (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 601-602 (Mason CJ, Deane, Dawson and Gaudron JJ). 215 ACCC v Singtel Optus Pty Ltd (No 3) [2010] FCA 1272 at [6]. 216 ACCC v Singtel Optus Pty Ltd (No 3) [2010] FCA 1272 at [6] citing Tec & Thomas (Australia) Pty Ltd v Matsumiya Computers Co Pty Ltd (1984) 1 FCR 28 at 38 (Beaumont J). 217 ACCC v Singtel Optus Pty Ltd (No 3) [2010] FCA 1272 at [6] citing Telstra Corporation Ltd v Optus Communications Pty Ltd (1996) 36 IPR 515 at 523-524 (Merkel J). 218 ACL, s 246(2)(b)(i), (ii) and (iii). 219 ACCC v Harbin Pty Ltd [2008] FCA 1792 (Finn J).

[13.300]

13 Public Enforcement

587

that has been contravened.220 The ACCC may seek an order that an independent external auditor be appointed to report to the ACCC the extent of the respondent’s compliance with the program.221 Community service orders

[13.295] Section 246(2)(a) of the ACL provides that the court may make a community service order. The following examples are provided in the Note to s 246: The following are examples of orders that the court may make under subsection (2)(a): (a) an order requiring a person who has made false representations to make available a training video which explains advertising obligations under this Schedule; (b) an order requiring a person who has engaged in misleading or deceptive conduct in relation to a product to carry out a community awareness program to address the needs of consumers when purchasing the product.

These examples suggest that the service the contravening party is required to undertake will be related to the contravening conduct.222 Probation order

[13.300] Section 246(2)(b) provides that the court may make a probation order which is designed to raise awareness of the ACL within the organisation and put in place training and compliance programs to prevent any recurrence of the contravening conduct. The ACCC has used the non-punitive powers provided by s 86C in innovative ways to ensure compliance for the future after a contravention has been found. For example, in ACCC v Seal-A-Fridge Pty Ltd (No 2),223 Logan J found that franchisor Seal-A-Fridge Pty Ltd had engaged in unconscionable conduct towards its franchisees. As part of the relief granted pursuant to s 86C of the CCA, Logan J ordered that Seal A-Fridge implement and maintain a fully documented complaint handling system for three years (the records of which are to be made available to the ACCC upon request), and that Seal-A-Fridge write to each of its franchisees advising them of this. Under the terms of the order Mr Rooney, who was the directing mind and will of Seal-A-Fridge, was required to: maintain or cause to be maintained a complete and accurate documentary record of all complaints received from Franchisees or prospective Franchisees relating to the first respondent’s compliance with the Code or its agreements with franchisees (the CHS Record), which is to include as a minimum: 220 ACCC v Z-Tek Computer Pty Ltd (1997) 78 FCR 197 at 204 (Merkel J). 221 See ACCC v Frozen Foods Pty Ltd (1996) ATPR ¶41-515 at 42, 448 (Heerey J); ACCC v Danoz Direct Pty Ltd (2003) ATPR (Digest) ¶46-241 at [267] (Dowsett J) and ACCC v Allergy Pathway Pty Ltd [2009] FCA 960 (Finkelstein J). 222 For community service orders made under CCA, s 86C(2)(a) see ACCC v Virgin Mobile Australia Pty Ltd (No 2) (2003) ATPR (Digest) ¶46-230 (French J); and ACCC v Econovite Pty Ltd (2003) ATPR ¶41-959 (French J). 223 ACCC v Seal-A-Fridge Pty Ltd (No 2) [2010] FCA 681 (30 June 2010).

588

The Australian Consumer Law

[13.305]

(i) the identity of the complainant, their contact details and the date of their complaint; (ii) where the complaint is in writing, a copy of written complaint; (iii) where the complaint is made in person or by telephone, a full description of the complaint; (iv) details of the steps taken by the first respondent to resolve the complaint, including the dates upon which the steps were taken; (v) where the steps taken by the first respondent involve any written communication, a copy of that written communication; (vi) where the steps taken by the first respondent involve any verbal communication, a written note of the details of that communication; (vii) where the first respondent has taken no steps to resolve the complaint, a written statement to that effect; (c) shall ensure that the documentary records of the CHS are available to the Australian Competition and Consumer Commission to be reviewed and copied from time to time. Such records are to be made available to the Australian Competition and Consumer Commission for review and copying within 14 days of a written request for those records; (d) maintain the CHS for a period of 3 years from the date of this order.

The CHS record would enable the ACCC to assess how the franchisor had dealt with each complaint and whether it had engaged in any further acts of unconscionable conduct. Disclosure order

[13.305] Section 246(2)(c) provides that the court may make an order requiring the disclosure of information to specified persons rather than the public in general. For example, it may be used to order a franchisor to disclose information to franchisees. Corrective advertising order

[13.310] Section 246(2)(d) provides that the court may make a corrective advertising order. Corrective advertising orders have a protective purpose. The purpose is to protect the public interest, eg, by protecting consumers who may be the victims of misleading advertising.224 The timing of such corrective advertising is important, and it is necessary to have regard to the nature, extent and intensity of the misleading advertising and the media in which it has been released to determine whether there are likely to be any consumers who still under a misapprehension as to the true position.225 In Medical Benefits Fund of Australia Ltd v Cassidy,226 an appeal from the decision of Hill J,227 the orders for corrective advertising were set aside because the effluxion of 224 See Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at 20-2 [48]-[54] (Stone J); ACCC v Target Australia Pty Ltd (2001) ATPR ¶41-840 at 43,382 (Lee J; ACCC v On Clinic Australia Pty Ltd (1996) ATPR ¶41-517 at 42,459 (Tamberlin J); and ACCC v Signature Security Group Pty Ltd (2003) ¶ATPR 41-908 at 46,542 (Stone J). 225 ACCC v On Clinic Australia Pty Ltd (1996) ATPR ¶41-517 at 42,459 (Tamberlin J). See also ACCC v Virgin Mobile Australia Pty Ltd (No 2) (2003) ATPR (Digest) ¶46-230 (French J). 226 Medical Benefits Fund of Australia Ltd v Cassidy (2003) ATPR ¶41-971. 227 Cassidy v Medical Benefits Fund of Australia Ltd (No 2) (2002) ATPR ¶41-892.

[13.315]

13 Public Enforcement

589

time and the medium used (“the evanescent quality of television advertising”) meant that corrective advertising was not likely to be effective.228 There seems to be no reason why corrective advertising should not be ordered where it is necessary to protect the public interest, and also incidentally protects a competitor of the contravener. For example, in Janssen Pharmaceutical Pty Ltd v Pfizer Pty Ltd,229 it was accepted under s 80 of the that the applicant was entitled to injunctive relief, both restraining the respondent from continuing its misleading advertising, and also requiring it to take some steps to correct the misinformation it had disseminated. Burchett J held that there was a strong case for granting relief: The respondent’s product had been promoted through advertising which made a meretricious appeal to medical science to justify exciting the fears and emotions of parents by seriously misleading statements. While parental feelings thus aroused were exploited for gain, a competitor’s product was in the process misleadingly denigrated. In my view, relief should be granted, which should include, if the Court’s power extends so far, a mandatory order to correct the misinformation purveyed … The respondent forthwith cause to be published prominently in Pharmacy Trade and Australian Journal of Pharmacy an announcement in the following terms: IMPORTANT ANNOUNCEMENT BY PFIZER PTY Ltd The Federal Court of Australia has ruled that Pfizer Pty Ltd in its recent advertising and promotion of Combantrin has engaged in conduct that is misleading or deceptive in that it has made statements or representations including the following: (i) That there are only three types of human-infesting gastro-intestinal nematode worms in Australia – ie threadworm, roundworm and hookworm – whereas in fact, there are at least five such types of worms – ie threadworm, roundworm, hookworm, whipworm and Strongyloides stercoralis. (ii) That threadworm, roundworm and hookworm are common in Australia whereas only threadworm is common and roundworm and hookworm are extremely rare. Pfizer Pty Ltd will forthwith be ceasing and withdrawing any and all such advertising and promotional material, including a manual entitled Pfizer Pharmacy Reference Manual, a television advertisement, a number of radio advertisements and a recently released pharmacy/consumer video. Pfizer Pty Ltd requests pharmacists to cease further distribution and use of such promotional material pending its collection by a Pfizer Pty Ltd representative.230

Adverse publicity orders [13.315] Section 247 provides: (1) A court may, on application of the regulator, make an adverse publicity order in relation to a person who: (a) has contravened a provision of Pt 2-2 or Ch 3; or (b) has committed an offence against Ch 4. (2) An adverse publicity order in relation to a person is an order that requires the person: 228 Medical Benefits Fund of Australia Ltd v Cassidy (2003) ATPR ¶41-971 at [61] (Stone J). 229 Janssen Pharmaceutical Pty Ltd v Pfizer Pty Ltd (1986) ATPR ¶40-654. 230 Janssen Pharmaceutical Pty Ltd v Pfizer Pty Ltd (1986) ATPR ¶40-654 at 47,295-6.

590

The Australian Consumer Law

[13.320]

(a) to disclose, in the way and to the persons specified in the order, such information as is so specified, being information that the person has possession of or access to; and (b) to publish, at the person’s expense and in the way specified in the order, an advertisement in the terms specified in, or determined in accordance with, the order.

This provision mirrors s 86D of the TPA. The following points should be noted in relation to ACL, s 247: • the regulator can seek these orders in relation to a person who is guilty of a criminal offence against Chapter 4 of the ACL, or a person who has contravened Pt 2-2 or Ch 3. • unlike s 246 which is protective in nature, s 247 is intended to punish wrong-doing. • the orders in s 247(2)(a) and (b) mirror those in s 246(2)(c) and (d). The existence of this specific power to disclose specified information does not detract from the more general power to order corrective advertising pursuant to s 232.

Orders disqualifying a person from managing corporations [13.320] To protect consumers in the future, the regulators may seek to ban individuals from managing corporations. The ACCC had some success in obtaining orders (with some of the features of a banning order) under s 80 of the TPA. The Productivity Commission recommended that the new national generic consumer law should give consumer regulators the capacity to seek the imposition of banning orders.231 The Productivity Commission observed: banning orders can be more effective than civil pecuniary penalties… because … financial penalties may sometimes be absorbed by the corporate entity rather than the individual (and treated as a cost of doing business). In addition, isolating the penalty for illegal conduct to the responsible individual rather than the corporate entity may prevent (or limit) harm to associated parties (for example, shareholders, employees, creditors and consumers seeking compensation) who may be indirectly affected by a financial penalty. Therefore, banning orders can be a potentially important and useful complement to civil penalties and other remedies.232

Section 248 provides: (1) A court may, on application of the regulator, make an order disqualifying a person from managing corporations for a period that the court considers appropriate if: (a) the court is satisfied that the person has contravened, has attempted to contravene or has been involved in a contravention of any of the following provisions: (i) a provision of Pt 2-2 (which is about unconscionable conduct); 231 Productivity Commission, Review of Australia’s Consumer Policy Framework, Final Report (2008), recommendation 10.1, p 251. 232 Productivity Commission, Review of Australia’s Consumer Policy Framework, Final Report (2008), p 241.

[13.325]

13 Public Enforcement

591

(ii) a provision of Pt 3-1 (which is about unfair practices); (iii) a provision (other than s 85) of Div 2 of Pt 3-2 (which is about unsolicited consumer agreements); (iv) s 106(1), (2), (3) or (5), 107(1) or (2), 118(1), (2), (3) or (5), 119(1) or (2), 125(4), 127(1) or (2), 128(2) or (6), 131(1) or 132(1) (which are about safety of consumer goods and product related services); (v) s 136(1), (2) or (3) or 137(1) or (2) (which are about information standards); (vi) a provision of Ch 4 (which is about offences); and (b) the court is satisfied that the disqualification is justified. (2) In determining under subsection (1) whether the disqualification is justified, the court may have regard to: (a) the person’s conduct in relation to the management, business or property of any corporation; and (b) any other matters that the court considers appropriate. (3) If the court makes an order under subs (1), the regulator must: (a) notify ASIC; and (b) give ASIC a copy of any such order. (4) For the purposes of this Schedule (other than this section or s 249), an order under this section is not a penalty.

A similar power also exists under Pt 2D.6 of the Corporations Act 2001 (Cth).

[13.325] It is important to note that directors and officers may be disqualified from managing corporations for engaging in conduct that contravenes a provision listed in s 248(1)(a) but they are also liable to be disqualified from managing a corporation if they attempt to contravene or have been involved in a contravention of any of those provisions.233 Disqualification orders ban or restrict individuals from participating in specific activities, including managing corporations. Although they have a significant impact on the individual subject to them, they are intended to protect consumers and provide a serious deterrent to engaging in illegal conduct. Prior to the High Court’s decision in Rich v ASIC,234 disqualification orders were considered to be protective in nature rather than constituting a penalty. Section 249 provides that in a civil or criminal proceeding under the ACL, a person is not entitled to refuse or fail to comply with a requirement in a proceeding arising out of the ACL or a requirement under the ACL to: • answer a question or give information; • produce a document; or • do any other act on the ground that doing so might tend to expose the person to a penalty. Section 249 reverses the effect of Rich v ASIC.235 233 See [13.220]. 234 Rich v ASIC (2004) 220 CLR 129. 235 See Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [15.120].

592

The Australian Consumer Law

[13.325]

Disqualification orders for contraventions of the ACL have only been made in a limited number of cases where the conduct of the individual has been deliberate, systematic, and likely to cause serious harm to consumers. In ACCC v Safe Breast Imaging Pty Ltd (No 2),236 a device for assessing whether a customer was at risk of breast cancer was marketed widely through the internet. The conduct was held to be misleading because there was no scientific basis for representing that the device was capable of assessing the risk of breast cancer. See [3.155]. A penalty of $200,000 was imposed on SBI and a penalty of $50,000 on Ms Firth who was found to be knowingly concerned in the contraventions of SBI.237 In addition, the court ordered that Ms Firth be disqualified from managing corporations for a period of four years pursuant to s 248 of the ACL.238 In ACCC v Excite Mobile Pty Ltd, Mansfield J accepted that the body of case law that has developed in relation to disqualification of officers under ss 206C and 206E of the Corporations Act 2001 should apply to consideration of applications to disqualify officers under ACL, s 248 (s 86E of the TPA).239 Mansfield J found that Excite Mobile had engaged in false, misleading and unconscionable conduct in the provision of mobile phone services to customers and had used “undue coercion” when attempting to collect debts for mobile phone services in contravention of s 60 of the TPA.240 The ACCC sought disqualification orders against the two directors of Excite Mobile, Mr Brown for a period of 15 years and Mr Samuel for a period of 10 years.241 The court stated: In assessing the appropriate length of prohibition, consideration has been given to the degree of seriousness of the contraventions, the propensity that the person may engage in similar conduct in the future and the likely harm that may be caused to the public. It is necessary to balance the personal hardship to the person to be banned against the public interest and the need for protection of the public from any repeat of the conduct. A mitigating factor in considering a period of disqualification is the likelihood of the contravenor reforming.242

Mansfield considered disqualification for three years was appropriate for Mr Brown and two years six months disqualification for Mr Samuel since there was no real risk of either of them contravening the ACL in the future.243 The “totality” principle requires that when considering multiple penalties, including a disqualification order, the total penalty imposed is just and equitable, and does not exceed what it is proper for the entire contravening conduct 236 ACCC v Safe Breast Imaging Pty Ltd (No 2) (2014) ATPR ¶42-481. 237 ACCC v Safe Breast Imaging Pty Ltd (No 2) (2014) ATPR ¶42-481 at [77]-[78]. 238 ACCC v Safe Breast Imaging Pty Ltd (No 2) (2014) ATPR ¶42-481 at [85]. See M Knox and A Seethor, “Disqualification Orders under the Australian Consumer Law” (2015) Australian Journal of Competition and Consumer Law 105 at 110. 239 ACCC v Excite Mobile Pty Ltd (No 2) (2013) ATPR ¶42-454 at [167]. 240 ACCC v Excite Mobile Pty Ltd [2013] FCA 350 at [208]. 241 ACCC v Excite Mobile Pty Ltd (No 2) (2013) ATPR ¶42-454 at [162]. 242 ACCC v Excite Mobile Pty Ltd (No 2) (2013) ATPR ¶42-454 at [172]. 243 ACCC v Excite Mobile Pty Ltd (No 2) (2013) ATPR ¶42-454 at [175]-[178].

[13.330]

13 Public Enforcement

593

involved.244 See [13.70]. In relation to the Corporations Act 2001, the question of any disqualification order is generally decided before any pecuniary penalty is imposed.245 If a disqualification order is imposed it may be grounds for imposing a lesser pecuniary penalty. Farrell J adopted the approach of considering the disqualification order before the imposition of pecuniary penalties in ACCC v Safety Compliance Pty Ltd (in liq) (No 2).246 The court ordered that Mr King be disqualified from managing corporations for a period of eight years.247 It also ordered that Mr King pay a pecuniary penalty of $125,000. Farrell J accepted that it is appropriate to impose a substantial pecuniary penalty on Mr King for the purpose of specific and general deterrence of the deliberate and systematic misleading representations to small businesses. Farrell J observed: I do not consider that such a penalty would be crushing to Mr King, even though he will be subject to a disqualification order and an order for the ACCC’s costs in these proceedings. If he has been truly forthcoming in his evidence as to the assets available to him and his liabilities, he would appear to be insolvent and this penalty will not change that position. The penalty would serve the purpose of general deterrence of others engaged in the telemarketing activities from deliberately engaging in misleading or deceptive conduct amounting to a scam. On the other hand, if the ACCC is correct (and I find that there are grounds to believe that Mr King has not been completely forthcoming), then (despite his submissions) he has not put the Court in a position to assess his capacity to pay a penalty and the penalty will serve the purpose of specific deterrence. I do not consider that this penalty should be decreased by reference to the disqualification order…248

Publisher’s defence [13.330] Section 251 of the ACL provides: (1) This section applies to a proceeding under this Part in relation to a contravention of a provision of Part 2-1 or 2-2 or Chapter 3 if the contravention was committed by the publication of an advertisement. (2) In the proceeding, it is a defence if the defendant proves that: (a) the defendant is a person whose business it is to publish or arrange for the publication of advertisements; and (b) the defendant received the advertisement for publication in the ordinary course of business; and (c) the defendant did not know, and had no reason to suspect, that its publication would amount to a contravention of such a provision.

This mirrors s 85(3) of the TPA. The scope of s 85(3) of the TPA was considered by the High Court in Google Inc v ACCC.249 The facts of this case are set out at [3.45]. The ACCC identified Google’s contravening conduct as being the “making” of the 244 See M Knox and A Seethor, “Disqualification orders under the Australian Consumer Law” (2015) Australian Journal of Competition and Consumer Law 105 at 111. 245 See ASIC v Australian Property Custodian Holdings Ltd (R & Mgs apptd) (in liq) (Controllers apptd) [2014] FCA 1308 at [79] (Murphy J). 246 ACCC v Safety Compliance Pty Ltd (in liq) (No 2) [2015] FCA 1469 at [42]. 247 ACCC v Safety Compliance Pty Ltd (in liq) (No 2) [2015] FCA 1469 at [108]. 248 ACCC v Safety Compliance Pty Ltd (in liq) (No 2) [2015] FCA 1469 at [113]. 249 Google Inc v ACCC (2013) 249 CLR 435.

594

The Australian Consumer Law

[13.335]

misleading representations contained in the sponsored links in issue. The ACCC did not allege that Google had engaged in misleading conduct by merely publishing a misleading third party advertisement. The majority of the High Court considered that publication of a misleading advertisement by an intermediary publisher will, in general, only constitute misleading conduct if the intermediary publisher can be said to have adopted or endorsed the misleading statements contained in the advertisement.250 Their Honours then stated: an intermediary publisher who has endorsed or adopted a published representation of an advertiser without appreciating the capacity of that representation to mislead or deceive may have resort to the statutory defence. In those circumstances, recognising that its business carried a risk of unwitting contravention, an intermediary publisher may need to show that it had some appropriate system in place to succeed in the defence that it did not know and had no reason to suspect that the publication of that representation would amount to a contravention.251

On the other hand, Hayne J was of the opinion that the mere publication of a misleading third party advertisement may constitute misleading conduct. His Honour noted that publishers who engage in such conduct may, however, seek to rely on the defence afforded by s 85(3) of the TPA (now s 251 of the ACL).252 Whilst the weight of judicial opinion favours the view that the mere act of publication of a misleading third party advertisement will not constitute misleading or deceptive conduct within the meaning of s 18 the ACL, the matter has not been finally resolved.

Undertakings [13.335] A person may offer an undertaking to the regulator in relation to a matter with a view to avoiding litigation. It is for the regulator to decide whether to accept the undertaking or to issue an infringement notice or to enforce the matter by court action.253 It appears that the issuing of an infringement notice is seen by the regulator as being more serious than accepting an undertaking, although clearly not as serious as enforcing the matter by court action seeking the imposition of pecuniary penalties. Section 218 of the ACL effectively gives a court the power to enforce undertakings given to regulators by converting them to orders of the court, and to make other orders at its discretion, including injunctions preventing the person in breach of the undertaking from committing any further breaches.254 Section 218 of the ACL provides: (1) The regulator may accept a written undertaking given by a person for the purposes of this section in connection with a matter in relation to which the regulator has a power or function under this Schedule. 250 Google Inc v ACCC (2013) 249 CLR 435 at [75] (French CJ, Crennan, and Kiefel JJ) at [164] (Heydon J). 251 Google Inc v ACCC (2013) 249 CLR 435 at [75]. 252 Google Inc v ACCC (2013) 249 CLR 435 at [118]-[120]. 253 ACL, s 218(1). 254 ACCC v StoresOnline International Inc [2007] FCA 1597 at [14] (Tamberlin J).

[13.335]

13 Public Enforcement

595

(2) The person may, with the consent of the regulator, withdraw or vary the undertaking at any time. (3) If the regulator considers that the person who gave the undertaking has breached any of its terms, the regulator may apply to a court for an order under subs (4). (4) If the court is satisfied that the person has breached a term of the undertaking, the court may make all or any of the following orders: (a) an order directing the person to comply with that term of the undertaking; (b) an order directing the person to pay to the Commonwealth, or to a State or Territory, an amount up to the amount of any financial benefit that the person has obtained directly or indirectly and that is reasonably attributable to the breach; (c) any order that the court considers appropriate directing the person to compensate any other person who has suffered loss or damage as a result of the breach; (d) any other order that the court considers appropriate.

If a term of the undertaking is breached the court may make all or any of the orders set out in ACL, s 218(4). For example, in Commissioner for Consumer Protection v Armstrong255 the Commissioner for Consumer Protection, as “the regulator” for the purposes of s 218 of the ACL (WA), accepted a written undertaking from Ms Armstrong, following allegations that she had engaged in misleading conduct in relation to the sales of dogs. She was subsequently found to have breached the undertaking. Beech J granted an injunction restraining Ms Armstrong from acting in breach of the undertaking under s 218(4) of the ACL (WA). Section 218 of the ACL mirrors s 87B of the CCA. Section 87B empowers the ACCC to accept court enforceable undertakings “in connection with a matter” in relation to which the ACCC has a power or function under the CCA which includes the ACL in Sch 2. The ACCC appears to use s 87B of the CCA rather than its power under s 218 of the ACL.256 The ACCC does not require that the corporation admits breaching the ACL since such an admission could result in third party claims by means of private enforcement. However, s 87B undertakings will not be accepted if they include a denial of liability. For example, in the ACCC s 87B undertaking accepted in the Maggie Beer Products Pty Ltd investigation Maggie Beer Products acknowledged that its conduct “was likely to have contravened ss 18 and 29(k) of the ACL”.257 Section 87B undertakings will form part of the ACCC’s public register, and will thus be available for dissemination and comment. This ensures that the ACCC’s 255 Commissioner for Consumer Protection v Armstrong [2012] WASC 206. 256 For example, on 19 August 2014, the ACCC terminated its investigation into conduct by Maggie Beer Products Pty Ltd, a leading producer of gourmet food products, following the giving of a court enforceable undertaking pursuant to s 87B of the CCA. On 2 September 2015, the ACCC accepted s 87B undertakings from P&M Quality Smallgoods Pty Ltd (trading as Primo Smallgoods), George Weston Foods Pty Ltd (trading as KR Castlemaine) and Pastoral Pork Company Pty Ltd (trading as Otway Pork) for use of the term “free range” in connection with the promotion and labelling of pork products, when they were not able to move about freely in an open paddock. See also the s 87B undertaking accepted on 13 June 2014 in which Barossa Farm Produce Pty Ltd agreed not to make claims about the characteristics for its Black Pig labelled smallgoods when it had no reasonable basis for doing so. See ACCC’s undertakings register at http://www.registers.accc.gov.au/content/index.phtml/itemId/12283. 257 See ACCC’s undertakings register at http://www.registers.accc.gov.au/content/index.phtml/ itemId/12283.

596

The Australian Consumer Law

[13.335]

enforcement is open to public scrutiny and that it is accountable and is not entering into secret deals with companies. It will also ensure that competitors, customers and suppliers in the market are made aware of the undertakings and are able to monitor them. If the undertakings are not complied with, they will have a strong incentive to report the breach to the ACCC. A breach of an undertaking given pursuant to s 218 of the ACL to a regulator, or s 87B of the CCA to the ACCC is actionable in court. The following points should be noted. First, s 218(4) and s 87B(4) provide that if a court is satisfied that a person has breached a term of an undertaking, it may make any of the remedial orders specified. These orders are separate from those otherwise available for breaches of the consumer protection provisions of the ACL. Secondly, if the breach of the undertaking contravenes one of the consumer protection provisions of the ACL, the ACCC can seek another remedy. Thirdly, if the ACCC needs to move quickly to enforce the undertaking it can seek an urgent interlocutory injunction under s 23 of the Federal Court of Australia Act 1976 (Cth), which gives the court “power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders … as the Court thinks appropriate”. For example, ACCC v StoresOnline International, Inc,258 StoresOnline were two companies incorporated in the United States of America, carrying on the business of conducting seminars and workshops in Australia to sell and promote their home business ecommerce software packages. In 2005, the ACCC commenced proceedings alleging, inter alia, that the StoresOnline had engaged in misleading and deceptive conduct in breach of the. The matter was settled between the parties on the basis that StoresOnline gave an undertaking pursuant to s 87B of the CCA to the ACCC, in which StoresOnline agreed not to conduct the seminars and workshops in Australia unless they abided by certain obligations. The ACCC submitted that StoresOnline had breached certain terms of the undertaking and sought an urgent interlocutory injunction under s 23 of the Federal Court of Australia Act 1976 to prevent further breaches. While Tamberlin J declined the ACCC’s application for an interlocutory injunction for a blanket order restraining StoreOnline from making any presentations in Australia, he ordered that StoreOnline give effect to the undertaking previously given to the ACCC. A breach of an undertaking is also punishable as a civil contempt.259 In ACCC v Allergy Pathway Pty Ltd (No 2),260 the ACCC brought proceedings for civil contempt of Court against Allergy Pathway and its Director Mr Keir for engaging in conduct

258 ACCC v StoresOnline International, Inc [2007] FCA 1597 (19 October 2007). 259 Biba Ltd v Stratford Investments Ltd [1973] Ch 281. 260 ACCC v Allergy Pathway Pty Ltd (No 2) [2011] FCA 74.

[13.345]

13 Public Enforcement

597

in breach of the undertakings they had given to the Court in August 2009.261 A fine of $7,500 was imposed on each respondent.

Administrative powers for the regulator [13.340] The following discretionary powers are available to regulators: • substantiation notices; • public warning notices; and • infringement notices. These discretionary powers are intended to permit initial investigations by the regulator in a greater number of matters, and to deal with matters in a more efficient and cost effective way. In addition, as traders become aware of the existence of these administrative powers, they will be motivated to take greater care in making claims about the attributes of their products. This should result in a higher level of compliance with the ACL. Substantiation notices

[13.345] Suppliers of goods and services in trade or commerce must have a reasonable basis for making objective claims about their products before the claims are disseminated. Substantiation notices are likely to be used by the regulator in relation to advertising claims where the regulator cannot readily discern the truth or accuracy of the claim being made. For example, in relation to reference pricing or two price advertising claims,262 the regulator may require the advertiser to demonstrate goods were in fact offered for sale for a reasonable period at the higher price. In relation to business opportunity claims, the regulator may require the promoter to substantiate that there are reasonable grounds for making the claimed return on investment.263 In relation to environmental claims,264 the advertiser is in the best position to substantiate a claim that a plastic bag is “biodegradable”, or in the case food claims, that say eggs are “free range organic”. Product safety claims are another area where the regulator may require the advertiser to substantiate a claim and present evidence of the tests that were conducted and led to the making of the claim.265 They may be regarded as a preliminary enforcement tool that can be used by the regulator to force the supplier to verify the basis or evidence relied upon for making the claim. They involve a lower threshold than a CCA, s 155(1)(a) notice to furnish information, although they do not replace the ACCC’s information gathering powers in CCA, s 155. The Productivity Commission in its Review of Australia’s Consumer Policy Framework recommended that the new national generic consumer law should give consumer 261 ACCC v Allergy Pathway Pty Ltd [2009] FCA 960 (Finkelstein J). 262 See [6.155]. 263 See [6.290]. 264 See [6.95]]. 265 See [6.105].

598

The Australian Consumer Law

[13.350]

regulators the capacity to issue notices to suppliers requiring them to “reasonably substantiate the basis upon which claims or representations are made”.266 The Productivity Commission observed: Because they effectively reverse the onus of proof from the regulator to traders, substantiation powers will necessarily involve additional compliance costs for some firms. This will be particularly problematic in situations where a trader may not have a high degree of knowledge about specific products, for example, where a retailer relies on information supplied by a manufacturer.267

Where manufacturers are the source of advertised claims, the burden of substantiation should lie with them. Since ACL, ss 18 and 29 impose significant liabilities on retailers, they will also have a strong incentive to scrutinise claims. Complying with the notice

[13.350] Section 219 of the ACL provides: (1) This section applies if a person has, in trade or commerce, made a claim or representation promoting, or apparently intended to promote: (a) a supply, or possible supply, of goods or services by the person or another person; or (b) a sale or grant, or possible sale or grant, of an interest in land by the person or another person; or (c) employment that is to be, or may be, offered by the person or another person. (2) The regulator may give the person who made the claim or representation a written notice that requires the person to do one or more of the following: (a) give information and/or produce documents to the regulator that could be capable of substantiating or supporting the claim or representation; (b) if the claim or representation relates to a supply, or possible supply, of goods or services by the person or another person – give information and/or produce documents to the regulator that could be capable of substantiating: (i) the quantities in which; and (ii) the period for which; the person or other person is or will be able to make such a supply (whether or not the claim or representation relates to those quantities or that period); (c) give information and/or produce documents to the regulator that are of a kind specified in the notice; within 21 days after the notice is given to the person who made the claim or representation. (3) Any kind of information or documents that the regulator specifies under subsection (2)(c) must be a kind that the regulator is satisfied is relevant to: (a) substantiating or supporting the claim or representation; or (b) if the claim or representation relates to a supply, or possible supply, of goods or services by the person or another person – substantiating the quantities in which, or the period for which, the person or other person is or will be able to make such a supply. 266 Productivity Commission, Review of Australia’s Consumer Policy Framework, Final Report (2008), recommendation 10.1, p 251. 267 Productivity Commission, Review of Australia’s Consumer Policy Framework, Final Report (2008), p 244.

[13.355]

13 Public Enforcement

599

According to the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 In order to comply with the substantiation notice, the person to whom it is issued does not need to substantiate the claim to the satisfaction of the regulator or a court.268

The obligation to provide information imposed by ACL, s 219(2)(c) of the kind specified in the substantiation notice power arises, even if a court would be unlikely to find that the claim was misleading or likely to mislead. For example, if the claim is likely to confuse, or cause a reasonable member of the target audience to wonder whether two products may have come from the same source, this will not suffice to establish that they are misleading within s 18. Nevertheless, the regulator will be able to issue a substantiation notice in such circumstances. Section 219(2)(a) only imposes an obligation to give information and/or produce documents that “could be capable or substantiating or supporting the claim or representation”. It is likely that “could” will be construed to mean “to be able to” or “to have the ability to”. Parliament did not use “would” in the sense of “would be likely to”. However, if it does not appear to the regulator on the evidence submitted that there is a reasonable basis for the claim, the regulator is likely to take enforcement proceedings. What constitutes a reasonable basis will be determined on a case-by-case basis. For example, where the claim is in specific terms such as achieving a high level of performance under specified condition (ordinary household use), the evidence must be sufficient to support that claim. Where the claim is expressed in general terms, what constitutes a reasonable basis is likely to depend on a number of factors, including the type of product, the consequences if the claim is false, the cost of developing substantiation for the claim, and the level of substantiation that experts in the relevant industry would regard as reasonable. In relation to health and safety claims the regulator is likely to require a high level of substantiation, including scientific test by qualified professionals. Substantiation notices are likely to be used by the regulator in investigating blatantly dubious claims. In such cases the use of notices can save considerable time and resources that would otherwise need to be spent in attempting to disprove the claim. If the person making the claim is required to provide substantiation of that claim and is unable to do so, this may significantly reduce investigation costs and delays in some cases. Contents of the notice

[13.355] Section 219(4) of the ACL provides: (4) The notice must: (a) name the person to whom it is given; and (b) specify the claim or representation to which it relates; and (c) explain the effect of ss 220, 221 and 222. 268 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [14.27].

600

The Australian Consumer Law

[13.360]

(5) The notice may relate to more than one claim or representation that the person has made. (6) This section does not apply to a person who made the claim or representation if the person: (a) is an information provider; and (b) made the claim or representation by publishing it on behalf of another person in the course of carrying on a business of providing information; and (c) does not have a commercial relationship with the other person other than for the purpose of: (i) publishing claims or representations promoting, or apparently intended to promote, the other person’s business or other activities; or (ii) the other person supplying goods or services, or selling or granting interests in land to the person.

Follow up action

[13.360] Once the regulator receives the information contained in the substantiation notice, the regulator will be able to determine whether further action is necessary. If the recipient of the notice is able to provide a reasonable basis for the claim, or sufficient proof to support a claim, no further action may be necessary. If, on the other hand, there is no reasonable basis for the claim or it is found to be false or misleading, the regulator will need to decide what further action is necessary in terms of accepting an undertaking pursuant to s 218, or commencing court proceedings for the imposition of a pecuniary penalty pursuant to s 224, or in the most serious cases, referring the matter to the CDPP for the prosecution of a criminal offence. The information provided in response to the substantiation notice can be used in evidence in any subsequent court proceedings. Offences for failure to comply

[13.365] Providing false or misleading information in a substantiation notice gives rise to civil and criminal liability. Section 222(1) provides that a person must not provide the regulator false or misleading information in compliance or purported compliance with a substantiation notice. Part 4-5 of the ACL sets out criminal offence provisions for failing to comply with a substantiation notice. Section 205 provides: (1) A person commits an offence if the person: (a) is given a substantiation notice; and (b) refuses or fails to comply with it within the substantiation notice compliance period for the notice. Penalty: (a) if the person is a body corporate – $16,500; or (b) if the person is not a body corporate – $3,300. (2) Subsection (1) does not apply if: (a) the person is an individual; and (b) the person refuses or fails to give particular information or produce a particular document in compliance with a substantiation notice; and

[13.370]

13 Public Enforcement

601

(c) the information, or production of the document, might tend to incriminate the individual or to expose the individual to a penalty. (3) Subsection (1) is an offence of strict liability.

Section 206 of the ACL provides: (1) A person commits an offence if the person, in compliance or purported compliance with a substantiation notice given by the regulator: (a) gives to the regulator false or misleading information; or (b) produces to the regulator documents that contain false or misleading information. Penalty: (a) if the person is a body corporate – $27,500; or (b) if the person is not a body corporate – $5,500. (2) This section does not apply to: (a) information that the person could not have known was false or misleading; or (b) the production to the regulator of a document containing false or misleading information if the document is accompanied by a statement of the person that the information is false or misleading. (3) Subsection (1) is an offence of strict liability.

Public warning notices

[13.370] Where there is an imminent need to warn the public about some consumer protection matter, the regulator has the power to issue a public warning notice. Despite some scepticism by the Productivity Commission about the intrinsic merit of including public warning notices in the new national generic consumer law, it nevertheless recommended their inclusion in the ACL: Certainly, the case for these powers is nowhere near as strong as that for civil pecuniary penalties or substantiation or infringement notices. In that context, their “early warning” role would not appear to be particularly significant given that just five public warning notices were issued in Victoria in 2005-06. Nonetheless, the Commission acknowledges that failure to replicate existing jurisdictional powers of this kind could undermine the consensus for a new national generic consumer law …269

Section 223 of the ACL provides: (1) The regulator may issue to the public a written notice containing a warning about the conduct of a person if: (a) the regulator has reasonable grounds to suspect that the conduct may constitute a contravention of a provision of Ch 2, 3 or 4; and (b) the regulator is satisfied that one or more other persons has suffered, or is likely to suffer, detriment as a result of the conduct; and (c) the regulator is satisfied that it is in the public interest to issue the notice. (2) Without limiting subsection (1), if: (a) a person refuses to respond to a substantiation notice given by the regulator to the person, or fails to respond to the notice before the end of the substantiation notice compliance period for the notice; and 269 Productivity Commission, Review of Australia’s Consumer Policy Framework, Final Report (2008), p 250.

602

The Australian Consumer Law

[13.375]

(b) the regulator is satisfied that it is in the public interest to issue a notice under this subsection; the regulator may issue to the public a written notice containing a warning that the person has refused or failed to respond to the substantiation notice within that period, and specifying the matter to which the substantiation notice related.

No penalties apply in relation to the issuing of a public warning notice by the ACCC. On 20 August 2010, the ACCC’s issued its first Public Warning Notice, PW01/10, in relation to a parcel delivery “business opportunity” for which individuals were required to pay between $10,000 and $30,000. The part-time delivery business was advertised in rural, regional and metropolitan newspapers and claimed earnings of between $900 and $2,000 per week for between three and four days’ work. In fact, none of the purchasers received the claimed income. The ACCC considered that the corporations responsible for the advertisements had no reasonable basis on which to claim these income projections. The success of the warning notice in achieving its objective will depend largely on the extent to which the notice is taken up and disseminated in the media. Infringement notices

[13.375] Infringement notices relate to past conduct. Since the Australian Constitution restricts Commonwealth agencies that belong to the executive from exercising judicial power,270 the ACCC cannot make a finding that a person has contravened a relevant provision of the ACL. However, the ACCC can issue an infringement notice where it has “reasonable grounds to believe” that there has been a contravention, as an alternative to proceedings for an order under s 224 for the imposition of pecuniary penalties.271 According to the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, The capacity to issue an infringement notice is not intended to amount to the imposition of a financial penalty by the regulator. It is intended, instead, to provide a mechanism through which a person that in the opinion of the regulator has contravened certain provisions of the ACL may forestall an application to the courts by the regulator for the imposition of a criminal sanction or civil penalty.272

Before issuing an infringement notice, the ACCC will have already formed the view that a person has contravened a provision of the ACL, and that it is prepared to 270 See Ch III of the Australian Constitution. The High Court has adopted strict separation of judicial power principles that prevent the Commonwealth Parliament from conferring judicial power on bodies other than the courts. See Waterside Workers’ Federation of Australia v JW Alexander Ltd (1915) 20 CLR 54 and R v Kirby (1956) 94 CLR 254. 271 When first introduced in April 2010, the ACCC’s power to issue infringement notices was contained in s 87ZE in Pt VIC of the TPA. Part VIC was repealed by the Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth) and the current regime was inserted in Pt XI Div 5 of the CCA. 272 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [21.6].

[13.375]

13 Public Enforcement

603

litigate the matter in court for the imposition of a criminal sanction or civil penalty. The ACCC is not required to give the company a written statement that sets out ACCC’s reasons for believing that a contravention has occurred; or give a representative of the company an opportunity to make submissions, give evidence and appear at a private hearing before the ACCC; or detail the circumstances giving rise to ACCC’s reasons to believe a contravention has occurred. Since the ACCC will have decided that the matter warrants litigation, a failure to pay an infringement notice penalty will result in the ACCC commencing proceedings for the imposition of a criminal sanction or civil penalty.273 Section 134A of the CCA provides: (1) If the Commission has reasonable grounds to believe that a person has contravened an infringement notice provision, the Commission may issue an infringement notice to the person. (2) Each of the following provisions of the Australian Consumer Law is an infringement notice provision: (a) a provision of Pt 2-2; (b) a provision of Pt 3-1 (other than subs 32(1), 35(1) or 36(1), (2) or (3) or s 40 or 43); (c) subs 66(2); (d) a provision of Div 2 of Pt 3-2 (other than s 85); (e) a provision of Div 3 of Pt 3-2 (other than subs 96(2)); (f) subs 100(1) or (3), 101(3) or (4), 102(2) or 103(2); (g) subs 106(1), (2), (3) or (5), 107(1) or (2), 118(1), (2), (3) or (5), 119(1) or (2), 125(4), 127(1) or (2), 128(2) or (6), 131(1), 132(1), 136(1), (2) or (3) or 137(1) or (2); (h) subs 221(1) or 222(1). (3) The Commission must not issue more than one infringement notice to the person for the same alleged contravention of the infringement notice provision. (4) The infringement notice does not have any effect if the notice: (a) is issued more than 12 months after the day on which the contravention of the infringement notice provision is alleged to have occurred; or (b) relates to more than one alleged contravention of an infringement notice provision by the person.

Infringement notices cannot be issued for an alleged contravention of s 18 of the ACL, the general misleading or deceptive conduct provision, possibly for the same reason that pecuniary penalties cannot be imposed for a contravention of s 18.274 Because of its general nature it may involve breaches of the law that are unintentional and inadvertent, and it would be inappropriate to penalise such conduct. If the ACCC has reasonable grounds for believing that a person has contravened an infringement notice provision within 12 months after the day on which the contravention is alleged to have occurred, the ACCC may issue an infringement notice. If the penalty is paid, the matter is closed without proceeding to court. Section 134(1) of the CCA provides that the issue of an infringement notice to a person for an alleged contravention is “as an alternative to proceedings for an order 273 See ACCC, Guidelines on the Use of Infringement Notices (issued on 16 October 2012) at [9]. 274 CCA, s 134A(2).

604

The Australian Consumer Law

[13.380]

under section 224 of the Australian Consumer Law”. Thus, the ACCC cannot issue an infringement notice and subsequently seek pecuniary penalties in relation to the same alleged contravention. Section 134(2)(a) of the CCA expressly provides that the issue of an infringement notice is discretionary. Section 134(2)(b) of the CCA provides that the infringement notice regime in Pt XI Div V of the CCA does not affect the liability of a person to a criminal sanction in Ch 4 of the ACL or the civil penalty in Pt V-2 of the ACL, if the ACCC, in its discretion, decides not to issue an infringement notice, or decides to issue an infringement notice but subsequently withdraws it. Section 134(2)(c) of the CCA provides that the infringement notice regime in Pt XI, Div V does not prevent a court from imposing a higher penalty that the penalty specified in the infringement notice if the person does not comply with the notice. According to the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, The limitation on the size of the financial penalty specified in the infringement notice and restrictions preventing the regulator from taking other action in relation to the conduct dealt with using the mechanism are intended to ensure that it is not used for more serious contraventions as an alternative to existing court processes. However, if a person fails to comply with an infringement notice and a court subsequently determines that a contravention has occurred, the court can impose a significantly higher pecuniary penalty.275

Penalties for infringement notice

[13.380] Infringement notices carry penalties of $102,000 for ASX-listed corporations, $10,200 for bodies corporate other than listed corporations and $2,040 for individuals.276 If the penalty specified in the infringement notice is paid, no proceedings (whether criminal or civil) may be started or continued against the person, by or on behalf of the Commonwealth in relation to the alleged contravention.277 If the penalty specified in the infringement notice is not paid, the person is liable to proceedings under Ch 4 (criminal proceedings, including fines), or Pt 5-2 (civil enforcement proceedings, including pecuniary penalties).278 Consequences of non-payment

[13.385] The non-payment of infringement notices will not allow the regulator to seek a court order requiring payment. However, the regulator is likely to take further action seeking a civil pecuniary penalty or taking criminal proceedings should they withdraw the infringement notice. On 9 September 2010, the ACCC instituted proceedings against four cafes and restaurants for alleged breaches of the component pricing law by failing to include Sunday and/or public holiday surcharges in their menu prices. These four traders 275 Second Explanatory Memorandum,Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [21.41]. 276 CCA, s 134C. 277 CCA, s 134D(3). 278 CCA, s 134E.

[13.395]

13 Public Enforcement

605

had failed to pay the infringement notices that had previously been issued by the ACCC against them.279 In ACCC v Gourmet Goody’s Family Restaurant Pty Ltd,280 the Federal Court ordered two restaurants to pay civil pecuniary penalties of $13,200 each for breaching s 53C of the TPA. Compensation orders on the application of the regulator

[13.390] Subdivision B of Div 4 of Pt 5-2 of the ACL provides for a process whereby the court may make compensation orders on the application of the regulator made on behalf of one or more injured persons (s 237(1)(b)), and orders to redress the loss or damage suffered by non-party consumers (s 239). The ACCC (or another regulator) has the power under ACL, s 237(1)(b) to seek compensation orders on behalf of one or more persons who are injured as a result of conduct that was in contravention of a provision of Chs 2, 3 or 4 of the ACL, or in reliance of a term of a consumer contract that has been declared to be unfair. Section 237(1)(b) of the ACL provides that the court may, on the application of the regulator made on behalf of one or more such injured persons, make such order or orders as the court thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct. The types of orders that a court may make are set out in ACL, s 243. Section 243(e) provides that without limiting s 237(1) the orders that a court may make under that section include “except if the order is to be made under s 239(1) – an order directing the respondent to pay the injured person the amount of the loss or damage”. Section 242(2) provides that the regulator must not make an application under s 237(1)(b) on behalf of one or more persons unless those persons have consented in writing to the making of the application, so that process is an “opt-in” process. Compensation orders are considered in more detail at [14.180]-[14.205]. Section 137H(2) of the CCA provides that a finding of fact in a prosecution or civil penalty case for a contravention of a provision of Chs 2, 3 or 4 of the ACL is prima facie evidence in proceedings for an order against a person under s 237(1) of the ACL. Compensation orders on the application of the regulator for non-party consumers

[13.395] Section 239(1) provides that the court may make non-party redress orders “other than an award of damages”. This is in contrast to s 237(2) which expressly provides that the order the court makes must be an order that the court considers will “compensate” the injured person. Section 239 mirrors s 87AAA of the TPA.281 At the time s 87AAA of the TPA was introduced, s 87 of the TPA only allowed the court to make orders in respect of parties.282 At that time, in order to 279 ACCC NR 186/10 (9 September 2010). 280 ACCC v Gourmet Goody’s Family Restaurant Pty Ltd [2010] FCA 1216 (Jagot J). 281 Non-party redress orders under s 87AAA of the TPA were made in ACCC v Yellow Page Marketing BV (No 2) (2011) 195 FCR 1 (Gordon J). 282 See Medibank Private Ltd v Cassidy (2002) 124 FCR 40 at [35] (FC, Sundberg, Emmett and Conti JJ).

606

The Australian Consumer Law

[13.395]

obtain compensation it was necessary for consumers who suffered loss or damage by contravening conduct to bring their own private actions. An application by a regulator seeking an order under s 239 may be made even if an enforcement proceeding in relation to the conduct, or the term of a consumer contract has not been instituted.283 An “enforcement proceeding” is defined in s 2 to mean: “a proceeding for an offence against Ch 4; or a proceeding instituted under Ch 5 (other than under ss 237 or 239)”. Section 239 provides: (1) If: (a) a person: (i) engaged in conduct (the contravening conduct) in contravention of a provision of Ch 2, Pt 3-1, Div 2, 3 or 4 of Pt 3-2 or Ch 4; or (ii) is a party to a consumer contract who is advantaged by a term (the declared term) of the contract in relation to which a court has made a declaration under s 250; and (b) the contravening conduct or declared term caused, or is likely to cause, a class of persons to suffer loss or damage; and (c) the class includes persons who are non-party consumers in relation to the contravening conduct or declared term; a court may, on the application of the regulator, make such order or orders (other than an award of damages) as the court thinks appropriate against a person referred to in subs (2) of this section. (2) An order under subsection (1) may be made against: (a) if subs (1)(a)(i) applies – the person who engaged in the contravening conduct, or a person involved in that conduct; or (b) if subs (1)(a)(ii) applies – a party to the contract who is advantaged by the declared term. (3) The order must be an order that the court considers will: (a) redress, in whole or in part, the loss or damage suffered by the non-party consumers in relation to the contravening conduct or declared term; or (b) prevent or reduce the loss or damage suffered, or likely to be suffered, by the non-party consumers in relation to the contravening conduct or declared term.

Non-party redress orders made under s 239 are not intended to operate as a substitute for damages. Section 243(e) of the ACL provides the court cannot make an order directing the respondent to pay the injured person the amount of the loss or damage under s 239(1). In ACCC v Clinica Internationale Pty Ltd (No 2),284 Mortimer J stated that non-party redress orders: …are intended to provide a limited form or redress where loss or damage is clearly identifiable, such as in the case of a refund for goods purchased or services paid for, in circumstances of contravening conduct.285 283 ACL, s 242(1). 284 ACCC v Clinica Internationale Pty Ltd (No 2) [2016] FCA 62. 285 ACCC v Clinica Internationale Pty Ltd (No 2) [2016] FCA 62 at [255].

[13.400]

13 Public Enforcement

607

An application seeking an order can be made at any time after the day on which the cause of action that relates to the contravening conduct accrues or the declaration relating to a term in a consumer contract is made.286 In determining whether to make an order under s 239(1) against a person, the court may have regard to the conduct of the person engaging in the contravening conduct, or party to the consumer contract advantaged by the term, and of the non-party consumers since the contravention or declaration was made.287 Section 243 sets out a non-exhaustive list of the kind of orders that can be made. Section 243(d) provides that a court may make an order directing the respondent to refund money, but the court cannot make an order directing the respondent to pay the injured person the amount of the loss or damage.288 Non-party consumer redress orders were made in ACCC v AGL South Australia Pty Ltd,289 where the court ordered, pursuant to s 239, that AGL SA provide refunds to approximately 23,000 consumers who had paid more under their energy plan than they would have paid if they had been supplied under AGL SA’s standard retail contract. In ACCC v Reebok Australia Pty Ltd, Reebok Australia made claims about the therapeutic benefits of its Easy Tone shoes in circumstances where the consumers were unable to verify those claims.290 The claims were false and penalty of $350,000 was imposed.291 In addition, the court made an order pursuant to s 239(1) of the ACL requiring Reebok to pay the sum of $35 to each consumer who purchased a pair of EasyTone shoes from September 2011 to February 2013 and claimed to have to have suffered loss or damage as a result of Reebok’s representations.292 Section 240(3) provides that in determining whether to make an order under s 239(1), the court need not make a finding as to which specific persons are non-party consumers, nor the exact nature of any loss or damage suffered or likely to be suffered by such persons. It appears a consumer does not need to formally “opt-out” of a regulator’s non-party consumer redress action if they think it will prejudice their ability to mount a private action. The effect of s 241 of the ACL is that a consumer who has the benefit of a non-party consumer redress order will be precluded from bringing a private action in respect of the loss or damage to which the order relates. Preference must be given to compensation of victims

[13.400] Section 227 of the ACL provides that where both pecuniary penalty and compensation orders are made and the court is satisfied the person against whom the compensation orders are made does not have sufficient financial resources to 286 ACL, s 239(4). 287 ACL, s 240(1) and (2). 288 ACL, s 243(e). 289 ACCC v AGL South Australia Pty Ltd [2015] FCA 399 (29 April 2015). 290 ACCC v Reebok Australia Pty Ltd [2015] FCA 83 at [69]. 291 ACCC v Reebok Australia Pty Ltd [2015] FCA 83 at [145]-[147]. 292 ACCC v Reebok Australia Pty Ltd [2015] FCA 83 at [168]-[170]. See also ACCC v CAN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd) [2015] FCA 368.

608

The Australian Consumer Law

[13.405]

pay both, the court must give preference to the order for compensation. Section 227 applies to compensation orders made under ss 237 and 238 of the ACL. In ACCC v Clinica Internationale Pty Ltd (No 2)293 Mortimer J held that the compensation priority under s 227 also applies to compensation orders made under s 239 of the ACL.

PART III – COUNTRY OF ORIGIN DEFENCES [13.405] Chapter 5, Pt 5-3 creates a number of defences to what would otherwise be contraventions of ss 18, 29(1)(a), 29(1)(k) and 151(1)(a) and 151(1)(k) of the ACL in relation to country of origin claims. They apply to any country of origin claim, not just claims of Australian origin. A person seeking to rely on these defences bears the evidential burden in proceedings under the ACL. The defences do not apply to claims about the place or region of origin (more localised than a country) of the goods, but only to country of origin claims. Place of origin claims are assessed on the normal principles that apply in relation to ss 18 and 29(1)(a), 29(1)(k) and 151(1)(a) and 151(1)(k) of the ACL. Origin claims that do not specify a country remain subject to potential liability for contraventions of ss 18, 29(1)(a), 29(1)(k) and 151(1)(a) and 151(1)(k) of the ACL. On 15 April 2014, the ACCC released its guidance on Country of Origin Claims and the Australian Consumer Law.294 The defences in s 255 of the fall into five categories: • representations about goods being “made in” a specified country; • representations about goods being a “product of” or “produce of” a specified country; • representations of origin based on the use of a logo prescribed pursuant to the ACL; • representations that goods were “grown in” a particular country; and • representations that ingredients or components were “grown in” a particular country. A person who seeks to rely on these defences bears the “evidential burden” in the proceedings under the ACL.295 “Evidential burden” is defined in s 2 of the ACL to mean: “the burden of adducing or pointing to evidence that suggests a reasonable possibility that the matter exists of does not exist”. The ACCC may also issue a substantiation notice requiring, for example, the maker of a representation that goods are “Made in Australia” to substantiate that 50% or more of the total cost of producing or manufacturing the goods is attributable to production or manufacturing processes that occurred in Australia. 293 ACCC v Clinica Internationale Pty Ltd (No 2) [2016] FCA 62. 294 At https://www.accc.gov.au/media-release/accc-launches-guidance-on-country-of-originlabelling-for-businesses. 295 ACL, s 258.

[13.410]

13 Public Enforcement

609

Made in Australia representations [13.410] The first defence relates to a representation as to the country of origin of the goods other than that they are the product of a particular country of origin or a logo claim. Thus, a “Made in Australia” or a “Manufactured in Australia” claim will be regulated by item 1 of s 255 which provides that a person does not contravene ACL, ss 18, 29 or 151 only by making a representation as to the country of origin of goods if the following requirements are met: (a) the goods have been substantially transformed in that country; and (b) 50% or more of the total cost of producing or manufacturing the goods as worked out under s 256 is attributable to production or manufacturing processes that occurred in the country; and (c) the representation is not a “product of/produce of” representation or prescribed logo representation. In order to rely on this defence it will be necessary to establish that the goods have been substantially transformed in the claimed country of origin and that 50% or more of the costs of production occurred in the country. Section 255(3) of the ACL provides: Goods are substantially transformed in a country if they undergo a fundamental change in that country in form, appearance or nature such that the goods existing after the change are new and different goods from those existing before the change.

The ACL does not define “fundamental change”. Some guidance is provided by the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 which states: The ACL provides a definition for substantially transformed. The test is that a good must undergo a fundamental change, in the country indicated in the representation, to how it looks, operates or to its purpose, for a substantial transformation to have occurred. Example 16.2 Examples of substantial transformation include the growing of wheat from seed, the sewing of cloth into a shirt, or the moulding of sheet metal into a car panel.296

Section 256 defines the total cost of producing or manufacturing goods as the sum of the expenditure on materials, plus the sum of expenditure on labour, plus the sum of expenditure on overheads. The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 provides the following guidance in respect of each of these cost components: Expenditure on materials Table item 1 in subs 256(1) identifies those materials that can be counted as legitimate production costs. Expenditure on materials can be counted when a cost is incurred in the purchase of materials used in the production or manufacture of the good bearing the country of origin representation. All material costs directly associated with the production 296 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [16.23].

610

The Australian Consumer Law

[13.410]

or manufacture of the good bearing the country of origin representation are included, except where explicitly disallowed by virtue of a regulation made under subs 256(2). “Materials” is defined separately in respect of goods that are unmanufactured raw products and those that are the result of a manufacturing process. “Materials” in the context of unmanufactured raw products are those products themselves. “Materials” in the context of manufactured products includes all matter and substances used or consumed in the manufacture of the goods, other than overheads. In both cases, the “inner containers” in which the goods are packed are counted as materials. An inner container is limited to the retail packaging for sale, and does not include packaging solely related to the transportation of the good from the manufacturer or wholesaler to the retail outlet. Example 16.4 The can in tinned tomatoes is included within the definition of “inner container” but the cardboard box holding the tins is not. The regulations may prescribe that the costs of certain materials are not to be counted as part of the cost of production for the purposes of s 256. The regulations may also prescribe the manner in which costs relating to certain materials are to be worked out. Expenditure on labour Table item 2 in subs 256(1) identifies the types of labour costs that can be allocated to the production or manufacture of goods. All labour costs that have been incurred by the manufacturer that relate to the production or manufacture of the goods to which a country of origin claim have been made can be included provided that: • they can reasonably be allocated to the production or manufacture of the goods; and • the regulations do not exclude them. It is more difficult to allocate labour costs than material costs in a good, and this provision is intended to prevent the padding-out of the labour component by the inclusion of costs peripheral to the manufacturing or production process. The regulations may prescribe that certain labour costs are not to be counted as part of the cost of production for the purposes of s 256. The regulations may also prescribe the manner in a certain labour cost is to be worked out. Expenditure on overheads Table item 3 in subs 256(1) identified the types of overheads costs that may be counted for the purposes of calculating the costs or production or manufacture of goods about which country of origin claims have been made. The calculation of overheads is identical to the considerations that must be taken into account in respect of labour costs, that is, all overhead costs that have been incurred by the manufacturer that relate to the production or manufacture of the goods to which a country of origin claim have been made can be included provided that: • they can reasonably be allocated to the production or manufacture of the goods; and • the regulations do not exclude them. The regulations may prescribe that certain overhead costs are not to be counted as part of the cost of production for the purposes of s 256.

[13.420]

13 Public Enforcement

611

The regulations may also prescribe the manner in which a certain overhead cost is to be worked out.297

Product of/produce of representations [13.415] The second defence relates to a representation that the goods are the produce of a particular country. According to the ACCC, The term “produce of” and related terms are generally regarded as premium claims about a good’s origin and imply a stronger meaning than “made in” or other general country of origin claims. Accordingly, this type of defence is more onerous than the general country of origin, or “made in” safe harbour defence.298 A “Product of Australia” or a “Produce of Australia” claim will be regulated by item 2 of s 255 which provides that a person does not contravene ss 18, 29 or 151 only by making a representation as to the country of origin of goods if the following requirements are met: (a) the country was the country of origin of each significant ingredient or significant component of the goods; and (b) all, or virtually all, processes involved in the production or manufacture happened in that country. The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 states: The nature of the good is relevant to what is a significant component. If an ingredient or component is integral to the nature of the good, that ingredient has to be from the country of the origin representation to allow it to carry a “product of” label. The question of whether a component is a significant component does not, necessarily go to the percentage content of ingredient or component, as, on occasion, small percentages of an ingredient can be critical in establishing the nature or function of the good. Example 16.5 For an apple and cranberry juice bottle to be able to carry a “produce of Australia” label, both the apple and the cranberry juice have to be sourced from Australia. This is despite the cranberry juice being, on average, about 5% of the total volume of the product. If a local source can be found for the apple juice and the cranberry juice, then it is legitimate to employ a “product of Australia” label, even if, say, a preservative was added to the juice and the preservative was imported. This is because the preservative does not go to the nature of the good.

Prescribed logo representations [13.420] Logos are sometimes used to promote goods or build brand recognition and they may include a reference to the country of origin of the goods. The third defence relates to a representation as to the country of origin of goods by means of a logo specified in the regulations. Thus, a logo claim will be regulated by item 3 of 297 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [16.28]-[16.39]. 298 Country of Origin Claims and the Australian Consumer Law, at https://www.accc.gov.au/mediarelease/accc-launches-guidance-on-country-of-origin-labelling-for-businesses.

612

The Australian Consumer Law

[13.425]

s 255 which provides that a person does not contravene ss 18, 29 or 151 only by making a representation as to the country of origin of goods if the following requirements are met: (a) the goods have been substantially transformed in the country represented by the logo as the country of origin of the goods; and (b) the prescribed percentage of the cost of producing or manufacturing the goods as worked out under s 256 is attributable to production or manufacturing processes that happened in that country. The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states: This provision provides a mechanism for the Government to encourage voluntary industry promotional campaigns through legislative protection for premium marks. Reflecting the intended premium nature of the prescribed logo provision, requirements for prescription are stricter than the general test set out in table item 1 of subs 255(1). In addition to meeting the substantial transformation test, the Minister may prescribe an industry logo, being either words or pictures or a combination thereof, the use of which is a representation of country of origin with a level of cost of production occurring in that country as prescribed. Logos will only be prescribed where the percentage of the cost is 51% or greater. The meaning of “substantially transformed” and the method of working out the production costs attributable to a certain country are the same as those for general country of origin claims.299

As yet no regulations have been made under the ACL to prescribe any logos.

“Grown in” representations [13.425] The fourth defence relates to representations that goods were “grown in” a particular country, where no other representation is made about the country of origin of the goods. Thus, a representation that goods were “grown in” a specified country will be regulated by item 4 of s 255 which provides that a person does not contravene ss 18, 29 or 151 only by making a representation as to the country of origin of goods if the following requirements are met: (a) each significant ingredient or significant component of the goods was grown in that country; and (b) all, or virtually all, processes involved in the production or manufacture happened in that country. If other representations are made about the country of origin of the goods, they will not be subject to this defence.

“Grown in” representations regarding ingredients or components [13.430] The fifth defence relates representations that ingredients of components were “grown in” a particular country, where no other representation is made about the country or origin of the goods. 299 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [16.44]-[16.46].

[13.430]

13 Public Enforcement

613

Thus, a representation that ingredients or components were “grown in” a specified country will be regulated by item 5 of s 255 which provides that a person does not contravene ss 18, 29 or 151 only by making a representation as to the country of origin of goods if the following requirements are met: (a) each ingredient or component that is claimed to be grown in that country was grown only in that country; and (b) each ingredient or component that is claimed to be grown in that country was processed only in that country; and (c) 50% or more of the total weight of the goods is comprised of ingredients or components that were grown and processed only in that country. If other representations are made about the country of origin of the goods, they will not be subject to this defence. For the purposes of the fourth and fifth defences, “grown” in relation to goods, ingredients or components, is defined broadly in the to include agricultural activities as well as the harvesting of wild plants and animals. Section 255(7) provides: Goods, or ingredients or components of goods, are grown in a country if they: (a) are materially increased in size or materially altered in substance in that country by natural development; or (b) germinated or otherwise arose in, or issued in, that country; or (c) are harvested, extracted or otherwise derived from an organism that has been materially increased in size, or materially altered in substance, in that country by natural development.

Packaging materials are not ingredients or components of goods and are not to be included in measurements to determine the weight of goods, ingredients or components.300 Water used to reconstitute dried or concentrated products to no more than their natural level of hydration is to be included in determining the weight of a product, and is deemed to have the same country of origin as the ingredient or component, regardless of its actual country of origin.301

300 ACL, s 255(8). 301 ACL, s 255(9).

14

Private Remedies [14.05] INTRODUCTION .............................................................................................................. 616 [14.10] EVIDENCE – FINDINGS IN OTHER PROCEEDINGS ............................................. 617 [14.15] CONSEQUENCES OF ILLEGALITY ............................................................................. 617

[14.20] Severability ......................................................................................................... 617 [14.25] DECLARATIONS .............................................................................................................. 618

[14.30] Declarations: unfair terms ............................................................................... 618 [14.35] DAMAGES .......................................................................................................................... 620

[14.40] Common sense approach to causation ......................................................... 621 [14.45] Evidence of causation ...................................................................................... 624 [14.50] Proving reliance ................................................................................................. 625 [14.60] Indirect theory of causation ............................................................................ 628 [14.65] Breaks in the chain of causation .................................................................... 629 [14.70] Reliance and failure to verify a representation ........................................... 630 [14.75] Declaration of non-reliance ............................................................................. 631 [14.85] MEASURE OF DAMAGES .............................................................................................. 633

[14.90] Price minus value at acquisition date ........................................................... 636 [14.95] No transaction approach ................................................................................. 636 [14.100] Measure of damages in employment cases ............................................... 637 [14.105] Loss of commercial opportunity .................................................................. 638 [14.110] Consequential damages ................................................................................. 639 [14.115] Exemplary damages ....................................................................................... 640 [14.120] TIME LIMITS ................................................................................................................... 640 [14.125] OTHER LIMITS ON DAMAGES .................................................................................. 642 [14.130] CONTRIBUTORY FAULT: ACL (CTH) ....................................................................... 642

[14.135] Avoiding the operation of s 137B ................................................................ 644 [14.140] CONTRIBUTORY FAULT: ACL (APPLICATION ACTS) ......................................... 645 [14.145] PROPORTIONATE LIABILITY FOR MISLEADING CONDUCT UNDER ACL . 646

[14.150] Apportionable claim ....................................................................................... 648 [14.155] Concurrent wrongdoers ................................................................................. 648 [14.160] Relevant factors in apportioning responsibility ........................................ 650 [14.165] Avoiding the operation of proportionate liability .................................... 650 [14.170] PROPORTIONATE LIABILITY UNDER ACL (APPLICATION ACTS) ................ 651 [14.175] ACCESSORIAL LIABILITY FOR DAMAGES ............................................................ 651

616

The Australian Consumer Law

[14.05]

[14.180] Intention or knowledge ................................................................................. 653 [14.190] Wilful blindness .............................................................................................. 655 [14.195] Participation in the contravention ............................................................... 657 [14.200] COMPENSATION ORDERS .......................................................................................... 657 [14.205] COMPENSATION ORDERS ARISING OUT OF OTHER PROCEEDINGS ......... 659

[14.210] Limits on compensation orders .................................................................... 659 [14.215] Nature of the relief ......................................................................................... 660 [14.220] Kinds of orders ................................................................................................ 660 [14.225] Compensation orders: unfair terms ............................................................. 661 [14.230] INJUNCTIONS ................................................................................................................. 662

[14.235] Interim injunctions .......................................................................................... 663 [14.240] Final injunctions .............................................................................................. 664 [14.245] PUBLISHER’S DEFENCE ............................................................................................... 664 [14.250] DEATH OR PERSONAL INJURY: CCA AND ACL FRAMEWORK ..................... 666

[14.255] Maximum damages available ....................................................................... 668 [14.260] Cap on damages for loss of earnings .......................................................... 668 [14.265] Threshold for damages .................................................................................. 668 [14.270] Court may refer to past decision in determining non-economic loss ... 668 [14.275] Abolition of aggravated and exemplary damages ................................... 668 [14.280] Gratuitous care ................................................................................................ 668 [14.285] Availability of structured settlements ......................................................... 669 [14.290] Reduced compensation in defective goods actions .................................. 669

INTRODUCTION [14.05]

Broadly speaking, three consequences flow from conduct being found to contravene a provision in Chs 2 (General protections), 3 (Specific protections) or 4 (Offences) of the ACL. First, the person who contravenes, or who is an accessory involved in the contravention of a provision of Chs 2, 3 or 4, is exposed to the risk of the regulators taking enforcement action for the imposition of one of the public remedies discussed in Parts I and II of Chapter 13 of this book. Secondly, the validity of any impugned provision in a contract is affected. As will be seen in this chapter, any provision in a contract that contravenes a provision in Chs 2, 3 or 4 of the ACL is illegal and unenforceable. Furthermore, the person who contravenes a provision of Chs 2 or 3, or who is involved in the contravention, is liable to pay damages and may be subject to other remedial orders in Pt 5-2 of the ACL. However, in the absence of a false or misleading representation or other contravening conduct, the mere failure to comply with a consumer guarantee does not constitute a contravention of one of the substantive prohibitions in Chs 2 or 3 and does not give rise to an action for damages under ACL, s 236 or other private

[14.20]

14 Private Remedies

617

remedial relief in Pt 5-2. Part 5-4 of the provides for separate private remedies for failure to comply with consumer guarantees.1

EVIDENCE – FINDINGS IN OTHER PROCEEDINGS [14.10]

Generally, an applicant bears the onus of proof in relation to each element of a cause of action, and findings by one court cannot be used as evidence to substantiate a claim in another action. However, s 137H of the CCA provides that in a proceeding against a person, under s 236(1) of the ACL for damages, or in an application under ss 237(1) or 239(1) of the ACL for compensation orders, a finding of any fact by a court made in proceedings under ss 228, 232, 246, 247, or 248 of the ACL, or for an offence against a provision of Ch 4 of the ACL, in which that person has been found to have contravened, or been involved in a contravention of Chs 2, 3, or 4 of the is prima facie evidence of that fact.2

Thus, where the ACCC successfully institutes public proceedings for the imposition of fines, civil penalties, injunctions or an order for corrective advertising for a contravention of Chs 2, 3 or 4 of the ACL, those persons who have suffered loss or damage as a result of the contravention may bring a private action under ss 236(1), 237(1) or 239(1) to recover the loss or damage. The court in the private action is not absolutely bound by the former finding in the public action (for example, fresh evidence may be put forward), but the prima facie presumption made by CCA, s 137H may considerably ease the task of the private applicant.

CONSEQUENCES OF ILLEGALITY [14.15]

Provisions of contracts that contravene one of the substantive prohibitions in Chs 2, 3 or 4 of the ACL are not merely void, but are also illegal. Thus the courts are unlikely to allow a cause of action for recovery of moneys paid under a contract which is illegal under the ACL.3 It is submitted that in actions for the recovery of moneys paid under a contract which is void by virtue of a contravention of a provision of Chs 2, 3 or 4, it would be proper to apply the in pari delicto maxim. If both parties are equally at fault, the effect of the maxim is that one party cannot recover what has been given to the other under a prohibited contract if it is necessary to rely on the illegality to do so. The ACL does not exclude the general operation of the common law. While ACL, s 243(a) provides for an order declaring a contract to be void, it does not preclude illegality from being pleaded by way of a defence to an action for damages.4

Severability [14.20]

Section 16 of the ACL provides:

1 See Chapter 15. 2 This provision reflects TPA, s 83. 3 Holman v Johnson (1775) 1 Cowp 341; 98 ER 1120 at 343 (Cowp), 1121 (ER). 4 Ketchell v Master Of Education Services Pty Ltd (2007) 226 FLR 169 at [35] (Mason P, with whom Basten JA and Handley AJA agreed).

618

The Australian Consumer Law

[14.25]

(1) If the making of a contract after the commencement of this section contravenes this Schedule because the contract includes a particular provision, nothing in this Schedule affects the validity or enforceability of the contract otherwise than in relation to that provision, so far as that provision is severable. (2) This section has effect subject to any order made under Division 4 of Part 5-2.

This provision is in similar terms to s 4L of the CCA which was considered by the High Court in SST Consulting Services Pty Ltd v Rieson.5 In that case it was held that s 4L requires rather than permits the severance of the offending provision.6 The facts were, a loan was made on the basis that the borrower was to use a company associated with the applicant for its freight forwarding needs. The loan was guaranteed by the respondent. The High Court confirmed that the arrangement constituted third line forcing which was prohibited by s 47(1) of the TPA. Section 4L required the offending provisions to be severed, and accordingly the guarantee could be enforced.7 If a provision in a contract is illegal under the Chs 2, 3 or 4 of the ACL, s 16 requires it to be severed. If it cannot be severed, the entire agreement is enforceable, subject to any orders that may be made under Div 4 of Pt 5-2 of the ACL. Section 237 which is in Div 4 of Pt 5-2 allows the court on the application of an injured person, or on the application of the regulator made on behalf of one or more such injured persons, to make such order or orders as the court thinks appropriate, including an order declaring a contract to be void or an order amending a contract so as to do justice to the parties. This approach allows for greater contractual certainty.

DECLARATIONS [14.25]

The Federal Court’s power to grant declaratory relief under s 21 of the Federal Court of Australia Act 1976 (Cth) in relation to public enforcement of the ACL is considered at [13.145]. The granting of a declaration is a discretionary remedy. In cases of false or misleading advertising a declaration will often be the most appropriate form of relief.8 If a declaration is granted, it will be drafted to reflect the actual finding in the case. The court may grant a declaration even though the contravening conduct has ceased.9

Declarations: unfair terms [14.30]

Section 250 of the ACL is set out at [13.150]. If a term in a standard form contract is declared under s 250 of the ACL to be an unfair term, s 23(1) of the ACL provides that it is void. The word “term” is not defined. Where a term has several parts, but only one part is found to be unfair, it seems that only the offending part is void and the remainder of the term will be enforced if the contract is capable of

5 SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516. 6 SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516 at 533 [53]. 7 See also Fadu Pty Ltd v ACN 008 112 196 Pty Ltd as Trustee of the “International Linen Service Unit Trust” (2007) ATPR ¶41-206 at [18] (Finn J). 8 Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd (No 2) [2015] FCA 477 at [5] (Nicholas J). 9 Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd (No 2) [2015] FCA 477 at [5].

[14.30]

14 Private Remedies

619

operating without the unfair part of the term. Section 23(2) provides that the remainder of the contract continues to bind the parties if the contract is “capable of operating without the term”. The words “capable of operating without the term” are not defined. Terms relating to price and subject matter are excluded from being considered as unfair by s 26 of the ACL. Since terms that define the main subject matter of consumer contracts are not affected there is unlikely to be a total failure of consideration in the event that another term is held to be unfair and void. The contract may be capable of operating without the term, even though the party seeking to apply or rely on the term would not have entered into it without the unfair term. The contract only has to “operate” without the term; it does not need to have the same effect. Any acts performed in reliance upon the unfair term will be unsupported by the contract. For example, if there has been a payment of money or transfer of property in reliance upon an unfair term, a court has the power under s 237 of the ACL, read in conjunction with s 243(d) of the ACL, to order the respondent to refund the money. If the operation of the unfair term has resulted in one party being forced to enter into a second contract, for example, the exercise of an option, the court would have the power under s 237, read in conjunction with s 243 of the of the ACL, to declare that the second contract is also void. Section 232(3) of the ACL provides that a court may grant an injunction on the application of any person in relation to conduct constituted by relying on, or purporting to rely on, a term of a consumer contract that has been declared to be void under s 250, as if the conduct were a contravention of a provision of Ch 2 of the ACL. In Ferme v Kimberley Discovery Cruises Pty Ltd,10 the applicants purchased a packaged tour that incorporated as its central feature, a cruise in the Kimberley region of Western Australia. The applicants had paid the full price in advance. Subsequently the cruise company cancelled the cruise because of a severe tropical cyclone which meant that “the cruise was likely to be unsafe and was certain to be unpleasant”.11 The respondent sought to rely on a provision of their terms and conditions which said that where a cruise was cancelled due to an “unexpected event” (which was defined quite expansively and included many things which would be within the control of the cruise company). The clause went on to provide “the passenger accepts that the passenger will not be entitled to any compensation or a refund of the fare paid should this occur except as provided for in these Cruise Ticket Conditions” (the forfeiture term). It was held the contracts were standard form contracts and that the forfeiture term was unfair and therefore void by reason of s 23(1) of the ACL.12 The applicants were no longer precluded by contract from seeking a refund of their fares. In 10 Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 (2 September 2015). 11 Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 at [3]. 12 Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 at [99].

620

The Australian Consumer Law

[14.35]

accordance with the test established in Baltic Shipping Company v Dillon,13 the applicants were entitled to restitution under the common law if there had been a total failure of consideration. There would not be a total failure of consideration if the applicants had received a substantial part of the benefit expected under the contract.14 The applicants had been flown from Darwin to Kununurra and had been provided with accommodation. However, the court held that the main object of the package was the Kimberley cruise, and that they were entitled to restitution.15 In the alternative, the applicants claimed damages under s 236 of the ACL. Although it was unnecessary to decide the point, the court concluded that the applicants were not entitled to damages under s 236 because the inclusion of an unfair term in the contract, and relying on it, did not contravene Chapter 2 or 3 of the ACL.16 The applicants had not sought relief under s 237 of the ACL.

DAMAGES [14.35]

Section 236 of the ACL provides:

(1) If: (a) a person (the claimant) suffers loss or damage because of the conduct of another person; and (b) the conduct contravened a provision of Chapter 2 or 3 the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention. (2) An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued.

Section 236 is the ACL equivalent of s 82 of the CCA. One difference between s 236 of the ACL and s 82 of the CCA is that the words “suffers loss or damage by the conduct of another person” in s 82 have been replaced with “suffers loss or damage because of the conduct of another person” in 236.17 The words “because of” are also used as a test of causation in s 139(1)(d) of the ACL. Parliament did not intend to change the degree of causation required between the conduct and the loss or damage suffered by the claimant. The Second Explanatory Memorandum, accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states: Division 3 of Part 5-2 allows a person to seek recovery of the amount of loss or damage caused by another person’s contravention of the consumer protection provisions in Chapters 2 or 3 of the ACL. It also allows such recovery of loss or damage from a person involved in a contravention. 13 Baltic Shipping Company v Dillon (1993) 176 CLR 344. 14 Baltic Shipping Company v Dillon (1993) 176 CLR 344 at 350 (Mason CJ). 15 Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 at [115]. 16 Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 at [118]. 17 It is worth noting that the words “because of” were used in s 159(1), the action for damages under the Fair Trading Act 1999 (Vic), and the equivalent to s 82(1) of the TPA. They are also used in the action for damages under s 217 of the Australian Consumer Law and Fair Trading Act 2012 (Vic).

[14.40]

14 Private Remedies

621

The damages provision in the ACL replace section 82 of the TPA and existing jurisprudence should continue to apply.18

The Second Explanatory Memorandum also states that when transferring the provisions of the TPA into the ACL, the opportunity was taken to express the law in a clearer style.19 The Treasury publication, The Australian Consumer Law – An Introduction, states: The ACL has been drafted in accordance with the requirements of plain language drafting. Existing TPA provisions included in the ACL have, in most cases, been modified and reordered to make the law clearer and also to reflect changes in drafting conventions since they were initially inserted into the TPA. With the exception of those areas where there have been policy changes, these drafting changes are not intended to alter the legal effect of these provisions.20

Section 15AC of the Acts Interpretation Act 1901 (Cth) provides: Where: (a) an Act has expressed an idea in a particular form of words; and (b) a later Act appears to have expressed the same idea in a different form of words for the purpose of using a clearer style; the ideas shall not be taken to be different merely because different forms of words were used.

The preposition “by” for the purposes of s 82 of the CCA has been construed to mean “by reason of” or “as a result of”,21 and the change in s 236 of the ACL to “because of” has the same meaning as “by reason of” or “as a result of”. There is no difference between the causation tests under s 236 of the ACL and s 82 of the TPA/CCA.22 Consequently, a claimant will have to prove that conduct in contravention of a provision of Chs 2 or 3 of the ACL was a material cause of the loss or damage, even though other causative factors may also have contributed to the loss.

“Common sense” approach to causation [14.40]

Section 236 of the ACL links the loss or damage to the contravention: the losses suffered must flow from the inducement, requiring that a direct causal link be established, but s 236 does not provide any further guidance as to the appropriate test. The rules of causation and remoteness in relation to s 236 of the

18 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [15.13]-[15.14]. 19 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.8] states: “much of the TPA has been in place for over 30 years, so a number of ACL provisions have been redrafted to comply with the requirements of plain English drafting.” 20 The Australian Consumer Law – An Introduction, p 19. 21 Munchies Management Pty Ltd v Belperio (1989) ATPR ¶40-926 at 50,037 (Fisher, Gummow and Lee JJ); and Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525 (Mason CJ, Dawson, Gaudron, and McHugh JJ). 22 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [15.75]-[15.76]. See Henville v Walker (2001) 206 CLR 459 at [132] (McHugh J); and I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at [142]-[143] (Kirby J).

622

The Australian Consumer Law

[14.40]

ACL are the same as those applied under the torts of negligence and deceit. Under the common law, the courts have traditionally applied the “common sense” approach.23 In relation to the law of negligence, the question of causation is whether the negligent act or omission was a factual cause of the plaintiff’s loss or injury as a matter of ordinary common sense and experience.24 This approach has been relied upon in the context of s 82 of the TPA,25 but its usefulness in the context of the has been called into question.26 If the claimant would have entered into the transaction even if the representation had not been made, it cannot be said that the losses suffered have flowed from the inducement. Such an approach is likely to be taken in relation to s 236 of the ACL. In Wardley Australia Ltd v Western Australia,27 the High Court established that the term “by” in s 82 of the invoked common law analogies of causation: The statutory cause of action arises when the plaintiff suffers loss or damage “by” contravening conduct of another person. “By” is a curious word to use … But the word clearly expresses the notion of causation without defining or elucidating it. In this situation, s 82(1) should be understood as taking up the common law practical or common-sense concept of causation recently discussed by this Court in March v Stramare (E & M H) Pty Ltd, except in so far as that concept is modified or supplemented expressly or impliedly by the provisions of the Act. Had Parliament intended to say something else, it would have been natural and easy to have said so.28

In March v Stramare (E & M H) Pty Ltd,29 Mason CJ (with whom Toohey and Gaudron JJ agreed) observed: The common law tradition is that what was the cause of a particular occurrence is a question of fact which “must be determined by applying common sense to the facts of each particular case”…30

In Henville v Walker,31 a majority of the High Court emphasised that a “common sense” approach is necessary in applying common law concepts of causation under 23 For a consideration of the “common sense” approach to causation see the Hon Justice Allsop, “Causation in Commercial Law” in Degeling, Edelman, Goudkamp (eds), Torts in Commercial Law (Thompson Reuters, Sydney, 2011) and Stapleton, “Reflections on Common Sense Causation in Australia” in Degeling, Edelman, Goudkamp (eds), Torts in Commercial Law (Thompson Reuters, Sydney, 2011). 24 March v Stramare (E & MH) Pty Ltd (1991) 171 CLR 506 at 522 (Deane J) and at 517 (Mason CJ, with whom Toohey J agreed). 25 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525 (Mason CJ, Dawson, Gaudron, and McHugh JJ). 26 See Stapleton, “Reflections on Common Sense Causation in Australia”, in Degeling, Edelman, Goudkamp (eds), Torts in Commercial Law (Lawbook Co., Sydney, 2011), and Kelly, “Causation and s 82 of the Trade Practices Act”, at http://www.hearsay.org.au/index.php?option=com_ content&task=view&id=828&Itemid=203. 27 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514. 28 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525 (Mason CJ, Dawson, Gaudron, and McHugh JJ). 29 March v Stramare (E & M H) Pty Ltd (1991) 171 CLR 506. 30 March v Stramare (E & M H) Pty Ltd (1991) 171 CLR 506 at 515. 31 Henville v Walker (2001) 206 CLR 459.

[14.40]

14 Private Remedies

623

s 82 of the CCA, rather than a mechanical application. The “common law conceptions of causation” that may be applicable in relation to s 236 of the ACL include: • the contravention needs to be a cause, but need not be the sole cause of the loss or damage;32 • the contravention must make a “material contribution” to the loss or damage;33 • the “but for” test of causation in tort law “… applied in a common sense and not a pedantic way, provides a … useful approach to the issue of causation”;34 and • there may be an abnormal, superseding event between the contravening conduct and the loss or damage that, as a matter of common sense, could be said to break the chain of causation.35 The “but for” test of causation was considered by the Full Federal Court in Merck Sharpe & Dohme (Aust) Pty Ltd v Peterson.36 At issue were the damages that could be claimed against a manufacturer under s 74B and s 74D of the TPA. The court examined the effect of the authorities on the test for causation under the common law in Australia and concluded: The “but for” test serves, in this field of discourse, as a negative criterion. That is to say, unless the defendant’s actionable conduct is shown to be a necessary condition of the plaintiff’s injury, the plaintiff’s claim will not succeed. Thus, in Amaca v Ellis at [11]-[12], it was accepted that a plaintiff must show on the balance of probabilities that the actionable conduct of the defendant was a necessary condition of the occurrence of the harm in respect of which the plaintiff claims damages. It is true, as counsel for Mr Peterson pointed out, that this rule was not the subject of argument in Amaca v Ellis; but it is also true that this rule represents the law in Australia binding on all courts below the High Court.37

The Full Court cited the following passage from the judgment of Kiefel J (with whom Hayne, Crennan and Bell JJ agreed) in Tabet v Gett:38 The common law requires proof, by the person seeking compensation, that the negligent act or omission caused the loss or injury constituting the damage. All that is necessary is that, according to the course of common experience, the more probable inference appearing from the evidence is that a defendant’s negligence caused the injury or harm. “More probable” means no more than that, upon a balance of probabilities, such an inference might reasonably be considered to have some greater degree of likelihood; it does not require certainty. 32 Henville v Walker (2001) 206 CLR 459 at [14] (Gleeson CJ) and [106] (McHugh J). See also I & L Securities v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at [33] (Gleeson CJ) and Taylor v Crossman (No 2) [2012] FCAFC 11 at [64]-[65]. 33 Henville v Walker (2001) 206 CLR 459 at [106] (McHugh J). See also North East Equity Pty Ltd v Proud Nominees Pty Ltd (2010) 269 ALR 262 at [71]. 34 McCarty v Mc Intyre [1999] FCA 784 (Full Court) and Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd [2011] WASCA 76 at [67] (McLure P). 35 Henville v Walker (2001) 206 CLR 459 at [14 (Gleeson CJ), [106] (McHugh J) and Gaudron J at [58]. See also Sellers v Adelaide Petroleum NL (1994) 179 CLR 332 at 356-7 (Brennan J). 36 Merck Sharpe & Dohme (Aust) Pty Ltd v Peterson (2011) 196 FCR 145 (Keane CJ, Bennett and Gordon JJ). 37 Merck Sharpe & Dohme (Aust) Pty Ltd v Peterson (2011) 196 FCR 145 at [99]. 38 Tabet v Gett (2010) 240 CLR 537 at [111]-[113].

624

The Australian Consumer Law

[14.45]

The “but for” test is regarded as having an important role in the resolution of the issue of causation, although more as a negative criterion than as a comprehensive test. The resolution of the question of causation has been said to involve the common sense idea of one matter being the cause of another. But it is also necessary to understand the purpose for making an inquiry about causation and that may require value judgments and policy choices. Once causation is proved to the general standard, the common law treats what is shown to have occurred as certain. The purpose of proof at law, unlike science or philosophy, is to apportion legal responsibility. That requires the courts, by a judgment, to “reduce to legal certainty questions to which no other conclusive answer can be given”. The result of this approach is that when loss or damage is proved to have been caused by a defendant’s act or omission, a plaintiff recovers the entire loss (the “all or nothing” rule).

Evidence of causation [14.45]

In relation to proof of causation the courts distinguish between cases where the plaintiff passively suffers a loss from another’s act where proof of causation is not required, and cases where the plaintiff is not passive but makes a positive decision to enter into a transaction based on a misrepresentation said to be material, which requires proof of causation.39

A case that falls into the former category is Janssen-Cilag Pty Ltd v Pfizer Pty Ltd,40 where Janssen passively suffered loss from Pfizer’s misleading conduct because consumers were led by the misleading conduct to buy less of Janssen’s product. Pfizer argued that only a person who relied on the misleading representation which constituted the contravention of s 52 of the TPA could recover damages under TPA, s 82. That is, only a consumer who was led by the misleading conduct to buy the product could recover damages (direct loss), and not a competitor, Janssen, who had passively lost sales as a result of consumers buying less of its product because of the misleading conduct by Pfizer (indirect losses). Lockhart J rejected this argument and refused to give s 82 a restrictive interpretation. His Honour held that the wording of s 82 did not impose some general requirement that damage can be recovered only where the applicant relies upon the conduct of the respondent constituting the contravention, and that s 82 can be relied upon by a rival trader whose business has suffered as a result of the contravening conduct.41 Lockhart J concluded: Whilst the applicant’s loss or damage must be caused by the respondent’s misleading or deceptive conduct, I see nothing in the language of the Act or its purpose to warrant the suggestion that the right of an applicant for damages under s 82 is confined to the case where he has relied upon or personally been influenced by the conduct of the respondent which contravenes the relevant provision of Pt IV or Pt V of the Act. Examples abound to prove the point, but it is sufficient if I take one simple case. A manufacturer of, say, leather 39 See De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) (2011) 200 FCR 253 at [64] (Stone J) referring to two decisions of the New South Wales Court of Appeal, Digi-Tech (Australia) Ltd v Brand (2004) ATPR (Digest) ¶46-248 at [155]-[158] and Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653 at [12]-[13]. 40 Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526. 41 Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526 at [16].

[14.50]

14 Private Remedies

625

goods may have established over many years a large and valuable reputation amongst the public or a significant section of the public. The respondent may commence to carry on business of manufacturing leather products under a name deceptively similar to that of the applicant and by which the applicant’s goods are known. Members of the public may be misled into believing that the respondent’s business is the business of the applicant or associated with the business of the applicant and they may take their business to the respondent. The applicant has not relied on any representation of the respondent or been misled or deceived by it, but his loss is the loss of business occasioned directly by the respondent’s conduct (or the consequent loss of profit). I can conceive of no reason why the Act, which is designed to foster and promote competition and, by Pt V, to prevent misleading or deceptive conduct, should be given a restrictive interpretation in s 82 such that only persons who relied upon the representation are entitled to recover loss or damage from the respondent. The evident purpose of the Act leads in my opinion plainly to a different conclusion.42

Proving reliance [14.50]

Where the plaintiff is not passive but makes a positive decision to enter into a transaction based on a misrepresentation said to be material, the applicant must prove by direct evidence that it relied upon the misrepresentation by, for example, entering into a contract. In Wardley Australia Ltd v Western Australia,43 the High Court stated: Here we are concerned with contraventions of s 52(1) in the form of misleading conduct constituted by misrepresentations. In this situation, as at common law, acts done by the representee in reliance upon the misrepresentation constitute a sufficient connexion to satisfy the concept of causation.44

The courts are likely to treat a self-serving assertion of reliance cautiously and are likely to require other evidence of reliance. In Hanave Pty Ltd v LFOT Pty Ltd,45 Kiefel J stated: Courts ought to be, and no doubt are, cautious in accepting mere assertions of reliance as essentially self-serving, and will usually attempt to assess that prospect by reference to objective criteria. This will be so particularly where the misrepresentation is not necessarily likely to be recalled as having had a strong impact.46

In De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq),47 De Bortoli Wines Pty Ltd (DBW) acquired more than 19 million shares in HIH Insurance Ltd (HIH). HIH was eventually liquidated and the shares became worthless. DBW submitted a proof of debt to the liquidators claiming to be owed more than $9 million, being the total 42 Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526 at [19]. Lockhart J’s views were quoted with approval by Gummow J in Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at [101]. 43 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514. 44 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525 (Mason CJ, Dawson, Gaudron and McHugh JJ). See also I&L Securities v HWT Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at 127 [55] (Gaudron, Gummow and Hayne JJ). 45 Hanave Pty Ltd v LFOT Pty Ltd (1999) ATPR ¶41-687 at 42,793. 46 Hanave Pty Ltd v LFOT Pty Ltd (1999) ATPR ¶41-687 at 42,793 [51], Wilcox J agreeing at [11]. See also Razdan v Westpac Banking Corporation [2014] NSWCA 126 at [15] (McColl JA); and Juniper Property Holdings No 15 Pty Ltd v Caltabiano [2016] QSC 5 at 75-6 (Jackson J). 47 De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) (2011) 200 FCR 253.

626

The Australian Consumer Law

[14.50]

cost of the HIH shares acquired by DBW. HIH contravened s 52 of the TPA directly, by providing false and misleading representations in financial statements, reports and media releases issued by HIH and in the statements of its officers, and indirectly, by way of third party analysts’ reports based on information provided by HIH. The liquidators rejected the proof of debt and DBW sought to have the liquidators’ decision set aside. In relation to the causal link required under s 82 of the TPA, DBW argued that the court could infer reliance from the fact that DBW purchased the HIH shares.48 Stone J held that the inference of reliance is rebuttable and that any inferred reliance must be weighed in the light of all the evidence. The weight of evidence in the case rebutted any such inference. Mr De Bortolli could not identify any marking or notation on the HIH or stockbroker documents that he had made to indicate that he had read the documents. Stone J concluded: In the absence of any contemporaneous notes or marking on the documents his assertion that he paid particular attention to statements highlighted by his legal advisors almost nine years later cannot be regarded reliable evidence.49

Despite the continuing fall in HIH’s share price, Mr De Bortolli continued to invest in the company because, in his judgment, the shares still represented good value. Mr De Bortoli explained that in the past he had invested in numerous companies where the share price had dropped significantly and admitted that he was “backing my own judgment”.50 Her Honour concluded: Mr De Bortoli’s actions over this period show that, far from relying on external information from HIH or any other source, Mr De Bortoli pursued his own strategy relying on his own views about investment generally and his own belief that what goes down must come up. His purchase of a large volume of shares in the face of strong independent statements in the financial press and by analysts that HIH was in severe financial trouble was not made in reliance on representations from HIH but on his own strategic plan.51

An appeal from this decision on the basis that Stone J erred in finding that the inference was rebutted by the evidence was dismissed.52 The Full Court found that Stone J did not err in finding that Mr De Bortoli did not rely on the misrepresentations. Leave to appeal to the High Court was refused.53 48 De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) (2011) 200 FCR 253 at [65] based on the Lord Blackburn’s comment in Smith v Chadwick (1884) 9 App Cas 187 at 196 that: if it is proved that the defendants with a view to induce the plaintiff to enter into a contract made a statement to the plaintiff of such nature as would be likely to induce a person to enter into a contract, and it is proven that the plaintiff did enter into the contract, it is a fair inference of fact that he was induced to do so by the statement. 49 De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) (2011) 200 FCR 253 at [90]. 50 De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) (2011) 200 FCR 253 at [99]. 51 De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) (2011) 200 FCR 253 at [103]. 52 De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) [2012] FCAFC 28 (Jacobson, Siopis and Nicholas JJ). 53 De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) [2012] HCASL 157 (13 November 2012).

[14.55]

14 Private Remedies

627

[14.55]

However, direct evidence of reliance may be unnecessary. The circumstances in which an inference may be drawn were considered by Kiefel J in Hanave Pty Ltd v LFOT Pty Ltd.54 Kiefel J held that causation can sometimes be resolved by the Court objectively determining the likely effect of the misleading conduct. Her Honour stated: The question of causation can sometimes be resolved not by direct evidence as to what part a misrepresentation played in the process of entry into contract, but by a Court determining what effect must be taken to have resulted. Indeed this course may sometimes be preferable to one which rested solely on evidence later given on the point. In Gould v Vaggelas [(1985) 157 CLR 215 at 236] Wilson J held that if a material representation is calculated (which is to say, objectively likely …) to induce the representee to enter into a contract and the person in fact enters into a contract, a fair inference arises that the representation operated as an inducement, adding that it need not be the only cause … That part of Wilson J’s judgment was not stated to be an exhaustive rule, but is to be seen as a guide to a question of fact which may arise. A conclusion of inducement may then be reached where a combination of factors, including the quality of the representation itself, goes unanswered. In relation to the representation itself it would need to be of a kind likely to provide that inducement and such that … commonsense would demand the conclusion that the false representations played at least some part in inducing the plaintiff to enter into the contract.55

In Henville v Walker,56 Mr Henville was an architect and property developer. Mr Walker was a real estate agent. Mr Henville approached Mr Walker to assist him to locate a suitable property for development. Mr Walker represented to Mr Henville that there was a significant demand for luxury units in Albany and that if he constructed units on the proposed site he was likely to achieve a sale price of between $250,000 and $280,000. After these misleading statements were made, Mr Henville prepared his own feasibility study that was hopelessly wrong. If it had been prepared with due care, Mr Henville would have realised before he purchased the property that the investment was not profitable. The High Court held that the misleading statements by Mr Walker were still a direct cause of Mr Henville’s loss.57 In Fabcot Pty Ltd v Port Macquarie-Hastings Council58 the primary judge, Hammerschlag J, held although the Council engaged in misleading conduct contrary to s 42(1) of the Fair Trading Act 1987 (NSW), Woolworths had not demonstrated that that it had suffered loss or damage by the Council’s conduct for the purposes of s 68(1) of the Fair Trading Act 1987 (NSW). The court did not accept 54 Hanave Pty Ltd v LFOT Pty Ltd (1999) ATPR ¶41-687. 55 Hanave Pty Ltd v LFOT Pty Ltd (1999) ATPR ¶41-687 at [46]. Wilcox J agreed (at [11]). Emmett J dissented. This objective approach to proving causation was confirmed by the Full Federal Court in Haros v Linfox Australia Pty Ltd [2012] FCAFC 42 at [52]-[54] (Gray, Marshall and Bromberg JJ). 56 Henville v Walker (2001) 206 CLR 459. 57 Henville v Walker (2001) 206 CLR 459 at [134] (McHugh J, with whom Gummow and Hayne JJ agreed). It is now necessary to consider s 137B of the CCA which provides that a court can reduce the damages awarded where the failure of the claimant to take reasonable care had contributed to the loss. 58 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2010] NSWSC 726. The facts of this case are set out at [3.105].

628

The Australian Consumer Law

[14.60]

that Woolworths would have acted any differently had it known that the Council had commenced to deal with Coles. The primary judge found that the hypothetical evidence of Woolworths’ executives that they would have accepted the Council’s demands if they had known of Coles’ involvement was coloured by the benefit of hindsight and had little probative value. The New South Wales Court of Appeal upheld this finding.59

Indirect theory of causation [14.60]

However, where there are a series of transactions or events and intermediaries are involved – for example, the misleading conduct of the respondent induces an innocent party to act in some way, and the innocent party’s act causes the applicant’s loss – it will be necessary to plead an indirect theory of causation.60 In Digi-Tech (Australia) Ltd v Brand,61 the appellants (investors) submitted that it was not necessary for a party seeking to recover damages to show direct reliance upon misleading conduct by the representor. The appellants relied upon an independent valuation report based on alleged misleading profit forecasts provided by Digi-Tech. They submitted that the misleading conduct might cause other persons to act in a way that led to the loss suffered by a plaintiff. They described the “indirect causation theory” as follows: if Digi-Tech had not produced misleading and deceptive forecasts concerning the revenue and gross margin of the products, Deloitte would not have produced a valuation to support the price of $72.5m. In the absence of that valuation, or any valuation supporting that price, the investment scheme would not have gone ahead and Mr Urwin would not have proposed the scheme to any of the investors. It was submitted that Digi-Tech’s misleading conduct, thereby, caused Mr Urwin to act in a way that led to loss or damage to the appellants.62

The New South Wales Court of Appeal rejected the “indirect causation theory” as a test of causation because it had not been pleaded in the original statement of claim. However, by way of obiter the court stated that in cases of misrepresentation inducing a transaction, where plaintiffs claim to have suffered loss because they are induced by misleading representations of other persons, they must prove that they relied on those misrepresentations.63 This reasoning was approved by the New South Wales Court of Appeal in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd.64 59 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [203]-[206]. 60 Bond Corporation Pty Ltd v Theiss Contractors Pty Ltd (1987) 14 FCR 215 at 222-223. See also Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58 (Sheller JA, Ipp JA and Mc Coll JA) at [164] and Caltex Australia Petroleum Pty Ltd v Charbden Haulage Pty Ltd [2005] FCAFC 271 where the respondent claimed that it had suffered damage due to an allegedly incorrect remediation report prepared by the appellant, but failed to prove its case because it did not establish that it had relied on the report. 61 Digi-Tech (Australia) Ltd v Brand (2004) ATPR (Digest) ¶46-248 (Sheller JA, Ipp JA, and McColl JA). 62 Digi-Tech (Australia) Ltd v Brand (2004) ATPR (Digest) ¶46-248 at [149]. 63 Digi-Tech (Australia) Ltd v Brand (2004) ATPR (Digest) ¶46-248 at [159]. 64 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd. (2008) 73 NSWLR 653 at [12]-[13] (Giles JA) and [616]-[618] (Ipp JA).

[14.65]

14 Private Remedies

629

Breaks in the chain of causation [14.65]

The claimant must establish causation between the conduct at issue and the loss or damage suffered. Causation will be established if the claimant can demonstrate that it relied on the misleading conduct. It is sufficient if the contravening conduct is a cause of the loss, so long as it materially contributes to the loss.65 A break in the chain of causation requires a supervening event such that the misleading representation is no longer an operative cause of the loss.66 In Pavich Pty Ltd v Bobra Nominees, French J stated: The primacy of the causation principle in s 82 would seem to exclude reliance upon such concepts as mitigation or contributory negligence, unless it can be shown that the applicant’s own carelessness or disregard for his or her interest is the cause of all or some part of the claimed loss.67

In Nella v Kingia Pty Ltd,68 the applicants contended that they were induced to acquire a hotel business by misleading representation as to the estimate of takings from the sale of beer. The applicants were told at the time they inspected the hotel that the actual sales figures were not available. The applicants decided to purchase the hotel on the basis of the estimates alone, without enquiring beyond them. It was argued that the chain of causation was broken by the applicants’ own imprudence in not bothering to check the estimates. French J rejected this argument; however, his Honour reduced the amount of the loss claimed by the amount that was attributable to the losses incurred as a result of the applicants’ continued operation of the business after it became clear that it was not profitable.69 While subsequent events by an outside agency cannot be regarded as a supervening event breaking the chain of causation, they can be taken into account when assessing the true purchase value of a business at the date of purchase. In Kizbeau Pty Ltd v WG & B Pty Ltd,70 the appellant purchased a hotel business from the respondent in 1988. The appellant contended that they were induced to buy a hotel business by a misleading representation about the ability to hold seminars in the hotel when condition (p) of the Town Council planning permit prohibited this. From 1988 to 1991, the appellant conducted the business as though condition (p) did not exist. The value of the business with condition (p) was considerably less than the value of the business without (p). In 1991 the Town Council amended 65 I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at [3] (Gleeson CJ); and Henville v Walker (2001) 206 CLR 459 at [106] (McHugh J). 66 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 356-7 (Brennan J); and Henville v Walker (2001) 206 CLR 459 at [14] (Gleeson CJ). For a case in which it was alleged that mismanagement of the franchise that had been acquired in reliance upon the misleading representations about profit levels, broke the chain of causation, see Gardner Corporation Pty Ltd v Zed Bears Pty Ltd [2003] WASC 13 at [64]-[65] (Steytler J). 67 See Pavich Pty Ltd v Bobra Nominees (1988) ATPR (Digest) ¶46-039 at 53,124 (French J) cited with approval by the Full Federal Court in Munchies Management Pty Ltd v Belperio (1989) ATPR ¶40-926 at 50,037 (Fisher, Gummow and Lee JJ). 68 Nella v Kingia Pty Ltd (1989) ATPR (Digest) ¶46-046. 69 Nella v Kingia Pty Ltd (1989) ATPR (Digest) ¶46-046 at 53,141. 70 Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 (Brennan, Deane, Dawson, Gaudron and McHugh JJ).

630

The Australian Consumer Law

[14.70]

condition (p) by adding condition (s) which allowed for seminars of no more than 50 people. The High Court held that in assessing the value of the hotel at the date of purchase, subsequent events (the insertion of condition (s)) were admissible to prove the value of the business at the date of purchase.71 Once the changes occurred they affected the future revenues and consequently the value of the business. Furthermore, the Court held that damages are to be assessed as compensation for loss actually suffered, and as the business had been conducted from 1988 to 1991 as if condition (p) did not exist it caused no diminution in the value of the business.72

Reliance and failure to verify a representation [14.70]

Questions of reliance and causation are questions of fact and in many cases it will be clear that the representations were relied upon. For example, in Karawi Constructions Pty Ltd v Bonefind Pty Ltd,73 the representation was that a commercial building when completed would consist of three floors with car parking for five cars and the net lettable area of 180 square metres. In fact, the net lettable area was only 137.4 square metres. The applicant’s managing director, Mr McDougall gave evidence that he relied upon the representation as to the net lettable area and that: “If [the lettable area] had been any less than 180 square metres … it just wouldn’t have been feasible to build the jolly thing”. The respondent submitted that Mr McDougall was an experienced real estate agent and property developer, and that his failure to verify the net lettable area negated reliance. Beaumont J rejected this submission: There may be cases under s 52 of the Act where, in considering whether, in all the circumstances, the conduct of the respondent was misleading or likely to mislead, a failure to verify a representation may negate reliance … But that kind of case, which must depend on its own circumstances, is not apposite to the present case.74

In relation to this passage McDougall J, in Ingot Capital Investment & Ors v Macquarie Equity Capital Markets & Ors [No 6], stated:75 Of course, Beaumont J was not seeking to lay down a rule of general application. His Honour was making the point that the question, whether reliance has been established, is something that needs to be considered on the whole of the available material (including, as I have said above, the nature of the representations found to have been made and what happened after they were made); and that, in some circumstances, an inference, adverse to reliance, may be drawn from a failure to check or verify a representation.

For example, if that which was represented were unlikely or improbable, evidence of reliance without any attempt at verification might be treated with some suspicion. On the other hand, if that which was represented were inherently 71 Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 at 291. 72 Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 at 296-7. 73 Karawi Constructions Pty Ltd v Bonefind Pty Ltd (1993) ATPR ¶41-265. 74 Karawi Constructions Pty Ltd v Bonefind Pty Ltd (1993) ATPR ¶41-265 at 41,570. 75 Ingot Capital Investment & Ors v Macquarie Equity Capital Markets & Ors [No 6] [2007] NSWSC 125 at [457] and [458].

[14.75]

14 Private Remedies

631

plausible, and if the representor was someone who should be thought to have knowledge of the subject matter of the representation, a failure to check or verify might not negative reliance.In CPI Group Ltd v Stora Enso Australia Pty Ltd,76 the Full Federal Court pointed out that it is no answer to a claim of misleading conduct by silence to say that the person misled should have made his or her own enquiries and that if they had they done so it would have revealed the true position.77 Whether a failure to verify might constitute contributory fault for the purposes of s 137B of the CCA is considered at [14.130].

Declaration of non-reliance [14.75]

Where the conduct at issue involves allegedly misleading pre-contractual representations and the applicant signs a deed or declaration of non-reliance, the deed or declaration may be evidence of non-reliance on the misleading precontractual representation.78 French CJ elaborated on this issue in Campbell v Backoffice Investments Pty Ltd: [I]f a person expressly declares in a contractual document that he or she did not rely upon pre-contractual representations, that declaration may, according to the circumstances, be evidence of non-reliance and of want of a causal link between the impugned conduct and the loss or damage flowing from the entry into the contract.79

For a declaration of non-reliance to be effective it must be clear in its terms, brought to the attention of the other contracting party, and the declaration will generally require the other contracting party to obtain professional advice in relation to its effect. A declaration of non-reliance was successfully relied upon in Poulet Frais Pty Ltd v The Silver Fox Company Pty Ltd.80 In Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd,81 the appellants (the tenants) leased shops in a shopping centre owned by the respondents. Before signing the lease the tenants were required by the landlord to specify in a deed any representations that had been made to them concerning the premises. The deed was signed in consultation with their solicitor. The tenants submitted that representations that a national chicken take-away operator would lease space in the centre misled them as to the characteristics the centre would have when the tenants entered into possession. These representations were not included in the deed signed by the tenants. The trial judge found that the misleading statements were in fact made and that they did induce the tenants to enter into the lease. 76 CPI Group Ltd v Stora Enso Australia Pty Ltd (2007) ATPR ¶42-193. 77 CPI Group Ltd v Stora Enso Australia Pty Ltd (2007) ATPR ¶42-193 at [68] citing Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546 at 558. 78 Keays v J P Morgan Administrative Services Australia Ltd [2011] FCA 358 (13 April 2011). 79 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [31] 321. 80 Poulet Frais Pty Ltd v The Silver Fox Company Pty Ltd (2005) 220 ALR 211 (Branson, Nicholson and Jacobson JJ). See also Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1989) ATPR (Digest) ¶46-048; and Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601. 81 Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1989) ATPR (Digest) ¶46-048.

632

The Australian Consumer Law

[14.80]

On appeal, a majority of the Full Federal Court, (Morling and Wilcox JJ), found that even if the statement was made, it did not induce the tenants to enter into the lease. Their Honours reached this conclusion on the basis that after they took possession of their shop, it must have been apparent to them that a national chicken operator had not leased space in the centre. They made written complaints to their landlord about a variety of matters on seven occasions between April 1982 and they signed a deed which set out the matters that they had relied upon and no mention was made in the deed of a representation that a national chicken take-away operator would lease space in the centre. Their Honours concluded that the tenants had made their own assessments about the prospects of the centre: the combination of their failure to make any mention in the deed that they relied on Mr Wakeham’s statement and their subsequent failure to make any complaint about it (in the context of a long history of complaints about other matters) provides a substantial basis for a finding that, even if the statement was made to them, it did not induce the Pallesons to enter into the lease.82

Similarly, in Leda Holdings Pty Ltd v Oraka Pty Ltd,83 a majority of the Full Federal Court (Branson and Emmett JJ) concluded that a tenant did not rely nor was induced by a vague prediction made by a Mr Keast, a director of the landlord, Leda Holdings, in informal circumstances concerning his optimistic expectations about occupancy levels at the shopping centre on opening. The tenant did not refer to Mr Keast’s prediction as a matter that induced it to enter into the shopping centre lease in the deed of acknowledgment that it signed prior to entering into the lease. Furthermore, the tenant had extensive commercial experience in negotiating leases; and it was aware that information about expected occupancy levels could have been obtained by it from the landlord’s agent with whom it had extensive dealings.84 Branson and Emmett JJ concluded: Mr Johnson [managing director of Oraka] had available to him … ample means for obtaining specific information concerning the letting of the other shops in the shopping centre. In particular, he was aware that such information was readily available from Ms Vale [the landlord’s agent]. There would be nothing surprising in his not placing reliance, in the circumstances, on the statement made in informal circumstances by Mr Keast.85

[14.80]

Such a declaration of non-reliance will not necessarily erase the misleading conduct of the franchisor in relation to sales/profitability forecasts in all circumstances. The fact that independent advice has been obtained and relied upon does not preclude a purchaser of a business from also relying on the vendor’s representations. The person making the declaration may nevertheless be found to have been actuated by the misrepresentations into entering the contract. The

82 Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1989) ATPR (Digest) ¶46-048 at 53,147. 83 Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601. 84 Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601 at 40-515-7. 85 Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601 at 40-516.

[14.85]

14 Private Remedies

633

question is not one of law, but of fact.86 For example, in Jainran Pty Ltd v Boyana,87 the plaintiff contracted to buy a service station site from the first defendant. Raine & Horne were engaged as agents for the vendor. The service station was the subject of a lease. There was a pre-existing dispute between the lessee of the service station and Boyana, the tenant claiming rent-free relief. Raine & Horne were aware of the litigation but continued to use a brochure that described the site as an “outstanding investment” and a “great opportunity for long-term income”. The plaintiff signed a contract which contained the following non-reliance term: “Purchaser acknowledges that neither vendor not anyone on behalf of the Vendor has made any representation on which the purchaser relies”. Jainran was entitled to recover against Boyana, but Boyana had no resources, so Jainran sought to make Raine & Horne liable. Raine & Horne argued that the brochure made it clear it was acting as a mere conduit, and that the declaration of non-reliance was evidence of lack of causation. Bryson AJ held that the brochure was misleading because it set out the positive characteristics of the tenant while omitting any facts about the dispute and whether the rent should be paid.88 Bryson AJ also held that there was evidence of reliance despite the declaration of non-reliance. The making of the representations by Raine & Horne were followed within a very short time by Jainran entering into the contract, which indicated that Jainran had, in fact, relied upon them.89

MEASURE OF DAMAGES [14.85]

Section 236 of the ACL does not prescribe the measure of damages recoverable by a plaintiff for a contravention of Chs 2 and 3 of the ACL. Accordingly, it is for the courts to determine what the appropriate measure is. In relation to s 82 of the TPA, the High Court in Henville v Walker acknowledged that the traditional common law measure of damages in tort and contract “will usually be of great assistance” in applying the Act.90 However, in assessing the measure of damage under s 236 of the ACL the court is not bound to adopt the measure of damages in tort for deceit or the measure of damages in contract.91 In Gates v City Mutual Life Assurance Society Ltd,92 the Mason, Wilson and Dawson JJ summarised the two tests at common law: In contract, damages are awarded with the object of placing the plaintiff in the position in which he would have been had the contract been performed–he is entitled to damages for loss of bargain (expectation loss) and damage suffered, including expenditure incurred, in reliance on the contract (reliance loss). In tort, on the other hand, damages are awarded 86 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at 321 [31] (French CJ). 87 Jainran Pty Ltd v Boyana [2008] NSWSC 468. 88 Jainran Pty Ltd v Boyana [2008] NSWSC 468 at [96]. 89 Jainran Pty Ltd v Boyana [2008] NSWSC 468 at [107]. 90 Henville v Walker (2001) 206 CLR 459 at [130] (McHugh J, with whom Gummow and Hayne JJ agreed). 91 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 14 (Mason, Wilson and Dawson JJ). 92 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 12 (Mason, Wilson and Dawson JJ).

634

The Australian Consumer Law

[14.85]

with the object of placing the plaintiff in the position in which he would have been had the tort not been committed (similar to reliance loss).93

The tortious measure of damages attempts to place the plaintiff in the position the plaintiff would have enjoyed if the tort had not been committed. In Gates, the High Court held that the question to be asked in cases involving misleading conduct is: “how much worse off the plaintiff is as a result of entering into the transaction which the representation induced him to enter than he would have been if the transaction had not taken place”.94 According to the Gates test, a plaintiff can recover reliance loss, but not expectation loss. The appellant, Gates, was misled by an agent of the respondent about the coverage of an insurance policy. He had been told that the policy would cover him if he became disabled and could not engage in his usual occupation. In fact, the policy only covered him if he became totally disabled for work. No evidence was presented by the appellant to show that he would have taken out a disability policy with another insurance company had he been aware of the misrepresentation before he entered the policy. Mason, Wilson and Dawson JJ held: if the appellant were able to establish that, but for his reliance on Mr Rainbird’s representation, he could and would have entered into policies of insurance containing a disability clause of the kind represented by Mr Rainbird, he might then succeed in obtaining an award of damages equal to the benefits which would have been payable under such policies less the premiums paid or payable in respect of them. Unfortunately for the appellant the evidence does not support this basis for an award of damages …95

Thus, the applicant will be able to recover monies spent in reliance upon the representation if it turns out to be false or misleading. However, the applicant will not be able to recover loss of an expectation or profits unless the applicant can prove that, but for reliance on the misleading conduct, the applicant would have entered into a different contract in respect of which the applicant would have made a profit.96 This approach was followed by the High Court in Marks v GIO Australia Holdings Ltd.97 The trial judge found that GIO told the borrowers that it would charge interest at a rate calculated as a base rate plus a fixed margin of 1.25%. The borrowers received a letter from GIO telling them that it proposed to increase the interest rate margin from 1.25% to 2.25% with effect from 1 August 1992. The loan agreements which the borrowers had signed permitted GIO to change the interest rate margin in this way. However, Einfeld J found that GIO represented to the borrowers that the interest rate margin was set at 1.25% and would not be changed during the life of the loan and that each of the borrowers had relied on this representation and had been induced by it to take the loan. 93 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 11-2. 94 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 12. 95 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 14-5. 96 Havyn v Webster (2005) 220 ALR 211 at [117] (Santow JA). See also Marks v GIO Australia Holdings Ltd (1998) 158 ALR 333 and Zipside Pty Ltd v Anscor Pty Ltd [2000] QCA 395. 97 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494.

[14.85]

14 Private Remedies

635

Einfeld J found that GIO had engaged in misleading or deceptive conduct in contravention of s 52 of the TPA. His honour gave judgment for the borrowers for damages assessed as the difference between the amount of interest calculated with a margin of 1.25% and the amount of interest calculated with a margin of 2.25% for the period between 1 August 1992 and the date of judgment in the case of borrowers who chose to continue their loans, or a date six weeks later for those borrowers who did not. Einfeld J rejected the borrowers’ claim for relief under s 87. GIO appealed to the Full Court of the Federal Court. The Full Court allowed the appeal. Although GIO had breached s 52, even with the margin increase, the GIO loan rate was the best available, so the borrowers could not prove that they were “worse off” as a result of the contravention. The borrowers appealed to the High Court, seeking orders under s 87 of the Act limiting the interest payable to the base rate plus a fixed margin of 1.25% for the life of the loans and damages under s 82 compensating them for the increased interest that they had paid. The High Court dismissed the appeal. McHugh, Hayne and Callinan JJ held: What is important is what that party could have done, not what it might have hoped for or expected. Some examples may serve to illustrate the point. If a person agrees to pay $50,000 for goods which the vendor falsely represents are worth $100,000 but which are, in fact, worth $50,000, what loss has the purchaser who is misled suffered by agreeing to buy (assuming no more is known)? If a person agrees to pay interest at the rate of 10% for a loan which the lender falsely represents would ordinarily command interest at a rate of 15% but which, in fact, would ordinarily command interest at 12%, what loss has the borrower who is misled suffered by agreeing to borrow (again, assuming no more is known)? … The fact that each of the misled parties in the examples given may have thought that it was to obtain some advantage from the transaction is not to the point. The contravening conduct has left the party that was misled no worse off than it was before the contravention occurred.98

The same principles are applicable in relation to the measure of damages for misleading conduct recoverable under s 236 of the ACL. Where a person purchases an asset in reliance upon a misrepresentation and the asset was worth less at the time of the contract than it was represented to be, the measure of damages will be the same as that applicable in an action for deceit, namely the difference between price and value – between the real value of the property at the time of contract and what the buyer actually paid for the property.99 Similarly, where misleading conduct induces a person to buy a business, the measure of damages will be the difference between the price and the real value of the business at the acquisition date.100 This is the so-called “common approach” to assessing damages under s 236 of the ACL. The courts have recognised an alternative approach for assessing 98 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 515. The real value can be affected by subsequent events. See Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281. 99 Potts v Miller (1940) 64 CLR 282; Gould v Vaggelas (1983-1985) 157 CLR 215 at 220; and Kenny & Good Pty Ltd v MGICA (1992) Ltd (1997) ATPR ¶41-576 (Wilcox, Branson and Sackville JJ concurring). 100 Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 at 291 (Brennan, Deane, Dawson, Gaudron and McHugh JJ).

636

The Australian Consumer Law

[14.90]

damages, namely for the purchaser to deduct from the purchase price of the property or assets, the value of whatever was “left in its hands”. Each approach will now be considered.

Price minus value at acquisition date [14.90]

The approach commonly employed in cases where misleading conduct gives rise to the acquisition of land, chattels, a business or shares is to deduct the real value of the asset at the date of acquisition from the purchase price.101 The “common approach” is sometimes referred to as the rule in Potts v Miller.102 The court compares the applicant’s financial position prior to entering into the contract with the applicant’s financial position after entering into the contract to determine how much worse off the applicant is as a result of the conduct. This assumes that the property is retained by the applicant. When the court is assessing damages by comparing the contract price and the real value at the date of acquisition, the court is entitled to take into account events after the date of acquisition; however, the cause of the decline in value must be inherent in the thing itself, and not the result of some extrinsic or supervening event.103 The common approach does not allow the applicant to recover any loss resulting from a general decline in property values since the date of acquisition. A person misled will generally not be able to recover their lost expectation or anticipated profit. Lost expectations, such as profits, are only likely to be recoverable under ACL, s 236, if the applicant can prove that, but for the misleading conduct, the applicant would have entered into another available arrangement that would have resulted in the expectation being met. The critical question is: what would the claimant have done if the respondent had not engaged in the misleading conduct and how much worse off is the claimant as a result of the conduct. It will generally be necessary for the party misled to prove by credible evidence that he or she would have acted in some other way (or refrained from acting) which would have resulted in him or her obtaining greater benefit or incurring less detriment.104

No transaction approach [14.95]

An alternative approach for assessing damages is referred to as the “non transaction” approach. Where it is established that the applicant would not have entered into the contract but for the misleading conduct (no transaction) the applicant is entitled to the difference between the purchase price of the property and the real value at the date of the trial. This “alternative” or “no transaction”

101 See Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 6-7 (Gibbs CJ), at 12 (Mason, Wilson and Dawson JJ); Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 at 291 (Brennan, Deane, Dawson, Gaudron and McHugh JJ). 102 Potts v Miller (1940) 64 CLR 282. See HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at [35] (Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ). 103 Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 at 291-6, and HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at [40]. 104 See Williams v Pisano [2015] NSWCA 177.

[14.100]

14 Private Remedies

637

approach was identified by the High Court in HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd,105 as being available when assessing damages under s 82 of the TPA. In that case, a valuer made representations to the proposed purchaser of a shopping centre that a new shopping centre to be constructed nearby would not have an adverse impact on tenancy levels in the existing shopping centre, the subject of the purchase. When the new shopping centre was completed, the applicant suffered a loss in rental income. The applicant had tried unsuccessfully to sell the shopping centre. The applicant sought to be compensated on the basis that but for the misleading conduct of the valuer it would not have entered into the transaction and therefore would not have suffered any loss. While acknowledging that the “no transaction” approach is available under s 82, the High Court applied the common approach (price minus value at acquisition date). It seems that the “no transaction” approach will only be available where there is evidence that the applicant has tried unsuccessfully to sell the assets or property acquired as a result of the misleading representations, or where the applicant is “locked into” using the assets as part of its business.106 In Bennett v Elysium Noosa Pty Ltd (in liq),107 property purchased as a result of misleading conduct declined sharply in value soon after purchase because of an extrinsic, supervening event, the global financial crisis. Counsel for the applicant sought to rely on the “alternative” approach, and submitted that the applicant’s case was a “no transaction” in that but for the agents’ representations, the transaction would not have ensued at all. Accordingly, the measure of damage was the difference between the purchase price of the property and its real value at the date of the trial. Reeves J rejected this submission because there was no evidence that the applicant was “locked into” the transaction and could not sell the property and there was no business activity associated with the purchase of the asset.108 His Honour applied the “common approach” which does not allow the applicant to recover any loss suffered as a result of a decline in value since the purchase. The additional loss or decline in value was not the consequence of the inducement.

Measure of damages in employment cases [14.100] In O’Neill v Medical Benefits Fund of Australia Ltd,109 misleading conduct led Mr O’Neill to leave his secure employment and take other employment with MBF. He left a secure job at a particular level of remuneration and took up employment with MBF two years later. He was then employed in occasional 105 Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254 at 284; affirmed in HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at [63]-[64]. Applied in Ingot Capital Investment & Ors v Macquarie Equity Capital Markets Ltd [2008] NSWCA 206. In North East Equity Pty Ltd v Proud Nominees Pty Ltd (2010) 269 ALR 262 at [176] the Full Court held that the trial judge should have considered whether the alternative approach applied in circumstances where new plant and equipment was integrated into existing plant and equipment so that the applicant was “locked into” using it. See also Mark Bain Constructions Pty Ltd v Avis [2012] QCA 100. 106 See the discussion in Bennett v Elysium Noosa Pty Ltd (2012) 202 FCR 72 at [248]-[253] (Reeves J). 107 Bennett v Elysium Noosa Pty Ltd (2012) 202 FCR 72. 108 Bennett v Elysium Noosa Pty Ltd (2012) 202 FCR 72 at [253]. 109 O’Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455 (Carr, Moore and Marshall JJ).

638

The Australian Consumer Law

[14.105]

temporary employment and then in more permanent employment. The Full Federal Court held that any loss he suffered was the loss flowing from his reliance on the misleading conduct. The loss could be quantified by ascertaining the difference (if any) between the salary he would have been earning in employment with his former employer and the income he then received in the position with MBF and in the employment he entered or might enter after being made redundant by MBF. The damages would be the difference over the period it was likely Mr O’Neill would have stayed in employment with his former employer.110

Loss of commercial opportunity [14.105] In seeking to recover damages for loss of an opportunity the applicant must prove on the balance of probabilities that the respondent’s conduct caused the loss of the opportunity to acquire a benefit. The Court will then assess the loss by reference to the possibilities of that benefit eventuating.111 However, loss of expectation or anticipated profit will generally not be able to be recovered under s 236 unless the applicant can prove that, but for reliance on the misleading conduct, the applicant would have entered into a different contract or another available arrangement in respect of which the applicant would have made a profit.112 In Sellars v Adelaide Petroleum NL, Mason CJ, Dawson, Toohey and Gaudron JJ, in their joint judgment stated that the principles to be applied in assessing damages for loss of a commercial opportunity were the same for a breach of contract, tort or contravention of s 52(1) of the TPA. Their Honours distinguished between proof of causation and proof of damages. Proof of causation is to be determined on the balance of probabilities. The applicant is required to prove the existence of a valuable loss of opportunity, and the fact that it was caused by the respondent’s misleading conduct on the balance of probabilities. The applicant is not required to prove the extent of the loss on the balance of probabilities. the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant’s case to say that the commercial opportunity was 110 O’Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455 at [45]. See also Gregory v Philip Morris Ltd (1988) 80 ALR 455 at 482-484 and Bostik (Australia) Pty Ltd v Gorgevski (No 1) (1992) 36 FCR 20 at 32-3. 111 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 368-9. See Rich, “Can Loss of Chance Damages Survive in Commercial Cases after Tabet v Gett?” (2011) 19 Australian Journal of Competition and Consumer Law 98 at 106-7. 112 Havyn v Webster (2005) 220 ALR 211 at [117] (Santow JA). See also Marks v GIO Australia Holdings Ltd (1998) 158 ALR 333 and Zipside Pty Ltd v Anscor Pty Ltd [2000] QCA 395.

[14.110]

14 Private Remedies

639

valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable.113 The inquiry is to be conducted in two stages. The applicant must first prove on the balance of probabilities that there was an opportunity said to have been lost, and that such an opportunity had some value that was “not negligible” and was not speculative. The second stage is to put a value on the chance or opportunity, that value being calculated “by reference to the degree of probabilities or possibilities” as to the success of the opportunity if it had it been pursued.114

Consequential damages [14.110] The “price minus value at acquisition date” approach is sufficiently flexible to allow for the recovery of consequential damages not limited to economic loss.115 In Murphy v Overton Investments Pty Ltd, a unanimous High Court stated: The Act’s references to “loss or damage” can be given no narrow meaning. Section 4K of the Act provides that loss or damage includes a reference to injury. It follows that the loss or damage spoken of in ss 82 and 87 is not confined to economic loss.116

The immediate and direct consequential losses caused by the respondent’s conduct will depend upon evidence of causation. Consequential losses may include loss of a chance or an opportunity,117 and in some cases, damages for anxiety, mental distress and inconvenience.118 For example, in Shahid v Australian College of Dermatologists,119 the court held that absent the making of the representations by the College in its Handbooks, the appellant would not have lodged any of her internal appeals following her unsuccessful application for a position as trainee registrar. The anxiety and distress that she suffered came about because of her participation in the appeals process and was injury “by conduct” of the College.120

113 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 355 and see Brennan J at 364-5. 114 For cases in which these principles have been applied see BestCare Foods Ltd v Origin Energy LPG Ltd (formerly Boral Gas (NSW) Pty Ltd) [2013] NSWSC 1287 (Stevenson J) and North East Solution Pty Ltd v Masters Home Improvement Australia Pty Ltd [2016] VSC 1 (Croft J). 115 See HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at [35]. 116 Murphy v Overton Investments Pty Ltd (2004) 21 CLR 388 at [45]. 117 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; Latrobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Ltd (2011) 273 ALR 774. 118 Steiner v Magic Carpet Tours Pty Ltd (1984) ATPR ¶40-490. Wilcox J considered without deciding (at 45,642) that if the tortious approach to remoteness of damage applied to assessing damages under s 82 of the TPA, “damage which is of a type foreseeable to occur in the event of a breach of the section – as in this case loss of enjoyment of the holiday, distress and inconvenience – would be allowed”. 119 Shahid v Australian College of Dermatologists (2008) 168 FCR 46. 120 Shahid v Australian College of Dermatologists (2008) 168 FCR 46 at [30] (Branson and Stone JJ) and [230] (Jessup J).

640

The Australian Consumer Law

[14.115]

Exemplary damages [14.115] In Musca v Astle Corporation Pty Ltd, French J held (at 262) that exemplary damages were not recoverable under ss 82 and 87 of the TPA because they do not compensate for loss or damage and that those provisions were essentially compensatory. It would seem that the same reasoning applies to ss 236 and 237 of the ACL which also refer to “loss or damage” and are compensatory in nature.

TIME LIMITS [14.120] Section 236(2) of the ACL provides that an action under s 236(1) for damages may be commenced at any time within six years after the day on which the cause of action accrued. This mirrors s 82(2) of the TPA. Whether a time limit has been exceeded is an issue that should be raised by the respondent as a defence.121 There is no provision in the ACL for the extension of time periods, and a party is unable to rely on State or Territory limitation of actions Acts, or equitable discretions to extend the time for commencement.122 A cause of action under s 236(1) consists of two elements: a contravention of a provision of Chs 2 or 3 of the ACL and the suffering of loss or damage. Since damage is the gist of the action, time runs when it is suffered. In Arcardi v Colonial Mutual Life Assurance Society Ltd,123 Toohey J held that a cause of action under s 82 accrues not when the contravention occurs, but rather when loss or damage is suffered in consequence. When there are several distinct losses, the cause of action is not kept alive so long as any loss or damage is being suffered. Once the applicant for damages has suffered the relevant loss or damage, the limitation period commences to run.124 The question of when the cause of action accrues depends on the facts of the case and the type of damage alleged. This question caused considerable problems in relation to actions based on a contravention of Pt V of the TPA. In the evidence-gathering process the first step is to obtain evidence of the making of the agreement or the offending conduct. The second step will be to obtain evidence from the victim as to the loss or damage suffered, when the loss or damage was suffered, and the causal or proximate connection between the conduct and the loss or damage suffered. It will be apparent from the second step when the limitation period starts to run. 121 See James v Australia & New Zealand Banking Group Ltd (1986) 64 ALR 347 at 396; Mehta v Commonwealth Bank of Australia (1990) ATPR ¶41-026; and Wardley Australia Ltd v Western Australia (1991) ATPR ¶41-131 at 52,928. 122 Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1988) ATPR ¶40-853 at 49,196 where Pincus J held: “Claims under the Trade Practices Act … are subject to such time bars as the Act contains and I do not think it to be implicit in s 82(2) that the rules in equity shall be applied to relieve applicants against the statutory time bar’s operation”. See also New South Wales v McCloy Hutcherson Pty Ltd (1993) 116 ALR 363 at 377-80 and Jekos Holdings Pty Ltd v Australian Horticultural Finance Pty Ltd (1994) 2 Qd R 515. 123 Arcardi v Colonial Mutual Life Assurance Society Ltd (1984) ATPR ¶40-473 at 45,454. 124 See James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 at 392.

[14.120]

14 Private Remedies

641

The High Court in HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd,125 provided four examples of the point in time at which loss or damages is sustained and the limitation period for the purposes of an action based on s 82 of the commences. First, where an asset was purchased due to misleading conduct and there was evidence of an under-value at the time of purchase, the limitation period commences to run at the time when the contract was entered into, or the time when it was completed.126 In such a case it is not necessary to wait to ascertain that some loss has been suffered. Secondly, in cases such as Wardley Australia Ltd v Western Australia,127 the High Court held that since loss or damage is the essence of the cause of action under s 82(1), it does not accrue until actual loss or damage is suffered, as distinct from potential or likely damage.128 The court drew a distinction between actual loss or damage and potential loss or damage, which is likely to be suffered in the future. The limitation period does not begin to run when the plaintiff’s loss or damage is merely potential. The third example provided by the High Court is where “a contingency is hidden by the respondent’s conduct which might or might not come to pass”.129 For example, in Murphy v Overton Investments Pty Ltd,130 a lessee entered into a retirement village lease based on misleading representations as to the amount of outgoings payable under the lease. The High Court held that time did not commence until the lessor exercised its discretion to increase the charges. The fourth example provided by the High Court is where an asset is purchased due to misleading conduct for a specific purpose and it is not suitable for that purpose. In Henville v Walker,131 land was purchased for a development project. Since there was no evidence of loss or damage at the date of purchase, time did not commence until the losses were incurred after the building and marketing of the units.132 Another example of this category of case is where a lessor’s misleading representations as to likely takings induces a tenant to enter a lease. Time will not commence to run at the time the lease was entered into; time will only run from the date when the disadvantageous character of the lease was ascertained or reasonably ascertainable.133 125 HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at [28]-[33]. See also Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd (2008) 19 VR 358 at 392. 126 HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at [28] and fn 43. 127 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514. 128 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 526 (Mason CJ, Dawson, Gaudron, and McHugh JJ), at 536 (Brennan J), at 539 (Deane J), and at 551 (Toohey J). 129 HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at 655 [30] and Murphy v Overton Investments Pty Ltd (2004) 21 CLR 388 at 410 [55] and 414-5 [70]. 130 Murphy v Overton Investments Pty Ltd (2004) 21 CLR 388. 131 Henville v Walker (2001) 206 CLR 459. 132 Henville v Walker (2001) 206 CLR 459 at 471 [22]. 133 Karedis Enterprises Pty Ltd v Antoniou (1995) 59 FCR 35 at 40-3 (Burchett and Hill JJ).

642

The Australian Consumer Law

[14.125]

OTHER LIMITS ON DAMAGES [14.125] It is not possible to recover damages under s 236 of the ACL for personal injury or death arising from misleading or deceptive conduct,134 or unfair practices,135 except where the personal injury or death results from smoking or the use of tobacco products.136 Where death or personal injury results from smoking or other use of tobacco products, Divs 2 and 7 of Pt VIB of the CCA apply to the action.137 Secondly, s 137 of the CCA limits the compensation payable for a contravention of s 18 of the ACL (misleading or deceptive conduct) where a professional standards law of a State of Territory is in place at the time to limit occupational liability. Section 137B of the CCA also provides that the amount awarded for a claim for economic loss or damage to property based on a contravention of s 18 of the ACL may be reduced if there is a failure to take reasonable care by the claimant. Finally, Pt VIA of the CCA limits the amount that can be recovered from each concurrent wrongdoer to the amount of the loss for which that party is responsible.

CONTRIBUTORY FAULT: ACL (CTH) [14.130] A contributory fault defence is provided by s 137B of the CCA in relation to claims for damages under s 236 of the ACL which re-enacts s 82(1B) of the TPA.138 State legislation139 allows a court to reduce an award of damages for contributory negligence only for claims arising out of the tort of negligence and contributory negligence is available at common law; or the claim is for loss arising from a breach of contractual duty that is concurrent with a duty of care in tort. The legislative provisions have not been amended to extend contributory negligence to a statutory claim for damages under s 236 of the ACL (Application Acts). Where a claim for damages for economic loss or damage to property is made in relation to a contravention of s 18 of the ACL, and the loss or damage was partly the fault of the respondent, and partly due to the claimant’s fault, the amount the claimant can recover is to be reduced. Section 137B of the CCA allows a court to 134 ACL, Pt 2-1. 135 ACL, Pt 3-1. 136 CCA, s 137C(1). 137 CCA, s 137C(2). 138 In relation to New South Wales see the decision of the New South Wales Court of Appeal in Perpetual Trustee Company Ltd v Milanex Pty Ltd (In liq) [2011] NSWCA 367. Seddon and Fridman, “Misleading Conduct and Contributory Fault: Inconsistency Under the Uniform Australian Consumer Law” (2012) 20 Australian Journal of Competition and Consumer Law 87. 139 See Law Reform (Miscellaneous Provisions) Act 1965 (NSW), ss 8 and 9; Law Reform Act 1995 (Qld), s 10; Civil Liability Act 1936 (SA), s 50; Tortfeasors and Contributory Negligence Act 1954 (Tas), s 4(1); Wrongs Act 1958 (Vic), s 26(1); Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 (WA), s 4(1); Law Reform (Miscellaneous Provisions) Act 1955 (ACT), s 15; Law Reform (Miscellaneous Provisions) Act (NT), s 16(1).

[14.130]

14 Private Remedies

643

reduce the damages to be awarded under s 236 for a contravention of s 18 where the claimant has failed to take reasonable care of their interest and this failure has contributed to their loss.140 Section 137B provides: If: (a) a person (the claimant) makes a claim under subs 236(1) of the Australian Consumer Law in relation to economic loss, or damage to property, suffered by the claimant because of the conduct of another person; and (b) the conduct contravened s 18 of the Australian Consumer Law; and (c) the claimant suffered the loss or damage as result: (i) partly of the claimant’s failure to take reasonable care; and (ii) partly of the conduct of the other person; and (d) the other person did not intend to cause the loss or damage and did not fraudulently cause the loss or damage; the amount of the loss or damage that the claimant may recover under subs 236(1) of the Australian Consumer Law is to be reduced to the extent to which a court thinks just and equitable having regard to the claimant’s share in the responsibility for the loss or damage.

This re-enacts s 82(1B) of the TPA.141 The operation of s 137B is limited in the following ways. • The claim must be for economic loss or damage to property so that claims for personal injury will not be affected by a failure to take reasonable care. The phrase “reasonable care” suggests an objective approach, but the courts are likely to take into account the attributes of the claimant, and be more lenient towards a claimant who is inexperienced than one who is sophisticated.142 • The claim must be for a contravention of s 18 of the ACL so that a claim based on a contravention of one of the other consumer protection provisions of the ACL, such as ss 29(1), 30(1), 31, 33 or 37, will not be affected. • There must be a causal link between the claimant’s failure to take reasonable care and the claimant’s loss or damage. The phrase “as a result of” is likely to be construed in accordance with the “common sense” approach adopted in March v Stramare (E & M H) Pty Ltd.143 140 This will only apply where the cause of action accrues after 26 July 2004. Section TPA82 was amended by Sch 3 to the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (Cth). By s 1466 of the Corporations Act 2001 (Cth) it is provided that the amendments to the Trade Practices Act 1974 made by Sch 3 apply to causes of action that arise on or after the day on which that Schedule commenced, which was 26 July 2004. Applied in BHP Coal Pty Ltd v O and K Orenstein and Koppel AG [2008] QSC 141 and Jainran Pty Ltd v Boyana [2008] NSWSC 468. 141 For commentary on the role played by TPA s 82(1B) and its equivalent, CCAs 137B, see Price and Griggs, “Causation, Contributory Negligence and Misleading or Deceptive Conduct” (2010) 18(2) Competition & Consumer Law Journal 93. 142 Compare Gardner Corporation Pty Ltd v Zed Bears Pty Ltd [2003] WASC 13 where the claimant was inexperienced and lacked training, with the High Court’s approach in Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 where the purchasers were “intelligent, shrewd and self-reliant”. 143 March v Stramare (E & M H) Pty Ltd (1991) 171 CLR 506 at 515.

644

The Australian Consumer Law

[14.135]

• A failure to verify a representation is unlikely to constitute contributory fault unless the circumstances are such as to put the claimant on notice that the representation is false or misleading.144 • The court is obliged to reduce the loss or damage but has the discretion as to the amount of the reduction. The court must consider what is just and equitable having regard to the claimant’s share in the responsibility for the loss or damage. • Section 137B does not apply if the defendant intended to cause the loss or damage or caused the loss or damage intentionally or fraudulently. • As McHugh J noted in Henville v Walker: There may, of course, be cases where the injured person’s failure to take care is such that it can be characterised as the sole cause of the loss or damage suffered. In that event, there will be no causal connection between the breach of the Act and the “loss or damage” to which s 82 refers.145

In such cases there is no causal link between the misleading conduct and the loss or damage suffered. In other cases the injured person’s failure to take care may be contributory, in which case s 137B will apply.

Avoiding the operation of s 137B [14.135] The same conduct can give rise to more than one contravention of a provision of the ACL. For example, assume that a claim is made for a contravention of ss 18 and 29 of the ACL, false or misleading representations about goods or services. In such circumstances, it seems that it would be open to an applicant to avoid the operation of s 137B of the CCA by basing its cause of action solely on the contravention of s 29 of the ACL. In Vero Lenders v Taylor Byrne Pty Ltd, Greenwood J said: Section 82(1B) has no application to a claim for compensation pursuant to s 87 nor to a claim for damages pursuant to s 82(1) arising out of a contravention of s 53A. Accordingly, had a contravention of ss 52 or 53A of the Act been found, such a claim would not be susceptible of reduction under s 82(1B).146

If Parliament had intended s 137B of the CCA to apply to a contravention other than s 18 of the ACL it would have been a simple matter to do so. Another possibility is to rely on the contravention of s 18, but claim compensation under s 237 rather than s 236 of the ACL. However, it seems that the courts will not allow the use of s 237 to circumvent the operation of s 137B, and in exercising its discretion under s 237 the court will take account of any contributory fault by the applicant. In other words, an applicant should be no better off by framing the cause of action for loss or damage under s 237, rather than s 236. In relation to the equivalent provisions of the TPA, Finkelstein J in BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 3), said: 144 See Jainran Pty Ltd v Boyana [2008] NSWSC 468 at [141] where Bryson AJ rejected a claim that a failure to check the viability of a tenant’s business constituted a failure to take reasonable care for the purposes of s 82(1B) of the TPA. 145 Henville v Walker (2001) 206 CLR 459 at [138]. 146 Vero Lenders v Taylor Byrne Pty Ltd [2006] FCA 1430 at [186].

[14.140]

14 Private Remedies

645

For the sake of completeness on this issue, I should address an argument raised by BHPB that it could seek relief under s 87 for its s 52 claim and so avoid s 82(1B) because that section does not apply to claims under s 87. I cannot accept this argument. BHPB’s claim for damages under s 82 and compensation under s 87 are essentially for the same loss. To obtain a compensation order under s 87 where damages under s 52 might be limited by s 82(1B), would be to use s 87 to circumvent the operation of s 82(1B). The power of a court to make an order under s 87 is discretionary. It would not be an appropriate exercise of that discretion to allow the section to be used in this way.147

Similarly, in Khoury v Sidhu (No 2), Greenwood J said that in exercising the discretion under s 87, “it is relevant to consider whether the same claim (that is, the substantive elements of the claim notwithstanding that the claim is not made under s 82) if framed under s 82 would be susceptible of just and equitable reduction …”.148

CONTRIBUTORY FAULT: ACL (APPLICATION ACTS) [14.140] There is no equivalent to s 137B of the CCA in the State and Territory Application Acts. State legislation149 allows a court to reduce an award of damages for contributory negligence only where the claim arises out of the tort of negligence and contributory negligence is available at common law or the claim is for loss arising from a breach of contractual duty that is concurrent with a duty of care in tort. The legislative provisions have not been amended to extend their operation to a statutory claim for damages under s 236 of the ACL (Application Acts). This presents a procedural advantage for claimants seeking damages under the ACL (Application Acts), who will be able to avoid a reduction of their damages award for contributory fault. In Perpetual Trustee Company Ltd v Milanex Pty Ltd (In liquidation),150 the New South Wales Court of Appeal held that a defence of contributory negligence is not available in respect of a claim for damages arising as a result of a contravention of s 42 of the Fair Trading Act 1987 (NSW). Milanex was a mortgage broker that submitted a loan application to one of Perpetuals’ mortgage managers and misrepresented that it had verified the borrower’s identity and income. Perpetual’s loan was found to have been unjust at the time it was made and the loan was declared void. Perpetual Trustee brought a claim against Milanex for damages for misleading conduct in breach of s 24 of the Fair Trading Act 1987 (NSW). Milanex argued that Perpetual had failed to take reasonable care of its own interests in relation to the loan, and that any damages awarded ought to be reduced to take account of Perpetual’s contributory negligence. 147 BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 3) [2009] FCA 1087 at [62]. 148 Khoury v Sidhu (No 2) [2010] FCA 1320 at [70]. This was affirmed by the Full Federal Court in Khoury v Sidhu [2011] FCAFC 71. 149 See Law Reform (Miscellaneous Provisions) Act 1965 (NSW), ss 8 and 9; Law Reform Act 1995 (Qld), s 10; Civil Liability Act 1936 (SA), s 50; Tortfeasors and Contributory Negligence Act 1954 (Tas), s 4(1); Wrongs Act 1958 (Vic), s 26(1); Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 (WA), s 4(1); Law Reform (Miscellaneous Provisions) Act 1955 (ACT), s 15; Law Reform (Miscellaneous Provisions) Act (NT), s 16(1). 150 Perpetual Trustee Company Ltd v Milanex Pty Ltd (in liq) [2011] NSWCA 367.

646

The Australian Consumer Law

[14.145]

Macfarlane JA (with whom Campbell JA and Young JA agreed) held: Whilst a defence of contributory negligence is, by statute, available in relation to claims for damages for contravention of s 52 Trade Practices Act (see s 82(1B)) and of s 12GF(1) Australian Securities and Investments Commission Act 2001 (Cth) (see s 12GF(1B)) (which latter provision was one of the bases of Perpetual’s claim), the Fair Trading Act (upon which Perpetual also based its claim) does not contain any comparable provision. Milanex did not contend that Perpetual was not entitled to rely upon the cause of action most favourable to it, that is, that under the Fair Trading Act. Further, no other statute or principle of law gives Milanex the right to rely upon a defence of contributory negligence. Milanex relied upon s 5R and s 5S of the Civil Liability Act but those sections do not confer a right to raise a defence of contributory negligence. They operate where that right otherwise exists. In any event Part 1A Civil Liability Act, of which ss 5R and 5S form part, applies only to claims “for damages for harm resulting from negligence” (s 5A), requiring in my view that negligence be an element of the relevant cause of action (although, as s 5A makes clear, it does not matter whether the claim is brought in tort, in contract, under statute or otherwise). However, negligence is not an element of a claim for damages arising out of contravention of s 42 Fair Trading Act (as the section appeared prior to enactment of the Fair Trading Amendment (Australian Consumer Law) Act 2010, Schedule 1). A contravention of that section may occur whether or not the defendant has been negligent. That a defendant might as a matter of fact have been careless does not convert a claim against it under s 42 into one based upon negligence. Milanex also relied upon ss 8 and 9 Law Reform (Miscellaneous Provisions) Act 1965 but those sections are only concerned with the reduction for contributory negligence of claims in respect of a “wrong”, where a “wrong” is defined as an act or omission giving rise to a liability in tort or related contractual duty of care. Neither tort nor contractual liability is alleged in the present case. The claims here are under statute.151

PROPORTIONATE LIABILITY FOR MISLEADING CONDUCT UNDER ACL [14.145] In many circumstances it will be possible to obtain an award of damages not just from the person who is directly responsible for the misleading conduct, but also from other persons. A claim for damages for a contravention of s 18 of the ACL made under s 236 of the ACL may be brought against anyone who is “involved in” a contravention. See [14.160]–[14.175]. Where the principal offender is a corporation, it may be possible to claim against the directors, employees and agents of the corporation if they are involved in the conduct found to contravene the ACL. The operation of s 139B(2) of the CCA which deems the conduct of the agent to be the conduct of the principal is considered at [2.110]-[2.135]. This part considers the circumstances in which the proportionate liability provisions contained in Pt VIA of the CCA apply.152 Part VIA was inserted into the TPA by the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 151 Perpetual Trustee Company Ltd v Milanex Pty Ltd (in liq) [2011] NSWCA 367 at [86]-[88]. 152 For an explanation of the background to the introduction of Pt VIA see BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2) [2008] FCA 1656 at [4]-[5] (Finkelstein J) where it is stated: “The impetus for the inquiry was the growing number of actions against professionals, particularly auditors, who were being singled out as targets for negligence actions not because of their culpability (which might be small) but because they were insured and had the capacity to pay large damages awards. One consequence was a sharp rise in insurance premiums payable by professionals”.

[14.145]

14 Private Remedies

647

2004 (Cth).153 The legislative policy of Pt VIA is that, in respect of claims for economic loss or property damage, a defendant should only be liable to the extent of his or her responsibility. Part VIA of the CCA applies to a claim for damages made under s 236 of the ACL for economic loss or damage to property caused by conduct that was done in contravention of s 18 of the ACL. The objective of proportionate liability provisions is to limit the amount that can be recovered from each concurrent wrongdoer to the amount of the loss for which that party is responsible. The operation of Pt VIA of the CCA is limited in the following ways. • Section 87CB(1) of the CCA provides that only a claim for economic loss or damage to property can be apportioned between concurrent wrongdoers so that claims for personal injury will not be affected. • Section 87CB(2) of the CCA provides that an apportionable claim will exist even where there are alternative causes of action against the wrongdoers provided that the causes of action arise from a contravention of s 18 of the ACL. • Section 87CC(1) of the CCA provides that a wrongdoer is not entitled to the benefit of proportionate liability if they have fraudulently or intentionally caused the loss of the claimant. Such a wrongdoer will be an excluded wrongdoer and liable jointly and severally for the loss suffered. • For the claim to be apportionable there must be a concurrent wrongdoer. This is defined in s 87CB(3) of the CCA as one of two or more persons whose “acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim”. It is irrelevant that a wrongdoer is insolvent, being wound up or has ceased to exist or died. This has the potential to disadvantage consumers where one or more of the wrongdoers is insolvent or has ceased to exist. • Section 87CE of the CCA imposes a positive obligation on the defendant to notify the plaintiff of any other possible concurrent wrongdoers and any unnecessary cost that the plaintiff incurs as a result of not being aware of a concurrent wrongdoer is recoverable from the defendant. • When apportioning the loss between concurrent wrongdoers the court may have regard to the culpability of wrongdoers who are not parties to the proceedings including those who are insolvent or deceased. Section 87CG of the CCA provides that where a wrongdoer is not a party to the current proceedings the plaintiff is permitted to commence a further claim for recovery of the loss or damage against that that other wrongdoer, but cannot recover more the loss sustained. • Section 87CI of the CCA provides that the proportionate liability provisions do not prevent: (i) a person being vicariously liable for a proportion of the claim for which another is liable; (ii) a partner from being held severally liable with another partner for a proportion of a claim; or 153 The reform followed the report on the law of joint and several liability by Professor JLR Davis, Inquiry into the Law of Joint and Several Liability (Commonwealth of Australia, 1994-5).

648

The Australian Consumer Law

[14.150]

(iii) the operation of any other Act to the extent that is imposes several liability on any person in respect of an apportionable claim. Thus, the provisions of Pt VIA do not prevent a principal from being held to be vicariously liable for the wrongful acts of an agent within the scope of the agent’s authority. There does not need to be an apportionment of liability as between the principal and agent in those circumstances, and they will be jointly and severally liable.154

Apportionable claim [14.150] An apportionable loss or claim is defined in s 87CB(1) of the CCA as … a claim for damages made under s 236 for: (a) economic loss; or (b) damage to property; caused by conduct that was done in a contravention of section 18 of the Australian Consumer Law.

The provisions will not apply to a claim for compensation under s 237 of the ACL or for a contravention of a substantive prohibition other than s 18 of the ACL.155 Where an individual is a concurrent wrongdoer, the individual, unless the conduct falls within the terms of s 6 of the CCA, will not have contravened s 18 of the ACL. The individual may, however, be liable for common law negligence. If so, the individual could not take advantage of s 87CB as the individual would not be a concurrent wrongdoer with an apportionable claim. If the claim is brought against the individual for a breach of s 18, ACL (NSW), for example, the individual would be a concurrent wrongdoer under s 34(2) of the Civil Liability Act 2002 (NSW) and the claim would be an apportionable claim for the purposes of s 35(1) of the Civil Liability Act 2002 (NSW).

Concurrent wrongdoers [14.155] If an apportionable claim exists, the second requirement is that the parties must be concurrent wrongdoers. The term “concurrent wrongdoers” is defined in s 87CB(3) of the CCA as “a person who is one of two or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim”. This definition is satisfied if each wrongdoer gives rise to the loss or damage suffered by the claimant. The definition does not require that each wrongdoer give rise to the same damage or loss. Where a single act is attributable to more than one person those persons are not concurrent wrongdoers. In Hadgelias Holdings Pty Ltd v Seirlis,156 the Holmes JA (with whom Gotterson and Morrison JJA agreed) stated: 154 Williams v Pisano [2015] NSWCA 177 at [77] (Emmett JA). 155 Selig v Wealthsure Pty Ltd (2015) 89 ALJR 572 at [29]-[30] (French CJ, Kiefel, Bell and Keane JJ) in relation to the equivalent proportionate liability provisions of Corporations Act 2001 (Cth), namely s 1041L which corresponds to s 87CB of the CCA, and s 1041H, which corresponds to s 18 of the ACL, and Williams v Pisano [2015] NSWCA 177 at [59]-[62] (Emmett JA). 156 Hadgelias Holdings Pty Ltd v Seirlis [2014] QCA 177.

[14.155]

14 Private Remedies

649

The phrase “independently of each other or jointly” in the s 87CB(3) definition qualifies the verb “caused”, rather than describing the acts or omissions. In other words, the issue is not whether acts or omissions are jointly undertaken but whether they either independently produce the same outcome or combine in their effect to do so.157

Thus, a vendor and the real estate agent acting on the vendor’s behalf were not concurrent wrongdoers because they performed a single act causing loss, namely the making of the representations that there were three car spaces attached to the apartment. On the facts of that case, there did not need to be an apportionment of liability as between the vendor principal and the agent. Section 87CI of the CCA expressly provides that Pt VIA does not prevent a principal from being held to be vicariously liable for the wrongful acts of an agent within the scope of the agent’s authority. Thus, there need not be an apportionment of liability between principal and agent in such a situation. In Williams v Pisano,158 the joint vendors of a property (Mr Williams and Ms Dandris) retained a real estate agent to market the property on their behalf. The vendors had renovated the property with a view to resale at a profit. They lived in the property from before 2005 until 2010 as their home and the renovations were carried out over a two year period. As soon as the renovations were completed they sold the property. The advertising brochure prepared by the agent made false representations about the standard of the renovations that had been made to the property. Mr Pisano purchased the property and brought a claim in damages for contraventions of ss 18 and 30 of the ACL. Mr Williams contended that the claim against the vendors was an apportionable claim under Pt VIA and that he should not be held liable for the total amount of the loss suffered by the purchaser. The case was decided on the basis that the sale did not occur in trade or commerce so there was no contravention of ss 18 or 30 of the ACL.159 Emmett JA expressed the “provisional” view in obiter that the joint vendors of a property were concurrent wrongdoers. His Honour stated that there was no reason why the purpose of Pt VIA “should not extend to wrongdoers who jointly commit a single act that causes the loss claimed by the plaintiff”.160 The agent who engaged in the misleading conduct on their behalf was not a concurrent wrongdoer because s 87CI of the CCA expressly provides that Pt VIA does not prevent a principal from being held to be vicariously liable for the wrongful acts of an agent within the scope of the agent’s authority.161 No apportionment was required. Bathurst CJ and McColl JA declined to express a concluded view on the issues of concurrent wrongdoers and apportionment. A wrongdoer who does not come within this definition or is excluded because the conduct was fraudulent or intentional will be an excluded wrongdoer.162 An 157 Hadgelias Holdings Pty Ltd v Seirlis [2014] QCA 177 at [20]. 158 Williams v Pisano [2015] NSWCA 177 (Bathurst CJ, McColl and Emmett JJA). 159 Williams v Pisano [2015] NSWCA 177 at [47]. 160 Williams v Pisano [2015] NSWCA 177 at [81]. 161 Williams v Pisano [2015] NSWCA 177 at [77]. 162 See McDonald, “Proportionate Liability in Australia – The Devil in the Detail” (2006) 26 Australian Bar Review 29.

650

The Australian Consumer Law

[14.160]

excluded wrongdoer will be jointly and severally liable for the entire loss or damage suffered. If a corporation that is a concurrent wrongdoer with an apportionable claim is in liquidation, s 87CB(5) provides that this does not preclude the court from taking into account its contribution and apportioning liability to it.

Relevant factors in apportioning responsibility [14.160] Section 87CD(1)(a) of the CCA requires the court to apportion the liability of a defendant who is a concurrent wrongdoer on the basis of what it considers “just” having regard to the extent of the defendant’s responsibility for the damage or loss. In Reinhold v New South Wales Lotteries Corporation (No 2),163 Barrett J determined the apportionment of loss on the basis of: (a) the degree of departure from the standard of care of the reasonable man as regards the causative conduct of the putative concurrent wrongdoer and the defendants; and (b) relative importance of the acts of the putative wrongdoer and the defendants in causing the loss suffered.164 In applying these criteria, Barrett J made a comparative examination of the whole conduct of each of Lotteries and the Newsagents in relation to the circumstances in which the loss was sustained. All of the concurrent wrongdoers will be parties in the one action and each will need to give evidence to prove the extent of their responsibility. The discretion to apportion will be applied on the basis of “common sense” principles. For example, did the one wrongdoer fail to check the information before providing it to the claimant?

Avoiding the operation of proportionate liability [14.165] Section 87CB(1) falls within Pt VIA of the CCA. It is confined to claims for damages under s 236 of the ACL for misleading conduct in breach of s 18 of the ACL. Section 87CB(1) of the CCA does not apply to claims under s 237 of the ACL, or to contraventions of substantive prohibitions other than s 18. The question of whether it is possible to circumvent s 87CB(1) by bringing a claim under s 237 of the ACL, or relying on a contravention other than s 18 of the ACL gives rise to issues similar to those considered in relation to circumventing s 137B of the CCA. In BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2),165 Finkelstein J held that a claim for relief under s 87 of the is not an apportionable claim within Pt VIA. This was affirmed by Reeves J in Bennett v Elysium Noosa Pty Ltd (in liq),166 who stated: I consider it is plain that s 87CB does not apply to claims for damages made under s 87(1A), or to claims where the damages are caused by false or misleading 163 Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187. 164 Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 at [60]; and Lovick & Son Developments Pty Ltd v Doppstadt Australia Pty Ltd [2012] NSWSC 529 at [257]-[261] (Slattery J). 165 BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2) [2008] FCA 1656 at [7]-[9]. 166 Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72.

[14.175]

14 Private Remedies

651

representations in contravention of s 53A(1) of the TPA. If the legislature had intended that s 87CB was to apply to all claims for loss or damage under the TPA, it could very easily have done that by omitting the words “made under s 82” from that section. It has not chosen to do so. Similarly, if the legislature had intended s 87CB to apply to any claim for conduct in contravention of any of the provisions of Pt V of the TPA, it could very easily have done that by referring to that Part, rather than specifically referring to “a contravention of s 52”. Again, it has not chosen to do so.167

PROPORTIONATE LIABILITY UNDER ACL (APPLICATION ACTS) [14.170] Similar provisions have been introduced into State and Territory legislation and apply in relation to claims for negligence and misleading conduct.168 For example, Pt 4 of the Civil Liability Act 2002 (NSW) is concerned with proportionate liability. By s 34(1)(b), Pt 4 is expressly rendered applicable to claims for economic loss for a contravention of s 42 of the Fair Trading Act 1987 (NSW). Section 35(1) of the Civil Liability Act 2002 (NSW) provides: In any proceedings involving an apportionable claim: (a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the court considers just having regard to the extent of the defendant’s responsibility for the damage or loss, and (b) the court may give judgment against the defendant for not more than that amount. … (4) This section applies in proceedings involving an apportionable claim whether or not all concurrent wrongdoers are parties to the proceedings.

The definition of “concurrent wrongdoer” is contained in s 34(2) of the Civil Liability Act 2002 (NSW) which provides: In this Part, a concurrent wrongdoer, in relation to a claim, is a person who is one of two or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim.

Section 35(1) of the Civil Liability Act 2002 (NSW) was considered in Tomasetti v Brailey,169 where a director of a company engaged in misleading conduct while providing financial advice on behalf of the company to clients. The director and the company were held to be jointly liable for the whole amount of the loss suffered by the clients and s 35(1) did not require an apportionment to be made.170

ACCESSORIAL LIABILITY FOR DAMAGES [14.175] The remedies in ss 236 and 237 of the ACL may be brought against anyone who is “involved in” a contravention of a provision of Sch 2. Where the 167 Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [275]. 168 Civil Liability Act 2002 (NSW), s 34(1)(b); Civil Liability Act 2003 (Qld), s 28(1)(b) (but note the exclusion for claims by consumers); Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA), s 8; Civil Liability Act 2002 (Tas), s 43A; Wrongs Act 1958 (Vic), s 24AF(1)(b); Civil Liability Act 2002 (WA), s 5AI(1)(b); Civil Law (Wrongs) Act 2002 (ACT), s 107B; Proportionate Liability Act (NT), s 4(2)(b). 169 Tomasetti v Brailey [2012] NSWCA 399. 170 Tomasetti v Brailey [2012] NSWCA 399 at [154] (Macfarlan JA).

652

The Australian Consumer Law

[14.175]

principal offender is corporation, it may be possible to claim against the directors, employees and agents of the corporation if they are involved in the conduct found to contravene the ACL. A person will only be “involved” in the contravention if they have sufficient knowledge to bring them within the definition in s 2 of the ACL which provides: a person is involved, in a contravention of a provision of this Schedule or in conduct that constitutes such a contravention, if the person: (a) has aided, abetted, counselled or procured the contravention; or (b) has induced, whether by threats or promises or otherwise, the contravention; or (c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or (d) has conspired with others to effect the contravention.

The definition of “involved” in s 2 of the ACL mirrors that in s 75B of the TPA. Thus, the extensive jurisprudence surrounding the meaning and application of “involved” in s 75B of the TPA will also apply to the application of “involved” in s 2 of the ACL. In Yorke v Lucas,171 the High Court of Australia considered the meaning of s 75B of the TPA. The action arose out of the sale of the business of Treasureway. The trial judge found that Yorke had been induced to enter into a contract to purchase the business by misleading and deceptive statements as to the average weekly turnover of the business. Also sued in the action was the respondent, Lucas, who was managing director of Ross Lucas Pty Ltd which acted as agent for Treasureway in the sale of the business. It was Lucas who passed on the misleading turnover figures to Yorke. The trial judge found that Lucas was not aware and had no reason to suspect that the turnover figures were incorrect. Accordingly, the trial judge dismissed the claim against Lucas on the ground that he was insufficiently aware of the relevant facts for him to be involved in the contravention within the meaning of ss 75B and 82 of the TPA. The High Court upheld the finding, dismissed the appeal. Mason ACJ, Wilson, Deane and Dawson JJ held that s 75B of the TPA was derived from the criminal law, and that the concept of a person involved in a contravention draws on s 5 of the Crimes Act 1914 (Cth).172 Their Honours held that there was no reason to dispense with the requirement of intent and knowledge because s 75B gives rise to civil liability. They held that s 75B(1)(a) of the TPA, “aiding and abetting”, will only be satisfied where the accessory “intentionally participates” in the contravention.173 There are thus two elements that need to be satisfied to 171 Yorke v Lucas (1985) 158 CLR 661. See Bannan, “Accessorial Liability under the Trade Practices Act” (2009) 83 Australian Law Journal 407 and Lumb, “Establishing Accessorial Liability under the Australian Consumer Law” (2014) 22 Australian Journal of Competition & Consumer Law 254. 172 Yorke v Lucas (1985) 158 CLR 661 at 668-9. 173 Yorke v Lucas (1985) 158 CLR 661 at 667 relying on a previous decision, Giorgianni v The Queen (1985) 156 CLR 473 which had held that in the criminal law where a party is accused of aiding and abetting, the party must have knowledge of the essential matters that go to make up the offence even if the person does not know that those matters amount to a crime. See also Cassidy v NRMA Health Pty Ltd (2002) ATPR ¶41-891 at [71]-[73] (Jacobson J); and Genocanna Nominees Pty Ltd v Thirsty Point Pty Ltd [2006] FCA 1268 at [268]-[280] (Lander J).

[14.180]

14 Private Remedies

653

establish liability as an accessory: first, a subjective intention or knowledge; and, secondly, some degree of participation in the contravention by the principal offender.

Intention or knowledge [14.180] In Yorke v Lucas Mason ACJ, Wilson, Deane and Dawson JJ held To form the requisite intent he must have knowledge of the essential matters which go to make up the offence whether or not he knows that those matters amount to a crime.174

Natural persons will not be held liable as accessories if they act innocently or inadvertently and have no knowledge of the falsity of the representations made. The weight of authority is that a person will only be “involved” in conduct within the ambit of s 75B of the CCA or s 2 of the ACL if that person intentionally participated in the contravention, in the sense that the person must have had actual knowledge of the “essential matters” that go to make up the contravention, including knowledge of the falsity of the representations made, or possibly a failure to inquire where there are suspicious circumstances, which may lead to the conclusion that the person had actual knowledge.175 For example, in Medical Benefits Fund of Australia Ltd v Cassidy,176 Moore J, with whom Mansfield J agreed, defined the “essential matters” in relation to a television advertisement as being the fact of publication, knowledge of the content of the advertisement and an awareness of matters that would allow that content to be characterised as misleading.177 In Keller v LED Technologies Pty Ltd,178 LED Technologies alleged that the Condor range of combination rear lights for motor vehicles were marketed with packaging that claimed the lights were “Australian Design Rules approved” and complied with Australian Design Rules. LED Technologies claimed that these captions were misleading contrary to ss 52 and 53 of the TPA because the Condor products did not comply with the relevant motor vehicle standard. LED claimed damages against Keller and Armstrong, the directors of the corporate respondents, on the basis that they were “involved” in the contraventions based on s 75B of the TPA. The primary judge concluded that the corporate respondents contravened ss 52 and 53TPA, but that Keller and Armstrong were not knowingly concerned in the contraventions. The primary judge found that Mr Keller understood that the 174 Yorke v Lucas (1985) 158 CLR 661 at 670 (Mason ACJ, Wilson, Deane and Dawson JJ). 175 See, eg, Sutton v A J Thompson Pty Ltd (in liq) (1987) ATPR ¶40-789 at 46,608 (Forster, Woodward and Wilcox JJ); Wheeler Grace and Pierucci Pty Ltd v Wright (1989) ATPR ¶40-940 at 50,257 (Lee J); Mackman v Stengold Pty Ltd (1991) ATPR ¶41-105 at 52,628-52,632 (Spender J); Bowler v Hilda Pty Ltd [2000] FCA 899 at [77] (Finn J); Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at 84-93 (Stone J); John Bevins Pty Ltd v Cassidy (2003) 135 FCR 1 at 84-93 (Stone J); Quinlivanc v ACCC (2004) 160 FCR 1 at [9]-[10] (Heerey, Sundberg and Dowsett JJ); Genocanna Nominees Pty Ltd v Thirsty Point Pty Ltd [2006] FCA 1268 at [268]-[280] (Lander J); HIH Insurance Ltd (in liq) v Adler [2007] NSWSC 633 (22 June 2007) at [56]-[60] (Einstein J). 176 Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1. 177 Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at 10-1. 178 Keller v LED Technologies Pty Ltd (2010) 185 FCR 449 (Emmett, Besanko and Jessup JJ).

654

The Australian Consumer Law

[14.185]

expression “ADR Approved” was commonly understood to mean that a product has passed a test for compliance with the Australian Design Rules (ADRs). Mr Keller was unaware that the Condor products did not, in fact, comply with the Australian Design Rules and believed at all material times that they did based on assurances from the Chinese manufacturers that the Condor lights complied with the Australian vehicle standard. While he may have been negligent in relying on the assurances of the Chinese manufacturers, his attitude was not such as to suggest wilful blindness or actual knowledge of how a relevant purchaser might understand the captions. On appeal, the Full Court held that no basis had been advanced on which it should depart from what is essentially a finding of credit on the part of the primary judge.179 One of the “essential matters” was to show that Keller and Armstrong sold the Condor products knowing that they did not comply with the ADRs.180

[14.185] There may be circumstances in which professional advisers have the requisite knowledge to be “involved” in the contravention by a client.181 In Heydon v NRMA Ltd,182 McPherson A-JA (with whom Ormiston A-JA agreed) said that solicitors engaged to advise on a prospectus would fall within s 75B(1)(a) or 75B(1)(c) of the TPA provided they had the knowledge required by that section.183 In Rafferty v Time 2000 West Pty Ltd (No 4),184 members of a firm of solicitors, Madgwicks, submitted that they were not liable to the applicants under s 75B(1) of the TPA because they did not have the required level of knowledge. The contravention in this case was a contravention of s 51AD of the TPA, and that came about because of a failure to comply with the requirements of cll 10 and 11 of the Franchising Code. Madgwicks knew that some of the Donovan respondents were corporations and that they were acting in trade or commerce. They knew of the terms of the agreements. They knew that there was a Franchising Code, and they knew that the Donovan respondents had taken no action to comply with it. The applicants submitted that this knowledge was sufficient to render Madgwicks liable under s 75B(1) of the TPA. Madgwicks submitted that, in order for them to be liable under s 75B(1) of the TPA, the applicants had to show, in addition, that they knew

179 Keller v LED Technologies Pty Ltd (2010) 185 FCR 449 at [143] (Emmett J); at [342] (Besanko J). Jessup J agreed with Besanko J in relation to all questions arising under ss 52, 53, 75B and 82 of the TPA. 180 ACCC v Giraffe World Australia Pty Ltd (1999) 95 FCR 302 at 346. In Rural Press Ltd v ACCC (2003) 216 CLR 53 at [48] the High Court said: “In order to know the essential facts, and thus satisfy s 75B(1) of the Act and like provisions, it is not necessary to know that those facts are capable of characterisation in the language of the statute”. 181 See Sutton v A J Thompson Pty Ltd (in liq) (1987) ATPR ¶40-789 at 48,608 (Forster, Woodward and Wilcox JJ); Wheeler Grace and Pierucci Pty Ltd v Wright (1989) ATPR ¶40-940 at 50,257 (Lee J); Mackman v Stengold Pty Ltd (1991) ATPR ¶41-105 at 52,628-32 (Spender J); Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at 84-93 (Stone J); HIH Insurance Ltd (in liq) v Adler [2007] NSWSC 633 at [56]-[60] (Einstein J). 182 Heydon v NRMA Ltd (2000) 51 NSWLR 1. 183 Heydon v NRMA Ltd (2000) 51 NSWLR 1 at 150 [436]. 184 Rafferty v Time 2000 West Pty Ltd (No 4) [2010] FCA 725 (13 July 2010).

[14.190]

14 Private Remedies

655

the Franchising Code applied to the agreements. Madgwicks accepted that it is not necessary for the applicants to show that they knew that there was a contravention of the Act. Besanko J at first instance dismissed the claim against Madgwicks based on s 75B(1) of the TPA because they did not have the required knowledge to be “involve” in the contraventions. They did not know that the Franchising Code applied to the agreements.185 In Raffety v Madgwicks,186 the Full Federal Court dismissed the appeal. The court defined the “essential matters” as being: (1) a corporation (2) acting in trade and commerce (3) entering a franchise agreement (4) without giving a copy of the Code and a disclosure document to the prospective franchisee 14 days before the franchisee enters the franchise agreement; and/or (5) without receiving written statements from the prospective franchisee to the effect that the franchisee has received, read and had a reasonable opportunity to understand the disclosure document and the Code, and has been given advice by an independent lawyer, business advisor or accountant about the proposed franchise agreement, or has been told that that kind of advice should be sought and has decided not to seek it.187

It held that Madgwicks was not required to know that the relevant conduct was a contravention of s 51AD,188 but an essential element of the contravention of s 51AD of the TPA was entering into a franchise agreement. In order to be involved in that contravention it would have to be shown that Madgwicks had actual knowledge that the agreement was a franchise agreement and Madgwicks did not possess that knowledge.189 Thus, in order to be liable as an accessory under s 236 of the ACL it will not be sufficient to prove that a lawyer was merely negligent in failing to turn his or her mind to the possible application of the law in a given set of circumstances; it will be necessary to prove that the lawyer knew that the law applied, but not that the conduct at issue constituted a contravention of the relevant law.

Wilful blindness [14.190] In some circumstances actual knowledge may be inferred from wilful blindness or deliberate ignorance in order to establish accessorial liability.190 In Crocodile Marketing v Griffith Vintners,191 the plaintiff sued the defendant company and its managing director for damages for supplying defective low alcohol wine to the plaintiff. The company was in receivership. The plaintiff alleged that the managing director was involved in the company’s contravention of the TPA in that he aided, abetted, procured or was in some way knowingly concerned in or party 185 Rafferty v Time 2000 West Pty Ltd (No 4) [2010] FCA 725 at [335]. 186 Raffety v Madgwicks (2012) 203 FCR 1 (Kenny, Stone and Logan JJ). 187 Raffety v Madgwicks (2012) 203 FCR 1 at [255]. 188 Raffety v Madgwicks (2012) 203 FCR 1 at [257]. 189 Raffety v Madgwicks (2012) 203 FCR 1 at [257]-[260]. 190 ACCC v IMB Group Pty Ltd [2003] FCAFC 17 at [135] and Raffety v Madgwicks (2012) 203 FCR 1 at [261] (Kenny, Stone and Logan JJ). See Lumb, “Establishing Accessorial Liability Under the Australian Consumer Law” (2014) 22 Australian Journal of Competition & Consumer Law 254 at 260-2. 191 Crocodile Marketing v Griffith Vintners (1989) 28 NSWLR 539 (Cole J).

656

The Australian Consumer Law

[14.190]

to the contravention. The managing director’s defence to the claim was that he had no actual knowledge of the falsity of the representations regarding the wine’s alcoholic and calorific content. The plaintiff argued that, as managing director, he should have been aware of the elements constituting the contravention. Cole J of the Supreme Court of New South Wales stated:192 The propositions advanced on behalf of the plaintiff are not, in my view, supported by authority. Yorke v Lucas establishes that there is a requirement of knowledge of falsity and thus to have been involved intentionally in the contravention. I do not think one can say that a person intentionally participated in a contravention if, in fact, his unawareness of falsity (that being an ingredient of contravention) was due to a simple failure to direct the conduct of acts to establish a fact. Absence of knowledge, save perhaps in the exceptional circumstance of ignorance being dishonestly and deliberately maintained, denies the necessary intent in regard to contravention.

This is particularly important to a non-executive director of a corporation who is not involved in the day-to-day operation of the corporation. Such a director who has no knowledge of the conduct of other directors and who is not involved in the particular negotiations giving rise to a contravention will not be liable for the misleading or deceptive conduct of another person. In Keller v LED Technologies Pty Ltd Besanko J stated: For present purposes, knowledge may be considered to include wilful blindness. However, it does not include recklessness or negligence. In a case concerning representations, the essential elements of the contravention are the fact that the representation was made and that, in a case such as the present, it was misleading or deceptive, or likely to mislead or deceive (s 52) or was false (s 53(a) and (c)). To establish accessorial liability it must be established that the relevant person knew the representation was made and the facts which made it misleading or deceptive, or likely to mislead or deceive, or false. It need not be shown that the relevant person actually drew the conclusion that the representation was misleading or deceptive, or likely to mislead or deceive, or was false.193

Where a person wilfully turns a blind eye, or deliberately abstains from asking questions or making enquiries, they may be held to have actual knowledge sufficient to attract accessorial liability.194 Actual knowledge may be inferred from a combination of suspicious circumstances and a failure to make inquiry.195 However, the courts will not draw an adverse inference lightly, given the seriousness of the consequences that flow from it. In ACCC v IMB Group Ltd,196 the Full Federal Court stated:197 before any accessorial liability will arise, it is necessary to establish the subjective element of knowledge of each of the essential elements of the contravention. That knowledge may 192 Crocodile Marketing v Griffith Vintners (1989) 28 NSWLR 539 at 546. 193 Keller v LED Technologies Pty Ltd (2010) 185 FCR 449 at [335]-[336]. 194 See the discussion of this issue in the judgment of Stone J in Medical Benefits Fund of Australia Ltd v Cassidy; John Bevins Pty Ltd v Cassidy (2003) 135 FCR 1 at 84-93. 195 Pereira v Director of Public Prosecutions (1988) 82 ALR 217 at 219-220 (Mason CJ, Deane, Dawson, Toohey and Gaudron JJ). 196 ACCC v IMB Group Ltd [2003] FCAFC 17 (Cooper, Kiefel, and Emmett JJ). 197 ACCC v IMB Group Ltd [2003] FCAFC 17 at [135].

[14.200]

14 Private Remedies

657

be constructive in the sense that it may be possible to show wilful blindness in relation to the elements of a contravention. However, absent a finding of wilful blindness, it is necessary to establish actual knowledge on the part of a person to whom it is sought to sheet home accessorial liability in respect of a contravention of Pt V [of the TPA].

Participation in the contravention [14.195] In addition to subjective intention or knowledge, it is also necessary to establish some degree of participation in the contravention by the primary respondent. In Yorke v Lucas it was Lucas who passed on the misleading turnover figures to Yorke. This was what made Lucas a participant in the contravention in that case.198 However, it is unclear what level of participation in the contravention is necessary in order to satisfy the requirements of s 2 of the ACL. Where the alleged accessory adopts or endorses the misleading information supplied by the primary respondent this will be sufficient participation for the purposes of s 2 of the ACL. However, where the alleged accessory passively acquiesces in the relaying of false information this would be insufficient participation to attract liability as an accessory under s 2 of the ACL. COMPENSATION ORDERS [14.200] Compensatory orders in private actions may be made under ss 237(1) or 238(1) of the ACL. Section 237 mirrors s 87 of the TPA. It expressly provides for orders to be made “compensating” the applicant. Section 237 provides: (1) A court may: (a) on application of a person (the injured person) who has suffered, or is likely to suffer, loss or damage because of the conduct of another person that: (i) was engaged in a contravention of a provision of Chapter 2, 3 or 4; or (ii) constitutes applying or relying on, or purporting to apply or rely on, a term of a consumer contract that has been declared under section 250 to be an unfair term; or (b) on the application of the regulator made on behalf of one or more such injured persons; make such order or orders as the court thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct. (2) The order must be an order that the court considers will: (a) compensate the injured person, or any such injured persons, in whole or in part for the loss or damage; or (b) prevent or reduce the loss or damage suffered, or likely to be suffered, by the injured person or any such injured persons. (3) An application under subsection (1) may be made at any time within 6 years after the day on which: (a) if subsection (1)(a)(i) applies – the cause of action that relates to the conduct referred to in that subsection accrued; or (b) if subsection (1)(a)(ii) applies – the declaration referred to in that subsection is made. 198 Yorke v Lucas (1985) 158 CLR 661 at 670.

658

The Australian Consumer Law

[14.200]

Section 237(1) provides the court with the widest possible discretion “to make such order as the court thinks appropriate” unconstrained by equitable and common law principles, but the court must be guided by the compensatory principle. In Tenji v Henneberry & Associates Pty Ltd,199 French J stated: the compensatory principle that informs the exercise of the power conferred by s 87. That principle derives from s 87(1) which conditions the power to make orders under the section upon the Court considering that the orders concerned will compensate a party who has suffered or is likely to suffer loss by reason of a contravention in whole or in part for the loss or damage or will prevent or reduce the loss or damage.200

The types of orders that can be made are set out in ACL, s 243 and are considered at [14.220]. In order to recover loss or damage pursuant to s 237, the injured person must prove that the loss or damage was suffered “because of” the conduct in contravention of the ACL. The same issues surrounding causation as an element of the cause of action under s 236 of the ACL (considered at [14.40]–[14.65]) also arise in relation to the cause of action under s 237. For example, an applicant must prove by direct evidence that they were induced by a misleading representation to enter into a contract before a court will make an order for rescission under s 237. The same issues surrounding accessorial liability in relation to s 236 of the ACL (considered at [14.160]–[14.175]) also arise in relation to the cause of action under s 237. Section 137D of the CCA provides that in determining whether to make an order for compensation under ss 237 or 238 of the ACL in relation to unconscionable conduct,201 or a declared unfair term,202 a court may have regard to the conduct of the parties since the contravention or declaration was made. Section 137H(2) of the CCA provides that a finding of fact in a prosecution or civil penalty case for a contravention of a provision of Chapter 2, 3 or 4 of the ACL is prima facie evidence in proceedings for an order against a person under s 237(1) of the ACL. Section 242(1) of the ACL provides: An application may be made under section 237(1) or 239(1) even if an enforcement proceeding in relation to the conduct, or the term of a consumer contract, referred to in that subsection has not been instituted.

Section 244 of the ACL provides that a court may make an order under s 237 of the ACL as a principal remedy where a person has contravened a provision of Chs 2, 3 or 4 of the ACL; or for conduct that constitutes applying or relying on or purporting to apply or rely on a term of a consumer contract that has been declared under s 250 of the ACL to be an unfair term. The order-making power is not ancillary to the granting of an injunction under s 232 or the making of an order for damages under s 236, or non-punitive orders under s 246, adverse publicity orders under s 247, or orders for disqualifying a person from managing a corporation under s 248. 199 Tenji v Henneberry & Associates Pty Ltd (2000) ATPR (Digest) ¶46-204 (French, Whitlam and Carr JJ). 200 Tenji v Henneberry & Associates Pty Ltd (2000) ATPR (Digest) ¶46-204 at 50,382 [17]. 201 ACL, Pt 2-2. 202 ACL, s 250.

[14.210]

14 Private Remedies

659

The limitation period prescribed is six years after the date of the cause of action based on a contravention of Chs 2, 3 or 4 accrued, or the date on which the unfair term declaration under s 250 was made.203

COMPENSATION ORDERS ARISING OUT OF OTHER PROCEEDINGS [14.205] Section 238 provides for orders to be made “compensating” an injured person who is a party to the proceeding. Section 238 of the ACL provides: (1) If a court finds, in a proceeding instituted under a provision of Chapter 4 or this Chapter (other than this section), that a person (the injured person) who is a party to the proceeding has suffered, or is likely to suffer, loss or damage because of the conduct of another person that: (a) was engaged in a contravention of a provision of Chapter 2, 3 or 4; or (b) constitutes applying or relying on, or purporting to apply or rely on, a term of a consumer contract that has been declared under section 250 to be an unfair term; the court may make such order or orders as it thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct. (2) The order must be an order that the court considers will: (a) compensate the injured person in whole or in part for the loss or damage; or (b) prevent or reduce the loss or damage.

The kinds of orders that may be made are set out in s 243 of the ACL and are considered at [14.220]. Section 137D of the CCA provides that in determining whether to make an order for compensation under ss 237(1) or 238(1) of the ACL in relation to unconscionable conduct,204 or a declared unfair term,205 a court may have regard to the conduct of the parties since the contravention or declaration was made. The purpose of this provision is to draw the court’s attention to the fact that the supplier may have already refunded money to the consumer since the contravention or declaration.206 Compensation orders may be made against a person involved in the contravening conduct.207 The definition of involved is contained in s 2 of the ACL and it mirrors s 75B of the TPA.

Limits on compensation orders [14.210] Section 137E(1) of the CCA provides that a court must not make compensation orders under ss 237(1) or 238(1) of the ACL for loss or damage resulting from personal injury or death to the extent that they are based on misleading or deceptive conduct, or unfair practices where they do not result from smoking or use of tobacco products. Section 137E(2) provides that compensation orders can be made under s 237 of the ACL for death or personal injury based on misleading or deceptive conduct, or 203 ACL, s 237(3). 204 ACL, Pt 2-2. 205 ACL, s 250. 206 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [18.16]. 207 See ACL, ss 237(1), 238(1) and 239(2(a).

660

The Australian Consumer Law

[14.215]

unfair practices where the death or personal injury results from smoking or other use of tobacco products. Div 2 of Pt VIB of the CCA applies to the actions made under s 237 for death or personal injury based on misleading or deceptive conduct, or unfair practices where the death or personal injury results from smoking or other use of tobacco products.

Nature of the relief [14.215] It is likely that the words “loss or damage” in ss 237 and 243 of the ACL will be construed broadly and will not be confined to monetary damages of the kind recoverable under s 236 of the ACL. Section 237 differs from s 236 in that, unlike damages under s 236, an order under s 237 is discretionary. Also, it is not necessary to prove that damage has actually been suffered; it is sufficient if the damage is likely to be suffered in the future.208 Sections 237 and 243 of the ACL are based on s 87(1) and (2) of the TPA. The meaning of “loss or damage” in s 87(1) and (2) of the TPA was considered by the Full Federal Court in Demagogue Pty Ltd v Ramensky.209 Black CJ held: In my view, the loss or damage for the purposes of both ss 87(1) … will include the detriment suffered by being bound to a contract induced by misleading or deceptive conduct in contravention of s 52. Proof of loss or damage of the sort that would be an “amount of … loss or damage” for the purpose of s 82 is not a prerequisite for the grant of relief under either subsection.210

Cooper J held: In my opinion “loss or damage” in s 87(1) means no more than the disadvantage which is suffered by a person as the result of the act or default of another…211

Kinds of orders [14.220] The kinds of compensatory orders that a court may make under s 237(1) or s 238(1) include those set out in s 243. Section 243(a) provides that a court may make an order declaring the whole or any part of a contract made between the respondent and a person (the injured person) who suffered, or is likely to suffer, the loss or damage referred to in that section, or of a collateral arrangement relating to such a contract to be void; and if the court thinks fit – to have been void ab initio or void at all times on and after such date as is specified in the order (which may be a date that is before the date on which the order is made). In Marks v GIO Australia Holdings Ltd, Gummow J stated, “the principles regulating the administration of equitable remedies afford guidance for, but do not dictate, the exercise of the statutory discretion conferred by s 87”.212 Principles such as affirmation, delay, the adequacy of damages as a remedy and third party rights will 208 Mister Figgins Pty Ltd v Centepoint Freeholds Pty Ltd (1981) 36 ALR 23 at 60. 209 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31. 210 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32-3. 211 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 46-7. 212 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 535.

[14.225]

14 Private Remedies

661

be taken into account but are not determinative. Rescission may be awarded even though the status quo cannot be entirely restored; however, in exercising its discretion the court will have regard to the conduct of the applicant after the applicant becomes aware of the misleading conduct.213 In Tenji v Henneberry & Associates Pty Ltd,214 the purchasers signed a contract to acquire a service station. Soon after taking possession they discovered that the annual sales of petrol were much less than had been represented to them. The purchasers purported to rescind the contract, but remained in possession without making proper arrangements to account to the vendor. The primary judge, Lee J, found that the loss suffered by the purchasers was $10,000 representing the difference between the purchase price and the real value of the land, but declined the purchasers’ claim for relief under s 87 of the TPA, treating the claim for relief under s 87 as “having the effect of an order for rescission in equity”.215 In allowing the appeal, the Full Federal Court held unanimously that the fact that the buyer remained in possession and did not undertake to account to the seller for the takings did not bar the grant of relief under s 87 of the TPA. French J stated: The effect of an order for avoidance of a contract under s 87 is to be equated only in a limited sense to that of an order for rescission in equity. For orders made under s 87(2)(a) declaring a contract void in whole or in part and ab initio or from a later date have their effect entirely by operation of the statute. The other element which is of importance in this case is the compensatory principle that informs the exercise of the power conferred by s 87. That principle derives from s 87(1) which conditions the power to make orders under the section upon the Court considering that the orders concerned will compensate a party who has suffered or is likely to suffer loss by reason of a contravention in whole or in part for the loss or damage or will prevent or reduce the loss or damage.216

The overriding question for the court is whether an order for rescission will compensate the applicant for the loss sustained or avoid the loss likely to be sustained.

Compensation orders: unfair terms [14.225] Section 15 of the ACL provides that conduct consisting merely of the voiding of an unfair term under s 23(1) will not constitute a contravention of the ACL. The effect of this provision, in relation to unfair terms is that the mere declaration of an unfair term is not a contravention of the ACL and the remedy provisions for damages will not apply. There is no “conduct” and no “contravention” for the purposes of bringing an action for damages under s 236 of the ACL. However, it will be possible to bring an action for damages if there is other conduct (eg, misleading conduct) surrounding the adoption of the unfair term, or as to its meaning.

213 Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 79 ALR 83 at 102. See also Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274. 214 Tenji v Henneberry & Associates Pty Ltd (2000) ATPR (Digest) ¶46-204 (French, Whitlam and Carr JJ). 215 Tenji v Henneberry & Associates Pty Ltd (1999) FCA 1029 at [78]. 216 Tenji v Henneberry & Associates Pty Ltd (2000) ATPR (Digest) ¶46-204 at 50,382 [17].

662

The Australian Consumer Law

[14.230]

If a person applies or relies on an unfair term after it is declared to be unfair under s 250, the injured person may seek a compensation order under s 237(1)(a)(ii) which provides: (1) A court may: (a) on application of a person (the injured person) who has suffered, or is likely to suffer, loss or damage because of the conduct of another person that: … (ii) constitutes applying or relying on, or purporting to apply or rely on, a term of a consumer contract that has been declared under section 250 to be an unfair term; … make such order or orders as the court thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct.

Compensation is available if a person has suffered or is likely to suffer loss or damage as a result of a person relying upon or applying a term declared to be unfair. The court may declare another contract entered into in reliance upon the unfair term to be void.217 Money paid or property transferred under the term may be recovered.218 There is some uncertainty surrounding the application of s 237. Once a term of a particular contract has been declared to be unfair, it is clear that relief will be available if the supplier seeks to apply or rely upon it in relation to the same consumer who is a party to that contract. However, it is not clear whether relief will be available if the same supplier seeks to rely upon the same term previously declared to be unfair in relation to a different consumer, without obtaining a second declaration. Furthermore, it is not clear whether a compensation order will be available if a different supplier seeks to rely a term of the same type previously declared to be unfair, in subsequent consumer transactions without obtaining a second declaration. Section 137D of the CCA provides that in determining whether to make an order under subs 237(1) of the ACL in relation to a term of a consumer contract that has been declared under s 250 of the ACL to be an unfair term, the court may have regard to the conduct of the parties to the proceeding referred to in that subsection since the contravention occurred or the declaration was made. An order can be made against the person relying on or applying the unfair term or a person “involved” in that conduct.219 Section 237(3) provides that an application under s 237(1) must be made within six years after the day on which the declaration is made. Jurisdiction to grant a compensation order under the ACL (Qld) is conferred on the District Court.220 An appeal lies to the Court of Appeal.

INJUNCTIONS [14.230] An application for an injunction under s 232 may be made by any person. Section 232 of the ACL it written in the same terms as s 80 of the TPA, and the decisions interpreting and applying s 80 of the TPA have been applied in 217 ACL, s 243(a). 218 ACL, s 243(d). 219 The term “involved” is defined in ACL, s 2. See [14.75]–[14.195]. 220 Fair Trading Act 1989 (Qld), s 51.

[14.235]

14 Private Remedies

663

relation to s 232 of the ACL.221 While a person adversely affected by conduct in contravention of a provision of Chs 2, 3 or 4 is more likely to apply for an injunction, an applicant need not have suffered damage or have any particular interest in the subject matter of the proceeding.222 The grant of an injunction is a discretionary matter for the court. The parties can put up draft orders expressed in wide terms for the court’s consideration, but the court will only grant injunctive relief that is confined to the facts at issue.223

Interim injunctions [14.235] Section 234 of the provides: (1) If an application is made under section 232, the court may, if it considers it is desirable to do so, grant an interim injunction under this subsection pending the determination of the application. (2) If a responsible Minister or the regulator made the application under section 232, the court must not require the applicant or any other person to give any undertakings as to damages as a condition of granting the interim injunction. (3) If: (a) in a case to which subsection (2) does not apply the court would, but for this subsection, require a person to give an undertaking as to damages or costs; and (b) a responsible Minister gives the undertaking; the court must accept the undertaking by the responsible Minister and must not require a further undertaking from any other person.

In Ocean Dynamics Charter Pty Ltd v Hamilton Island Enterprises Ltd,224 Edelman J, referring to the decision of the Full Court in Samsung Electronics Company Ltd v Apple Inc,225 set out the test for an interlocutory injunction: Where an interlocutory injunction is sought in respect of private rights, it is necessary to identify the legal or equitable rights which are to be determined at the trial and in respect of which the final relief is sought (Samsung, 256 [52]). There are two questions: (1) has the applicant established a prima facie case (in the sense that if the evidence remains as it is there is a probability that at the trial of the action the applicant will be held entitled to relief); and (2) does the balance of convenience and justice favour the grant of an injunction or the refusal of that relief? The balance of convenience includes a consideration of whether the refusal of the injunction would have the effect that the applicant will suffer irreparable injury for which damages will not be adequate compensation (Samsung, 259-260 [61] - [63]). 221 See Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd (No 2) [2015] FCA 477 at [10]-[17] (Nicholas J) relying on the Full Federal Court’s reasons in ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 (Lockhart, Gummow and French JJ); and ACCC v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513. 222 See World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181 at 186 (Bowen CJ) and R v Judges of Federal Court of Australia; Ex parte Pilkington ACI (Operations) Pty Ltd (1978) 142 CLR 113 at 131 (Murphy J). 223 Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at [111]-[113]. 224 Ocean Dynamics Charter Pty Ltd v Hamilton Island Enterprises Ltd [2015] FCA 460 at [26]-[27]. 225 Samsung Electronics Company Ltd v Apple Inc (2011) 217 FCR 238.

664

The Australian Consumer Law

[14.240]

The balance of convenience and the strength of the prima facie case are inter-related. The significance of the strength of the prima facie case will be less where the balance of convenience clearly favours the applicant than in a case where the balance of convenience favours the respondent.226 If an award of damages would be adequate to compensate the applicant for losses sustained by conduct in contravention of a provision of Chs 2, 3 or 4 of the ACL prior to trial, an interlocutory injunction will not be granted however strong the applicant’s claim at the interlocutory stage.227 In considering whether to grant interlocutory relief it is necessary to consider not only the interests of the parties to the application but also the adverse impact upon third parties and the public interest.228 Where the practical effect of an interlocutory injunction would be to finally determine the issue, the court will pay special attention to the strength of the applicant’s case.229

Final injunctions [14.240] In Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd (No 2) Nicholas J held that the court had a wide discretion and that while s 232(4) expressly permits an injunction to be granted whether or not there appears to be any likelihood of a future contravention, however the possibility that the respondent is likely to repeat the contravening conduct is a relevant factor to be taken into account when deciding whether or not to grant an injunction.230 The court may also grant an injunction to mark its disapproval of the respondent’s contravening conduct.231 The court is not likely to grant an injunction where unintentional conduct is found to be misleading and contrary to s 18 of the ACL, or where there is an isolated breach.232 PUBLISHER’S DEFENCE [14.245] The provisions relating to misleading or deceptive conduct impose strict liability. An aspect of strict liability is that any newspaper which publishes, or television or radio station which broadcasts, a misleading or deceptive segment of news, information, opinion and comment has engaged in misleading or deceptive conduct. It may, however, be possible for information providers to rely on the statutory exemption in ACL, s 19(1), which states that the provisions relating to misleading or deceptive conduct do not apply to an information provider if the 226 Samsung Electronics Company Ltd v Apple Inc (2011) 217 FCR 238 at 261 [67]. 227 Tytel Pty Ltd v Telecom (1986) 67 ALR 433 at 441 (Jackson J). 228 Tytel Pty Ltd v Telecom (1986) 67 ALR 433 at 442. 229 Sabre Corporation Pty Ltd v Laboratories Pharm-a-Care (1995) ATPR ¶41-396 at 40,382-4 (Beazley J) and Regent’s Pty Ltd v Subaru (Aust) Pty Ltd (1996) ATPR ¶41-463 at 41,628 (RD Nicholson J). 230 Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd (No 2) [2015] FCA 477 at [18] (Nicholas J) citing the Full Federal Court’s reasons in ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 (Lockhart, Gummow and French JJ); and ACCC v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513. 231 Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd (No 2) [2015] FCA 477 at [17]. 232 ACCC v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513 at [111].

[14.245]

14 Private Remedies

665

information provider made a publication in the course of carrying on a business of providing information, unless the publication is related directly to its business activities. However, s 19(1) is circumscribed by ss 19(2)(3) and (4).This exemption does not apply to: (a) advertisements; (b) a publication in connection with the supply (or promotion of the supply) of goods or services by the information provider; or (c) a publication in connection with the sale or grant (or promotion of the sale or grant) of an interest in land by the information provider. In relation to advertisements there is a special defence for information providers created by s 251 of the ACL. Section 251 provides: (1) This section applies to a proceeding under this Part [Part 5-2-Remedies] in relation to a contravention of a provision of Part 2-1 or 2-2 or Chapter 3 if the contravention was committed by the publication of an advertisement. (2) In the proceeding, it is a defence if the defendant proves that: (a) the defendant is a person whose business it is to publish or arrange for the publication of advertisements; and (b) the defendant received the advertisement for publication in the ordinary course of business; and (c) the defendant did not know, and had no reason to suspect, that its publication would amount to a contravention of such a provision.

Section 251 of the ACL replaces s 85(3) of the TPA. Section 18 of the ACL will not apply to the information provider where it is apparent that the information provider is not the source of the advertisement, did not endorse it and was merely relaying it without accepting responsibility for it.233 The scope and operation of s 85(3) of the TPA was considered by French CJ, Crennan and Kiefel JJ in Google Inc v ACCC.234 Their Honours observed: Section 85(3) provided a defence in proceedings in relation to a contravention of Pt V or VC of the Act which was limited to publishers of advertisements. If an intermediary publisher has not endorsed or adopted a published representation of an advertiser, that circumstance may be sufficient, in the context of a particular case, to justify a finding that the intermediary has not contravened s 52. By way of contrast, an intermediary publisher who has endorsed or adopted a published representation of an advertiser without appreciating the capacity of that representation to mislead or deceive may have resort to the statutory defence. In those circumstances, recognising that its business carried a risk of unwitting contravention, an intermediary publisher may need to show that it had some appropriate system in place to succeed in the defence that it did not know and had no reason to suspect that the publication of that representation would amount to a contravention. It is sufficient for present purposes to state that the recognisable distinctions between these different scenarios illustrate the different spheres of operation of the line of authority in this Court commencing with Yorke v Lucas and the statutory defence in s 85(3).235 233 See [3.40]. 234 Google Inc v ACCC (2013) 249 CLR 435. 235 Google Inc v ACCC (2013) 249 CLR 435 at 461, see also Hayne J at 472-4.

666

The Australian Consumer Law

[14.250]

DEATH OR PERSONAL INJURY: CCA AND ACL FRAMEWORK [14.250] Dramatic increases in insurance premiums in the early years of the 21st century prompted a review of the laws of negligence relating to personal injury. State and Territory governments introduced a range of reforms designed to limit liability for personal injury in certain circumstances, and to place restrictions on the amount of damages which could be awarded. At the same time, the Federal Government initiated a review of personal injury laws, chaired by Ipp J. The Ipp Report236 made 61 recommendations for reform, including a suggestion that uniform legislation be adopted across Australia. Several amendments to the TPA were also recommended, most of which were enacted. However, rather than adopt a uniform framework, State and Territory reforms varied from the Ipp recommendations in a number of ways, and as a result there were several differences between jurisdictions, and between the States and Territories and the TPA with regards to the availability of damages or compensation for personal injury, and the quantum of awards where available. The CCA imposes limits on plaintiffs seeking an award of personal injury damages. Sections 137C and 137E of the CCA respectively provide that plaintiffs cannot bring actions for personal injury damages under s 236 of the ACL and compensation orders under ss 237 and 238 of the ACL to the extent that they relate to misleading or deceptive conduct,237 or unfair practices,238 where they do not relate to smoking or use of tobacco products. Section 137C of the CCA provides: (1) A person is not entitled to recover an amount of loss or damage by action under subsection 236(1) of the Australian Consumer Law to the extent to which: (a) the action would be based on the conduct contravening a provision of Part 2-1 or 3-1 of the Australian Consumer Law; and (b) the loss or damage is, or results from, death or personal injury; and (c) the death or personal injury does not result from smoking or other use of tobacco products. (2) Divisions 2 and 7 of Part VIB of this Act apply to an action under subsection 236(1) of the Australian Consumer Law to compensate a person for loss or damage a person suffers to the extent to which: (a) the action would be based on the conduct contravening a provision of Part 2-1 or 3-1 of the Australian Consumer Law; and (b) the loss or damage is, or results from, death or personal injury; and (c) the death or personal injury results from smoking or other use of tobacco products; as if the action were a proceeding to which Part VIB of this Act applied.

Section 137E of the CCA provides: (1) A court must not make an order under subsection 237(1) or 238(1) of the Australian Consumer Law to compensate a person for loss or damage the person suffers because of the conduct of another person to the extent to which: 236 Commonwealth of Australia, Review of the Law of Negligence Report (Canberra, 2002). 237 ACL, Pt 2-1. 238 ACL, Pt 3-1.

[14.250]

14 Private Remedies

667

(a) the action would be based on the conduct contravening a provision of Part 2-1 or 3-1 of the Australian Consumer Law; and (b) the loss or damage is, or results from, death or personal injury; and (c) the death or personal injury does not result from smoking or other use of tobacco products. (2) Division 2 of Part VIB of this Act applies to an application for an order under subsection 237(1) of the Australian Consumer Law to compensate a person for loss or damage the person suffers because of the conduct of another person to the extent to which: (a) the action would be based on the conduct contravening a provision of Part 2-1 or 3-1 of the Australian Consumer Law; and (b) the loss or damage is, or results from, death or personal injury; and (c) the death or personal injury results from smoking or other use of tobacco products; as if the proceeding in relation to the application were a proceeding to which Part VIB of this Act applies and as if the making of the application were the commencement of the proceeding. (3) Division 7 of Part VIB of this Act applies to a proceeding in which an order under subsection 237(1) or 238(1) of the Australian Consumer Law to compensate a person for loss or damage the person suffers because of the conduct of another person is made, to the extent to which: (a) the action would be based on the conduct contravening a provision of Part 2-1 or Part 3-1 of the Australian Consumer Law; and (b) the loss or damage is, or results from, death or personal injury; and (c) the death or personal injury results from smoking or other use of tobacco products; as if the proceeding were a proceeding to which Part VIB of this Act applied.

This provision is based on the repealed s 82(1AAA) and (1AAB) of the TPA. Part VIB, Div 2 of the CCA deals with the limitation periods that apply for claims for damages or compensation for death or personal injury and, to the extent to which that Division is applied to the application by this subsection, it overrides subs 237(3) of the ACL. Part VIB, Div 7 of the CCA deals with structured settlements for claims for damages or compensation for death or personal injury. Part VIB of the CCA regulates awards of damages or compensation for death or personal injury. Section 87E(1) of the CCA provides that Pt VIB applies to proceedings taken under the ACL: (a) that relate to Part 2-2 (unconscionable conduct), Part 3-3 (safety standards in relation to consumer goods, bans on consumer goods and product related services, compulsory recall of consumer goods, voluntary recall of consumer goods), Part 3-4 (information standards), Part 3-5 (liability of manufacturers for goods with safety defects) or Division 2 of Part 5-4 (actions for damages against manufacturers of goods where there is a failure to comply with the consumer guarantees); and (b) in which the plaintiff is seeking an award of personal injury damages; and (c) that are not proceedings in respect of the death of or personal injury to a person resulting from smoking or other use of tobacco products.

668

The Australian Consumer Law

[14.255]

It specifies the relevant time limits for bringing claims, imposes limits on the amount and types of damages that can be awarded, and sets thresholds for non-economic loss, below which damages are not available. It provides for the circumstances under which a plaintiff can be awarded damages for gratuitous care, and abolishes exemplary and aggravated damages. It also provides that a court can refer to past decisions, and can make consent orders for structured settlements. The CCA and the State and Territory application legislation treat actions for death similarly to those for personal injury.

Maximum damages available [14.255] The Ipp review recommended that awards for non-economic loss be capped at $250,000. Section 87M of the CCA imposes such a cap. Cap on damages for loss of earnings [14.260] Section 87U of the CCA places a cap on damages for loss of earnings at two times the average full time weekly earnings. Threshold for damages [14.265] Section 87S of the CCA imposes a threshold for claiming damages at 15% of the most extreme case. Section 87S provides: If the non-economic loss the plaintiff suffers is less than 15% of a most extreme case, the court must not award personal injury damages for non-economic loss.

Court may refer to past decision in determining non-economic loss [14.270] Section 87T of the CCA allows for the court to refer to past decisions. This was one of the recommendations of the Ipp review. Section 87T provides: (1) In determining personal injury damages for non-economic loss, the court may refer to earlier decisions of the court or of other courts for the purpose of establishing the appropriate award in the proceeding. (2) For that purpose, the parties to the proceeding or their counsel may bring the court’s attention to awards of personal injury damages for non-economic loss in those earlier decisions. (3) This section does not affect the rules for determination of other damages or compensation.

Abolition of aggravated and exemplary damages [14.275] Section 87ZB of the CCA expressly excludes awards for aggravated and exemplary damages for personal injury.

Gratuitous care [14.280] Sections 87W and 87X of the CCA provide that damages for gratuitous care will not be available unless certain prerequisites are established. These apply to both care which the plaintiff will require as a result of the accident, and

[14.290]

14 Private Remedies

669

compensation for loss of the plaintiff’s ability to provide care which was provided by them prior to the accident. In order for damages for gratuitous care to be available, the care must be provided for at least six hours a week, and for a period of at least six months. Care which is required by the plaintiff must be necessary and must be a result of the personal injury.

Availability of structured settlements [14.285] Section 87ZC of the CCA, and all States and Territories, make provision for the court to grant a consent order for a structured settlement. Section 87ZC provides: (1) In a proceeding to which this Part applies, a court may, on the application of the parties, make an order under section 87 approving a structured settlement, or the terms of a structured settlement, even though the payment of damages is not in the form of a lump sum award of damages. (2) This section does not limit the powers of a court to make an order under section 87 in a proceeding that is not a proceeding to which this Part applies. (3) In this section: structured settlement means an agreement that provides for the payment of all or part of an award of damages in the form of periodic payments funded by an annuity or other agreed means.

Reduced compensation in defective goods actions [14.290] Part 3-5, Div 2 of the ACL (defective goods actions) considered in Chapter 12 is a strict liability scheme which absolves the plaintiff of the need to establish the defendant’s negligence. However, s 137A of the CCA provides that if the plaintiff’s actions contributed to their loss, a manufacturer’s liability will be reduced to such an extent that the court thinks fit. See [12.145].

15

Remedies Relating to Guarantees [15.05] INTRODUCTION .............................................................................................................. 672 [15.10] PART I: REMEDIES AGAINST SUPPLIERS OF GOODS .......................................... 673

[15.10] Introduction ....................................................................................................... 673 [15.15] Who may bring the cause of action against the supplier? ........................ 675 [15.20] What is a major failure? .................................................................................. 675 [15.25] Cannot be remedied or is a major failure: NZ approach .......................... 676 [15.30] Cannot be remedied or is a major failure: Australian approach ............. 678 [15.45] Remedies – major failure ................................................................................. 681 [15.80] Remedies – not a major failure ...................................................................... 689 [15.90] Replacement restarts consumer guarantees ................................................. 691 [15.95] Refund ................................................................................................................. 692 [15.100] Damages for reasonably foreseeable consequential loss ......................... 692 [15.105] Consequential loss: causation and loss sharing ........................................ 692 [15.110] PART II: REMEDIES AGAINST MANUFACTURERS OF GOODS ....................... 693

[15.110] Introduction ...................................................................................................... 693 [15.115] Who may bring the cause of action against the manufacturer? ............ 694 [15.120] Exceptions to right of redress against the manufacturer of goods ........ 694 [15.125] Damages that may be recovered against the manufacturer ................... 695 [15.130] Damages for consequential loss against manufacturer of goods ........... 696 [15.135] Limits on damages for personal injury and death ................................... 696 [15.140] Indemnification of suppliers by manufacturers of goods ....................... 696 [15.145] PART III: REMEDIES AGAINST SUPPLIERS OF SERVICES ................................. 697

[15.145] Introduction ..................................................................................................... 697 [15.150] What is a major failure? ................................................................................ 698 [15.180] Remedies – not a major failure .................................................................... 700 [15.185] Remedies – major failure ............................................................................... 700 [15.190] Exceptions to right of redress against the supplier of services .............. 701 [15.215] PART IV: RIGHTS AND REMEDIES AGAINST LINKED CREDIT PROVIDERS . 702

[15.215] Introduction ..................................................................................................... 702 [15.220] Joint liability ..................................................................................................... 702 [15.230] Action to be taken jointly .............................................................................. 705

672

The Australian Consumer Law

[15.235] [15.240] [15.245] [15.250]

[15.05]

Exceptions where linked credit supplier is not liable .............................. Amount of liability ......................................................................................... Liability of suppliers and linked credit providers inter se ..................... Scope for overlap with general and specific protections ........................

705 706 706 706

[15.255] PART V: EXCLUSION CLAUSES AND LIMITATIONS OF LIABILITY ............... 707

[15.255] Introduction ..................................................................................................... 707 [15.260] Suppliers limiting liability: non-personal goods under $40,000 limit ... 708 [15.265] Suppliers excluding liability for consequential loss ................................. 709 [15.270] Manufacturers excluding liability ................................................................ 709 [15.275] Choice of law and venue clauses ................................................................. 710 [15.280] Limitation of liability: recreational services – ACL .................................. 712 [15.290] Limitation of liability: recreational services ACL (Application Acts) ... 714 [15.295] Action by the ACCC to enforce consumer guarantees ............................ 714

INTRODUCTION [15.05]

This chapter deals with the remedies available to a consumer when the supplier of goods or services, or the manufacturer of goods fails to comply with one or more of the consumer guarantees. In this situation, it is advisable, initially, to address two matters – first, the nature of the supplier’s or manufacturer’s failure to comply with the relevant consumer guarantee; and secondly, the variety of remedies that may be available to the consumer. When a failure to comply with a consumer guarantee in relation to goods occurs, the consumer has a choice under the ACL. The consumer can either pursue the manufacturer of the goods; or pursue the person that supplied the goods to the consumer. The consumer’s rights against the supplier of goods are more extensive than they are against the manufacturer. The consumer can only recover its losses (monetary damages) from the manufacturer (subject to s 271(6)), whereas the consumer has specific repair, replacement and refund rights against the supplier of the goods.

The statutory causes of action for failure to comply with the consumer guarantees arise independently of contract. They arise as a consequence of goods or services having been “supplied”.1 This avoids the difficulty sometimes encountered with the statutory implied terms regime where consumers cannot bring actions against suppliers of faulty goods because they are unable to point to a contract onto which the implied term can be grafted. These statutory causes of action are in addition to the other rights and remedies the consumer may have.2 In all cases, the ACL recognises that a failure to meet one of the guarantees may result in consequential damages, and allows the consumer to recover these to 1 See [8.160]. 2 See, eg, Brandt v Flower Power and Stone Masonry Pty Ltd [2012] NSWCTTT 261 (13 July 2012) which was decided on the basis that both the implied conditions of fitness for purpose and merchantable quality under the Sale of Goods Act 1923 (NSW) and the guarantee of acceptable quality under s 54 of the ACL (NSW) applied to the transaction.

[15.10]

15 Remedies Relating to Guarantees

673

ensure that the consumer is fully compensated. The ACL regulators have issued a guide that explains the remedies available to consumers when goods or services fail to meet the consumer guarantees.3 This chapter is divided into five parts: • Part I – considers the rights and remedies available against suppliers of goods. • Part II – considers rights and remedies available against manufacturers of goods. • Part III – considers the rights and remedies available against suppliers of services. • Part IV – considers rights and remedies available against linked credit providers. • Part V – considers the extent to which suppliers and manufacturers can use exclusion clauses and other limitations of liability in their contracts.

PART I: REMEDIES AGAINST SUPPLIERS OF GOODS Introduction [15.10]

The statutory causes of action that can be brought against suppliers of goods are regulated by Pt 5-4, Div 1, Sub-div A of the ACL. Under the Sale of Goods Acts there are two tiers of implied terms, conditions and warranties, and different remedies attaching to their breach. Under the Sale of Goods Acts, a consumer may rescind the contract of sale and reject the goods supplied where the supplier is in breach of an express or implied condition of the contract. It appears to be the design of these Acts that the various “conditions” they imply are to be strictly observed so that if the supplier is in breach of any one of them, no matter how trivial the breach, it will allow the consumer to rescind the contract and reject the goods. On the other hand, rescission is not possible where the supplier is in breach of a mere implied “warranty”. In such a case, the consumer’s remedy is a claim for damages only.4

The repealed s 75A of the TPA created a special provision governing the rescission of consumer contracts for the supply of goods. However, this provision applied only where there had been a breach of a condition implied by Pt V, Div 2 of the TPA.5 One of the purposes behind the consumer guarantees law is to overcome the lack of clarity associated with the two tiers of implied terms, conditions and warranties, and different remedies attaching to their breach. However, some uncertainty still surrounds the manner in which the different remedies available under the ACL apply in practice. Section 259 of the ACL establishes a hierarchy of remedies under which the supplier is given the opportunity to remedy the failure where it is capable of being remedied. If the failure cannot be remedied or is a major failure, the consumer may 3 See Australian Consumer Law, Consumer Guarantees: A Guide for Businesses and Legal Practitioners, at http://www.consumerlaw.gov.au/files/2015/09/consumer_guarantees_guide.pdf. 4 See the discussion in Sutton, Sales and Consumer Law (4th ed, LBC Information Services, 1995), [7.15]. 5 See the discussion in Sutton, Sales and Consumer Law (4th ed, LBC Information Services, 1995), [7.46].

674

The Australian Consumer Law

[15.10]

reject the goods or obtain damages in compensation for any reduction in value below the price paid. The consumer may take action against the supplier of goods for: • non-compliance with the guarantee as to title;6 • non-compliance with the guarantee as to undisturbed possession;7 • non-compliance with the guarantee as to undisclosed securities;8 • non-compliance with the acceptable quality guarantee;9 • non-compliance with the guarantee as to fitness for any disclosed purpose;10 • non-compliance with the description guarantee;11 • non-compliance with the guarantee relating to the supply of goods by sample demonstration model; or12 • non-compliance with the guarantee relating to express warranties by a supplier.13 Section 259 of the ACL provides: (1) A consumer may take action under this section if: (a) a person (the supplier) supplies, in trade or commerce, goods to the consumer; and (b) a guarantee that applies to the supply under Subdivision A of Division 1 of Part 3-2 (other than sections 58 and 59(1)) is not complied with. (2) If the failure to comply with the guarantee can be remedied and is not a major failure: (a) the consumer may require the supplier to remedy the failure within a reasonable time; or (b) if such a requirement is made of the supplier but the supplier refuses or fails to comply with the requirement, or fails to comply with the requirement within a reasonable time–the consumer may: (i) otherwise have the failure remedied and, by action against the supplier, recover all reasonable costs incurred by the consumer in having the failure so remedied; or (ii) subject to section 262, notify the supplier that the consumer rejects the goods and of the ground or grounds for the rejection. (3) If the failure to comply with the guarantee cannot be remedied or is a major failure, the consumer may: (a) subject to section 262, notify the supplier that the consumer rejects the goods and of the ground or grounds for the rejection; or (b) by action against the supplier, recover compensation for any reduction in the value of the goods below the price paid or payable by the consumer for the goods. 6 ACL, s 51. See [8.185]. 7 ACL, s 52. See [8.190]. 8 ACL, s 53. See [8.195]. 9 ACL, s 54. See [8.205]–[8.345]. 10 ACL, s 55. See [8.350]–[8.380]. 11 ACL, s 56. See [8.385]. 12 ACL, s 57. See [8.390]. 13 ACL, s 59(2). See [8.400]–[8.405].

[15.20]

15 Remedies Relating to Guarantees

675

(4) The consumer may, by action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure. (5) Subsection (4) does not apply if the failure to comply with the guarantee occurred only because of a cause independent of human control that occurred after the goods left the control of the supplier. (6) To avoid doubt, subsection (4) applies in addition to subsections (2) and (3). (7) The consumer may take action under this section whether or not the goods are in their original packaging.

Who may bring the cause of action against the supplier? [15.15]

The only person who may bring a cause of action against the supplier under s 259 is a “consumer” as defined in s 3 of the ACL. The definition of the word “consumer” is considered at [8.70]–[8.115]. A person will only be a “consumer” for the purposes of s 3 of the ACL if they “acquire” goods. The definition of “acquire” in s 2(1) of the ACL is inclusive but the examples given – acquire by way of purchase, exchange, lease hire or hire-purchase – are all transaction based, and have in common an acquisition of goods by payment of some form of consideration. This narrows the scope of the cause of action and would exclude acquisition by way of gift. However, s 266 of the ACL provides that the recipient of a gift can enforce the consumer guarantees against the supplier. Thus, where goods are acquired by a consumer paying for them, but the goods are for a family member or friend, that family member or friend has the same rights as the consumer who acquired them.

What is a major failure? [15.20]

The ACL classifies failures into those that are “major” and those that are not major. The equivalent expression in s 21 of the NZ CGA is “a failure of a substantial character”. It is unclear why the word “major” was adopted in Australia, rather than the New Zealand term “a failure of a substantial character”. This may raise issues about the relevance of New Zealand authorities in Australia, despite the statement in the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, that the provisions set out in Pt 3-2, Div 1 of the ACL are couched in terms broadly similar to those used in the NZ CGA and “the jurisprudence applicable to that Act is of relevance to those provisions”.

Since the right to rescind and reject the goods depends on whether the failure is major or not, an essential first step is to determine whether the failure is “major”. There is a lack of clarity in the tests for distinguishing between major and non-major failures that has been the subject of some criticism.14 Section 260 of the ACL sets out a number of alternative tests for determining whether a failure is “major”. It provides a failure is major if: (a) the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or 14 Griggs, Freilich and Messel, “Consumer Guarantees – Lessons to be Learnt from Afar” (2015) 23 Australian Journal of Competition and Consumer Law 36.

676

The Australian Consumer Law

[15.25]

(b) the goods depart in one or more significant respects: (i) if they were supplied by description – from that description; or (ii) if they were supplied by reference to a sample or demonstration model – from that sample or demonstration model; or (c) the goods are substantially unfit for a purpose for which goods of the same kind are commonly supplied and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; (d) the goods are unfit for a disclosed purpose that was made know to: (i) the supplier of the goods; (ii) or a person by whom any prior negotiations or arrangements in relation to the acquisition of the goods were conducted or made; and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or (e) the goods are not of acceptable quality because they are unsafe.

In relation to s 260(a), the matters that a reasonable consumer would take into account include: • how soon the fault developed after supply: the shorter the time the more serious the fault; • the price of the goods: the more expensive the goods, the less acceptable is any fault; • any representations made about the goods by the supplier or manufacturer, either orally or in the advertising or packaging; • any other faults with the goods: a number of small faults may not be serious, but their cumulative effect may be major.

Cannot be remedied or is a major failure: NZ approach [15.25]

The remedies available against a supplier of goods in ss 259(2) and (3) of the ACL are predicated on a determination of whether the goods can be remedied or not. It is only if the goods cannot be remedied and the failure is major that the consumer has a right to reject the goods. This mirrors s 18(3) of the NZ CGA which provides: Where the failure cannot be remedied or is of a substantial character within the meaning of Section 21 of this Act the consumer may – (1) subject to Section 20 of this Act, reject the goods in accordance with section 22 of this Act; or (2) obtain from the supplier damages in compensation for any reduction in value of the goods below the price paid or payable by the consumer for the goods.

The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states that the provisions set out in Pt 3-2, Div 1 of the ACL are couched in terms broadly similar to those used in the New Zealand Consumer Guarantees Act 1993 (NZ) and “the jurisprudence applicable to that Act is of relevance to those provisions.”15 15 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.9], p 179.

[15.25]

15 Remedies Relating to Guarantees

677

The application of the remedies available against the supplier of defective goods under the NZ CGA was first considered in Stephens v Chevron Motor Court Ltd.16 The District Court of New Zealand held that the correct approach was first to consider whether the goods were of “acceptable quality”. If the goods are not of acceptable quality, the consequence is that the purchaser is then entitled to seek cancellation of the contract if the failure cannot be remedied or it was of a “substantial character” as envisaged by s 21 of the NZ CGA. However, it may not be immediately apparent whether the defects can be remedied. If the purchaser requires the trader to remedy any faults within a reasonable time in accordance with s 19 of the NZ CGA, the consumer is entitled to require the supplier to provide information as to the nature and extent of the defect before being in a position to consider whether the defect is of a substantial character. The election to repair does not preclude the purchaser from cancelling the contract if it subsequently transpires that the defect is of a substantial character. If the failure to comply with the guarantee of acceptable quality was of a “substantial character” within the meaning of s 21 of the NZ CGA, or if the faults cannot be remedied, it is necessary to ask whether the purchaser exercised their right to reject the goods within a reasonable time. In Stephens v Chevron Motor Court Ltd, the appellant consumer purchased a 1983 Mitsubishi Pajero from the respondent dealer on 25 November 1994. Within a matter of days of purchase, the vehicle was found to be out of oil, with no brake or clutch fluid. The consumer elected to repair the vehicle and returned it to the respondent. Shortly afterwards, the vehicle started to burn oil and the consumer informed the dealer that she wished to reject the vehicle. It was thought that the turbo charger needed to be cleaned, and without consulting the consumer, the dealer sent the vehicle to a specialist repairer. The repairer replaced the valve stem oil seals, but the vehicle continued to burn oil. The vehicle was returned to the repairer, which removed the turbo charger, finding no oil traces that might suggest that the turbo charger was at fault. It was found that the rings were worn and had to be replaced. The cost of repairs amounted to $1,200, and was paid by the dealer. In January 1995, after the last repairs, the consumer refused to accept the vehicle back and ceased paying hire purchase instalments. Cancellation of the contract was sought by solicitor’s letter dated 27 January 1995. A complaint was lodged with the Christchurch Motor Vehicle Disputes Tribunal. The tribunal required the appellant to accept the vehicle back. The vehicle continued to suffer further mechanical problems. On appeal, Judge MacDonald observed: The issues of whether the vehicle was not of “acceptable quality” and whether there had been a failure of a “substantial character” are in my opinion linked, with the test for acceptable quality being “fit for all purposes for which the goods [of the type in question] are commonly supplied” and “substantial failure” being “the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure.”17 16 Stephens v Chevron Motor Court Ltd [1996] DCR 1. 17 Stephens v Chevron Motor Court Ltd [1996] DCR 1 at 6.

678

The Australian Consumer Law

[15.30]

His Honour held: Whether a defect is of a “substantial character” is obviously a matter of degree in any given case. On a monetary level being required to spend say $1,000 on repairs in respect of a vehicle purchased for $5,000 might indicate a failure of a “substantial character” but that would not necessarily hold true for the same repairs on a vehicle of significantly greater value.18

On the facts, the repairs represented only 5% of the purchase price; nevertheless, Judge MacDonald concluded that the failure (a mechanical defect: badly worn rings which had to be replaced) was of a substantial character, because “a reasonable consumer would not have acquired the vehicle if acquainted with the badly worn state of the rings and the cost of repair.”19 Judge MacDonald concluded: I consider that the correct approach to the Act was to first consider whether the vehicle was of “acceptable quality”. The tribunal considered it was not and as I perceived it there was no quarrel with that conclusion. The consequence of that conclusion was that the appellant was then entitled to seek cancellation of the contract if the failure could not be remedied or it was of a “substantial character” as envisaged by s 21. In that regard I have found that the failure was of a “substantial character”. I have also found that the remedy sought was cancellation and not repair. Therefore once cancellation was sought the respondent was obliged to accept it. It was not for the respondent to decide that it was unnecessary and proceed to carry out repairs which is effectively what occurred.20

Cannot be remedied or is a major failure: Australian approach [15.30]

The tests of whether goods are of “acceptable quality” for the purposes of s 54 of the ACL and whether there is a “major failure” to comply with that guarantee for the purposes of s 260 of the ACL are linked in that both tests adopt a “reasonable consumer” test. The test of “acceptable quality” is: “fit for all of the purposes for which goods of that kind are commonly supplied”, and whether a reasonable consumer fully acquainted with the state and condition of the goods, (including any hidden defects of the goods), would regard as acceptable, having regard to the matters in subs 54(3). The test of “major failure” in s 260(a) is: “the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure”. The Tribunal member in Goldiwood Pty Ltd t/as Margaret Franklin & Associates v ADL (Aust) Pty Ltd t/as Adviser Logic,21 commented on this similarity. In that case, Margaret Franklin & Associates (MFA) entered into a contract with ADL for the supply of software pursuant to a licence. The software was web-based. In order to use the software clients needed to access the web-based system through the internet. Once logged in, users could ask for financial planning documents and reports to be produced, downloaded and/or printed. The Tribunal held that the software itself was expressly included within the definition of “goods” in ACL, s 2(1). New releases of the software would also constitute the 18 Stephens v Chevron Motor Court Ltd [1996] DCR 1 at 6. 19 Stephens v Chevron Motor Court Ltd [1996] DCR 1 at 6. 20 Stephens v Chevron Motor Court Ltd [1996] DCR 1 at 21. 21 Goldiwood Pty Ltd t/as Margaret Franklin & Associates v ADL (Aust) Pty Ltd t/as Adviser Logic [2014] QCAT 238.

[15.30]

15 Remedies Relating to Guarantees

679

supply of goods. There were three defects in the software as supplied: there was a failure to provide the email noting system compatible with MFA’s system, a failure of the software to merge the template from MFA licensed adviser partner when merging other templates as well, and there was an error checking failure on one of the reports. On the basis of these defects MFA terminated the software licence and sought a refund. In relation to the guarantee of acceptable quality, the Tribunal member found: Overall it cannot be said that the software was not of acceptable quality under section 54 of the ACL having regard to the matters set out in that section. In particular, the software was fit for the purpose for which software of that kind was commonly supplied as a reasonable consumer fully acquainted with it would regard as acceptable. It is inevitable that software will have some problems, particularly when it needs to be compatible with software provided by third parties. The reasonable consumer envisaged under section 54 would take this into account when considering the fitness of the software.22

However, in relation to the guarantee of fitness for purpose, the Tribunal member found: In my view, the failure of the software to provided [sic] the email noting system and to merge properly with the template from MFA’s licensed adviser partner were breaches of section 55. These were things that MFA explained they needed from the system, yet they were not part of the functionality of the software upon delivery and installation on MFA’s system.23

In deciding whether MFA was legally justified in rejecting the goods, the Tribunal member had to determine whether the failure to comply with the guarantee of fitness for purpose was a major failure. The Tribunal member noted a reasonable consumer test was common to both the guarantee of acceptable quality in s 54 of the ACL and the test in s 260 for what constitutes a major failure and observed: It is fair to say that no reasonable consumer would ever be willing to acquire goods which were not of acceptable quality and in breach of the guarantee in section 54. It might be said that this is wrong because a reasonable consumer would always be willing to acquire goods which were not of acceptable quality provided they could be obtained at a much lower price than they were being offered. But I do not think that this can be the test intended by section 260 because otherwise no failure could ever be a “major failure”. Thus it would appear that a breach of section 54 will always be one which is a “major failure” permitting a purchaser to reject the goods, provided the entitlement to do so has not been lost under the provisions of section 262.24

With respect, this disregards the overall scheme of Pt 5-4 of the ACL – the remedies relating to guarantees. The definition of a major failure in s 260 needs to be read in conjunction with the remedies available against a supplier of goods pursuant to ss 259(2) and (3). While rejection and a full refund may be the preferred remedy for the consumer, the ACL recognises that this may be unjust from the supplier’s 22 Goldiwood Pty Ltd t/as Margaret Franklin & Associates v ADL (Aust) Pty Ltd t/as Adviser Logic [2014] QCAT 238 at [70]. 23 Goldiwood Pty Ltd t/as Margaret Franklin & Associates v ADL (Aust) Pty Ltd t/as Adviser Logic [2014] QCAT 238 at [72]. 24 Goldiwood Pty Ltd t/as Margaret Franklin & Associates v ADL (Aust) Pty Ltd t/as Adviser Logic [2014] QCAT 238 at [84]-[85].

680

The Australian Consumer Law

[15.35]

perspective, especially if the failure is not major and the supplier is willing to repair or replace the goods. Accordingly, rejection and a refund are not available unless the failure is major, and the consumer has not lost the right to reject the goods. Where the failure to comply with the guarantee of acceptable quality is not major, the remedies available are repair or replacement at the supplier’s option. It was never intended that a failure to comply with the guarantee of acceptable quality would always be a major failure entitling the consumer to reject the goods. Whether the goods can be remedied will depend on the cost of the repairs in relation to the price of the goods as the court held in Stephens v Chevron Motor Court Ltd.25 It will also depend on the nature of the goods, the time taken to effect the repair and the level of disruption that the consumer is likely to suffer while the repairs are being carried out. Major failure: aggregation of defects In Cary Boyd v Agrison Pty Ltd,26 (considered at [8.280]), the applicant made a number of claims, including a claim that the tractor delivered to him failed to comply with the demonstration model he inspected in terms of its quality, state or condition, as required by ACL, s 57; that the tractor failed to comply with a disclosed purpose as to speed as required by ACL, s 55; and that these failures “individually or collectively” amounted to a major failure within the meaning of ACL, s 260. The defendant, on the other hand, submitted that the alleged defects in quality, state or condition such as an overspray on a headlight, insufficient gas in bonnet struts could not be considered anything but easily repairable minor defects.

[15.35]

The court held: on a proper construction of s 260 of the ACL, that the use of the conjunction “or” after each of sub-paragraph (a), (b), (c) and (d) has the effect that to amount to a major failure only one of the sub-paragraphs need qualify and that s 260 does not require a consumer to prove each sub-paragraph in order to satisfy the Court that there has been a major failure.27

The court also held that: despite the use of “a”, to suggest the singular, “a major failure” might be constituted by a series of specific and individual defects which taken as a whole constitute one major failure. I also agree with this interpretation of s 260 of the ACL.28

The court concluded: the tractor suffers a major failure due to a steering defect … I am also satisfied that the tractor is incapable of obtaining speed that Mr Boyd was told the tractor could reach in response to a disclosed purpose known to Agrison and moreover that the tractor on the balance of probabilities was suffering rust occasioned by corrosion of an extent that is 25 Stephens v Chevron Motor Court Ltd [1996] DCR 1 at 6. 26 Cary Boyd v Agrison Pty Ltd [2014] VMC 23. 27 Cary Boyd v Agrison Pty Ltd [2014] VMC 2 at [50]. 28 Cary Boyd v Agrison Pty Ltd [2014] VMC 2 at [51]. See also Goldiwood Pty Ltd t/as Margaret Franklin & Associates v ADL (Aust) Pty Ltd t/as Adviser Logic [2014] QCAT 238 at [65]. The same approach has been adopted in New Zealand. See Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170 at [32]-[33].

[15.50]

15 Remedies Relating to Guarantees

681

counter indicative to the tractor being a new tractor and that these matters either individually or collectively amount to a major failure within the meaning of the ACL.29

Major failure: unsafe goods

[15.40]

Safety is one of the attributes to be considered in determining whether goods are of acceptable quality (see [8.245]). “Safety” for the purposes of s 54(2)(d) of the ACL is a relative concept to be determined according to the characteristics to be taken into account by a reasonable consumer, including the nature of the goods and their price. Safety is also a relevant consideration in determining whether there has been a major failure to comply with a guarantee. For the purposes of s 260 of the ACL, safety is also to be assessed in a relative sense. Goods that are relatively lowly priced may pose some risk to safety, without there being a major failure to comply with the guarantee of acceptable quality. This will be especially so if the goods can be easily remedied without undue expense and rendered completely safe.

In Marwood v Agrison Pty Ltd,30 the applicant purchased a new Agrison tractor for $26,000 in May 2012. Mr Marwood used the tractor in his vineyard and needed a tight turning circle so that the tractor could go from one row to the next at the end of a row. The tractor had power steering which was defective and did not allow the tractor to turn more than 20 degrees. He sought a refund of the purchase price on the basis that he had rejected the tractor in September 2012 because the tractor was unsafe, and that this was a major failure to comply with the guarantee of acceptable quality in ACL, s 54. Even though the defective steering posed a threat to the safety of the driver, the Tribunal member did not consider that it amounted to a major failure because it could be remedied relatively simply. It would only be a major failure if the bleeding of the steering system did not remedy the defect.31

Remedies – major failure [15.45]

Section 259(3) of the ACL provides that if the failure is major or cannot be remedied, the consumer (not the supplier) has a choice. The consumer may: (a) reject the goods by notifying the supplier of the rejection and the ground or grounds for rejecting the goods; or (b) keep the goods but asking for compensation to make up the difference in value caused by the failure.

Rejecting the goods

[15.50]

The consequences of rejecting goods are provided for in s 263 of the ACL. If the consumer rejects the goods under s 259(3) the consumer must: (a) notify the supplier; and (b) return the goods, unless the goods cannot be returned, removed or transported “without significant cost to the consumer,” in which case the supplier must collect the goods at their own expense and within a reasonable time.

29 Cary Boyd v Agrison Pty Ltd [2014] VMC 2 at [112]. 30 Marwood v Agrison Pty Ltd [2013] VCAT 1549. 31 Marwood v Agrison Pty Ltd [2013] VCAT 1549 at [27].

682

The Australian Consumer Law

[15.55]

If the consumer decides they would like to reject the goods they need to advise the supplier of their intention to do so and their reason. This can be done orally or in writing. The consumer would normally be responsible for returning the goods. If the cost of returning the goods is “significant” the supplier is responsible for collecting them from the consumer at the supplier’s expense. Section 263(2) does not indicate what would constitute a “significant” cost, and whether it is to be determined in absolute or relative terms. Section 263(6) provides: If the property in the rejected goods has passed to the consumer before the rejection was notified, the property in those goods rejected revests in the supplier on the notification of the rejection.

Thus, any risk to the goods from the notification of rejection onwards is borne by the supplier. If the goods are, for example, uninsured and are damaged by fire, the supplier must bear the loss. After the consumer has returned the goods, or they have been collected by the supplier, the supplier must provide the remedy the consumer has chosen. Section 263(4) of the ACL provides that the consumer may choose between: • a refund; or • replacing the rejected goods with goods of the same type, and of similar value, if such goods are reasonably available to the supplier. The consumer is entitled to a full refund of the purchase price and there is no provision in the ACL for the supplier to be compensated for any depreciation in value of the rejected goods. Section 263(4) is in similar terms to s 23(1) of the NZ CGA. Section 263(5) of the ACL provides that if the consumer chooses a refund after rejecting the goods, the supplier is specifically precluded from providing replacement goods to satisfy the requirement of a refund. If the consumer chooses replacement of the rejected goods, s 264 of the ACL provides that the same guarantees are then applicable to the replaced goods as applied to the goods originally supplied. Loss of right to reject

[15.55]

Section 262(1) of the ACL provides that the right to reject goods conferred by s 259(3) is lost if: (a) the rejection period for the goods has ended; or (b) the goods have been lost, destroyed or disposed of by the consumer; or (c) the goods were damaged after being delivered to the consumer for reasons not related to their state or condition at the time of supply; or (d) the goods have been attached to, or incorporated in, any real or personal property and they cannot be detached or isolated without damaging them.

[15.60]

15 Remedies Relating to Guarantees

683

These provisions replace the Sale of Goods legislation which provides for the circumstances in which a buyer is deemed to have accepted goods and thereby lost any right of rejection.32 Rejection period

[15.60]

The “rejection period” for goods is defined in s 262(2) of the ACL as:

The period from the time of supply of the goods to the consumer within which it would be reasonable to expect the relevant failure to comply with a guarantee referred to in section 259(1)(b) to become apparent having regard to: (a) the type of goods; and (b) the use to which a consumer is likely to put them; and (c) the length of time for which it is reasonable for them to be used; and (d) the amount of use to which it is reasonable for them to be put before such a failure becomes apparent.

The test is one based on the period within which it would be reasonable to expect the relevant failure to become apparent; it is not based on actual knowledge by the consumer of the nature of the defect. The consumer must reject seriously defective goods promptly. In the New Zealand case, Nesbit v Porter,33 the Nesbits purchased an 11-year-old, Nissan Navara, four-wheel drive utility motor vehicle. Some five months later, problems became apparent. There was extensive rust and problems with the steering box and the shock absorbers, which were latent at the time of supply. The New Zealand Court of Appeal had to consider what would be a “reasonable period” within which to reject goods for the purposes of s 20 of the NZ CGA. Section 20 of the NZ CGA defines the term “reasonable period” in the same way as the term “rejection period” is defined in the ACL. The court observed that the period must be reasonable in relation to the particular defect or failure at issue. Within what time would it be reasonable for such defects to become apparent? The court held that a reasonable period was one that: suffices to enable the consumer to become fully acquainted with the nature of the defect, which, where the cause of breakage or malfunction is not apparent, the consumer can be expected to do by taking the goods to someone, usually or preferably the supplier, for inspection. In this context, therefore, a defect is not “apparent” until its cause has been identified and the buyer knows what has to be done to fix it, and what that will cost; in other words, until the buyer is in a position to determine whether the defect is substantial.34

The defects relied on by the Nesbits were the extensive rust and the problems with the steering box and the shock absorbers, which were latent at the time of supply, but which became apparent six months later at the time of the first mandatory warranty check on 19 January 1996. 32 See Sale of Goods Act 1923 (NSW), s 38(1). See the discussion in Sutton, Sales and Consumer Law (4th ed, LBC Information Services, 1995), at [7.38] and [20.3]. 33 Nesbit v Porter [2000] 2 NZLR 465. 34 Nesbit v Porter [2000] 2 NZLR 465 at [39].

684

The Australian Consumer Law

[15.60]

After considering the relevant factors in s 20(2) of the NZ CGA, the court concluded that the reasonable time for rejection was the middle of February.35 The court recognised that the NZ CGA imposed burdens on suppliers: In our view the motor vehicle dealer should generally be freed from the burden of having to accept rejection of a vehicle of this age and pedigree after the time for the next mandatory six-monthly warrant of fitness check has passed. If, at the latest, a defect of the kind found in the Navara has not manifested itself on such an inspection, it would be an unfair burden upon the supplier if a buyer of such a vehicle, which must be assumed to have been in daily use, sometimes in rough conditions, should thereafter be able to reject it.36

What constitutes a reasonable time for rejection also arose for consideration in another New Zealand case, Cooper v Ashley & Johnson Motors Ltd.37 On 12 June 1995 the plaintiff, Dr Cooper, visited the defendant’s premises and test-drove a 1989 Nissan Fairlady. He entered into a contract to purchase it for $41,000. According to the plaintiff, the vehicle was hard to start and was not running smoothly from his first day of ownership. Within three days the plaintiff complained to the defendant and was referred to a workshop, which diagnosed transmission problems and required repairs costing $2,000. The cost was paid by the defendant. After the repairs the plaintiff still experienced difficulty in starting the vehicle and it ran poorly when cold but satisfactorily when warm. In September the brake indicator lights showed a malfunction. The plaintiff paid $342 to have the malfunction repaired making no claim on the defendant. In November, the vehicle’s drive shaft failed and was repaired by the plaintiff for $510. In early December, the vehicle was not running well and spark plugs were replaced. Late in December, using another mechanic, it was found that the cam belt was very worn. It was replaced but the vehicle still ran roughly. The mechanic thought the vehicle had travelled 80,000 km rather than 40,000km. The plaintiff paid $586 for the repairs. The plaintiff told the defendant about the various faults and was asked if it was prepared to repair them. The defendant was not. The vehicle was taken back to the original repairer who cleaned the electrical injectors, replaced a water pump and fuel filter and installed a turbo boost. The vehicle still ran poorly. The plaintiff paid $893.82 for the repairs. The vehicle was again referred to that mechanic in April but no fault could be found. In early May, the plaintiff tried a third mechanic who could not solve the problems. The plaintiff paid that mechanic $757.87. The plaintiff telephoned the defendant to seek its assistance. It was not prepared to assist further. On 22 May 1996, the plaintiff wrote to the defendant purporting reject the vehicle, cancel the contract and took proceedings against the defendant. The plaintiff argued he was entitled to cancel the contract under the NZ CGA. The defendant contended that the plaintiff had retained the vehicle for too long to enable him to cancel the contract. Judge GV Hubble found that the vehicle supplied failed to comply with the guarantee of acceptable quality. At the time of supply it had substantial latent 35 Nesbit v Porter [2000] 2 NZLR 465 at [50]. 36 Nesbit v Porter [2000] 2 NZLR 465 at [48]. 37 Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170.

[15.65]

15 Remedies Relating to Guarantees

685

defects in that the transmission was faulty (it needed replacement within three or four days of purchase); the driveshaft couplings were in a seriously worn state and required replacement by 7 November; and the vehicle was starting poorly and running roughly, the reasons for which did not emerge until much later. A reasonable consumer fully acquainted with these defects would not regard the vehicle as acceptable. In this case the plaintiff’s position is strengthened further by the fact that there was an admitted representation that the vehicle was “a good one” and that the relatively low mileage indicated was correct “as far as the dealer was aware”. His Honour found that under s 20(2) of the NZ CGA (the NZ equivalent of s 262(2) of the ACL): Time will begin to run as soon as it can be said that the goods have a “substantial defect”, the substance of which is known by the consumer. I do not agree with Mr Holland that an understanding of the nature of the fault is irrelevant. Section 21(a) allows a consumer to become “fully acquainted with the nature and extent of the failure”. This “substantial defect” may either exist as a latent defect at the time of purchase or it may result because of an accumulation of more minor defects which in themselves could not be described as “substantial”.38

Furthermore, his Honour stated: In my view it is a continuing obligation of the supplier to provide a consumer with sufficient information on which to make that informed decision. In other words if a problem of a “substantial character” exists at the time of sale, the dealer is prima facie responsible for the diagnosis of that problem and to fully inform the purchaser accordingly. If the dealer abdicates that responsibility to the purchaser then he cannot be heard to complain in my opinion if the purchaser takes a long time to carry out the diagnosis himself.39

The court concluded that in relation to the Nissan vehicle: it is not entirely clear that the problem has yet been diagnosed even at the date of hearing. Last minute investigations by both parties and their mechanics have now come up with some plausible theories which will clearly require substantial work on a number of functions in the engine. The plaintiff even now cannot be said to be fully informed in the nature of the problem. In my judgment therefore his election to reject or claim compensation remains open.40

Keeping the goods

[15.65]

As an alternative to rejection, s 259(3)(b) of the ACL provides that the consumer is entitled to keep the goods but ask for compensation to make up the difference in value caused by the failure. The damages recoverable against a supplier are the reduction in value caused to the goods below the price paid or payable by the consumer of the goods. For example, if consumer bought goods for $30, the goods are worth only $10 due to the failure to meet a consumer guarantee. The supplier must pay the consumer

38 Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170 at [32]-[33]. 39 Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170 at [34]. 40 Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170 at [36].

686

The Australian Consumer Law

[15.70]

$20. In some cases where the fault is serious, it may mean that the goods have no value and the full price paid is recovered. Damages for consequential loss against supplier of goods

[15.70]

Section 259(4) of the ACL provides:

The consumer may, by action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee, if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure.

The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 states: If a consumer suffers losses as a result of a failure of a supplier to comply with guarantees, the consumer can recover those losses from the supplier. This type of loss is often known as “consequential loss”. The losses that are recoverable are limited to those that are “reasonably foreseeable” to result from the failure. In other words, the consumer can recover all those losses that are a probable consequence of the failure. An example is water damage to a carpet that is a result of a failure of a washing machine to be of acceptable quality.41

Section 259(5) of the ACL provides that a consumer cannot recover consequential losses from a supplier if they were caused by something independent of human control that occurred after the goods left the control of the supplier. Thus, the supplier will not be liable for losses unrelated to their own conduct. The same issues regarding the appropriate measure of damages, causation and remoteness considered in relation to ss 236 and 237 of the ACL arise in relation to claims for consequential losses under ss 259(4) and 267(4) of the ACL. The consumer must be able to prove on the balance of probabilities that the loss or damage arose “because of” the failure to comply with the guarantee. First, the statutory measure of damages for a breach of a guarantee is the loss or damage that was “reasonably foreseeable”. The choice of “reasonably foreseeable” (the measure of damage in tort) appears to signify a rejection of the measure of damage in contract.42 It is likely that the tort measure will be applied in relation to s 259(4) of the ACL. Under the tort measure a plaintiff will be entitled to any consequential losses directly flowing from the failure to comply with the relevant consumer guarantee. The immediate and direct consequential losses caused by the respondent’s conduct will depend upon evidence of causation. In order to make out a cause of action against the supplier based on s 259(4) of the ACL for a failure to comply with one of the consumer guarantees in relation to goods, the following matters need to be determined: • whether the supplier has failed to comply with the relevant guarantee, for example, as to acceptable quality or fitness for purpose; • whether loss or damage has been suffered by the consumer; 41 Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 at [7.95]. 42 See [14.40].

[15.70]

15 Remedies Relating to Guarantees

687

• whether that loss or damage was “as a result of” the failure to comply with the guarantee; and • whether it was “reasonably foreseeable” that the consumer would suffer such loss or damage. In relation to motor vehicles that do not comply with guarantees that goods are of acceptable quality43 or fitness for any disclosed purpose,44 a reasonably foreseeable loss recoverable under s 259(4) would be the cost of hiring a replacement vehicle while repairs were being performed on the motor vehicle acquired from the supplier, and loss of salary.45 It seems that damages for distress and inconvenience that is reasonably foreseeable from a failure to comply with a consumer guarantee may also be recoverable.46 However, the supplier will not be liable for losses that are not reasonably foreseeable. For example, if a consumer purchased a domestic oven for the purpose of baking bread for re-sale, and the oven developed a serious fault, the consumer could reject it and obtain a refund. However, the consumer would not be able to obtain damages for loss of earnings since these would not have been reasonably foreseeable. It seems that the loss or damage must have been reasonably foreseeable at the time when the contract for the supply of the goods was entered into, and the consumer is entitled to be fully compensated, and put into the position he or she would have been in if the goods supplied had complied with the guarantee. It is unclear whether such an action for consequential loss or damage would extend to cover “personal injury damages”, that is, damages or compensation for loss or damage that is, or results from the death of or personal injury to a person, as defined in CCA, s 87D. Part VIB of the CCA is meant to cover all claims for damages or compensation for death or personal injury under the ACL and it makes no mention of ACL, s 259(4). The causes of action that may be brought against a manufacturer are expressed as actions for damages. They clearly extend to cover “personal injury damages” as CCA, s 87E(1) expressly refers to proceedings taken under Div 2 of Pt 5-4 of the ACL. The equivalent provision in the NZ CGA is s 18(4) which provides: In addition to the remedies set out in subsection (2) and subsection (3) of this section, the consumer may obtain from the supplier damages for any loss or damage to the consumer resulting from the failure (other than loss or damage through reduction in value of the goods) which was reasonably foreseeable as liable to result from the failure.

The scope of s 18(4) and issues of causation and loss sharing arose in Contact Energy Ltd v Jones.47 Miller J held that the language of s 18(4) of the NZ CGA indicated that the court’s power to award the full loss was discretionary and carried with it the 43 ACL, s 54. 44 ACL, s 55. 45 See Adams v J & D’s Used Cars Ltd (1983) 26 Sask R 40. 46 See Hosking v The Warehouse Ltd (Unreported, District Court, Auckland NP 1476/97, 5 October 1998) and Auckland Property Restoration Ltd v Blackford (Unreported, District Court, Auckland NP 3852/97, 25 November 1998). See Tokeley, Consumer Law in New Zealand (Butterworths, Wellington, 2000), at [2.2.5]. 47 Contact Energy Ltd v Jones [2009] 2 NZLR 830.

688

The Australian Consumer Law

[15.75]

power to award less, taking into account the consumer’s contribution to the loss.48 His Honour held that the language of s 18(4) “evokes the common law, with its common sense approach to causation and remoteness”.49 In Alex Pordage t/as Pattisserie Fe Fi Fo v Chrystal & Co Pty Ltd t/as Caterlink,50 the applicant purchased a Skope three door freezer cabinet from the respondent supplier for use in the applicant’s catering business. The purchase price was $10,395. The installation cost was $2,134. The unit supplied was incorrectly labelled by the manufacturer leading the installer to fit the wrong compressor. A second larger compressor was fitted but the applicant continued to experience problems. The sliding action of the trays was producing metal shavings which were contaminating the food stored in the cabinet. The applicant gave evidence that contaminated food had to be thrown out to the value of $6,345. The Tribunal held that the failure to comply with the consumer guarantees of acceptable quality and fitness for disclosed purpose was a major failure because no reasonable consumer would have acquired the goods if they had known of the failures to comply with the consumer guarantees in this case. The Tribunal also found that the applicant was entitled to reject the goods and that the rejection period had not expired.51 The Tribunal held that, even though the goods were attached to the applicant’s premises, they could be removed without damage. The Tribunal further found that the goods could not be returned to the supplier without significant cost to the applicant and that the respondent had to collect the goods at the respondent’s expense.52 Duty to mitigate

[15.75]

It seems that although there is no reference to a duty to mitigate in ACL, s 259(4), applicants will be under a duty to mitigate their damages, and that a failure to do so will be taken into account in the final award.

In Pojzak v Congeo Nominees Pty Ltd,53 the consumer purchased a second-hand car from a dealer, Congeo. Congeo had replaced the car’s engine with a used engine bought from a wrecker. The engine failed because it was not fitted properly. On 26 March 2012 Mrs Pojzak rejected the car and sought a refund. After the car had been rejected it was placed in storage, incurring storage charges that were alleged to amount to $6,240. Mrs Pojzak claimed the storage charges as consequential damages under s 259(4) of the ACL. The Tribunal held that the consumer had a

48 Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [131]. 49 Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [133]. 50 Alex Pordage t/as Pattisserie Fe Fi Fo v Chrystal & Co Pty Ltd t/as Caterlink [2014] NSWCATCD 72. 51 Alex Pordage t/as Pattisserie Fe Fi Fo v Chrystal & Co Pty Ltd t/as Caterlink [2014] NSWCATCD 72 at [16]. 52 Alex Pordage t/as Pattisserie Fe Fi Fo v Chrystal & Co Pty Ltd t/as Caterlink [2014] NSWCATCD 72 at [17]. 53 Pojzak v Congeo Nominees Pty Ltd [2013] VCAT 2175.

[15.80]

15 Remedies Relating to Guarantees

689

duty to mitigate the damages, and that “[h]er damages should have been the cost of towing the car from Auto Star to her own property or that of Congeo; a few hundred dollars at most”.54

Remedies – not a major failure Repair by the supplier: optional or mandatory?

[15.80]

If the failure to comply with a guarantee can be remedied and is not a major failure, s 259(2)(a) of the ACL provides that the consumer “may” require the supplier to remedy the failure within a reasonable time. The use of “may” rather than “must” suggests that the consumer is not obliged to give the supplier the opportunity to make good the failure. Section 259(2)(b)(i) of the ACL provides that if the supplier refuses or fails to provide a remedy for the failure within a reasonable time, the consumer may have the failure remedied and recover the costs against the supplier, or notify the supplier that the consumer rejects the goods, and the ground or grounds for rejecting the goods. The right provided for in s 259(2)(b)(i) to have the failure remedied by a third party appears to be predicated on the consumer first giving the supplier the opportunity to make good the failure. Thus, the position is that the supplier must rectify the goods and if the supplier fails to do so, the consumer may rectify and recover the costs from the supplier. However, if the consumer has the goods repaired by a third party without first giving the supplier the opportunity to rectify the defect, the consumer will be denied the right to recover the third party costs from the supplier.

Persuasive authority for this construction of s 259(2) is provided by the interpretation s 18(2) of the NZ CGA (the equivalent of ACL, s 259(2)) in Acquired Holdings Ltd v Turvey.55 Mr Turvey purchased a Nissan Skyline for $15,000 from Acquired Holdings. Six months after the purchase, defects emerged in the vehicle’s gauges and onboard computer. Mr Turvey did not notify the supplier, but instead had the defects repaired by a third party at a cost of $4,299. In the District Court it was accepted by the parties that the defects could be remedied and were not substantial, and that Mr Turvey had not given Acquired Holdings the opportunity to repair them. The District Court held that Mr Turvey was entitled by s 18(4) of the NZ CGA to the cost of the repairs. Acquired Holdings appealed to the High Court which upheld the appeal. Winkelmann J stated: I consider that on a plain reading of s 18 in circumstances where the defect can be remedied and is not of a substantial character, the purchaser must follow the requirement in s 18(2) to allow the supplier an opportunity to remedy the failure within a reasonable time in accordance with the provisions of s 19. Although the first sentence in s 18(2) uses the word “may”, that word does not connote that the procedure in s 18(2) is optional in the sense that it is an option available to a consumer who wishes the supplier to remedy the failure but who may equally decide to recover the cost of repair under s 18(4). Rather the word “may” is used because two alternative remedies are set out in s 18(2), with the second self-help remedy in s 18(2)(b) exercisable only if the supplier refuses or fails to 54 Pojzak v Congeo Nominees Pty Ltd [2013] VCAT 2175 at [80]. 55 Acquired Holdings Ltd v Turvey (2008) 8 NZBLC 102,107.

690

The Australian Consumer Law

[15.85]

remedy the failure under s 18(2)(a). It is difficult to see the reason for the inclusion of the stepped procedure in s 18(2) and the related provisions in s 19 (which details how the supplier may meet its obligations under s 18(2)(a)) if the scheme set out there is purely optional.56

As regards the policy reasons that supported this interpretation, Winkelmann J stated: There are, as set out in Gault on Commercial Law, good reasons why s 18(2) should be interpreted to require a consumer to provide the supplier with an opportunity to repair or replace before commissioning such repairs him or herself (at CG 18.09): Where a consumer exercises rights under s 18(2), he or she is required to first give the supplier the opportunity to remedy the defect in the goods. As well as the practicality of this remedy, the supplier is able to assess whether the goods have been subjected to unreasonable use, whether the defect has caused the problem, and, in particular, to control the quality of the remedy, which would not necessarily be the case if repairs are carried out by an unauthorised repairer. The supplier is also in a better position than a third party repairer to negotiate its own remedy with the manufacturer. Section 19 sets out options for suppliers as to how defects are to be remedied. The policy underlying the Act is that suppliers of goods are liable not because of their own default, but because businesses and not consumers, should bear the risk where the goods and services they supply fail to comply with consumers’ reasonable expectations: Kerry Stone Ltd v Knowles (2006) 11 TCLR 768 at [44]. Given the burden this places on the supplier, it is only reasonable that the legislation requires the consumer to first allow the supplier to remedy the defects.57

What is “reasonable” time in which to remedy the failure will depend in part on the nature of the goods. According to Second Explanatory Memorandum, accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 a “reasonable time to remedy a problem with essential goods such as hot water systems would be much shorter than discretionary goods such as a games console”.58 Remedies provided at the supplier’s option

[15.85]

If the failure to comply is not major s 261 provides that the supplier may choose between: (a) if the failure relates to title – by curing any defect in title; or (b) if the failure does not relate to title – by repairing the goods; or (c) by replacing the goods with goods of an identical type; or (d) by refunding: (i) any money paid by the consumer for the goods; and (ii) any amount that is equal to the value of any other consideration provided by the consumer for the goods.

56 Acquired Holdings Ltd v Turvey (2008) 8 NZBLC 102,107 at [11]. 57 Acquired Holdings Ltd v Turvey (2008) 8 NZBLC 102,107 at [13]-[14]. 58 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 at [7.92].

[15.90]

15 Remedies Relating to Guarantees

691

In TPS Developments Pty Ltd v Chef’s Hat Australia Pty Ltd,59 TPS, which operated a restaurant, purchased a commercial dishwasher from Chef’s Hat, a retailer. The purchase price was $4,900. The dishwasher was “new”, but its manufacturer had used is as a display unit in two food catering “Expos”. It had not been operated, but merely put on display. Chef’s Hat purchased it from the manufacturer at a discounted price. TPS claimed that the dishwasher was not of acceptable quality because it had required five service calls in 15 months. The repairs had been carried out by the manufacturer under warranty at no cost to TPS. The Tribunal held that the dishwasher was not of acceptable quality, because it was not free from defects or durable. A commercial dishwasher does not meet the requirement of being acceptable by merely operating properly in the first few weeks.60 However, the failure to comply was not a major failure and that accordingly s 261 applied: Chef’s Hat is entitled to repair the dishwasher, and it has affected the repairs by arranging for the manufacturer to do so under its warranty. Whilst s 261 is prefaced by the concept of the consumer requiring a supplier to remedy a failure to comply with a consumer guarantee, the section says that the “supplier may comply with the requirement” in a number of ways. The section does not dictate which method is to predominate, but there is a logic in reading statutory provisions in order. “Repairing the goods” is stated before the other methods. The section empowers the supplier to choose the method of remedying the breach, in the sense that the supplier would take the initiative in saying how it would do so, and once it took that action the consumer would be unable to insist on another method.61

Replacement restarts consumer guarantees [15.90]

If the supplier replaces the rejected goods pursuant to s 261(c), the same guarantees are then applicable to the replaced goods as applied to the goods originally supplied. Section 264 provides: If the goods are replaced under section 261(c) or 263(4)(b): (a) the replacement goods are taken, for the purposes of Division 1of Part 3-2 and this Part, to be supplied by the supplier; and (b) the provisions of Division 1 of Part 3-2 and this Part apply in relation to the replacement goods.

The following example is provided by the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010: due to a major failure six months after its purchase, the guarantees that apply would be exactly the same as would apply to a new mobile telephone. It is not the case that, for

59 TPS Developments Pty Ltd v Chef’s Hat Australia Pty Ltd [2013] VCAT 731. 60 TPS Developments Pty Ltd v Chef’s Hat Australia Pty Ltd [2013] VCAT 731 at [18]. 61 TPS Developments Pty Ltd v Chef’s Hat Australia Pty Ltd [2013] VCAT 731 at [21].

692

The Australian Consumer Law

[15.95]

example, the guarantee as to acceptable quality would extend for six months less than would apply to a new mobile telephone because the consumer had the use of the original telephone for six months.62

Technically, s 264 only applies to goods that are replaced by the supplier (not the manufacturer). However, while the ACL does not expressly state that the consumer guarantees also apply to the replacement products provided by a manufacturer, this is likely to be the case because the guarantees are expressed to apply in very general terms.

Refund [15.95]

As an alternative to repairing or replacing the goods, the supplier is entitled to refund any money paid by the consumer for the goods, or refund an amount equal to the value of any other consideration provided by the consumer for the goods.

Damages for reasonably foreseeable consequential loss [15.100] Section 259(4) provides that in addition to the remedy which the supplier elects to provide under s 261 of the ACL, the consumer has a cause of action to recover any reasonably foreseeable consequential loss resulting from the failure to comply with the guarantee. The issues surrounding a claim for reasonably foreseeable consequential loss are considered at [15.70] in relation to a major failure. Section 259(6) provides that for the avoidance of doubt the cause of action for reasonable foreseeable consequential loss or damage under s 259(4) applies in cases where the failure is not major under s 259(2), and cases where the failure is major under s 259(3).

Consequential loss: causation and loss sharing [15.105] The equivalent provision to s 259(4) of the ACL in the NZ CGA is s 18(4) which provides: In addition to the remedies set out in subsection (2) and subsection (3) of this section, the consumer may obtain from the supplier damages for any loss or damage to the consumer resulting from the failure (other than loss or damage through reduction in value of the goods) which was reasonably foreseeable as liable to result from the failure.

The scope of s 18(4) and issues of causation and loss sharing arose in Contact Energy Ltd v Jones.63 Miller J held that the language of s 18(4) of the NZ CGA indicated that the court’s power to award the full loss was discretionary and carried with it the power to award less, taking into account the consumer’s contribution to the loss.64 62 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, Example 7.10. 63 Contact Energy Ltd v Jones [2009] 2 NZLR 830. 64 Contact Energy Ltd v Jones [2009] 2 NZLR 830 [131] by analogy with the Court of Appeal’s ruling in Goldsbro v Walker [1993] 1 NZLR 394 where in relation to the Fair Trading Act 1986 (NZ) Hardie Boys J held (at 406) that the power to order payment of the entire loss encompasses a discretion to award less taking into account the plaintiff’s contribution to the loss.

[15.110]

15 Remedies Relating to Guarantees

693

His Honour held that the language of s 18(4) “evokes the common law, with its commonsense approach to causation and remoteness”.65 Miller J accepted that electricity retailing differed from other goods in that the retailer was not able to prevent or manage defects and that the consumer may be able to manage defects by installing surge devices.66 Nevertheless, the consumer was entitled to recover the full amount of the loss unless the retailer could establish that it was more likely than not that surge equipment would have avoided the loss.67

PART II: REMEDIES AGAINST MANUFACTURERS OF GOODS Introduction [15.110] Section 271 of the ACL provides for four separate causes of action against the manufacturer: • • • •

non-compliance non-compliance non-compliance non-compliance

with with with with

the the the the

guarantee of acceptable quality; description guarantee; guarantee as to repair and spare parts; and guarantee as to express warranties.

Section 271(1) of the ACL provides: If: 1 a guarantee under s 54 applies to a supply of goods to a consumer; and 2 the guarantee is not complied with; an affected person in relation to the goods, may by action against the manufacturer of the goods, recover damages.

Section 271(3) of the ACL provides: If: (a) a person supplies, in trade or commerce, goods by description to a consumer; and (b) the description was applied to the goods by or on behalf of the manufacturer of the goods, or with express or implied consent of the manufacturer; and (c) the guarantee under section 56 applies to the supply and it is not complied with; an affected person in relation to the goods may, by action against the manufacturer of the goods, recover damages from the manufacturer.

Section 271(5) of the ACL provides: If: (a) the guarantee under section 58 [guarantee as to repairs and spare parts] or 59(1) [guarantees as to express warranties] applies to a supply of goods to a consumer; and (b) the guarantee is not complied with; an affected person in relation to the goods may, by action against the manufacturer of the goods, recover damages from the manufacturer. 65 Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [133]. 66 Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [136]. 67 Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [137].

694

The Australian Consumer Law

[15.115]

There is no cause of action against the manufacturer for breach of the guarantee as to a disclosed purpose in s 55 of the ACL. The policy reason for this may be the consumer guarantees law is a “loss allocation mechanism” that attempts to strike a balance between the manufacturer, the supplier and the consumer.68 It is not intended to provide the consumer with an indemnity against all of the consequences of all defects in goods or faulty services. It may be that it was not thought appropriate to hold the manufacturer liable for a purpose disclosed to the supplier, but not to the manufacturer in circumstances where the manufacturer never intended that the goods would be fit for that disclosed purpose.

Who may bring the cause of action against the manufacturer? [15.115] The cause of action against the manufacturer under s 271 can be brought by an “affected person”. The term “affected person” is defined in s 2(1) of the ACL: in relation to goods, means: (a) a consumer who acquires the goods; or (b) a person who acquires the goods from the consumer (other than for the purpose of re-supply); or (c) a person who derives title to the goods through or under the consumer.

The range of persons who may bring a cause of action against the manufacturer is broader than the range of persons who may bring a cause of action against the supplier. The only person who may bring a cause of action against the supplier is a “consumer” as defined in s 3 of the ACL. However, the persons who may bring a cause of action against the manufacturer include not only a consumer, but also a person who “acquires the goods from a consumer”, and a person who “derives title to the goods through or under the consumers”. What is the significance of the use of the words “derives title” in para (c) rather than “acquires title”? While the word “acquire” as defined in s 2(1) of the ACL appears to be limited to acquisition pursuant to some transaction by way of purchase, exchange, lease hire or hire-purchase, and the goods are acquired by payment of some form of consideration. This would exclude acquisition by way of gift. The word “derives” is not defined in the ACL, and is to be given its ordinary meaning. According to the Macquarie Dictionary, the meaning of the word “derive” is “to receive, obtain, take or trace”. Thus, a third party who derives title to the goods without paying any consideration and suffers loss would fall within the definition of “an affected person”. There is no need for s 266 of the ACL to extend the right of action against the manufacturer under s 271 to the recipients of gifts. The recipient of a gift from a consumer is included within the definition of an “affected person” as they derive title to the goods through the consumer.

Exceptions to right of redress against the manufacturer of goods [15.120] Section 271(2) of the ACL provides that there shall be no right of redress against the manufacturer in respect of goods which do not comply with the guarantee of acceptable quality only because of: 68 See [8.55].

[15.125]

15 Remedies Relating to Guarantees

695

• an act, default or omission of, or any representation made by, any person other than the manufacturer or an employee or agent of the manufacturer; or • a cause independent of human control, that occurred after the goods left the control of the manufacturer; or • the fact that the price charged by the supplier was higher than the manufacturer’s recommended retail price, or the average retail price, for the goods. The equivalent provision of the NZ CGA (NZ) is s 26. Section 271(4) of the ACL provides a further exception which relates to non-compliance with the description guarantee (ACL, s 56). It provides: (4) Subsection (3) does not apply if the guarantee under section 56 is not complied with only because of: (i) an act, default or omission of any person other than the manufacturer or an employee or agent of the manufacturer; or (ii) a cause independent of human control that occurred after the goods left the control of the manufacturer.

Once again the words “only because of” are critical: the other person’s failure must be the sole cause of the failure.

Damages that may be recovered against the manufacturer [15.125] Section 272(1)(a) of the ACL provides that the damages recoverable against a manufacturer of goods is the reduction in value caused to the goods below whichever of the following prices is the lower: (a) the price paid or payable by the consumer of the goods; or (b) the average retail price of the goods at the time of supply. The following example is provided at [8.9] of the “ACL Guide on Consumer Guarantees”: A consumer bought goods for $30. The average retail price at the time was $28. The goods are worth only $10 due to the failure to meet a consumer guarantee. The manufacturer must pay the consumer $18.

In some cases where the fault is serious, it may mean that the goods have no value and the full price paid is recovered. Manufacturers generally prefer to repair or replace faulty goods rather than pay damages. Section 271(6) of the ACL provides that if a manufacturer provides an express warranty, and the consumer has required the manufacturer to remedy a failure to comply with a guarantee of acceptable quality by repairing or replacing the goods, the consumer is not entitled to commence an action for damages under s 272(1)(a), unless the manufacturer has refused or failed to remedy the failure, or has failed to remedy the fault within a reasonable time. Thus, unless manufacturers provide an express warranty specifying that they will remedy a fault by repair or replacement of the goods, they could be obliged to pay monetary damages if a consumer guarantee of acceptable quality applies.

696

The Australian Consumer Law

[15.130]

Damages for consequential loss against manufacturer of goods [15.130] Section 272(1)(b) of the ACL provides that the damages payable by a manufacturer to a consumer include losses that were “reasonably foreseeable” as a result of the failure. See [15.70]. Limits on damages for personal injury and death [15.135] Part VIB of the CCA regulates awards of damages under ACL, ss 271 and 272 for a failure by a manufacturer of goods to comply with a consumer guarantee pursuant to Pt 5-4 Div 2. See CCA, s 87E(1). Part VIB of the CCA is meant to cover all claims for damages or compensation for death or personal injury under the ACL. The causes of action that may be brought against a manufacturer are expressed as actions for damages. They clearly extend to cover “personal injury damages” as CCA, s 87E(1) expressly refers to proceedings taken under Div 2 of Pt 5-4 of the ACL.

Indemnification of suppliers by manufacturers of goods [15.140] The consumer guarantees law recognises that in some circumstances it would be unreasonable to make the supplier jointly liable with the manufacturer. This is because it is the manufacturer who is responsible for putting the unsuitable or defective goods into circulation and it is the manufacturer who is responsible for packaging and labelling which describe the goods. In such circumstances, where the consumer elects to seek redress from the supplier, the supplier can be indemnified by the manufacturer pursuant to s 274. Section 274 of the ACL provides: 1) A manufacturer of goods is liable to indemnify a person (the supplier) who supplies the goods to a consumer if: a) the supplier is liable to pay damages under section 259(4) to the consumer for loss or damage suffered by the consumer; and b) the manufacturer is or would be liable under section 271 to pay damages to the consumer for the same loss or damage. 2) Without limiting subsection (1), a manufacturer of goods is liable to indemnify a person (the supplier) who supplies the goods to a consumer if: a) the supplier incurs costs because the supplier is liable under this Part for a failure to comply with a guarantee that applies to the supply under Subdivision A of Division 1 of Part 3-2; and b) the failure is: c) a failure to comply with the guarantee under section 54; or d) a failure to comply with the guarantee under section 55 in relation to a disclosed purpose that the consumer made known to the manufacturer either directly or through the supplier or the person referred to in section 55(2)(a)(ii); or e) a failure to comply with the guarantee under section 56 in relation to a description that was applied to the goods by or on behalf of the manufacturer of the goods, or with the express or implied consent of the manufacturer. 3) The supplier may, with respect to the manufacturer’s liability to indemnify the supplier, commence an action against the manufacturer in a court of competent jurisdiction for such legal or equitable relief as the supplier could have obtained if that liability had arisen under a contract of indemnity made between them.

[15.145]

15 Remedies Relating to Guarantees

697

Section 274(1) provides that if the consumer sues the supplier and the supplier is liable to pay consequential damages under s 259(4), and the manufacturer would be liable to the consumer under s 271, for failure to comply with the guarantee as to acceptable quality under s 54, the manufacturer is liable to indemnify the supplier as if a contract of indemnity had been made between them in relation to those consequential damages. Section 274(2) provides that the manufacturer is additionally liable to indemnify the supplier for any costs incurred by the supplier, including replacing or repairing the goods, because of the supplier’s liability arose from a failure to comply with: (i) the guarantee of acceptable quality under s 54 (for which the manufacturer will be responsible); or (ii) the guarantee as to fitness for purpose under s 55, but only in relation to a purpose disclosed to the manufacturer; or (iii) the guarantee as to compliance with description under s 56, but only for a description applied by or on behalf of the manufacturer.

PART III: REMEDIES AGAINST SUPPLIERS OF SERVICES Introduction [15.145] Section 267 of the ACL establishes a hierarchy of remedies under which the supplier of the services is given the opportunity to remedy the failure to comply with the guarantee within a reasonable time where it is capable of being remedied. If the guarantee cannot be remedied or is a major failure, the consumer may terminate the contract; or obtain damages in compensation for any reduction in the value of the services below the price paid or payable by the consumer of the services. Section 267 provides for four separate causes of action. The consumer may take action against the supplier of services for: • non-compliance with the guarantee of due care and skill;69 • non-compliance with the guarantee as to fitness for a particular purpose;70 • non-compliance with the guarantee that services will achieve the desired result;71 and • non-compliance with the guarantee as to reasonable time for supply.72 Section 267 of the ACL provides: (1) a consumer may take action under this section if: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and (b) a guarantee that applies to the supply under Subdivision B of Division 1 of Part 3-2 is not complied with; and (c) unless the guarantee is the guarantee under section 60 – the failure to comply with the guarantee did not occur only because of: 69 ACL, s 60. See [9.75]–[9.90]. 70 ACL, s 61(1). See [9.95]–[9.105]. 71 ACL, s 61(2). See [9.110]. 72 ACL, s 62. See [9.115].

698

The Australian Consumer Law

[15.150]

(i) an act, default or omission of, or a representation made by, any person other than the supplier, or an agent or employee of the supplier; or (ii) a cause independent of human control that occurred after the service were supplied. (2) If the failure to comply with the guarantee can be remedied and is not a major failure: (a) the consumer may require the supplier to remedy the failure within a reasonable time; or (b) if such a requirement is made of the supplier but the supplier refuses or fails to comply with the requirement, or fails to comply with the requirement within a reasonable time – the consumer may: (i) otherwise have the failure remedied and, by action against the supplier, recover al reasonable costs incurred by the consumer in having the failure remedied; or (ii) terminate the contract for the supply of the services. (3) If the failure to comply with the guarantee cannot be remedied or is a major failure, the consumer may: (a) terminate the contract for the supply of the services; or (b) by action against the supplier, recover compensation for any reduction in the value of the services below the price paid or payable by the consumer for the services. (4) The consumer may, by action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee if it was reasonably foreseeable that the consumer would suffer such loss as a result of such a failure. (5) To avoid doubt, subsection (4) applies in addition to subsections (2) and (3).

The ACL classifies failures into those that are major and those that are not major.

What is a major failure? [15.150] Section 268 of the ACL sets out a number of alternative tests that need to be satisfied that are not entirely clear. Section 268 provides that a failure is major if: A failure to comply with a guarantee referred to in section 267(1)(b) that applies to a supply of services is a major failure if: (a) the services would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or (b) the services are substantially unfit for a purpose for which services of the same kind are commonly supplied and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or (c) both of the following apply: (i) the services, and any product resulting from the services, are unfit for a particular purpose for which the services were acquired by the consumer that was made known to the supplier of the services; (ii) the services, and any of those products, cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or (d) both of the following apply: (i) the services, and any product resulting from the services, are not of such a nature, or quality, state or condition, that they might reasonably be expected to achieve a result desired by the consumer that was made known to the supplier;

[15.170]

15 Remedies Relating to Guarantees

699

(ii) the services, and any of those products, cannot, easily and within a reasonable time, be remedied to achieve such a result; or (e) the supply of the services creates an unsafe situation.

Services would not have been acquired by a reasonable consumer

[15.155] In relation to s 268(a) of the ACL, the matters that a reasonable consumer would take into account include: • how soon the fault developed after supply: the shorter the time the more serious the fault; • the price of the services: the more expensive the services, the less acceptable is any fault; • any representations made about the services by the supplier either orally or in the advertising; • any other faults with the services: a number of small faults may not be serious, but their cumulative effect may be major. Services are substantially unfit for normal purpose

[15.160] Section 268(b) of the ACL provides that a failure to comply with a guarantee is major if the services are substantially unfit for their normal purpose and cannot easily be remedied to make them fit for purpose within a reasonable time. In deciding whether the failure is major, it is necessary to have regard to “the nature and extent” of the failure, and to have regard to compliance with the fitness for purpose, whether the services can be remedied within a reasonable time, and how serious the failure is in relation to the contract as a whole. The “ACL Guide on Consumer Guarantees” provides the following example (p 21): the services are substantially unfit for their normal purpose and cannot easily be made fit, within a reasonable time. For example, a carpet-cleaning service changes the colour of the consumer’s carpet in some places.

Services are substantially unfit for a special purpose

[15.165] Section 268(c) of the ACL provides that a failure to comply with a guarantee is major if the services are substantially unfit for a particular purpose that the consumer told the supplier about, and cannot easily be made fit within a reasonable time. In deciding whether the failure is major it is necessary to have regard to “the nature and extent” of the failure, and to have regard to compliance with fitness for purpose, whether the goods can be remedied within a reasonable time, and how serious the failure is in relation to the contract as a whole. Services not expected to achieve desired result

[15.170] Section 268(d) of the ACL provides that a failure to comply with a guarantee is major if the services are not of such a nature, or quality, state or condition that they might reasonably be expected to achieve a result desired by the consumer that was made known to the supplier, and they cannot be remedied to achieve such a result within a reasonable time.

700

The Australian Consumer Law

[15.175]

Supply creates unsafe situation

[15.175] Section 268(e) of the ACL provides that a failure to comply with a guarantee is major if the supply of the services creates an unsafe situation. Safety is to be assessed in a relative sense for the purpose of s 268(e) of the ACL, so that in relation to lowly priced services, the consumer must accept some minor level of risk without there being a major failure to comply with the guarantee of due care and skill. However, even in the case of lowly priced services, if they create a dangerous situation, such as incorrectly wiring a kitchen appliance, this will constitute a major failure to comply with the guarantee of due care and skill. Remedies – not a major failure [15.180] If the failure to comply with a guarantee can be remedied and is not a major failure, s 267(2) of the ACL provides the consumer may require the supplier to remedy the failure within a reasonable time. The consumer must give the supplier who provided the service the opportunity to fix the problem at no cost to the consumer. If the supplier refuses, or fails to remedy the failure within a reasonable time, the consumer has two choices: (1) have the failure remedied and recover the costs from the first supplier; or (2) terminate the contract for the supply of services and refuse to pay for the services supplied. Section 269(2)(a) provides that if the consumer terminates, the termination takes effect at the time the termination is made known to the supplier. Where the consumer has difficulty contacting the supplier, s 269(2)(b) provides that the termination takes effect at the time the consumer indicates “by means which are reasonable in the circumstances, his or her intention to terminate the contract.” According to the Second Explanatory Memorandum, “An example of this type of termination might involve the consumer sending a letter to the supplier’s last known address.”73

Remedies – major failure [15.185] When a consumer makes a contract for the supply of services, the consumer is under an obligation to pay the contract price; however, the consumer will be relieved of this obligation where the consumer exercises a statutory right to terminate. Section 267(3) of the ACL provides that if the failure is major or cannot be remedied, the consumer (not the supplier) has a choice. The consumer may: • terminate the contract for the supply of services; or • recover compensation from the supplier to make up any reduction in value of the services caused by the failure. For example, if the consumer elects to terminate for breach of the consumer guarantee imposed by s 60 to exercise due care and skill, the contract is discharged 73 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.113].

[15.205]

15 Remedies Relating to Guarantees

701

and the consumer is discharged from further performance. If the consumer has already paid the supplier, the consumer will be able to recover compensation. The amount of the compensation will depend on whether some aspect of the service was satisfactory. The consumer may also be able claim damages for consequential loss.

Exceptions to right of redress against the supplier of services [15.190] Section 267(1)(c) of the ACL provides two exceptions to the consumer’s right of redress against the supplier for failure to comply with the guarantee of fitness for purpose or desired result (ACL, s 61), and the guarantee of supply within a reasonable time (ACL, s 62), but not the guarantee of due care and skill (ACL, s 60). Section 267(1)(c) provides: A consumer may take action under this section if: … (c) unless the guarantee is the guarantee under section 60 – the failure to comply with the guarantee did not occur only because of: (i) an act, default or omission of, or a representation made by, any person other than the supplier, or an agent or employee of the supplier; or (ii) a cause independent of human control that occurred after the service were supplied.

Carve out for guarantee of due care and skill

[15.195] The opening words in s 267(1)(c) of the ACL carve out the guarantee of due care and skill in s 60 of the ACL from the exclusion. First exclusion: acts, defaults, omissions or representations made by third parties

[15.200] Section 267(1) of the ACL is drafted positively. The opening words are: “A consumer may take action under this section … against a person (the supplier)”. The section then sets out the circumstances in which the consumer may bring an action against the supplier. Section 267(1)(c)(i) deals with the situation where there is a third party involved and that third party’s conduct may have been a contributory cause of the breach. In such circumstances, where the breach did not occur only because of an act, default or omission of, or a representation made by a third party, and the supplier was partly responsible for the breach, the consumer will have a cause of action against the supplier. Where, however, the breach occurred only because of an act, default or omission of, or a representation made by a third party, the consumer will not have a cause of action against the supplier. Second exclusion: causes independent of human control

[15.205] The second exception is where the failure to comply with the guarantee of fitness for purpose or achieving a desired result or completion within a reasonable time is due to a cause independent of human control occurring after the services were supplied in which case the fault will not be attributed to the supplier.

702

The Australian Consumer Law

[15.210]

The exclusion is narrower than its New Zealand counterpart in s 33(b) of the NZ CGA which applies to a cause independent of human control whenever it occurs, rather than being limited to causes after the services were supplied. Damages for consequential loss against supplier of services

[15.210] Section 267(4) of the ACL provides that the consumer may bring an action against the supplier to recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee, including losses that were “reasonably foreseeable” as a result of the failure. See [15.70]. The Explanatory Memorandum to the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 states: If a consumer suffers losses as a result of a failure of a supplier of services to comply with guarantees, the consumer can recover those losses from the supplier. This type of loss is often known as “consequential loss”. The losses that are recoverable are limited to those that are “reasonably foreseeable” to result from the failure. In other words, the consumer can recover all those losses that are a probable consequence of the failure. An example of this type of loss is a house fire caused by incorrect installation of electric lighting in the house of a consumer.74

PART IV: RIGHTS AND REMEDIES AGAINST LINKED CREDIT PROVIDERS Introduction [15.215] The repealed s 73 of the TPA contained a detailed set of provisions dealing with the allocation of liability in cases in which one corporation (the “supplier”) supplied goods to a credit provider which, in turn, supplied those goods to a consumer. In broad outline, it provided that where a consumer suffered loss through the breach of a term implied by the TPA: • the supplier and the credit provider were jointly and severally liable to the consumer where the supplier and credit provider were “linked”; • only the supplier was liable to the consumer where it was not linked to the credit provider and the latter did not take possession of the goods. Joint liability meant that the consumer could seek a remedy from either the supplier or the lender in the event of a breach of one of the implied terms, and protected consumers in the event of the insolvency of the supplier or the lender. Part 5-5 of the ACL now makes suppliers of goods and services and a person providing certain types of connected finance jointly liable for certain breaches of contract in relation to either the contract of sale or the linked credit contract.

Joint liability [15.220] Part 5-5 of the ACL now makes suppliers of goods and services and a person providing certain types of connected finance jointly liable for certain 74 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.114].

[15.225]

15 Remedies Relating to Guarantees

703

breaches of contract in relation to either the contract of sale or the linked credit contract. While s 131A(1) of the CCA provides that the ACL does not apply to the supply, or possible supply of financial services or of financial products, an exception is made for Pt 5-5 of the ACL. Section 278(1) provides: (1) If a consumer who is a party to a linked credit contract suffers loss or damage as a result of: (a) a misrepresentation relating to the credit provided under that linked credit contract, or to a supply of goods or services (a related supply) to which that contract relates; or (b) a breach of the linked credit contract, or of a contract for a related supply; or (c) the failure of consideration in relation to the linked credit contract, or to a contract for a related supply; or (d) a failure to comply with a guarantee that applies, under section 54, 55, 56, 57, 60, 61 or 62, in relation to a related supply; or (e) a breach of a warranty that is implied in the linked credit contract by section 12ED of the Australian Securities and Investments Commission Act 2001; the linked credit provider who is a party to the contract, and the supplier of a related supply, are jointly and severally liable to the consumer for the amount of the loss or damage.

Section 278(2) of the ACL defines a “linked credit contract” to mean: a contract that a consumer enters into with a linked credit provider of a person (the supplier) for the provision of credit in relation to: (a) the supply by way of sale, lease, hire or hire-purchase of goods to the consumer by the linked credit provider where the supplier supplies the goods, or causes the goods to be supplied, to the linked credit provider; or (b) the supply by the supplier of goods or services, or goods and services, to the consumer.

The term “linked credit provider” is defined in s 2 to mean: in relation to a supplier of goods or services, means a credit provider: (3) with whom the supplier has a contract, arrangement or understanding relating to: (i) the supply to the supplier of goods in which the supplier deals; or (ii) the business carried on by the supplier of supplying goods or services; or (iii) the provision to persons to whom goods or services are supplied by the supplier of credit in respect of payment for those goods or services; or (4) to whom the supplier, by arrangement with the credit provider, regularly refers persons for the purpose of obtaining credit; or (5) whose forms of contract, forms of application or offers for credit are, by arrangement with the credit provider, made available to persons by the supplier; or (6) with whom the supplier has a contract, arrangement or understanding under which contracts, applications or offers for credit from the credit provider may be signed by persons at premises of the supplier.

[15.225] Section 278(1) is concerned with the situation where a supplier furnishes goods or services to the consumer and the linked credit provider supplies credit in relation to that transaction. It is not concerned with a situation where the

704

The Australian Consumer Law

[15.225]

supplier furnishes goods to the linked credit provider and the latter enters into a contract with the consumer for the supply of goods and the supply of credit. The essential requirement is that there is a pre-existing link between the supplier and the credit provider whereby the supplier assists or facilitates the provision of credit in relation to goods or services supplied by the supplier to a consumer. That link can take one of four different forms: 1. a contract, arrangement or understanding between the credit provider and the supplier of the goods or services relating to the provision of credit in respect of payment of the goods or services; or 2. an arrangement under which the supplier regularly refers its customers to the credit provider; or 3. an arrangement under which the supplier makes available to its customers the loan application forms of the credit provider; or 4. a contract, arrangement or understanding between the credit provider and the supplier under which applications for credit and contracts may be signed at the premises of the supplier. The words “contract, arrangement or understanding” are not defined in the ACL or the CCA. They appear in Pt IV Div 1 and 2 of the CCA, and have been the subject of much judicial consideration. They embrace a “spectrum of consensual dealings”.75 While the word “contract” should be given its ordinary common law meaning, the words “arrangement” and “understanding” are intended to catch transactions or dealings which are less formal and may not give rise to a legally binding contract.76 However, what is required is some form of communication between two or more parties to the arrangement or understanding and some level of commitment that at least one of them will act in a certain way.77 In Business Professional Leasing Pty Ltd v Dannawi,78 Young CJ in Equity held that an “arrangement or understanding” between the linked credit provider and the supplier can be inferred from the surrounding circumstances. It could be inferred even though applications for finance were channelled through a third party and even though that third party sometimes directed applications to other financiers. It depended on the closeness of the relationship between the particular parties.79 The purpose of establishing this link is to ensure that “the credit supplier is sufficiently involved in the transaction so as to justify joint and several liability with the supplier”.80 Where that link is established both the supplier and the linked credit provider are jointly responsible for loss suffered by the consumer as a result of: 75 ACCC v Leahy Petroleum Pty Ltd (2007) 160 FCR 321 at [24] (Gray J). 76 For a consideration of the case law construing the terms “arrangement” and “understanding” in the context of Divs 1 and 2 of Pt IV of the CCA, see Corones, Competition Law in Australia (Lawbook Co, Sydney, 2010), pp 271-80. 77 Apco Service Stations Pty Ltd v ACCC (2005) ATPR ¶42-078 at [44]-[45]. 78 Business Professional Leasing Pty Ltd v Dannawi [2008] NSWSC 902. 79 Business Professional Leasing Pty Ltd v Dannawi [2008] NSWSC 902 at [169]. 80 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [20.12].

[15.235]

15 Remedies Relating to Guarantees

705

• • • •

misrepresentation; breach of contract; failure of consideration; failure to comply with a consumer guarantee (in relation to goods: acceptable quality, fitness for purpose, correspondence with description, correspondence with sample; and in relation to services: due care and skill, fitness of purpose, and reasonable time of supply); or • a breach of warranty under s 12ED of the ASIC Act.

Action to be taken jointly [15.230] Where a supplier and a linked credit provider are jointly responsible, an action must be taken jointly in a court of competent jurisdiction unless the supplier is dissolved or winding up proceedings have been commenced.81 Exceptions where linked credit supplier is not liable [15.235] Section 280 provides for the following specific exceptions where a linked credit provider will not be liable to a consumer under s 278 of the ACL. First, if the linked credit provider establishes that the credit provided was the result of an approach made to the credit provider by the consumer, and the approach was not induced by the supplier.82 Secondly, if the linked credit provider establishes that before becoming a linked credit provider of the supplier the credit provider made “due inquiry” to satisfy itself that the supplier’s financial standing and business conduct was “good”, and after becoming a linked credit provider had no cause to suspect that the supplier might not be able to meet the supplier’s liabilities as and when they fell due.83 Thirdly, if the linked credit provider establishes that before becoming a linked credit provider of the supplier: • the credit provider made “due inquiry” to satisfy itself that the supplier’s financial standing and business conduct was “good”, and • after becoming a linked credit provider but before a tied loan contract was entered into, had no cause to suspect that the consumer might, if the tied loan contract was entered into, be entitled to recover damages for failure to comply with a guarantee, and • had no cause to suspect that the supplier might not be able to meet the supplier’s liabilities as and when they fell due.84 A “tied loan contract” is defined in s 2 of the ACL to mean: a loan contract entered into between a credit provider and a consumer where: (a) the credit provider knows, or ought reasonably to know, that the consumer enters into the loan contract wholly or partly for the purposes of payment for goods or services supplied by a supplier; and 81 ACL, s 279. 82 ACL, s 280(1). 83 ACL, s 280(2). 84 ACL, s 280(3).

706

The Australian Consumer Law

[15.240]

(b) at the time the loan contract is entered into the credit provider is a linked credit provider of the supplier.

Fourthly, if the linked credit provider establishes that, in relation to a tied continuing credit contract, the credit provider, before becoming aware of the contract of sale or proposals for making such a contract, and having regard to: • the nature and volume of the business of the credit provider; and • such other matters relevant to the case, had no cause to suspect that the person entering into such a contract with the supplier might be entitled to make a claim as a result of a failure to comply with a consumer guarantee under Div 1 of Pt 3-2 of the ACL for the goods or services.85 A “tied continuing credit contract” is defined in s 2 of the ACL to mean: a continuing credit contract under which a credit provider provides credit in respect of the payment by a consumer for goods or services supplied by a supplier in relation to whom the credit provider is a linked credit provider.

Amount of liability [15.240] Section 281 limits the liability of a linked credit provider to the amount financed under the credit contract plus the amount of interest awarded by the court and the cost of the proceedings.86 Section 284 of the ACL provides that if, in joint liability proceedings, judgment is given against the supplier or a linked credit provider, the court must award interest to the consumer from the time when the consumer became entitled to recover the amount of the loss or damage until the date on which judgment is given, unless the respondents show good cause that interest should not be awarded.

Liability of suppliers and linked credit providers inter se [15.245] Section 285 of the ACL provides that if a supplier and credit provider are liable to a consumer under s 278: • if the liability relates to the supply of goods or services or to a consumer guarantee under the ACL – then the supplier is liable to the credit provider for the amount of loss suffered by the credit provider (up to the amount of the credit contract plus interest and costs); • if the liability relates to the linked credit contract or to a warranty under s 12ED of the – then the credit provider is liable to the supplier for the amount of loss suffered by the supplier (up to the amount of the sale contract plus costs).

Scope for overlap with general and specific protections [15.250] Section 15 provides: Conduct is not taken, for the purposes of this Schedule, to contravene a provision of this Schedule merely because of the application of: (b) a provision of Division 1 of Part 3-2 (other than section 66(2)) 85 ACL, s 280(4). 86 ACL, s 281.

[15.255]

15 Remedies Relating to Guarantees

707

Thus, conduct consisting of the failure to honour a consumer guarantee, other than a failure to display a notice at the point of sale summarising the content of the guarantees, will not constitute a contravention of the ACL. The effect of this provision is that the remedy provisions for damages87 and compensation orders88 will not apply, and the consumer must have recourse to remedy provisions expressly provided where there is a major or a minor failure to comply with the standard. However, it is important to note the word “merely” in s 15. There may be other surrounding circumstances involving attempts to explain, modify, limit or exclude the consumer guarantees that may be misleading and constitute a contravention of s 18 of the ACL or another provision of Ch 2 of the ACL. The same fact situation may give rise to a contravention of s 18 (misleading conduct) and s 29(m) and/or (n) (false or misleading representations), as well as to an action for failure to comply with the consumer guarantees.

PART V: EXCLUSION CLAUSES AND LIMITATIONS OF LIABILITY Introduction [15.255] Clauses that purport to exclude, restrict or modify liability for failure to comply with the consumer guarantees (exclusion clauses) will generally be void. Section 64(1) of the ACL provides: A term of a contract (including a term that is not set out in the contract but is incorporated in the contract by another term of the contract) is void to the extent that the term purports to exclude, restrict or modify, or has the effect of excluding, restricting or modifying: (a) the application of all or any of the provisions of this Division; or (b) the exercise of a right conferred by such a provision; or (c) any liability of a person for a failure to comply with a guarantee that applies under this Division to a supply goods or services.

This mirrors the repealed s 68 of the TPA. The prohibition on contracting out applies to both suppliers and manufacturers. It is intended to ensure that a supplier or manufacturer cannot avoid obligations imposed by the consumer guarantees by inserting a term to the effect that the guarantees do not apply. The most obvious examples of terms that will be prohibited by s 64 of the ACL are “all care but no responsibility” or “no liability for negligence” terms. However, s 64 will also render void terms which purport to restrict the remedies available to consumers following a breach of a consumer guarantee. Where the ACL applies it will generally not be possible to exclude liability for: • claims made after a certain period; or 87 ACL, s 236. 88 ACL, s 237.

708

The Australian Consumer Law

[15.260]

• claims in excess of a certain amount; or • claims for consequential damages; or • “no refund” or “no exchange” claims.

Suppliers limiting liability: non-personal goods under $40,000 limit [15.260] It is possible for suppliers of goods or services to limit the remedy available to a consumer, in the case of consumer goods of a kind not ordinarily acquired for personal, domestic or household use or consumption under the $40,000 limit. Section 64A of the ACL provides: (1) A term of a contract for the supply by a person of goods other than goods of a kind ordinarily acquired for personal, domestic or household use or consumption is not void under section 64 merely because the term limits the person’s liability for failure to comply with a guarantee (other than a guarantee under section 51, 52 or 53) to one or more of the following: (a) the replacement of the goods or the supply of equivalent goods; (b) the repair of the goods; (c) the payment of the cost of replacing the goods or of acquiring equivalent goods; (d) the payment of the cost of having the goods repaired. (2) A term of a contract for the supply by a person of services other than services of a kind ordinarily acquired for personal, domestic or household use or consumption is not void under section 64 merely because the term limits the person’s liability for failure to comply with a guarantee to: (a) the supplying of the services again; or (b) the payment of the cost of having the services supplied again. (3) This section does not apply in relation to a term of a contract if the person to whom the goods or services were supplied establishes that it is not fair or reasonable for the person who supplied the goods or services to rely on that term of the contract. (4) In determining for the purposes of subsection (3) whether or not reliance on a term of a contract is fair or reasonable, a court is to have regard to all the circumstances of the case, and in particular to the following matters: (a) the strength of the bargaining positions of the person who supplied the goods or services and the person to whom the goods or services were supplied (the buyer) relative to each other, taking into account, among other things, the availability of equivalent goods or services and suitable alternative sources of supply; (b) whether the buyer received an inducement to agree to the term or, in agreeing to the term, had an opportunity of acquiring the goods or services or equivalent goods or services from any source of supply under a contract that did not include that term; (c) whether the buyer knew or ought reasonably to have known of the existence and extent of the term (having regard, among other things, to any custom of the trade and any previous course of dealing between the parties); (d) in the case of the supply of goods, whether the goods were manufactured, processed or adapted to the special order of the buyer.

This is similar to s 68A of the TPA. The effect of s 64A is to create a form of exception to s 64 where the goods or services involved are of a non-personal kind and are under the $40,000 limit. Thus, for example, in relation to non-personal goods a supplier can limit liability under the consumer guarantees to replacement,

[15.270]

15 Remedies Relating to Guarantees

709

repair or the payment of the cost of replacement or repair. The supplier may require the purchaser in such circumstances to acknowledge in writing that the goods are being acquired for a business purpose or use. If the supplier does not seek to limit its liability, the full remedies available under the consumer guarantees will apply. For example, the definition of “goods” includes computer software. Some business software packages are priced less than $40,000. The supplier of such business software is able to limit its liability for consequential losses such as lost business sales, if there is a major failure of the software to comply with the guarantee of acceptable quality. However, liability for failure to comply with the guarantees imposed by ACL, ss 51 (guarantee as to title),89 52 (guarantee as to undisturbed possession)90 or 53 (guarantee as to undisclosed securities)91 cannot be limited, and there is a residual discretion retained whereby limitations of liability can be overturned by a court on the basis that it is not fair and reasonable for the supplier to rely on the clause. Section 64A(3) and (4) sets out the criteria for determining whether it is “fair or reasonable” for the supplier to rely on the limitation of liability term of the contract.

Suppliers excluding liability for consequential loss [15.265] Section 259(4) of the ACL provides that the consumer may bring an action against the supplier to recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee, including losses that were “reasonably foreseeable” as a result (consequence) of the failure. Section 267(4) makes similar provision in relation to services. If a supplier purports to exclude liability for consequential loss or damage the term is void pursuant to s 64 of the ACL, and the supplier may incur civil or criminal liability.92 However, s 64A permits the supplier to limit liability, including liability for consequential loss or damage that is reasonably foreseeable, in the case of non-personal goods and services under the $40,000 limit.

Manufacturers excluding liability [15.270] Section 271(1) of the ACL provides that if there is a failure to comply with the guarantee of acceptable quality, an affected person in relation to the goods may by action against the manufacturer of the goods, recover damages from the manufacturer. Section 272(1)(b) of the ACL provides that the damages that can be recovered by an affected person against the manufacturer include “any loss or damage suffered by the affected person … if it was reasonably foreseeable that the affected person would suffer such loss or damage as a result of the failure”. Section 274 of the ACL provides that a manufacturer of goods is liable to indemnify a supplier where the supplier is liable to pay damages to the consumer for loss or 89 See [8.185]. 90 See [8.190]. 91 See [8.195]. 92 See [15.255].

710

The Australian Consumer Law

[15.275]

damage suffered by the consumer. Section 276 provides that any term of a contract that purports to exclude, restrict or modify the obligation of the manufacturer to reimburse the supplier is void. Section 276A(1) provides that when the goods are of the non-personal kind, the manufacturer can limit their liability to the supplier to an amount equal to: (a) the cost of replacing the goods; or (b) the cost of obtaining equivalent goods; or (c) the cost of having the goods repaired; whichever of the above is the lowest amount. However, s 276A(2) provides that it is only possible to limit liability under s 276A(1) if it is “fair and reasonable” to do so. The ability of suppliers to limit their liability under s 64A for consequential losses arising in respect of defects in non-personal goods whose price did not exceed the $40,000 limit is considered at [15.260]. Manufacturers will not generally sell directly to consumers and there will be no supply contract between the manufacturer and the consumer. Where s 271(1) of the ACL applies, the affected person can claim damages from the manufacturer, including consequential loss or damage that is reasonably foreseeable. Section 276 provides that this liability cannot be limited or excluded. Thus, manufacturers are more exposed to liability for consequential loss than suppliers in relation to non-personal goods. There seems to be no good policy reason why manufacturers should not be able to limit their liability for consequential loss in relation to non-personal goods under the $40,000 limit.

Choice of law and venue clauses [15.275] Many contracts with suppliers will include provisions which purport to specify the laws which govern the contract, and the courts that have jurisdiction over the contract or any claims resulting from it. It may be more convenient for the supplier to have all actions against them brought under the laws of the supplier’s own State or country, and in courts or tribunals where the supplier already has a physical presence. However, a choice of law and venue clause may have “the effect of” excluding, restricting or modifying the consumers’ rights under the consumer guarantees regime, The Second Explanatory Memorandum states that s 67(1) of the ACL is intended to ensure that “it is not possible for a contract to displace consumer guarantees by specifying that some other law, such as the law of the country where a supplier resides, applies to the contract”.93 Section 67 of the ACL provides: If: (a) the proper law of a contract for the supply of goods or services to a consumer would be the law of any part of Australia but for a term of the contract that provides otherwise; or (b) a contract for the supply of goods or services to a consumer contains a term that purports to substitute, or has the effect of substituting, the following provisions for all or any of the provisions of this Division: 93 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.10].

[15.275]

15 Remedies Relating to Guarantees

711

(i) the provisions of the law of a country other than Australia; (ii) the provisions of the law of a State or a Territory; the provisions of this Division apply in relation to the supply under the contract despite that term.

Section 67(a) of the ACL requires the court to apply a common-law test to establish what the “proper law” of the contract is – that is, the law of the country with the most real and substantial connection to the contract. In Akai Pty Ltd v People’s Insurance Co Ltd,94 a majority of the High Court (Toohey, Gaudron and Gummow JJ) held that in determining the law with the most real connection to the contract it is necessary to have regard to the parties’ place of residence or business, the place of formation of the contract, the place of performance, and the nature and subject matter of the contract.95 If after this assessment the proper law of the contract would be the law of Australia (if not for the term of the contract), s 67(a) will render the governing law clause, and most likely a governing forum clause unenforceable.96 Unlike s 67(a), the operation of s 67(b) is not dependent on Australian law otherwise being the proper law of the contract. In Laminex (Aust) Pty Ltd v Coe Manufacturing Co,97 an Australian company sued a US-based supplier for misleading and deceptive conduct, and breach of warranties implied by the repealed Pt V Div 2 of the TPA. The contract in this case contained a provision that “[t]he terms, conditions and covenants herein shall be governed by the laws of the State of Oregon and venue shall be in Multnomah County, Oregon for any actions arising hereunder”. The New South Wales Supreme Court held that the proper law of the contract was the law of the State of Oregon, so s 67(a) had no application, and the court permanently stayed an action brought by Laminex in Australia.98 Sections 67(a) and (b) of the ACL were considered in ACCC v Valve Corporation (No 3).99 The facts of the case are set out at [8.140]. The Subscriber Service Agreements, which purported to exclude the right to a refund in the event that the computer software (goods) supplied failed to comply with the guarantee of acceptable quality, were expressed to be governed by the law of the State of Washington. Edelman J applied the common law test set out in Akai and concluded that the proper law of the contract was not a law of any part of Australia, and that accordingly s 67(a) did not apply. Valve submitted that s 67(b) was conditional on the proper law of the contract being Australian law. His Honour rejected this submission concluded that s 67(b) applied because “… the inclusion of a Washington State choice of law clause purported to substitute Washington State 94 Akai Pty Ltd v People’s Insurance Co Ltd (1996) 188 CLR 418. 95 Akai Pty Ltd v People’s Insurance Co Ltd (1996) 188 CLR 418 at 437. 96 For example, see Law v MCI Technologies Pty Ltd [2006] VCAT 415 at [43]-[48] (Morris P); and Kiley v MCI Technologies Pty Ltd [2006] VCAT 2543 at [26]-[30] (Steele DP). 97 Laminex (Aust) Pty Ltd v Coe Manufacturing Co (1998) ATPR ¶41-610. 98 This was confirmed on appeal in Laminex (Aust) Pty Ltd v Coe Manufacturing Co [1999] NSWCA 370, but the Court of Appeal varied the stay to make it conditional on Coe Manufacturing allowing a claim for breach of the Pt V Div 2 implied warranties to be tried on its merits in proceedings in Oregon. 99 ACCC v Valve Corporation (No 3) [2016] FCA 196.

712

The Australian Consumer Law

[15.280]

law for all or any of the provisions of Division 1 [of the ACL]”.100 This construction means that it is not possible to exclude the statutory guarantees regime by the adoption of a foreign choice of law clause, even if applying the common law test leads to the conclusion that the proper law of the contract is that foreign law.

Limitation of liability: recreational services – ACL [15.280] One of the recommendations of the Ipp Review was that limitations should be placed on the liability for personal injury of persons or companies that provide recreational services. Section 68B(1) of the TPA, before it was repealed, allowed for a limitation of liability which arises under s 74 (warranties implied in contracts for the supply of services) in relation to personal injury where the services are recreational services. Section 68B(2) of the TPA defined “recreational services” to mean services that consist of participation in: (a) a sporting activity or a similar leisure time pursuit; or (b) any other activity that: (i) involves a significant degree of physical exertion or physical risk; and (ii) is undertaken for the purposes of recreation, enjoyment or leisure.

Section 139A of the CCA expressly provides that suppliers of recreational services may exclude, restrict or modify their liability to consumers for death or personal injury. Such a term is not void under s 64 of the ACL. Section 139A of the CCA allows suppliers of recreational services to exclude, limit or modify the application of the consumer guarantees in relation to services in Pt 3-2 of the ACL. It provides: (1) A term of a contract for the supply of recreational services to a consumer by a person is not void under section 64 of the Australian Consumer Law only because the term excludes, restricts or modifies, or has the effect of excluding, restricting or modifying: (a) the application of all or any of the provisions of Subdivision B of Division 1 of Part 3-2 of the Australian Consumer Law; or (b) the exercise of a right conferred by such a provision; or (c) any liability of the person for a failure to comply with a guarantee that applies under that Subdivision to the supply. (2) Recreational services are services that consist of participation in: (a) a sporting activity or a similar leisure time pursuit; or (b) any other activity that: (i) involves a significant degree of physical exertion or physical risk; and (ii) is undertaken for the purposes of recreation, enjoyment or leisure. (3) This section does not apply unless the exclusion, restriction or modification is limited to liability for: (a) death; or (b) a physical or mental injury of an individual (including the aggravation, acceleration or recurrence of such an injury of the individual); or (c) the contraction, aggravation or acceleration of a disease of an individual; or 100 ACCC v Valve Corporation (No 3) [2016] FCA 196 at [89].

[15.285]

15 Remedies Relating to Guarantees

713

(d) the coming into existence, the aggravation, acceleration or recurrence of any other condition, circumstance, occurrence, activity, form of behaviour, course of conduct or state of affairs in relation to an individual: (i) that is or may be harmful or disadvantageous to the individual or community; or (ii) that may result in harm or disadvantage to the individual or community.

[15.285] The remedies in s 267 of the ACL, for failure to comply with the consumer guarantees in relation to the supply of services, arise independently of contract. Section 267(4) of the ACL provides that a consumer may bring an action against the supplier of consumer services to recover damages for losses that were “reasonably foreseeable” as a result of the failure to comply with the guarantee of due care and skill. Section 139A(1) of the CCA provides that suppliers of recreational services may limit their liability for death, physical or mental injury and illness, not property damage. This would include liability for consequential loss under s 267(4) of the ACL. The term limiting liability would only bind the other party to the contract (the consumer), but not another person who may be injured as a result of the failure to comply with the guarantee (third party). The consumer guarantees arise independently of contract, and a cause of action under s 267(4) of the ACL would be available to a third party whose injuries were a “reasonably foreseeable” consequence of the failure to comply. Section 139A(2) of the CCA defines the term “recreational services” to mean: services that consist of participation in: (a) a sporting activity or a similar leisure-time pursuit; or (b) any other activity that: (i) involves a significant degree of physical exertion or physical risk; and (ii) is undertaken for the purposes of recreation, enjoyment or leisure.101

The Second Explanatory Memorandum states: Examples of activities that are within the scope of this definition are all forms of sport and other activities such as hiking, bungee jumping and paintball. Activities that are not captured include bus tours, shopping and theatre going.102

Section 139A(4) of the CCA provides that while a failure to comply with the consumer guarantees relating to services can be excluded, s 139A does not apply “if the exclusion, restriction or modification would apply to significant personal injury suffered by a person that is caused by the reckless conduct of the supplier of the recreational services”.103 The use of the expression “would apply” appears to require an analysis of the wording of the particular exclusion clause at issue and whether it attempts to exclude recklessness. If it is drafted too broadly and attempts to exclude recklessness, it seems that it cannot be relied upon even when the 101 The same definition of “recreational services” is adopted in s 22(4) of the Australian Consumer Law and Fair Trading Act 2012 (Vic). 102 Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.139]. 103 CCA, s 139A(4).

714

The Australian Consumer Law

[15.290]

particular act or omission that has occurred is a simple failure to comply with the guarantee of due care and skill, rather than a reckless failure to comply with the guarantee of due care and skill. The term “reckless conduct” is defined in s 139A(5) of the CCA which provides: The supplier’s conduct is reckless conduct if the supplier: (a) is aware, or should reasonably have been aware, of a significant risk that the conduct could result in personal injury to another person; and (b) engages in the conduct despite the risk and without adequate justification.

No guidance is provided as to what constitutes a “significant risk” that conduct could result in personal injury and what constitutes an “adequate justification”.

Limitation of liability: recreational services ACL (Application Acts) [15.290] Section 275 of the ACL provides that where there is a failure to comply with a guarantee that applies to the a supply of services and a law of a State or Territory is the proper law of the contract, that State or Territory law may apply to limit or preclude liability for the failure to comply with the guarantee.104 Action by the ACCC to enforce consumer guarantees [15.295] CCAAC in its report, Consumer Rights: Reforming Statutory Implied Conditions and Warranties,105 recommended that in order to provide an additional incentive for suppliers to comply with consumer guarantees the ACCC should have the right to bring civil proceedings to secure compensation for systemic failure to honour guarantees. Section 277 of the ACL provides that the regulator may commence an action on behalf of one or more persons who are entitled to take action against suppliers or manufacturers who fail to honour consumer guarantees. The regulator may only make the application if it has obtained the written consent of the person, or each of the persons, on whose behalf the application is made.106 The maximum penalty that can be imposed is $1.1 million if the supplier or manufacturer is a body corporate or $220,000 if the retailer is not a body corporate.

104 See eg, s 22 of the Australian Consumer Law and Fair Trading Act 2012 (Vic). 105 The report is available on the Australian Government, Treasury’s website, Consumer Rights – CCAAC Report on Statutory Implied Conditions and Warranties (2009), at http://www.ccaac.gov.au. 106 ACL, s 277(2).

Index A ACCC — see Australian Competition and Consumer Commission (ACCC) Acceptable quality — see Consumer guarantees for goods Accessorial liability agents, ........................................ [13.35], [14.175] aiding and abetting, ................ [13.30], [14.175] civil liability, ...................................... [13.215] criminal liability, .................. [13.25], [13.30] attempt and attempt to induce, .......... [13.220] civil pecuniary penalties, ...... [13.165], [13.215] attempted contravention, ............... [13.220] principal offender ceasing to exist, ........................................................ [13.230] conspiracy, ................................................. [13.35] criminal offences, ....................... [13.25], [13.30] damages, for, ........................................... [14.175] deliberate ignorance, ............................. [14.190] directors, .................... [13.35], [14.175], [14.190] employees, ................................. [13.35], [14.175] fines, liability to pay, ............................... [13.25] injunctions, .............................................. [14.240] intention, .................................. [14.175], [14.180] involvement in contravention, ............ [14.175] innocent or inadvertent, ................. [14.180] involved, definition, ........................ [14.175] proportionate liability, ..................... [14.145] unfair contract terms, ...................... [14.225] knowledge of contravention, ................ [3.195], [14.175], [14.180] actual knowledge, ............ [14.180], [14.185] essential matters, .............. [14.180], [14.185] inferred actual knowledge, ............ [14.190] professional advisers, ...................... [14.180] sufficient knowledge, ....................... [14.175] misleading or deceptive advertising, ... [3.195] knowledge of contravention, ........... [3.195] social media, on, ................................ [3.195] overview, ................................. [14.175], [13.215] participation in contravention, ........... [14.175], [14.195] professional advisers, ............................ [14.180] wilful blindness, ..................................... [14.190] ACL — see Australian Consumer Law (ACL) ACL regulators ACCC — see Australian Competition and Consumer Commission (ACCC)

administrative powers, ......................... [13.340] ASIC — see Australian Securities and Investments Commission (ASIC) compensation orders on application of, ........................................................ [13.390] non-party consumers, ..................... [13.395] Compliance and Enforcement Guide, .. [13.10] enforcement — see also Enforcement powers, ................................................ [13.15] priorities, ............................................. [13.10] strategies, ............................................. [13.15] ensuring compliance, .............................. [13.10] memoranda of understanding, .............. [1.145] one law, multiple regulators, ................. [13.10] overview, ..................................... [1.145], [13.05] powers, ........................................................ [6.05] regulator, definition, ................................ [1.145] representative actions by, ..... [12.160], [13.390] States and Territories, .............................. [1.145] Adverse publicity orders civil proceedings, ................................... [13.315] criminal proceedings, ............................ [13.135] lay-by agreement breach, ..................... [10.125] power to make, ...................................... [13.315] proof of transaction breach, ................... [9.130] Advertising bait advertising — see Bait advertising comparative, ............................... [3.205], [6.150] consumer detriment, ................... [1.10], [3.170] corrective advertising orders, ............. [13.280], [13.310] false or misleading representations — see False or misleading representations information provider defence — see Information provider defence misleading or deceptive — see Misleading or deceptive advertising overview, ................................................... [3.170] price — see also Price bait advertising, ................................... [7.35] comparative advertising, .... [3.205], [6.150] false or misleading — see False or misleading representations two-price advertising, ........... [1.20], [6.155] substantiation notices — see Substantiation notices trading or commercial character, ............ [2.80] unauthorised advertisements — see Unauthorised entries or advertisements

716

The Australian Consumer Law

Affiliation false or misleading representations, ...... [6.90], [6.115], [6.120] environmental claims, ......................... [6.95] infringement notices, ......................... [6.120] meaning, ...................................... [6.115], [6.120] Agents accessorial liability, .................. [13.35], [14.175] liability for conduct of, .............. [2.110]–[2.135] actual or apparent authority, ........... [2.120] civil liability, ...................................... [13.215] conduct “on behalf of”, ....... [2.115], [2.120] consent or direction, .......................... [2.125] corporate principal, .............. [2.110]–[2.125] criminal offences, .................. [13.20]–[13.35] direct liability, ........................ [2.110]–[2.135] elements of prohibition, .................... [2.110] non-corporate principal, ................... [2.130] vicarious liability at common law, .. [2.110] misleading or deceptive conduct, .......... [3.40], [3.45] conduit defence, ....................... [3.40], [3.45] disclaimers, ................................ [3.40]–[3.55] passing on representations, .... [3.40]–[3.50] proportionate liability, ........................... [14.145] trade or commerce, conduct in, ............ [2.100] vicarious liability of principal, .............. [2.110] Agricultural and veterinary chemicals Australian Pesticides and Veterinary Medicines Authority (APVMA), .......................................... [11.25], [11.250] product safety reporting requirements, ........................................................ [11.250] regulation of industry, ............................. [11.25] Aiding and abetting — see Accessorial liability Approval false or misleading representations, ...... [6.90], [6.115], [6.120] environmental claims, ......................... [6.95] infringement notices, ......................... [6.120] meaning, ...................................... [6.115], [6.120] Architects consumer guarantees, ............................... [9.25] exclusion, ................................. [9.25], [9.100] ASIC — see Australian Securities and Investments Commission (ASIC) ASIC Act complementary operation with ACL, .. [3.255] consistency with ACL, ............................ [3.250]

consumer protection provisions, .......... [1.105], [3.250] false or misleading representations, .............................. [6.220]–[6.245], [6.260] financial products and services — see Financial products and services insurance contracts, ................................. [1.110] misleading or deceptive conduct, ........ [1.105], [3.250]–[3.290] overlap with ACL, ................................... [3.290] proceedings for breach, .......................... [3.250] unconscionable conduct, ........................ [1.105], [4.195]–[4.215] unfair contract terms, ................ [5.195]–[5.245] unfair sales techniques, ............................. [7.05] bait advertising, ................................... [7.45] harassment or coercion, .................... [7.225] promotional offers, .............................. [7.30] pyramid selling, ................................. [7.145] referral selling, .................................... [7.205] unauthorised advertisements, ........ [7.100], [7.110] unsolicited credit and debit cards, ... [7.75] wrongly accepting payment, ............. [7.60] Auctions consumer guarantees, ............................. [8.170] online auctions, ........................................ [8.170] sale by auction, definition, ..................... [8.170] Australian Competition and Consumer Commission (ACCC) administration of ACL, ........................... [1.145] administrative powers, ......... [13.140], [13.340] ASIC Act breaches, proceedings for, .... [3.250] civil proceedings, role in, ....................... [13.20] compensation orders on application of, ........................................................ [13.390] non-party consumers, ..................... [13.395] consumer guarantees, action to enforce, ........................................................ [15.295] Debt Collection Guideline, ..................... [7.225] door-to-door sales industry report, ...... [10.05] enforcement by — see Enforcement Green Marketing Guide, ........................... [6.95] powers, ........................................................ [6.05] product recall guidelines, ........ [11.05], [11.35], [11.110]–[11.125] product safety guides, ............................. [11.05] mandatory reporting law, .............. [11.225], [11.230] public enforcement by, .............. [13.05], [14.10] public register, ........................................ [13.335] representative proceedings, . [12.160], [13.390], [15.295] undertakings accepted by, .................... [13.335] unfair terms guide, ........ [5.95], [5.130], [5.160]

Index Australian Consumer Law (ACL) administration by CAF, ............................ [1.45] application, .................................................. [1.50] Commonwealth law, as, ........ [1.90]–[1.115] conduct outside Australia, .. [1.95], [1.100], [2.40] corporations, ...... [1.50], [1.90], [2.05]–[2.35] cover the field, not intended to, ..... [1.115], [1.125], [8.15] Crown, ............................ [2.05], [2.50]–[2.70] doubling-up of liabilities prevented, .......................................................... [1.135] extraterritorial, ........................ [1.95], [1.130] financial services, ............................... [1.105] insurance excluded, ........................... [1.110] internet, use of, ....................... [1.100], [2.40] legislation, ................................. [1.50], [1.55] natural persons, ......... [1.90], [1.100], [2.05], [2.40], [2.45] necessary connection with Australia, ............................................................ [1.95] “person”, ........ [1.90], [1.120], [2.05], [2.40], [2.45] regulated by Pt XIAA of CCA, .......... [1.50] small business, .............. [1.30], [5.10], [5.70] States and Territories, ............. [1.50], [1.55], [1.120]–[1.135], [2.05] trade or commerce, ............... [1.100], [2.05], [2.75]–[2.105] background, ................................................ [1.05] commencement dates, ............................... [1.55] Commonwealth law, as, .............. [1.90]–[1.115] Competition and Consumer Act Sch 2, . [1.50] constitutional power, ..................... [1.90], [2.05] consumer guarantees — see Consumer guarantees consumer protection policy — see Consumer protection policy contents, ....................................................... [1.50] corporate liability under — see Corporation liability corporations, application to, ........ [1.90], [2.05] carrying on business in Australia, .... [1.95] conduct outside Australia, ................. [1.95] definition, .................................. [2.10], [2.30] financial corporations, ............. [2.10], [2.25] foreign corporations, ............... [2.10], [2.15] incorporated in a Territory, ................ [2.30] related bodies corporate, .................... [2.35] trading corporations, ............... [2.10], [2.20] Crown, application to, .............................. [2.05] Commonwealth, ....................... [2.50]–[2.60] States and Territories, .............. [2.65]–[2.70] defective goods actions — see Defective goods actions detriment, protection against business — see Business detriment

717

consumer — see Consumer detriment drafting approach, ............. [1.05], [1.65], [1.90] enforcement — see Enforcement false or misleading representations — see False or misleading representations financial services exclusion, ............................... [1.105], [3.250] overlap with ASIC Act, ..................... [3.290] future modifications, ............................... [1.140] general consumer protections, .... [1.05], [3.05], [6.05] goods — see Goods historical background, ................... [1.70]–[1.85] CAAC recommendations, ...... [1.80], [1.85], [8.45], [8.50] consumer guarantees, ............. [1.75]–[1.85], [8.10]–[8.60] differences in legislation, .................... [1.75] lay-by agreements, ........................... [10.100] one regulator model, ......................... [1.120] product safety regime, ...................... [11.05] Productivity Commission, ..... [1.70]–[1.85], [1.120], [11.05] unsolicited consumer agreements, .. [10.05] implementation, ......................................... [1.55] insurance excluded from, ....................... [1.110] interpretation, ............................................. [1.40] policy objectives and, .......................... [1.40] “purposive” approach, ........................ [1.40] unconscionable conduct, .................... [1.05], [4.45]–[4.70] lay-by agreements — see Lay-by agreements legislation constituting, ............................. [1.05] misleading or deceptive conduct — see Misleading or deceptive conduct national law, ................................................ [1.05] natural persons, application to, .............. [1.90], [1.100], [2.05], [2.40] corporations power relied on, where, ............................................................ [2.05] direct liability, ........................... [2.40], [2.45] forms of conduct, ................................. [2.40] necessary connection with Australia, ............................................................ [1.95] overseas conduct, ..................... [1.95], [2.40] States and Territories, .......................... [2.45] unfair contract terms, .............. [2.40], [5.50] other legislation, relationship with, ..... [1.115], [1.130], [8.15] overseas conduct, application to, ........... [1.95], [1.100], [2.40] overview, ............................. [1.05], [1.50], [2.05] policy objectives — see Consumer protection policy product safety — see Product safety regulations, .................................... [1.50], [1.140] commencement dates, ......................... [1.55]

718

The Australian Consumer Law

Australian Consumer Law (ACL) — cont exemptions, ......................................... [1.140] future modifications, ......................... [1.140] regulators — see ACL regulators review of, ..................................................... [1.45] scope of law, ............................................... [2.05] services — see Services small business, application to — see Small business specific consumer protections, ..... [1.05], [6.05] stages of reforms, ....................................... [1.05] States and Territories, ...... [1.05], [1.75], [1.120] ACL as law of, ...................... [1.120]–[1.140] application in, ............. [1.50], [1.120], [2.05] application legislation, ........... [1.50], [1.55], [1.120]–[1.135], [2.05] commencement dates, ......................... [1.55] cover the field, not intended to, ...... [1.125] Crown in right of — see Crown differences in provisions, .................... [1.50] double jeopardy, ................................. [1.135] doubling-up of liabilities prevented, .......................................................... [1.135] extraterritorial application, ............... [1.130] future amendments, .......................... [1.140] implementation of ACL, ..................... [1.55] natural persons, .................................... [2.45] principal acts, ..................................... [1.120] substantive changes introduced by, ........ [1.65] supply, meaning — see Supply of goods or services trade or commerce, conduct in — see Trade or commerce Trade Practices Act compared, .... [1.65], [6.05] false or misleading representations, . [6.10] principal differences, ........................... [1.65] transitional measures, ......................... [1.60] unconscionable conduct, ..................... [4.05] unconscionable conduct — see Unconscionable conduct unfair contract terms — see Unfair contract terms unfair sales techniques — see Unfair sales techniques unsolicited consumer agreements — see Unsolicited consumer agreements Australian Securities and Investments Commission (ASIC) administration of ACL, ........................... [1.145] Debt Collection Guideline, ..................... [7.225] enforcement of ACL, ............................... [1.145] financial services regulation, ... [1.105], [3.250], [3.255] specialist regulator, .................................. [3.255]

B Bait advertising application of prohibition, ........................ [7.05] ASIC Act, ..................................................... [7.45] “at a specified price”, ................................ [7.35] civil liability, .................................... [6.05], [7.35] criminal liability, ............................ [6.05], [7.40] defences, ...................................................... [7.40] definition, .................................................... [7.35] false or misleading representations and, .......................................................... [6.125] financial services, ....................................... [7.45] liability dependent on knowledge, ......... [7.35] post-advertising conduct, ......................... [7.35] prohibition, ........................ [4.120], [7.05], [7.35] reasonable, what is, ................................... [7.35] TPA provisions compared, ....................... [7.35] Banning orders civil proceedings, ................... [13.320], [13.325] criminal proceedings, ............................ [13.135] Productivity Commission recommendations, ........................................................ [13.320] proof of transaction breach, ................... [9.130] purpose and effect, ................................ [13.325] totality principle, .................................... [13.325] Bargaining power — see Inequality of bargaining power Behavioural economics, ................................. [1.20] “Bounded rationality” theory, ...................... [1.15] Building services consumer guarantees, ............................... [9.40] fixtures as goods, ................... [8.145], [9.40] leasehold or freehold interest, ........... [9.45] mixed supplies, ...................... [8.130], [9.40] residential dwellings, .......................... [9.45] standard form contracts, ........................... [5.05] inequality of bargaining position, ..... [5.05] Burden of proof — see Onus of proof Business carrying on — see Carrying on a business detriment to — see Business detriment sale of consumer guarantees and non-consumer use, .................................................. [8.110] misleading or deceptive conduct, ..... [3.20] stock-in-trade not consumer goods, .......................................................... [8.110]

Index Business — cont small — see Small business Business activities false or misleading representations, ..... [6.290] civil liability, ............................ [6.05], [6.290] criminal liability, .................... [6.05], [6.295] defences, .............................................. [6.295] franchise arrangements, .................... [6.290] future matters, .................................... [6.290] Business detriment business consumers, ...................... [1.30], [1.35] business suppliers, ..................................... [1.30] business-to-business transactions, .......... [1.30] drip pricing, ................................................ [1.35] misleading or deceptive conduct, .......... [1.35], [3.05] premium claims, ........................................ [1.35] protection against, ..................................... [1.30] unfair contract terms, .................. [1.30], [5.135] Business-to-business transactions misleading or deceptive conduct, .......... [1.35], [3.10] small business protection — see Small business unconscionable conduct, .. [1.30], [4.05], [4.10], [5.65] applicable arrangements, ........ [4.90], [4.95] special disadvantage, .......................... [4.35] statutory factors, ..................... [4.95]–[4.185] undue influence or pressure, ........... [4.125]

C

Carrying on a business Australia, in, ............................................... [1.95] commercial flavour, ................................... [2.55] Commonwealth Crown, ............... [2.05], [2.55] exceptions, ............................................. [2.60] government activities, ......................... [2.55] conduct outside Australia, ....................... [1.95] meaning, ...................................................... [2.55] State and Territory Crowns, ......... [2.05], [2.65] authorisations, ...................................... [2.70] exceptions, ............................................. [2.70] intra-governmental transactions, ...... [2.70] “trade or commerce”, distinction, ........... [2.55] Causation “because of”, meaning, ........................... breaks in chain of, ................................... “but for” test, .............................. [3.165], “common sense” approach, ...................

[14.35] [14.65] [14.40] [14.40]

719

consumer guarantee breaches, ............. [15.70], [15.105] damages actions, ........................ [14.35]–[14.75] declaration of non-reliance, ...... [3.160], [14.75] defective product, loss from, ................. [12.85] evidence of, ............................................... [14.45] indirect causation theory, ....................... [14.60] misleading or deceptive conduct, ........ [3.165], [3.170] reliance, proof of, ......... [14.50], [14.55], [14.70] supervening event, .................................. [14.65] TPA compared, ........................... [14.35], [14.40] CAANZ, ............................................................ [1.45] CCAAC — see Commonwealth Consumer Affairs Advisory Council Chattels affixed to land, ................ [8.145], [9.40], [11.25] consumer guarantees, ............................. [8.165] fixtures, .................................... [8.145], [9.40] mixed supply, ....................................... [8.85] trade or commerce, supply in, ........ [8.165] goods, as, ....................................... [8.165], [9.40] supply of, .................................................. [8.165] Choice of law and venue clauses consumer guarantees and, ................... [15.275] proper law of contract, ......................... [15.275] Choses in action copyright, .................................................. [8.140] goods, whether, ........................................ [8.125] software licence, ....................................... [8.140] Civil liability false or misleading representations, ...... [6.05], [6.10] business activities, ............................. [6.290] land, ...................................................... [6.250] misleading conduct employment matters, ........................ [6.265] nature of goods or services, ............. [6.275] misleading or deceptive conduct, ........... [6.05] pyramid selling, ....................................... [7.115] unfair sales techniques, ................. [6.05], [7.05] bait advertising, ................................... [7.35] harassment or coercion, .................... [7.210] multiple pricing, ................................. [7.150] promotional offers, .............................. [7.15] referral selling, .................................... [7.195] unauthorised entries or advertisements, .......................................................... [7.100] unsolicited credit or debit cards, ...... [7.65] unsolicited goods or services, ............ [7.80]

720

The Australian Consumer Law

Civil liability — cont wrongly accepting payment, ............. [7.50] Civil pecuniary penalties ACCC, public proceedings by, .............. [14.10] accessorial liability, ................ [13.165], [13.215] attempted contravention, ............... [13.220] principal offender ceasing to exist, ........................................................ [13.230] ACL and TPA compared, ......... [1.65], [13.155] advantages for regulators, .................... [13.155] applicable provisions, ........................... [13.165] assessment of amount, .......................... [13.170] absence of harm mitigating, .......... [13.175] amount of loss or damage, ............ [13.175] circumstances of contravention, .... [13.180] deliberateness of contravention, ... [13.190] instinctive synthesis, ....................... [13.170] joint submissions, ............................. [13.205] mandatory factors, ........... [13.170]–[13.185] non-mandatory factors, ................... [13.190] parity principle, ................................ [13.200] previous contraventions, ................ [13.185] size of contravenor, ......................... [13.190] totality principle, .............................. [13.195] compensation to victims has preference, ........................................................ [13.400] contravention of two or more provisions, ........................................................ [13.210] contraventions for which imposed, .... [13.165] defences honest and reasonable conduct, ... [13.165], [13.240] publisher’s defence, ......................... [13.330] double jeopardy, ..................................... [13.325] general deterrence, ................................ [13.160] indemnification of officers, ... [13.165], [13.245] infringement notice penalties distinguished, ........................................................ [13.155] joint submissions on, ............................. [13.205] key penalty provision, .......................... [13.155] lay-by agreements, ................................. [10.125] maximum penalties, .............................. [13.165] misleading advertising, ......................... [13.160] misleading or deceptive conduct excluded, ........................................................ [13.165] multiple contraventions, ....................... [13.210] overview, ..................................... [6.05], [13.155] parity principle, ...................................... [13.200] previous contraventions, ...................... [13.185] proceedings for recovery, ..................... [13.165] product recalls, ......................... [11.85], [11.135] product safety breaches, ....................... [11.165] information standards, .................... [11.180] reporting obligations, ...................... [11.255] safety bans, ........................................ [11.205] proof of transaction offence, .................. [9.130] specific deterrence, ................................ [13.160]

totality principle, .................................... [13.195] TPA compared, ........................... [1.65], [13.155] unauthorised entries or advertisements, .......................................................... [7.100] unsolicited consumer agreements, ........ [10.90] Civil proceedings ACCC role, ................................................ [13.20] adverse publicity orders, ...................... [13.315] civil pecuniary penalties — see Civil pecuniary penalties compensation orders — see Compensation orders corrective advertising orders, ............. [13.280], [13.310] declarations — see Declarations defences honest and reasonable conduct, ... [13.165], [13.240] publisher’s defence, ......................... [13.330] disqualification orders, ......... [13.320], [13.325] double jeopardy, ..................................... [13.235] indemnification of officers, ... [13.165], [13.245] injunctions — see Injunctions multiple contraventions, ....................... [13.210] non-punitive orders, .............................. [13.290] community service, ......................... [13.295] compliance programs, ..................... [13.290] disclosure orders, ............................. [13.305] probation orders, .............................. [13.300] penalties, .................................................. [13.155] infringement notice — see Infringement notices options for ACCC, ........................... [13.155] pecuniary — see Civil pecuniary penalties preservation of property orders, ......... [13.285] publisher’s defence, ............................... [13.330] undertakings, .......................................... [13.335] COAG, ....................... [1.05], [1.45], [1.120], [1.140] Coercion — see Harassment or coercion Collateral contracts express warranties and, .......................... [8.400] proof of, ..................................................... [8.400] Commonwealth Consumer Affairs Advisory Council (CCAAC) ACL background, ........................... [1.80], [1.85] consumer guarantees, ... [8.45], [8.50], [15.295] acceptable quality, .................. [8.50], [8.345] extended warranties, ................. [6.190]–[6.200] implied terms regime, ...... [1.80], [1.85], [8.45], [8.50] Commonwealth Crown — see Crown Community service orders examples, ................................................. [13.255]

721

Index Comparative advertising definition, .................................................. [3.205] false or misleading representations, ..... [6.150] misleading and deceptive conduct, ...... [3.205] use of, ......................................................... [6.150] Compensation orders — see also Damages ACL and TPA compared, ......................... [1.65] application of regulator, on, ................. [13.390] evidence from other proceedings, ........................................................ [13.390] injured person, for, .......................... [13.390] non-party consumers, for, .............. [13.395] opt-in process, .................................. [13.390] compensatory principle, ....................... [14.200] defective goods dependants, claim by, ....... [12.95], [12.100] personal injury claims, ........ [12.75]–[12.90] discretion of court, ................................. [14.200] equitable principles, .............................. [14.220] evidence from other proceedings, ..... [13.390], [14.200] fines, preference over, ............................. [13.85] jurisdiction to grant, .............................. [14.225] lay-by agreement breach, ..................... [10.125] limitation period, ..................... [5.190], [14.200] limits on, .................................................. [14.210] nature of relief, ....................................... [14.215] non-party redress orders, ..................... [13.395] other proceedings, arising out of, ....... [14.205] overview, ................................................. [14.200] pecuniary penalty, preference over, .... [13.400] personal injury or death, ...................... [14.205] injured person party to proceedings, ........................................................ [14.205] limitation period, ............................. [14.200] limits on compensation, .................. [14.210] loss or damage, meaning, .............. [14.215] misleading or deceptive conduct, . [14.210] smoking or tobacco products, ....... [14.210] types of orders, ................................. [14.220] unfair practices, ................................ [14.210] private actions, ....................................... [14.200] proof of transaction offence, .................. [9.130] regulator, application by, ...................... [13.390] non-party redress orders, ............... [13.395] rescission of contract, ............................ [14.220] types of orders, ....................................... [14.220] unconscionable conduct, ....... [14.200], [14.205] unfair contract terms, ........... [14.200], [14.205], [14.225] ACCC proceedings, ........................... [5.185] Commonwealth, ................................. [5.175] declared unfair, .... [5.175], [5.180], [13.150], [14.200], [14.225] different consumer, .......................... [14.225] jurisdiction to grant, ........................ [14.225]

limitation period, ............... [5.190], [14.200] private litigant, ................................... [5.190] States, ................................................... [5.180] Competition and Consumer Act 2010 ACL — see also Australian Consumer Law (ACL) Pt XIAA regulation application of, ... [1.50] Sch 2 containing, ...................... [1.50], [1.90] constitutional power, ................................. [1.90] future amendments, ................................ [1.140] key provisions, ........................................... [2.05] objects clause, ............................................. [1.40] overview of provisions, ............................ [1.50] Trade Practices Act 1974 renamed, ......... [1.55] transitional provisions, ....................... [1.60] Competition policy consumer detriment and, ......................... objects of IGA, ............................................ overview, ..................................................... supply and demand, .................................

[1.10] [1.40] [1.10] [1.10]

Compliance — see Enforcement Computer software consumer guarantees, ............................. [8.140] goods or services, ................ [8.135], [8.140] supplier limiting liability, ............... [15.260] supply, .................................................. [8.140] goods, as, ....................... [8.135], [8.140], [12.25] licence as chose in action, ...................... [8.140] Concurrent wrongdoers apportionable claim, .............. [14.145], apportionment of loss, .......... [14.145], definition, ................ [14.145], [14.155], proportionate liability, ........... [14.145], State legislation, ......................... [1.50],

[14.150] [14.160] [14.170] [14.155] [14.170]

Conspiracy corporate liability, .................................... [13.35] fines, ........................................................... [13.35] Constitution High Court jurisdiction, ......................... [1.150] legislative powers under consumer protections laws, .. [1.90], [1.105] corporations power, ................. [1.90], [2.05] heads of power, .................................... [1.90] referral of, .............................. [1.105], [1.120] States and Territories, ........................ [1.120] Consumer acquisition as, ................................ [8.70]–[8.115] acquire, meaning, ................................. [8.70]

722

The Australian Consumer Law

Consumer — cont aggregation, .......................................... [8.80] amount paid or payable, ....... [8.75], [8.80], [8.95] business goods, .................................... [8.75] commercial road vehicles and trailers, .......................................................... [8.105] credit terms, .......................................... [8.95] hire or lease, .......................................... [8.90] mixed supplies, .......... [8.85], [8.90], [8.130] non-consumer use exceptions, .......... [8.75], [8.110] personal, household or domestic use, .......................................................... [8.100] prescribed amount, .............................. [8.75] presumption, ....................................... [8.115] price, definition, ................................... [8.75] purpose of acquisition, ....................... [8.70] re-supply of goods, .............. [8.110], [8.160] services, .................................................. [9.10] stock-in-trade, ..................................... [8.110] using up or transforming goods, .... [8.110] “bounded rationality”, .............................. [1.15] business consumers, ...................... [1.30], [1.35] competition policy and, ............................ [1.10] definition, ............... [1.35], [5.65], [8.70]–[8.115] ACL and TPA compared, ................... [1.65] objective approach, ............................ [8.100] detriment to — see Consumer detriment presumption, ............................................. [8.115] Consumer Affairs Australia and New Zealand (CAANZ) advisory and consultative committees, . [1.45] functions, ..................................................... [1.45] Consumer agreements lay-by — see Lay-by agreements overview, ................................................... [10.05] unsolicited — see Unsolicited consumer agreements Consumer contracts definition, .......................... [5.60], [5.65], [5.200] dual purposes, ............................................ [5.65] financial services, ..................................... [5.200] implied terms — see Implied terms regime land, acquisition of, ................................... [5.60] purposes of acquisition, ............................ [5.60] standard form contracts, ............... [5.05], [5.90] unfair terms — see Unfair contract terms Consumer credit — see Credit Consumer detriment behavioural economics and, .................... [1.20] “bounded rationality” and, ...................... [1.15]

business detriment, protection against, . [1.30] competition policy and, ............................ [1.10] consumer protection policy, ......... [1.10]–[1.30] defective products, .................................... [1.25] definition, ...................................... [1.10], [13.10] drip pricing, ................................................ [1.35] enforcement and risk of, ......................... [13.15] high pressure sales techniques, ............... [1.20] information asymmetry, ............................ [1.15] market failure, ............................................ [1.15] minimising, ............................................... [13.10] misleading advertising, ............... [1.10], [3.170] overview, ..................................................... [1.10] personal detriment, ..................... [1.10], [3.170] structural detriment, .................... [1.10], [3.170] supply and demand and, ......................... [1.10] transaction costs, ........................................ [1.15] unfair terms causing, ... [5.110], [5.120], [5.135] applied or relied on, .......................... [5.135] evidence of actual detriment, .......... [5.135] financial detriment, ............................ [5.135] financial services, ............................... [5.225] non-financial detriment, ................... [5.135] unsafe or defective products, ...... [1.10], [1.25] unsolicited consumer agreements, ......... [1.20], [10.05] Consumer guarantees ACCC action to enforce, ....................... [15.295] acquisition as consumer — see Consumer application of ACL, ....................... [8.15], [8.65] assignment of responsibility, .................... [8.55] background, ............. [1.75]–[1.85], [8.10]–[8.60] CCAAC recommendations, ... [1.80], [1.85], [8.45]–[8.55] intention of parliament, ...................... [8.55] NEIAT study findings, ....................... [1.85], [8.20]–[8.45] Productivity Commission recommendations, .............. [1.75], [1.80] single enterprise theory, ...................... [8.45] civil pecuniary penalties, ...................... [13.165] commencement date, ..................... [8.05], [8.60] consumer awareness, .............................. [6.210] consumer, definition — see Consumer cover the filed, not intended to, .............. [8.15] criminal offences, ..................................... [9.120] defective goods actions and, ................ [12.170] failure to comply, ........... [8.05], [14.05], [15.05] choices for consumers, .......... [8.05], [15.05] remedies — see Consumer guarantees: remedies goods — see Consumer guarantees for goods New Zealand — see New Zealand consumer guarantees overlap of protections, .............. [8.15], [15.250] overview, ..................................................... [1.65]

Index Consumer guarantees — cont policy objectives, ........................................ [8.55] remedies — see Consumer guarantees: remedies Sale of Goods Acts compared, ................ [8.15] services — see Consumer guarantees for services Trade Practices Act compared, .... [1.65], [8.10] Consumer guarantees for goods acceptable quality, ....................... [8.50], [8.180], [8.205]–[8.345] abnormal use exclusion, .... [8.205], [8.310], [8.330] onus of proof, ................................. [8.305] aesthetic quality, ................................. [8.235] appearance and finish, ........ [8.225], [8.235] attributes, ............................... [8.225]–[8.250] auction sales excluded, ....... [8.170], [8.205] CCAAC findings, ................... [8.50], [8.345] defects aggregation of, ................................ [15.35] definition, ........................................ [8.240] design defects, ................................ [8.240] drawn to consumer’s attention, ..... [8.310], [8.320] freedom from, ..... [8.225], [8.240], [8.265] instructional defects, ....................... [8.240] latent, ............................................... [8.250] manufacturing defects, .................... [8.240] notice of, ............... [1.65], [8.310], [8.325] safety defects, ................................. [8.245] definition, ..... [8.55], [8.205], [8.220]–[8.250] durability, .. [6.205], [8.225], [8.235], [8.250] evidentiary issues, ............................. [8.340] examination of goods, ......... [8.310], [8.335] exclusions from liability, .................. [8.205], [8.310]–[8.335] abnormal use, .................................. [8.330] defects drawn to attention, ............. [8.320] examination of goods, .................... [8.335] written notice of defects, .... [1.65], [8.235] extended warranties and, ................. [6.205] fitness for purposes, .......................... [8.230] freedom from defects, ........ [8.225], [8.240], [8.265] inspection of goods by consumer, .. [8.205] intermediaries, role of, ...................... [8.300] latent defects, ...................................... [8.250] major failure, ........... [15.20]–[15.40], [15.70] marketing of goods, .......................... [8.300] matters to be considered, .. [8.205], [8.260], [8.270]–[8.300] merchantable quality under TPA compared, ........................ [8.210], [8.215] motor vehicles disputes, ................... [8.340] nature of goods, ..... [8.245], [8.265], [8.275]

723

New Zealand, ........ [8.205], [8.220], [8.240], [8.255]–[8.265] non-major failure, .............................. [15.85] objective assessment of quality, ....... [8.255] price of goods, ........ [8.260], [8.265], [8.280] reasonable consumer standard, ...... [8.205], [8.225], [8.240], [8.245], [8.225]–[8.265], [15.30] relevant circumstances, ..................... [8.300] remedies for failure — see Consumer guarantees: remedies representations by supplier or manufacturer, ................................ [8.290] safety, .......... [8.225], [8.245], [8.265], [15.40] second-hand goods, ........................... [8.245] state and condition of goods, .......... [8.260] statements on packaging or labels, .......................................................... [8.285] strict liability, ...................................... [8.205] time for assessing, ............................. [8.305] trade or commerce, supply in, ........ [8.155] ACL Guide, .... [8.185], [8.195], [8.325], [8.380], [15.125] ACL regime generally — see Consumer guarantees acquisition as consumer — see Consumer application of ACL, ....................... [8.15], [8.65] assignment of responsibility, .................... [8.55] auction sales, ............................................. [8.170] background — see Consumer guarantees chattels, .......................................... [8.165], [9.40] affixed to land, ........................ [8.145], [9.40] mixed supply, ....................................... [8.85] supply of, ............................................ [8.165] commencement date, ..................... [8.05], [8.60] computer software goods or services, ................ [8.135], [8.140] supplier limiting liability, ............... [15.260] consumer awareness, .............................. [6.210] consumer, definition — see Consumer correspondence with description, ........ [8.180], [8.385] auction sales excluded, ..................... [8.170] nature of obligation, .......................... [8.385] non-compliance, remedy for, ........... [15.10] supply by description, ...................... [8.385] TPA compared, ................................... [8.385] trade or commerce, supply in, ........ [8.155] credit terms, ................................................ [8.95] criminal offences, ..................................... [9.120] damages for breach — see Consumer guarantees: remedies defective goods actions and, ................ [12.170] definition of consumer — see Consumer enforcement by ACCC, ......................... [15.295] exclusion clauses, ..... [8.380], [15.255]–[15.290] express warranties, .................... [8.180], [8.400]

724

The Australian Consumer Law

Consumer guarantees for goods — cont auction sales excluded, ..................... [8.170] collateral contracts, ............................ [8.400] definition, ............................................ [8.400] manufacturer, ...................................... [8.400] non-compliance, remedy for, ........... [15.10] supplier, ............................................... [8.400] warranties against defects distinguished, .......................................................... [8.405] extended warranties and, ....................... [6.205] financial products not subject to, .... [6.230] failure to comply, ........... [8.05], [14.05], [15.05] choices for consumers, .......... [8.05], [15.05] opportunity to remedy, ..................... [15.10] recreational services, ........................... [1.50] remedies — see Consumer guarantees: remedies false or misleading representation as to, .......................................................... [6.180] financial products not subject to, .......... [6.230] fitness for purpose, ...... [8.180], [8.350]–[8.380] acceptable quality and, ..................... [8.230] ACL Guide, ......................................... [8.380] auction sales excluded, ..................... [8.170] defective goods actions and, .......... [12.170] disclosed purpose, ............................. [8.350] disclosure of purpose, ....................... [8.365] elements under TPA, ......................... [8.360] loss or damage from goods not being, .......................................................... [8.360] major failure, ...................................... [15.70] nature of supplier’s duty, ................. [8.370] “no reliance clause”, .......................... [8.380] non-compliance, remedy for, ........... [15.10] particular purpose, ............................ [8.360] pre-conditions, .................................... [8.350] prior negotiations, .............................. [8.375] proviso, ................................................ [8.380] reasonably fit, ..................................... [8.370] reliance on seller’s skill or judgment, .......................................................... [8.260] special purpose, .................................. [8.365] “state of the art” defence, ............... [8.370], [12.170] test for determining, .......................... [8.360] TPA compared, ..................... [8.355], [8.360] trade or commerce, supply in, ........ [8.155] unreasonable reliance, ....................... [8.260] gift recipients, ........................................... [8.160] goods, definition, ....................... [8.120], [8.125] chattels affixed to land, ......... [8.145], [9.40] digital products, ................... [8.135], [8.140] mixed supply, ........... [8.85], [8.130], [8.145] residential dwellings, ........................ [8.150] services distinguished, ........ [8.125]–[8.150] “guarantee”, use of term, ......................... [8.05] hire of goods, .............................................. [8.90] consumer, definition, ........................... [8.90]

title guarantee not applicable, ......... [8.185] undisclosed securities, ...................... [8.195] undisturbed possession, ................... [8.190] implementation, ......................................... [8.05] implied terms regime, replacing, ........... [1.75], [8.10] background, ....... [1.75]–[1.85], [8.10]–[8.60] comparison, ........................................... [8.15] international sale of goods, .................... [8.175] lease of goods, ............................................ [8.90] consumer, definition, ........................... [8.90] title guarantee not applicable, ......... [8.185] undisclosed securities, ...................... [8.195] undisturbed possession, ................... [8.190] linked credit providers, ............ [9.20], [15.215] ACL applicable, ...................... [3.250], [9.20] rights and remedies, ........ [15.215]–[15.245] major failure — see Consumer guarantees: remedies manufacturers, .......................... [8.180], [15.110] defective goods actions, .................. [12.170] exclusion of liability, ........ [15.255], [15.270] express warranties, ............................ [8.400] indemnification of suppliers, ............ [1.65], [8.05], [8.55], [15.140] joint responsibility for quality, .......... [8.45] remedies against — see Consumer guarantees: remedies repairs, ................................................. [8.395] responsibility of, ................................... [8.55] spare parts, .......................................... [8.395] warranties against defects, ............... [8.405] mixed supplies, ............................ [8.85], [8.130] chattels and dwelling/building, .... [8.165], [9.40] digital products, ................................. [8.140] modification or restriction exclusion clauses, .............................. [8.380], [15.255]–[15.290] false or misleading representation, . [6.180] motor vehicles acceptable quality, .. [8.235], [8.280], [8.290] damages for failure of, ...................... [15.70] disputes, evidence in, ........................ [8.340] hire, ....................................................... [8.190] inspection by purchaser, ................... [8.335] linked credit contract, ....................... [8.375] private sales, ....................................... [8.155] repair and spare parts, ...................... [8.395] undisclosed securities, ...................... [8.195] undisturbed possession, ................... [8.190] New Zealand Consumer Guarantees Act, ................................................ [8.10], [8.45] acceptable quality, . [8.205], [8.220], [8.240], [8.255] ACL regime based on, ............ [8.45], [8.50] loss allocation mechanism, ................. [8.55]

Index Consumer guarantees for goods — cont residential dwellings, ........................ [8.150] single enterprise theory, ...................... [8.45] obligations on different persons, ............. [8.15] overview, ......................................... [8.05], [8.65] point-of-sale information, ....................... [6.210] criminal offences, ............................... [9.120] failure to display, ............... [9.120], [15.250] policy objectives, ........................................ [8.55] private sales, ............................................. [8.155] product recalls and, ................. [11.90], [12.170] proof of transactions, .............................. [9.125] ACL and TPA compared, ................... [1.65] definition, ............................................ [9.125] enforcement powers, ......................... [9.130] examples, ............................................. [9.125] remedies, ............................................. [9.130] remedies for non-compliance — see Consumer guarantees: remedies repair of goods, .......................... [8.180], [8.395] auction sales excluded, ..................... [8.170] exemption from liability, .................. [8.395] importers, ............................................ [8.395] manufacturers, .................................... [8.395] reasonableness test, ........................... [8.395] warranties against defects and, ....... [8.405] residential dwellings, .................. [8.150], [9.45] re-supply of goods, .................... [8.110], [8.160] rights of different persons, ....................... [8.15] Sale of Goods Acts compared, ................ [8.15] sample, compliance with, ......... [8.180], [8.390] auction sales excluded, ..................... [8.170] freedom from defects, ....................... [8.390] single enterprise theory, .............. [8.45], [8.180] spare parts, .................................. [8.180], [8.395] auction sales excluded, ..................... [8.170] exemption from liability, .................. [8.395] importers, ............................................ [8.395] manufacturers, .................................... [8.395] reasonableness test, ........................... [8.395] strict liability, .............................................. [8.50] suppliers express warranty, ............................... [8.400] indemnification by manufacturers, .. [1.65], [8.05], [8.55], [15.140] joint responsibility for quality, .......... [8.45] limitation of liability, .......................... [8.55], [15.255]–[15.265] opportunity to make good non-compliance, ............................. [8.55] proof of transactions, .......... [9.125], [9.130] remedies against — see Consumer guarantees: remedies warranty against defects, ................. [8.405] supply, definition, .................................... [8.160] telecommunications extended warranties and, ................. [6.205] title to goods, ................ [8.180], [8.185], [8.200]

725

ACL Guide, ......................................... [8.185] hire or lease excluded, ...................... [8.185] limitation of liability not permitted, ........................................................ [15.260] limited title, ........................... [8.185], [8.200] non-compliance, remedy for, ........... [15.10] remedy by supplier, .......................... [15.85] right to dispose, ................................. [8.185] undisturbed possession and, ........... [8.190] trade or commerce requirement, ............ [2.75], [2.85], [8.155] transitional provisions, ............................. [1.60] underlying philosophy, ........................... [8.180] undisclosed securities, ............. [8.180], [8.195], [8.200] ACL Guide, ......................................... [8.195] floating charges, ................................. [8.195] limitation of liability not permitted, ........................................................ [15.260] non-compliance, remedy for, ........... [15.10] undisturbed possession, .......... [8.180], [8.190], [8.200] hire or lease, ........................................ [8.190] limitation of liability not permitted, ........................................................ [15.260] limited title, ......................................... [8.190] non-compliance, remedy for, ........... [15.10] United Kingdom fitness for purpose, .............. [8.355], [8.365] merchantable quality, ........................ [8.210] Vienna Convention, ................................. [8.175] warranties against defects, ..................... [8.405] whole of supply chain obligations, ........ [8.15] Consumer guarantees for services ACL regime generally — see Consumer guarantees architects, ....................................... [9.25], [9.100] background — see Consumer guarantees building services, ....................................... [9.40] fixtures as goods, ................... [8.145], [9.40] leasehold or freehold interest, ........... [9.45] mixed supplies, ...................... [8.130], [9.40] residential dwellings, ............ [8.150], [9.45] common law duties duty of care, .......................................... [9.65] overcoming inadequacies of, ............. [9.55] consumer — see also Consumer acquisition as, ....................................... [9.10] criminal offences, ..................................... [9.120] desired result, ............................... [9.95], [9.110] major failure, ..................... [15.150], [15.170] non-compliance, remedy for, ......... [15.145] question of fact, .................................. [9.110] reasonably expected to achieve, ....... [9.95], [9.110] digital products, whether, ........ [8.135], [8.140]

726

The Australian Consumer Law

Consumer guarantees for services — cont due care and skill, .............. [9.05], [9.60]–[9.90] acceptable level, ................................... [9.80] architects, ............................................... [9.25] common law duty compared, ........... [9.65] due care, meaning, .................. [9.65], [9.85] engineers, .............................................. [9.25] exception to right of redress, ......... [15.195] major failure, .................................... [15.150] motor vehicle repairs, ......................... [9.90] New Zealand, ........................... [9.70], [9.85] non-compliance, remedy for, ......... [15.145] requirements, ........................................ [9.75] standard of due care, .............. [9.85], [9.90] test for, ................................................... [9.75] TPA compared, ......................... [9.65], [9.85] United Kingdom, ................................. [9.70] electricity, ................................................... [9.500] engineers, ...................................... [9.25], [9.100] excluded services, .......................... [9.15]–[9.50] exclusion clauses, ................... [15.255]–[15.290] financial services, ....................................... [9.20] ACL not applicable, ............... [3.250], [9.20] fitness for purpose, .......... [9.05], [9.95]–[9.105] architects excluded, ............... [9.25], [9.100] engineers excluded, ............... [9.25], [9.100] major failure, ..... [15.150], [15.160], [15.165] making known purpose, .................. [9.105] non-compliance, remedy for, ......... [15.145] reasonably fit, ....................................... [9.95] TPA compared, ................................... [9.100] gas, .............................................................. [9.500] insurance contracts excluded, .................. [9.35] itemised bills, ............................................ [9.135] linked credit providers, ............ [9.20], [15.215] ACL applicable, ...................... [3.250], [9.20] rights and remedies, ........ [15.215]–[15.245] major failure — see Consumer guarantees: remedies mixed supplies, ............................ [8.85], [8.130] chattels and building, ............ [8.165], [9.40] digital products, ................................. [8.140] motor vehicle repairs desired result, ..................................... [9.110] due care and skill, ............................... [9.90] overview, ......................................... [9.05], [9.55] personal, domestic or household use, services for, ..................................................... [9.15] point-of-sale information, ....................... [6.210] criminal offences, ............................... [9.120] display of notice, .................. [6.210], [9.120] failure to display, ............... [9.120], [15.250] proof of transactions, .............................. [9.125] ACL and TPA compared, ................... [1.65] definition, ............................................ [9.125] enforcement powers, ......................... [9.130] examples, ............................................. [9.125] remedies, ............................................. [9.130]

purpose, ....................................................... [9.55] reasonable time for supply, ........ [9.05], [9.115] architects and engineers, .................... [9.25] consideration of circumstances, ....... [9.115] major failure, .................................... [15.150] non-compliance, remedy for, ......... [15.145] recreational services, ................. [1.50], [15.280] guarantee independent of contract, ........................................................ [15.285] limitation of liability, .......................... [1.50], [15.280]–[15.290] reckless conduct of supplier, ......... [15.285] remedies for failure to comply, ..... [15.285] States and Territories, .......... [1.50], [15.290] remedies for non-compliance — see Consumer guarantees: remedies residential dwellings, .................. [8.150], [9.45] re-supply of services, ................................ [9.10] scheme of ACL, .......................................... [9.60] service, definition, ............ [8.120], [9.15], [9.45] goods distinguished, ............ [8.125]–[8.150] services protected, ..................................... [9.15] exclusions, ................................. [9.15]–[9.50] storage services, ......................................... [9.30] suppliers indemnification by manufacturers, .. [1.65], [8.05], [15.140] itemised bills, ...................................... [9.135] proof of transactions, .......... [9.125], [9.130] remedies against — see Consumer guarantees: remedies supply, meaning, ...................................... [8.160] telecommunications services, ................... [9.50] TPA compared, ........................................... [9.05] trade or commerce, supply in, .............. [8.155] transportation services, ............................. [9.30] fitness for purpose, ............................ [9.105] Consumer guarantees: remedies ACCC action to enforce, ....................... [15.295] ACL and TPA compared, ......................... [1.65] choice of law and venue clauses, ....... [15.275] choices for consumers, . [8.05], [15.05], [15.45], [15.185] consumer, available to, ........................... [15.15] curing defect in title, ............................... [15.85] damages for consequential loss, ........... [15.05] causation, ............................. [15.70], [15.105] duty to mitigate, ................................ [15.75] exclusion of liability, ........ [15.265], [15.270] indemnification of supplier, .. [1.65], [8.05], [8.55], [15.140] loss sharing, ...................................... [15.105] major failure, ...................................... [15.70] manufacturer, against, ..... [15.130], [15.270] manufacturer excluding liability, .. [15.270] measure of, .......................................... [15.70]

Index Consumer guarantees: remedies — cont motor vehicles, ................................... [15.70] New Zealand, ................................... [15.105] non-major failure, ............................ [15.100] reasonably foreseeable loss, ............ [15.70], [15.100], [15.130], [15.210], [15.265] supplier excluding liability, ............ [15.265] supplier of goods, against, .............. [15.70], [15.100], [15.265] supplier of services, against, ......... [15.210], [15.265] damages for personal injury and death, ........................................................ [15.135] damages for reduction in value manufacturer, against, ..................... [15.125] supplier of goods, ................ [15.45], [15.65] supplier of services, ......................... [15.185] defective goods actions compared, ..... [12.170] exclusion clauses, ....... [6.180], [8.380], [15.255] choice of law and venue clauses, . [15.275] manufacturer excluding liability, .. [15.270] recreational services, ........ [15.280]–[15.290] supplier excluding liability for consequential loss, ..................... [15.265] supplier limiting liability, ............... [15.260] failure cannot be remedied, ................... [15.20] Australian approach, ......................... [15.30] NZ approach, ........................ [15.20], [15.25] indemnification of supplier by manufacturer, .................... [1.65], [8.05], [8.55], [15.140] limitation of liability, ............................. [15.255] manufacturer, .................................... [15.270] “no reliance clause”, .......................... [8.380] non-personal goods, ........ [15.260], [15.270] recreational services, .......................... [1.50], [15.280]–[15.290] supplier, ............................................. [15.260] linked credit providers, against, ........................................ [15.215]–[15.245] ACL and TPA compared, ... [1.65], [15.215] amount of liability, ........................... [15.240] exceptions to liability, ...................... [15.235] joint actions, ...................................... [15.230] joint liability, ..................... [15.215], [15.220] pre-existing link, .............................. [15.225] prior negotiations, .............................. [8.375] remedies in relation to, ... [15.215]–[15.245] supplier and credit provider liable inter se, ........................................................ [15.245] TPA compared, ..................... [1.65], [15.215] loss allocation, ............................ [8.55], [15.110] major failure of goods, ............... [8.05], [15.10], [15.20]–[15.75] aggregation of defects, ...................... [15.35] Australian approach, ........... [15.30]–[15.40] compensation, ......... [15.45], [15.65]–[15.75] meaning, ................................ [15.20]–[15.30] NZ approach, ........................ [15.20], [15.25]

727

quality, .................................... [15.20]–[15.40] reasonable consumer test, .. [15.30], [15.40] rejection of goods, ................ [15.50]–[15.60] remedies, ................................ [15.45]–[15.75] substantial character, ........... [15.20], [15.25] tests, ........................................ [15.20]–[15.40] unsafe goods, ...................................... [15.40] major failure of services, ...... [15.145]–[15.170], [15.185] desired result not achieved, ........... [15.170] meaning, ............................................ [15.150] reasonable consumer test, .............. [15.155] remedies, ........................................... [15.185] unfit for normal purpose, ............... [15.160] unfit for special purpose, ............... [15.165] unsafe situation, ............................... [15.175] manufacturer, against, ................ [8.05], [15.05], [15.110]–[15.135] affected person, ................................. [15.115] causes of action, ............................... [15.110] damages for consequential loss, .. [15.130], [15.270] damages for personal injury and death, ........................................................ [15.135] damages for reduction in value, ... [15.125] defective goods actions compared, ........................................................ [12.170] exceptions to right of redress, ....... [15.120] exclusion of liability, ........................ [15.270] failure to remedy fault in reasonable time, ........................................................ [15.125] who may bring action, .................... [15.115] New Zealand damages for consequential loss, ... [15.105] failure of a substantial character, ... [15.20], [15.25] rejection of goods, ................ [15.50], [15.60] repair by supplier, ............................. [15.80] non-major failure, .......... [8.05], [15.10], [15.20] goods, ................................... [15.80]–[15.105] repair by supplier, ............................. [15.80] services, .............................................. [15.180] overlap of protections, .............. [8.15], [15.250] overview, ........................... [1.65], [8.05], [15.05] private litigation, ........................................ [8.05] proof of transaction offences, ................. [9.130] proper law of contract, ......................... [15.275] recreational services, ................. [1.50], [15.280] damages for reasonably foreseeable loss, ........................................................ [15.285] guarantee independent of contract, ........................................................ [15.285] limitation of liability, .......................... [1.50], [15.280]–[15.290] reckless conduct of supplier, ......... [15.285] remedies for failure to comply, ..... [15.285] States and Territories, .......... [1.50], [15.290]

728

The Australian Consumer Law

Consumer guarantees: remedies — cont refund, ............................ [15.50], [15.85], [15.95] rejection of goods, ...................... [15.50]–[15.60] cost of returning goods, .................... [15.50] loss of right, ........................................ [15.55] major failure, ......................... [15.30], [15.45] reasonable time, ................................. [15.60] rejection period, .................................. [15.60] replacement goods, ............................ [15.50] seriously defective goods, ................ [15.60] repair by manufacturer, ........................ [15.125] repair by supplier, ..................... [15.80], [15.85] replacement of goods, ............... [15.50], [15.85] restarts consumer guarantees, ......... [15.90] “state of the art” defence, ........ [8.265], [8.370] statutory causes of action, ...................... [15.05] independent of contract, ................... [15.05] supplier and credit provider liable inter se, ........................................................ [15.245] supplier of goods, against, ...................... [8.05], [15.10]–[15.105] compensation, ....................... [15.45], [15.65] consumer, available to, ..................... [15.15] curing defect in title, ......................... [15.85] damages for consequential loss, .... [15.70], [15.100], [15.105], [15.265] exclusion of liability, ........................ [15.265] hierarchy of remedies, ...................... [15.10] indemnification by manufacturer, .... [1.65], [8.05], [8.55], [15.140] keeping goods, ................................... [15.65] limitation of liability, ....................... [15.260] major failure, ........... [15.10], [15.20]–[15.75] non-major failure, ............... [15.10], [15.20], [15.80]–[15.105] opportunity to remedy failure, ........ [15.10] optional, ................................. [15.80], [15.85] refund, ...................... [15.50], [15.85], [15.95] rejection of goods, ................ [15.50]–[15.60] repair, ..................................... [15.80], [15.85] replacement of goods, ......... [15.50], [15.85] Sale of Goods legislation compared, .......................................................... [15.10] TPA compared, ................................... [15.10] who may bring action, ...................... [15.15] supplier of services, against, ................ [15.145] compensation for reduction in value, ........................................................ [15.185] damages for consequential loss, .. [15.210], [15.265] exceptions to right of redress, ........................................ [15.190]–[15.205] act, default or representation by third party, .................................................. [15.200] causes beyond human control, ..... [15.205] guarantee of due care and skill, ... [15.195] exclusion of liability, ........................ [15.265] limitation of liability, ....................... [15.260]

major failure, ..... [15.145]–[15.170], non-major failure, ............................ remedy failure and pay costs, ....... termination of contract, .. [15.180],

[15.185] [15.180] [15.180] [15.185]

Consumer protection ACL approach, ........................................... [1.05] business consumers, ...................... [1.30], [1.35] different approaches to, ............................ [1.05] financial services, ..................................... [1.105] general prohibitions, ................................. [1.05] laws, power to make, .................. [1.90], [1.105] policy — see Consumer protection policy rule-based regulation, ............................... [1.05] statutory framework, ................................. [1.05] Consumer protection policy accessibility, ................................................. [1.40] awareness, ................................................... [1.40] behavioural economics, ............................ [1.20] business detriment, ........................ [1.30], [1.35] unfair contract terms, .......................... [1.30] clarity, ........................................................... [1.40] COAG, ................. [1.05], [1.45], [1.120], [1.140] competition policy and, ................ [1.10], [1.15] compliance, ................................................. [1.40] consistency, .................................................. [1.40] consumer detriment and, ......................... [1.10] behavioural economics, ...................... [1.20] defective products, .............................. [1.25] information asymmetry, ...................... [1.15] market failure, ...................................... [1.15] minimising, ................................ [1.10]–[1.30] transaction costs, .................................. [1.15] unfair sales techniques, ....................... [1.20] consumer guarantees, ............................... [8.55] Governance Forum of Consumer Affairs (CAF), ............................................... [1.45] information asymmetry, ............................ [1.15] Intergovernmental Agreement for the ACL (IGA), ................... [1.40], [1.105], [1.140] interpretation and, ..................................... [1.40] purposive approach, ............................ [1.40] lay-buy sales, .............................................. [1.20] manufacturer’s liability, .......................... [12.05] market failure, ............................................ [1.15] overarching objective, ............................... [1.40] overview, ......................................... [1.05], [1.40] product liability, ........................... [1.25], [11.10] Productivity Commission, ........... [1.05], [1.10], [1.40] review of framework, .............. [1.70], [1.75] “purposive” interpretation, ...................... [1.40] reform and, ................................................. [1.45] review of framework, .................... [1.70], [1.75] States and Territories, ................................ [1.40] unsolicited selling practices, .................... [1.20]

Index Contracts bargaining power — see Inequality of bargaining power breaching ACL, ........................... [14.05], [14.10] consequences of illegality, ................ [14.15] declaration — see Declarations evidence, .............................................. [14.10] rescission, .......................................... [14.220] severance of provisions, ................... [14.20] business contracts, ................................... [10.20] definition, ............................................ [10.20] unsolicited consumer agreement exemption, ....................... [10.15], [10.20] collateral contracts, .................................. [8.400] consumer contracts definition, .................... [5.60], [5.65], [5.200] dual purposes, ...................................... [5.65] financial services, ............................... [5.200] land, acquisition of, ............................. [5.60] purposes of acquisition, ...................... [5.60] unfair terms — see Unfair contract terms exclusion clauses — see Exclusion clauses freedom of contract, .................................. [5.05] illegality, ..................................................... [14.15] severance of provisions, ................... [14.20] implied terms — see Implied terms regime insurance — see Insurance misleading representations — see Misleading or deceptive conduct rescission, ................................................ [14.220] severance of illegal provisions, ............. [14.20] standard form contracts, ............... [5.05], [5.90] definition, .............................................. [5.90] inequality of bargaining power, ....... [5.05], [5.95] rebuttable presumption, ................... [5.100] unfair terms — see Unfair contract terms unconscionable conduct — see Unconscionable conduct unfair terms — see Unfair contract terms void, ........................................................... [14.15] declaration, .......................... [14.15], [14.220] unfair terms — see Unfair contract terms Contributory fault circumventing operation, ..................... [14.135] contributory negligence, ....... [14.130], [14.140] damages reduced for, ............... [1.50], [14.130], [14.290] manufacturer, action against, ......... [12.145] failure to take reasonable care, ........... [14.125], [14.130] failure to verify representation, ............ [14.70], [14.130] reduction for, .......................... [14.130], [14.140] State and Territory legislation, ............ [14.140] TPA compared, ....................................... [14.130]

729

Cooling off period unsolicited consumer agreements, ......... [1.20], [10.05], [10.50], [10.60] emergency exemption, ...................... [10.85] mandatory, .......................................... [10.05] provision of information about, ...... [10.50] Corporate liability breaches of ACL, ...................................... [2.110] criminal offences, ..................................... [13.20] aiding and abetting, ............ [13.25], [13.30] conspiracy, ........................................... [13.35] fines, payment of, .............................. [13.25] intention, .............................................. [13.20] director, employee or agent, conduct of, ............................................ [2.110]–[2.125] actual or apparent authority, ........... [2.120] civil liability, ...................................... [13.215] conduct “on behalf of”, ....... [2.115], [2.120] consent or direction, .......................... [2.125] conspiracy to commit offence, ......... [13.35] criminal liability, ................... [13.20]–[13.35] direct liability, ........................ [2.110]–[2.135] scope of authority, ............................. [2.120] vicarious liability at common law, .. [2.110] elements to be satisfied, .......................... [2.110] overview, .................................................... [2.110] Corporations application of ACL, ........... [1.50], [1.90], [2.05] carrying on business in Australia, .... [1.95] conduct outside Australia, ................. [1.95] unfair contract terms, ............. [5.50], [5.60], [5.175] constitution, unfair terms exclusion, ...... [5.45] criminal liability, ...................................... [13.20] aiding and abetting, ............ [13.25], [13.30] conspiracy, ........................................... [13.35] fines, payment of, .............................. [13.25] definition, ........................................ [2.10], [2.30] disqualification from management, ... [13.135], [13.320], [13.325] financial corporations, ................... [2.10], [2.25] foreign corporations, ..................... [2.10], [2.15] incorporated in a Territory, ................ [2.30] indemnification of officers, ... [13.165], [13.245] liability for breaches — see Corporate liability misleading or deceptive conduct, ........... [2.05] related bodies corporate, .......................... [2.35] trading corporations, ..................... [2.10], [2.20] unfair contract terms, ...... [5.50], [5.60], [5.175] Corporations Act complementary operation with ACL, .. consistency with ACL, ............................ financial service, definition, ................... financial services regulation, .... [1.105],

[3.255] [3.250] [3.265] [3.250]

730

The Australian Consumer Law

Corporations Act — cont misleading or deceptive conduct, ........ [3.250], [3.285] disclosure documents, ....................... [3.285] financial services, ................. [1.105], [3.250] literal truth, ......................................... [3.130] opinion, ................................................ [3.150] takeover documents, ......................... [3.285] Corporations Agreement, 2002, .... [1.105], [3.250] Corrective advertising orders court’s power, ......................... [13.280], [13.310] public interest, ........................................ [13.310] purpose, ................................... [13.280], [13.310] Costs criminal prosecutions, ........................... [13.100] Country of origin representations ACL and TPA compared, ......................... [1.65] defences to contravention of ACL, ..... [13.405] evidential burden, ............................ [13.405] grown in a particular country, ...... [13.425] ingredients or components, .......... [13.430] logo representations, ....................... [13.420] made in Australia claims, .............. [13.405], [13.410] product or produce of, .................... [13.415] essential character test, ........................... [6.165] false or misleading, ................................. [6.165] food labelling, ..................................... [6.170] “grown in” representations, ................. [13.425] ingredients or components, ........... [13.430] packaging materials, ........................ [13.430] water, .................................................. [13.430] “made in Australia” claims, ... [6.165], [13.410] cost components, .............................. [13.410] false or misleading, ........................... [6.165] substantial transformation, ............ [13.410] substantiation notice, ...................... [13.405] overview, ................................................... [6.165] product of/produce of, ......................... [13.415] Courts Federal Circuit Court, ............................. Federal Court — see Federal Court State and Territory courts, ........ [1.150], transfer of proceedings, .......................... unfair terms, proceedings for, ...............

[1.150] [1.155] [1.160] [5.170]

Credit consumer, definition, ................................. [8.95] definition, ...................................... [3.270], [8.95] facilities — see Credit facilities inequality of bargaining power, .............. [5.05] National Credit Code, ............... [1.105], [3.250]

standard form contracts, ........................... [5.05] Credit cards — see Unsolicited credit or debit cards Credit facilities definition, .................................... [3.270], [3.285] financial products, as, ................. [3.270], [8.95] goods supplied in conjunction with, .... [3.290] misleading or deceptive conduct, ......... [3.285] overlap of ACL and ASIC Act, ........ [3.290] transactions deemed to be, .................... [3.270] unfair terms, ............................................. [5.220] Credit providers — see Linked credit providers Criminal liability aiding and abetting, .................. [13.25], [13.30] consumer guarantees, ............................. [9.120] corporations, ............................................. [13.20] aiding and abetting, ............ [13.25], [13.30] authorisation or permission, ............ [13.20] conspiracy, ........................................... [13.35] intention, .............................................. [13.20] false or misleading representations, ...... [6.05], [6.215] business activities, ............................. [6.295] defences, ................ [6.215], [6.255], [13.105] land, ........................................ [6.255], [6.260] lay-by agreements, ................................. [10.130] misleading conduct employment matters, ........................ [6.270] nature of goods or services, ............. [6.280] overview, ....................................... [6.05], [13.20] product recalls, ......................... [11.85], [11.135] product safety offences defences, ............................................ [13.130] information standards, .................... [11.180] reporting obligations, ...................... [11.255] safety bans, ........................................ [11.205] safety standards, ............................... [11.165] pyramid selling, ....................................... [7.140] substantiation notice offence, ............... [13.365] Trade Practice Act, ..................................... [6.05] unfair sales techniques, ............................. [6.05] bait advertising, ................................... [7.40] harassment or coercion, .................... [7.220] multiple pricing, ................................. [7.160] promotional offers, .............................. [7.25] referral selling, .................................... [7.200] single price specification, ................. [7.190] unauthorised entries or advertisements, .......................................................... [7.105] unsolicited credit or debit cards, ...... [7.70] unsolicited goods or services, ............ [7.90] wrongly accepting payment, ............. [7.55] unsolicited consumer agreements, ........ [10.95]

Index Criminal prosecutions aiding and abetting, .................. [13.25], [13.30] Commonwealth Prosecution Policy, ..... [13.20] conspiracy, ................................................. [13.35] corporations, ............................................. [13.20] aiding and abetting, ............ [13.25], [13.30] conspiracy, ........................................... [13.35] costs, ......................................................... [13.100] defences, .................................................. [13.110] act or default of another, ................ [13.120] information providers, .................... [13.105] non-compliance with standards, ... [13.130] reasonable mistake of fact, ............. [13.115] Director of Public Prosecutions, ............ [13.20] double jeopardy, ..................................... [13.235] enforcement of penalty, .......................... [13.80] Federal Court enforcement of fines, ......................... [13.80] jurisdiction, ......................................... [13.40] fines, ........................................... [13.55], [13.135] accessorial liability, ............................ [13.25] assessment of amount, ........ [13.55], [13.60] compensation to victims has preference, .......................................................... [13.85] conspiracy, ........................................... [13.35] corporations, against, ........................ [13.25] deterrence factors, .............................. [13.60] failure to pay, ...................................... [13.80] multiple offences, ................. [13.75], [13.90] orders in addition to, ...................... [13.135] parity principle, .................................. [13.65] recovery of, ......................................... [13.80] totality principle, ................................ [13.70] general deterrence, .................................. [13.60] imprisonment for non-payment of fine, .......................................................... [13.80] infringement notices, non-payment, .. [13.380], [13.385] injunctions, .............................................. [13.135] jurisdiction, ............................................... [13.40] limitation period, ..................................... [13.50] multiple offences, ....................... [13.75], [13.90] onus of proof, ........................................... [13.45] orders, ...................................................... [13.135] overview, ................................................... [13.20] parity principle, ........................................ [13.65] previous convictions, ............................... [13.95] specific deterrence, .................................. [13.60] standard of proof, .................................... [13.45] States and Territories, .............................. [13.20] time limits, ................................................ [13.50] totality principle, ...................................... [13.70] Crown application of ACL, ............ [2.05], [2.50]–[2.70] Commonwealth Crown application to, ........................... [2.05], [2.50]

carrying on business, .............. [2.05], exceptions, ........................................ meaning, ............................................ liability of, ................................. [2.50], State and Territory Crowns application to, ........................... [2.05], carrying on business, .............. [2.05], authorisations, whether, .................... exceptions, ........................................ intra-governmental transactions, ...... jurisdiction, ........................................... participating jurisdiction, ...................

731 [2.55] [2.60] [2.55] [2.55] [2.65] [2.65] [2.70] [2.70] [2.70] [2.65] [2.65]

D

Damages — see also Compensation orders ACL and TPA compared, ........... [1.65], [14.35] causation, ..................................... [14.35]–[14.75] “because of”, meaning, ..................... [14.35] breaks in chain of, ............................. [14.65] “but for” test, ...................................... [14.40] “common sense” approach, ............. [14.40] declaration of non-reliance, ............. [3.160], [14.75] evidence of, ......................................... [14.45] indirect theory of, .............................. [14.60] reliance, proof of, ... [14.50], [14.55], [14.70] supervening event, ............................ [14.65] TPA compared, ..................... [14.35], [14.40] concurrent wrongdoers, ........ [14.145], [14.155] apportionable claims, ...................... [14.150] apportionment of loss, .... [14.145], [14.160] definition, .......... [14.145], [14.155], [14.170] limits on amount recoverable, ....... [14.125] consequential losses, ............................. [14.105] consumer guarantee remedies — see Consumer guarantees: remedies contributory fault, ...................... [1.50], [14.130] circumventing operation, ............... [14.135] contributory negligence, . [14.130], [14.140] defective goods action, ... [12.145], [14.290] failure to take reasonable care, ..... [14.125], [14.130] failure to verify representation, ...... [14.70], [14.130] manufacturer, action against, ......... [12.145] reduction for, .................... [14.130], [14.140] State and Territory legislation, ...... [14.140] TPA compared, ................................. [14.130] defective product, injury from, ............. [12.75] causation, ............................................. [12.85] claimants, ............................................. [12.80] contributory fault, ............ [12.145], [14.290] dependants, claim by, ....... [12.95], [12.100] elements of action, ............................. [12.75] measure of damages, ......................... [12.90]

732

The Australian Consumer Law

Damages — cont evidence causation, of, ....................................... [14.45] findings in other proceedings, ......... [14.10] exemplary damages, .............................. [14.115] expectation loss, ......................... [14.85], [14.90] indirect causation theory, ....................... [14.60] interpretation of s 236, ............................ [14.35] lay-by agreement breach, ..................... [10.125] limitation period, ..................... [14.35], [14.120] accrual of cause of action, .............. [14.120] limits on, .................................... [14.85], [14.125] expectation loss, ................................. [14.85] failure to take reasonable care, ..... [14.125], [14.130] professional standards law, ............ [14.125] loss of commercial opportunity, .......... [14.105] loss or damage caused by contravention, .......................................................... [14.35] measure of, ................................ [14.85]–[14.110] “alternative approach”, ..................... [14.95] “common approach”, .......... [14.90], [14.95] common law measures, .................... [14.85] consequential losses, ....................... [14.105] discretion of court, ............................. [14.85] employment cases, ........................... [14.100] expectation loss, ................... [14.85], [14.90] loss of commercial opportunity, .... [14.105] “no transaction” approach, .............. [14.95] Potts v Miller, rule in, ........................ [14.90] price minus benefits left in hands, . [14.95] price minus value at acquisition date, .......................................... [14.90], [14.110] reliance loss, ........................................ [14.85] tortious measure, ............................... [14.85] unreasonable conduct of applicant, .......................................................... [14.95] overview, ................................................... [14.35] personal injury or death, ...... [14.125], [14.250] aggravated damages abolished, .... [14.275] consumer guarantees, ..................... [15.135] contributory fault, ............ [12.145], [14.290] defective product action, .... [12.75]–[12.90] dependants, by, ............... [12.95], [12.100] exemplary damages abolished, ..... [14.275] gratuitous care, ................................. [14.280] limits, .. [14.125], [14.250]–[14.260], [15.135] loss of earnings, ............................... [14.260] manufacturer, against, ..................... [15.135] maximum amount, .......................... [14.255] negligence reforms, .......................... [14.250] non-economic loss, .......................... [14.270] smoking or tobacco products, ...... [14.125], [14.250] structured settlements, .................... [14.285] threshold for, ..................................... [14.265] TPA compared, ................................. [14.250] professional standards law limiting, .. [14.125]

proof of reliance, ........................ [14.50], [14.55] proof of transaction breach, ................... [9.130] proportionate liability, ............... [1.50], [14.145] apportionable claim, ........ [14.145], [14.150] apportionment of loss, .... [14.145], [14.160] circumventing provisions, .............. [14.165] concurrent wrongdoers, . [14.145], [14.155], [14.170] excluded wrongdoer, ....................... [14.155] involvement in contravention, ...... [14.145] limited operation of provisions, .... [14.145] misleading conduct, for, ................. [14.145] State legislation, ................... [1.50], [14.170] reliance loss, .............................................. [14.85] reliance, proof of, ....................... [14.50], [14.55] declaration of non-reliance, ............. [3.160], [14.75], [14.80] failure to verify representation, ....... [14.70] indirect evidence, ............................... [14.55] self-serving assertion, ........................ [14.50] statutory cause of action, ....................... [14.35] structured settlements, .......................... [14.285] Death — see Personal injury or death Debit cards — see Unsolicited credit or debit cards Debt collection — see Harassment or coercion Deceit measure of damages for, ........................ [14.85] misleading and deceptive conduct action compared, ........................................ [3.05] Declarations civil proceedings, in, ............................. [13.145] discretionary remedy, .............................. [14.25] false or misleading advertising, ............ [14.25] Federal Court power to grant, ........... [13.145], [14.25] non-reliance, .................. [3.160], [14.75], [14.80] overview, ................................................... [14.25] proper contradictors, ............................. [13.145] requirements, .......................................... [13.145] unfair contract terms, ............. [14.30], [13.150], [14.225] ACCC proceedings, ........................... [5.185] Commonwealth, ................................. [5.175] compensation orders, ..... [13.150], [14.200], [14.225] private litigant, ................................... [5.190] States and Territories, ........................ [5.180] void, ..................................................... [14.30] void contract, ............................ [14.15], [14.220] Defective goods action against manufacturer — see Defective goods actions

Index Defective goods — cont consumer detriment, ..................... [1.10], [1.25] declarations under TPA, ........................... [1.60] false or misleading representations, ..... [6.105] manufacturer’s liability — see Defective goods actions permanent bans under TPA, .................... [1.60] product recalls — see Product recalls transitional provisions, ............................. [1.60] Defective goods actions ACL and TPA compared, ......................... [1.65] acquisition for use by another, .............. [12.20] actual manufacturer, ................................ [12.10] concurrent liability with deemed manufacturer, ................................ [12.10] identification of, ................................. [12.15] ALRC report, ............................................ [12.05] background to ACL regime, .................. [12.05] compliance with mandatory standards, .......................................................... [12.70] defence, .............................................. [12.125] component defence, ............................... [12.140] concurrent liability of actual and deemed manufacturers, .............................. [12.10] contributory fault, .................................. [12.145] reducing damages, ........... [12.145], [14.290] deemed manufacturers, .......................... [12.10] defences, ..................... [12.05], [12.115]–[12.140] compliance with mandatory standard, ........................................................ [12.125] component defence, ......................... [12.140] defect not existing at time of supply, ........................................................ [12.120] state of the art, ... [12.05], [12.130], [12.170] unidentified manufacturer, ............... [12.15] dependants, action by, ............ [12.95], [12.100] claimants, ........................................... [12.100] elements of action, ............................. [12.95] destroyed or damaged goods, action for, ........................................................ [12.105] destroyed or damaged land, buildings or fixtures, ........................................ [12.110] electricity, ................................................... [12.25] defence, .............................................. [12.120] exclusion not permitted, ....................... [12.165] goods, meaning, ....................................... [12.25] identifying manufacturer, ....................... [12.15] importer deemed manufacturer, ........... [12.10] inherently dangerous goods, ................. [12.60] intermediaries, role, ................................. [12.60] joint and several liability, ..................... [12.155] limitation period, ..................... [12.15], [12.150] loss allocation mechanism, ..................... [12.05] manufacturer’s liability, .......................... [12.05] deemed manufacturer, ...................... [12.10] defences, ............... [12.05], [12.115]–[12.140]

733

definition of manufacturer, .. [1.65], [12.10] supply of goods, ................................ [12.20] trade or commerce requirement, ..... [12.30] modification not permitted, ................. [12.165] negligence not necessary, ....................... [12.35] overlap of protections, .......................... [12.170] overview, ................................................... [12.05] personal injury, damages for, ................ [12.75] causation, ............................................. [12.85] claimants, ............................................. [12.80] contributory fault reducing, .......... [12.145], [14.290] dependants, claim by, ....... [12.95], [12.100] elements of action, ............................. [12.75] measure of damages, ......................... [12.90] policy objectives, .......................... [1.25], [12.05] reasonably expected uses, ...................... [12.50] repairers excluded, .................................. [12.10] representative actions by regulator, .... [12.160] safety defect, ............................... [12.35]–[12.70] compliance with mandatory standards, .......................................................... [12.70] definition, ............................................ [12.35] extent of expected safety, ................. [12.35] inherently dangerous goods, ........... [12.60] injuries suffered because of, ............. [12.05] loss or damage due to, ..................... [12.05] marketing of goods, .......................... [12.40] objective test, ...................................... [12.35] potential risk, ........................ [12.35], [12.45] presentation of goods, ....................... [12.45] reasonably expected uses, ................ [12.50] relevant circumstances, ..................... [12.60] subsequent safer goods, .................... [12.65] time of supply, .................................... [12.55] state of the art defence, ......... [12.05], [12.130], [12.170] strict liability, .............................. [12.05], [12.45] subsequent safer goods, .......................... [12.65] supplied, meaning, .................................. [12.20] supplier not manufacturer, ..................... [12.15] supplier’s records, .................................... [12.15] time for commencing action, ............... [12.150] time of supply, .......................................... [12.55] trade or commerce requirement, ........... [12.30] Trade Practices Act, ...... [1.65], [12.05], [12.15], [12.170] transitional provisions, ............................. [1.60] unidentified manufacturer, ..................... [12.15] requests to suppliers, ........................ [12.15] unsatisfactory goods, .............................. [12.05] unsuitable goods, ..................................... [12.05] warning labels, ......................................... [12.45] Defences ACL and TPA compared, ......................... [1.65] act or default of another, ...................... [13.120] bait advertising, ......................................... [7.40]

734

The Australian Consumer Law

Defences — cont civil proceedings honest and reasonable conduct, ... [13.165], [13.240] conduit defence, ................. [3.40], [3.45], [6.15] contributory fault, ...... [1.50], [14.130]–[14.140] contributory negligence, ....... [14.130], [14.140] country of origin claims, ...................... [13.405] evidential burden, ............................ [13.405] grown in a particular country, ...... [13.425] ingredients or components, .......... [13.430] logo representations, ....................... [13.420] made in Australia claims, .............. [13.405], [13.410] product or produce of, .................... [13.415] criminal prosecutions, ........................... [13.110] act or default of another, ................ [13.120] information providers, .................... [13.105] non-compliance with standards, ... [13.130] publishers, ......................................... [13.125] reasonable mistake of fact, ............. [13.115] defective goods actions, ........ [12.115]–[12.140] compliance with mandatory standard, ........................................................ [12.125] component defence, ......................... [12.140] defect not existing at time of supply, ........................................................ [12.120] state of the art, ... [12.05], [12.130], [12.170] unidentified manufacturer, ............... [12.15] false or misleading statements, ............. [6.215] business activities, ............................. [6.295] information providers, ....... [6.300], [6.305], [13.105] land, about, ......................................... [6.255] harassment or coercion, .......................... [7.220] honest and reasonable conduct, ......... [13.165], [13.240] information provider — see Information provider defence lay-by agreements, ................................. [10.135] misleading conduct employment, ....................................... [6.270] nature of goods and services, .......... [6.280] misleading or deceptive conduct, ........... [3.40] multiple pricing, ....................................... [7.160] product safety offences, ........................ [13.130] publisher’s defence, ............................... [13.125] pyramid selling, ....................................... [7.140] reasonable mistake of fact, ................... [13.115] reasonable reliance on information supplied by another, ................................... [13.115] referral selling, .......................................... [7.200] single price specification, ....................... [7.190] unauthorised entries or advertisements, .......................................................... [7.105] unfair promotional offers, ........................ [7.25] unsolicited consumer agreements, ........ [10.95] unsolicited credit and debit cards, ......... [7.70]

unsolicited goods or services, ............ [7.90] wrongly accepting payment, ....... [7.50], [7.55] Definitions acceptable quality, ........ [8.205], [8.220]–[8.250] ACL reforms, .............................................. [1.65] acquire, ......................................................... [8.70] affiliation, ................................................... [6.115] applied Australian Consumer Law, ........ [1.50] apportionable loss or claim, ................. [14.150] asserting a right to payment, ..... [7.85], [7.100] Australian Consumer Law, ...................... [1.90] Australian Consumer Law text, ............ [1.120] authorisation, .............................................. [2.70] bait advertising, ......................................... [7.35] business contract, ..................................... [10.20] concurrent wrongdoers, ....... [14.145], [14.155], [14.170] conduct, ........................................... [3.25], [3.30] consumer, ... [1.35], [8.70]–[8.115], [5.65], [9.10] consumer contract, ......................... [5.60], [5.65] consumer detriment, ................... [1.10], [13.10] consumer goods, .......................... [8.75], [11.25] corporation, ..................................... [2.10], [2.30] credit, ............................................. [3.270], [8.95] credit card, .................................................. [7.65] credit facility, ............................................ [3.270] dealer, ........................................... [10.10], [10.45] debit card, ................................................... [7.65] discontinued negotiations agreement, . [10.25] displayed price, ........................................ [7.150] enforcement proceeding, ...................... [13.395] engaging in conduct, ......... [3.15], [3.30], [3.30] evidential burden, .................................. [13.405] express warranty, ..................................... [8.400] extended warranty, .................................. [6.195] financial corporation, ................................ [2.25] financial product, ....................... [3.265], [3.270] financial product advice, ........................ [3.275] financial service, ....................................... [3.265] foreign corporation, ................................... [2.15] goods, ............................. [8.120], [8.125], [12.25] individual, ....................................... [1.30], [5.65] information provider, .............. [3.235], [13.105] interest in land, ........................................ [6.250] invitation, .................................................. [10.30] involved, .................................................. [14.175] jurisdiction, ................................................. [2.65] lay-by agreement, .................................. [10.105] linked credit contract, ........................... [15.220] linked credit provider, .......................... [15.220] mandatory standard, ............................. [12.125] manufacturer, ............................................ [12.10] merchantable quality, ................ [8.205], [8.210] mixed supply, ............................................. [8.85] negotiation, ............................................... [10.10] participating jurisdiction, ......................... [2.65] party plan event, ...................................... [10.30]

Index Definitions — cont person, ....................................................... [1.120] price, ................................... [6.125], [7.35], [8.75] product-related services, ......................... [11.30] proof of transaction, ................................ [9.125] pyramid scheme, ...................................... [7.120] reasonably foreseeable use or misuse, . [11.20] recreational services, ............................. [15.280] regulator, .................................................... [1.145] rejection period, ........................................ [15.60] renewable agreement of the same kind, .......................................................... [10.35] responsible Minister, ................................ [11.45] safety, .......................................................... [15.40] safety defect, ............................................. [12.35] sale by auction, ......................................... [8.170] serious injury or illness, .......................... [11.40] services, ................ [8.120], [8.125], [9.15], [9.45] single price, ............................................... [7.165] standard form contract, ............................ [5.90] structured settlement, ............................ [14.285] subsequent agreement of the same kind, .......................................................... [10.40] supplier, ..................................................... [11.35] supply, ............................ [7.175], [8.160], [12.20] this jurisdiction, .......................................... [2.65] tied continuing credit contract, ........... [15.235] tied loan contract, .................................. [15.235] trade or commerce, ......... [1.100], [2.75]–[2.90], [6.40], [12.30] trading corporation, .................................. [2.20] unfair term, ......... [1.05], [5.15], [5.105]–[5.135] unsolicited consumer agreement, ......... [10.10] unsolicited goods, ...................................... [7.80] unsolicited services, ................................... [7.80] warranty against defects, ....................... [8.405] Detriment business, to — see Business detriment consumers, to — see Consumer detriment

735

liability for conduct of, .............. [2.110]–[2.125] actual or apparent authority, ........... [2.120] civil liability, ...................................... [13.215] consent or direction, .......................... [2.125] criminal liability, ................... [13.20]–[13.35] direct liability, ........................ [2.110]–[2.135] elements of breach, ............................ [2.110] “on behalf of” corporation, ............. [2.115], [2.120] scope of authority, ............................. [2.120] vicarious liability at common law, .. [2.110] proportionate liability, ........................... [14.145] Disclaimers misleading or deceptive conduct and advertising, ......................................... [3.190] agent or intermediary, ............. [3.40]–[3.55] contemporaneous, ................................ [3.55] effectiveness, ............................. [3.50], [3.55] endorsement of representations, ....... [3.50] small print, .......................................... [3.190] Disclosure orders purpose, ................................................... [13.305] Discontinued negotiations agreement definition, .................................................. [10.25] unsolicited consumer agreement exemption, ............................................ [10.15], [10.25] Disqualification orders — see Banning orders Donations supply, form of, ........................................ [8.160] ACL and TPA compared, ................... [1.65]

Digital products goods or services, ...................... [8.135], [8.140]

Door-to-door sales prohibited conduct, ................................. [4.120] regulation prior to ACL, ......................... [10.05] unconscionable conduct, ......................... [4.120] unsolicited agreements — see Unsolicited consumer agreements

Director of Public Prosecutions criminal prosecutions, ............................. [13.20] enforcement by, ........................................ [13.05]

Double jeopardy civil and criminal proceedings, ........... [13.235] State and Territory legislation, .............. [1.135]

Directors accessorial liability, .. [13.35], [14.175], [14.190] disqualification/banning orders, ....... [13.320], [13.325] criminal proceedings, ...................... [13.135] lay-by agreement breach, ............... [10.125] proof of transaction breach, ............. [9.130] purpose and effect, .......................... [13.325] totality principle, .............................. [13.325]

Drafting of ACL, ..................... [1.05], [1.65], [1.90] Drip pricing business detriment, .................................... [1.35] component pricing, form of, .................. [7.170] consumer detriment, ................................. [1.35] false or misleading representations, ..... [6.140] meaning, ...................................... [6.140], [7.170] travel services, ............................ [6.140], [7.170]

736

The Australian Consumer Law

E

[14.10]

strategies, ............................................. [13.15] administrative powers, ......... [13.140], [13.340] administrative resolutions, ..................... [13.15] civil pecuniary penalties — see Civil pecuniary penalties civil proceedings — see Civil proceedings compensation orders — see Compensation orders Compliance and Enforcement Guide, .. [13.10] consumer guarantees — see Consumer guarantees: remedies criminal prosecutions — see Criminal prosecutions declarations — see Declarations Director of Public Prosecutions, ............ [13.05] criminal prosecutions, ....................... [13.20] enforceable undertakings, ...................... [13.15] evidence, .................................................... [14.10] Federal Circuit Court jurisdiction, ........ [1.150] Federal Court jurisdiction, ..................... [1.150] fines — see Fines infringement notices — see Infringement notices injunctions — see Injunctions lay-by agreements, ................................. [10.125] litigation, .................................................... [13.15] one law, multiple regulators, ................. [13.10] overview, ......... [13.05], [13.10], [13.15], [14.05] priorities of regulators, ........................... [13.10] private, ....................................................... [14.05] compensation orders — see Compensation orders damages — see Damages declarations — see Declarations injunctions — see Injunctions Productivity Commission recommendations, ........................................................ [13.140] infringement notices, ....................... [13.375] public warning notices, .................. [13.370] substantiation notices, ..................... [13.345] proportionate to harm, ............................ [13.05] public, ........................................................ [13.05] public warning notices, ........ [13.340], [13.370] State and Territory courts jurisdiction, ............................. [1.150], [1.60] transfer of proceedings to/from, .... [1.160] State and Territory tribunals, ................. [1.155] States and Territories, ................ [1.120], [13.20] strategies of regulators, ........................... [13.15] substantiation notices — see Substantiation notices undertakings, ............................ [13.15], [13.335] unfair terms prohibition, ........................ [5.185]

[13.10] [13.15] [13.10]

Engineers consumer guarantees, ............................... [9.25] exclusion, ................................. [9.25], [9.100]

E-commerce application of ACL, ................................. [1.100] Electricity consumer goods, regulation of, ............. [11.25] consumer guarantees, ............................... [9.50] ACL and TPA compared, ................... [1.65] defective goods actions defence, .............................................. [12.120] electricity as goods, ........................... [12.25] goods, included in definition of, .......... [8.120], [9.50], [12.25] standard form contracts, ........................... [5.05] inequality of bargaining position, ..... [5.05] Email trading or commercial character, ............ [2.80] Employees accessorial liability, .................. [13.35], [14.175] liability for conduct of, .............. [2.110]–[2.130] actual or apparent authority, ........... [2.120] civil liability, ...................................... [13.215] conduct “on behalf of”, ....... [2.115], [2.120] consent or direction, .......................... [2.125] corporate principal, .............. [2.110]–[2.125] criminal liability, ................... [13.20]–[13.35] direct liability, ........................ [2.110]–[2.135] elements of breach, ............................ [2.110] non-corporate principal, ................... [2.130] “on behalf of” corporation, ............. [2.115], [2.120] scope of authority, ............................. [2.120] vicarious liability at common law, .. [2.110] proportionate liability, ........................... [14.145] trade or commerce, conduct in, ............ [2.100] terms of employment representations, ............................................................ [2.95] Employment measure of damages, ............................. [14.100] misleading conduct, .................. [6.265], [6.270] civil liability, ............................ [6.05], [6.265] criminal liability, .................... [6.05], [6.270] pre-contractual negotiations, ........... [6.265] TPA compared, ................................... [6.265] Enforcement ACCC proceedings, ................... [13.05], ACL regulators ensuring compliance, ........................ powers, ................................................ priorities, .............................................

Index Environmental claims ACCC Green Marketing Guide, .............. [6.95] false or misleading, ................................... [6.95] Equity equitable estoppel, ..................................... [4.15] unconscionable conduct — see also Unconscionable conduct categories of case, ................................ [4.15] concept, ...................................... [4.15], [4.60] special disadvantage, ............... [4.15]–[4.35] unwritten law, ...................................... [4.15] Evidence breach of ACL, ......................................... [14.10] evidential burden, .................................. [13.405] country of origin defences, ............ [13.405] misleading or deceptive conduct, ... [3.135] findings in other proceedings as, .......... [14.10] compensation order application, .. [13.390], [14.200] loss or damage, ........................................ [14.10] onus of proof — see Onus of proof reliance, proof of, ....................... [14.50], [14.55] Exclusion clauses “all care but no responsibility”, .......... [15.255] consumer guarantees and, ...... [6.180], [8.380], [15.255] choice of law and venue clauses, . [15.275] manufacturer excluding liability, .. [15.270] non-personal goods, ........ [15.260], [15.270] recreational services, ........ [15.280]–[15.290] supplier excluding liability for consequential loss, ..................... [15.265] supplier limiting liability, ............... [15.260] misleading or deceptive conduct and, . [3.160] declaration of non-reliance, .............. [3.160] “no liability for negligence”, ............... [15.255] prohibited by ACL, ................................ [15.255] Exploitative pricing unconscionable conduct .......................... [4.130] financial services, ............................... [4.210] Exported goods product recall notice compulsory recall, .............................. [11.80] voluntary recall, ............................... [11.130] Extended warranties consumer guarantees and acceptable quality, .............................. [6.205] durability, ............................................ [6.205] financial products not subject to, .... [6.230] contractual right, ........................ [6.190], [6.205]

737

consumers’ failure to understand, .. [6.190] requirement to pay for, ..................... [6.190] definition, .................................................. [6.195] false or misleading representations, ..... [6.190] financial services, ................. [6.230]–[6.245] requirement to pay, ........................... [6.190] financial products and services, ............................................ [6.230]–[6.245] false or misleading representations, ............................................ [6.230], [6.245] incidental products, ........................... [6.235] insurance contracts, ........................... [6.240] product disclosure statement, details in, .......................................................... [6.240] repair or replacement of defective goods, .......................................................... [6.235] types of warranties, ........................... [6.230] goods supplied in conjunction with, .... [3.290] issues of concern, ..................................... [6.200] NEIAT study findings, ............................ [6.200] requirement to pay for, ............. [6.190]–[6.205] scope, .......................................................... [6.205]

F False billing — see Unsolicited goods or services False or misleading representations accessories, .................................................. [6.90] advertising, ..................................... [6.25], [6.45] comparative, ....................................... [6.150] declaratory relief, ............................... [14.25] financial services, ............................... [6.225] information provider exemption, .... [6.300] price, ....................................... [6.125]–[6.155] testimonials, .............................. [6.70]–[6.85] two-price advertising, ........... [1.20], [6.155] affiliation, ......................... [6.90], [6.115], [6.120] environmental claims, ......................... [6.95] infringement notices, ......................... [6.120] approval, .......................... [6.90], [6.115], [6.120] environmental claims, ......................... [6.95] meaning, ................................ [6.115], [6.120] ASIC Act, ..................................... [6.220]–[6.245] information provider exemption, .... [6.305] land, sale of, ........................................ [6.260] benefits, ........................................................ [6.90] environmental claims, ......................... [6.95] health benefits, ................................... [6.100] business activities, ................................... [6.290] civil liability, ............................ [6.05], [6.290] criminal liability, .................... [6.05], [6.295] defences, .............................................. [6.295] franchise arrangements, .................... [6.290] future matters, .................................... [6.290] civil liability, .................................... [6.05], [6.10]

738

The Australian Consumer Law

False or misleading representations — cont business activities, ............................. [6.290] land, sale of, ........................................ [6.250] conditions, existence or effect of, ......... [6.180], [6.185] conduit defence, ......................................... [6.15] connection with supply, ............................ [6.30] consumer guarantees, ............................. [6.180] point-of-sale information, ................. [6.210] contractual rights, .................................... [6.180] extended warranties, ........... [6.190]–[6.205] requirement to pay for, ......... [6.10], [6.190] country of origin, ..................................... [6.160] criminal liability, .......................... [6.05], [6.215] business activities, ............................. [6.295] defences, .............................. [6.215], [13.105] land, sale of, .......................... [6.255], [6.260] damages — see Damages data security, ............................................. [6.110] defective goods actions and, ................ [12.170] defences, ........................ [6.215], [6.255], [6.295] discount or rebate, ................................... [6.145] employment, ............................... [6.265], [6.270] environmental claims, ............................... [6.95] ACCC Green Marketing Guide, ........ [6.95] extended warranties, ................. [6.190]–[6.205] financial services, ................. [6.225]–[6.245] requirement to pay for, ..................... [6.190] false, meaning, ............................................ [6.20] false or misleading, ................................... [6.10] financial services, ....................... [6.220]–[6.245] ASIC Act prohibition, .......... [6.220], [6.260] extended warranties, ........... [6.230]–[6.245] information provider exemption, .... [6.305] infringement notices, ......................... [6.225] land, sale of, ........................................ [6.260] misleading advertisements, .............. [6.225] food labelling, ................................. [6.45], [6.50] place of origin, ..................... [6.160], [6.170] premium claims, .................................. [6.50] goods, ....................... [1.65], [6.05], [6.10], [6.20] agreement to acquire, .......................... [6.65] composition, .......................................... [6.45] nature of, ............................................... [6.45] need for, ............................................... [6.175] new, ........................................................ [6.60] particular, meaning, ............................. [6.35] performance characteristics, . [6.90]–[6.110] place of origin, ..................... [6.165], [6.170] premium claims, .................................. [6.50] previous history, ................................... [6.45] price, ....................................... [6.125]–[6.155] quality, ....................................... [6.35], [6.45] sponsorship or approval, ..... [6.90], [6.115], [6.120] standard, quality or grade, .... [6.35], [6.45] style of, .................................................. [6.45] used goods as new, ............................. [6.60]

uses or benefits, ........................ [6.45], [6.90] value, ...................................................... [6.45] guarantees, existence or effect of, ......... [6.180] health benefits, ......................................... [6.100] information provider exemption, ......... [6.300], [13.105] ASIC Act, ............................................. [6.305] infringement notices financial services, ............................... [6.225] sponsorship or affiliation cases, ...... [6.120] two-price advertising, ....................... [6.155] intention, ...................................................... [6.25] internet-based business, application of ACL, .......................................................... [1.100] land, sale or grant of, ................ [6.250]–[6.260] ACL and TPA compared, ..... [1.65], [6.250] ASIC Act, ............................................. [6.260] civil liability, ............................ [6.05], [6.250] criminal liability, ...... [6.05], [6.255], [6.260] defences, .............................................. [6.255] financial products and services, ...... [6.260] making a representation, .......................... [6.15] misleading, .................................................. [6.25] effect on target audience, .................... [6.25] test to determine, ................................. [6.25] misleading or deceptive conduct distinguished, ....................................... [6.10] overlap of provisions, ......................... [6.25] need for goods or services, .................... [6.175] onus of proof, ........................................... [13.45] overlap of provisions, ................. [6.25], [6.125] overview, ......................................... [6.05], [6.10] particular, meaning, ................................... [6.35] passing on information, ............................ [6.15] pecuniary penalties, ................................. [6.215] performance characteristics, ....... [6.90]–[6.110] environmental claims, ......................... [6.95] health benefits, ................................... [6.100] privacy and data security, ................ [6.110] product safety, .................................... [6.105] place of origin, ............................ [6.160]–[6.170] essential character test, ..................... [6.160] food labelling, ..................................... [6.170] “made in Australia” claims, ............ [6.165], [13.410] substantiation notice, ...................... [13.405] predictions or opinions, ............................ [6.15] premium claims, ........................................ [6.50] price, ............................................. [6.125]–[6.155] advertised price not total price, ...... [6.140] comparative advertising, .................. [6.150] definition, ............................................ [6.125] delivery charge, .................................. [6.125] discount or rebate, ............................. [6.145] drip pricing, ............................ [1.35], [6.140] “free”, use of, ........................ [6.130], [6.135] land, ...................................................... [6.250]

Index False or misleading representations — cont overlap with other provisions, ........ [6.125] two-price advertising, ........... [1.20], [6.155] privacy claims, .......................................... [6.110] product safety, .......................................... [6.105] reasonable person, effect on, .................... [6.25] rebate, ......................................................... [6.145] remedies damages — see Damages repairs, ....................................................... [6.160] rights or remedies existence or effect of, ......................... [6.180] extended warranties, ........... [6.190]–[6.205] point-of-sale information, ................. [6.210] scope of prohibition, ................................. [6.10] services, .................... [1.65], [6.05], [6.10], [6.20] agreement to acquire, .......................... [6.65] nature of, ............................................... [6.55] need for, ............................................... [6.175] particular, meaning, ............................. [6.35] performance characteristics, . [6.90]–[6.110] price, ....................................... [6.125]–[6.155] sponsorship or approval, ..... [6.90], [6.115], [6.120] standard, quality or grade, .... [6.35], [6.55] suitability for purpose, ....................... [6.55] uses or benefits, .................................... [6.90] value, ...................................................... [6.55] silence, .......................................................... [6.15] spare parts, ................................................ [6.160] specific prohibition, ....................... [6.05], [6.10] sponsorship, .................... [6.90], [6.115], [6.120] environmental claims, ......................... [6.95] infringement notices, ......................... [6.120] meaning, ................................ [6.115], [6.120] standard, quality or grade goods, ......................................... [6.35], [6.45] services, ...................................... [6.35], [6.55] target audience, .............................. [6.25], [6.45] testimonials, ........................ [6.10], [6.70]–[6.85] celebrity testimonials, .......................... [6.85] consumer testimonials, ....................... [6.80] evidentiary onus, ................................. [6.70] expert testimonials, .............................. [6.75] fictitious, ................................................ [6.70] presumption that misleading, ........... [6.70] trade or commerce, .................................... [6.40] Trade Practices Act compared, ... [1.65], [6.10], [6.20] used goods as new, ................................... [6.60] uses or benefits, .......................................... [6.90] environmental claims, ......................... [6.95] warranties existence or effect of, ......................... [6.180] extended, ................................ [6.190]–[6.205] Federal Circuit Court jurisdiction, ............................................... [1.150]

Federal Court criminal prosecutions, ............................. enforcement of fines, ......................... declarations, .............................. [13.145], injunction, power to grant, .................... jurisdiction, ................................. [1.150], transfer of proceedings to/from, .......... unfair terms, proceedings for, ...............

739

[13.40] [13.80] [14.25] [1.150] [13.40] [1.160] [5.170]

Financial corporations application of ACL — see Corporations corporation, definition, ............................. [2.10] definition, .................................................... [2.25] overview, ............................................... [2.25] substantial current activities test, ............ [2.25] Financial product advice definition, .................................................. [3.275] lawyer, by, ................................................. [3.275] misleading or deceptive conduct, ......... [3.285] Financial products and services ACL carve-out for, ..................... [1.105], [3.250] application of ACl, ................................... [1.105] ASIC Act provisions, ............................... [1.105] complementary operation with ACL, .......................................................... [3.255] consistency with ACL, ...................... [3.250] implied warranties, ............................ [3.250] ASIC’s role, ................... [1.105], [3.250], [3.255] background to reforms, .......................... [3.255] bait advertising, ......................................... [7.45] coercion, ..................................................... [7.225] Commonwealth legislative powers, ..... [1.105] consumer contracts, ................................. [5.200] consumer guarantees, ............................... [9.20] ACL not applicable, ............... [3.250], [9.20] linked credit providers — see Linked credit providers credit facilities, ........................... [3.270], [3.285] overlap of ACL and ASIC Act, ........ [3.290] dealing in, ................................................. [3.280] definition, .................................................. [3.270] exclusions and inclusions, ................ [3.270] exclusion from ACL, ................. [1.105], [3.250] extended warranties, ................. [6.230]–[6.245] false or misleading representations, ............................................ [6.230], [6.245] incidental products, ........................... [6.235] insurance contracts, ........................... [6.240] product disclosure statement, details in, .......................................................... [6.240] repair or replacement of defective goods, .......................................................... [6.235] types of warranties, ........................... [6.230] false or misleading representations, ............................................ [6.220]–[6.245]

740

The Australian Consumer Law

Financial products and services — cont consumer guarantees, regarding, .... [3.285] extended warranties, ........... [6.230]–[6.245] information provider exemption, .... [6.305] infringement notices, ......................... [6.225] land, sale of, ........................................ [6.260] misleading advertisements, .............. [6.225] financial investment, meaning, ............. [3.270] financial product advice, ........................ [3.275] financial products dealing in, ........................................... [3.280] definition, .............................. [3.265], [3.270] exclusions and inclusions, ................ [3.270] financial services, definition, ................. [3.270] harassment or coercion, .......................... [7.225] implied warranties, .................................. [3.250] incidental products, ................................. [6.235] inequality of bargaining power, .............. [5.05] insurance contracts, ..................... [1.110], [9.35] extended warranties, ......................... [6.240] linked credit providers — see Linked credit providers misleading conduct concerning nature of, .......................................................... [6.285] misleading or deceptive conduct, ........ [1.105], [3.250]–[3.290] ACL not applicable, ............. [1.105], [3.250] ASIC Act, ................. [1.105], [3.250]–[3.290] Corporations Act, ... [1.105], [3.250], [3.285] determination, .................................... [3.285] disclosure documents, ....................... [3.285] financial product advice, .................. [3.275] general prohibition, ............. [3.260], [3.285] overlap with ACL, ............................. [3.290] predictions, .......................................... [3.285] rationale for regulation, .................... [3.255] securities dealings excluded, ........... [3.285] misleading promotional offers, ................ [7.30] National Credit Code, ............... [1.105], [3.250] overview, ..................................... [1.105], [3.250] pyramid selling, ....................................... [7.145] rationale for legislative framework, ..... [3.255] referral selling, .......................................... [7.205] regulation, ................................... [1.105], [3.250] trading scheme definition, ............................................ [7.145] pyramid selling, ................................. [7.145] unauthorised advertisements, .. [7.100], [7.110] unconscionable conduct, ........... [1.105], [4.195] court’s considerations, ...................... [4.195] exploitative pricing, ........................... [4.210] good faith, lack of, ............................. [4.215] imbalance of bargaining power, ...... [4.200] unreasonable conditions, .................. [4.205] unfair contract terms, ................ [5.195]–[5.245] ACL not applicable, ............................. [5.45] ASIC Act regime, .................. [5.195]–[5.245] consumer contracts, ........................... [5.200]

context, ................................... [5.220], [5.230] contract as a whole, ........................... [5.240] contracts covered, ................. [5.195]–[5.205] excluded contracts, ............................ [5.210] excluded terms, .................................. [5.215] grey list, ................................. [5.220], [5.245] inequality of bargaining power, ........ [5.05] operative provisions, ......................... [5.195] requirements, ...................................... [5.195] significant imbalance, ........................ [5.225] small business contracts, .................. [5.205] standard form contracts, ..................... [5.05] test of unfairness, ................. [5.220]–[5.240] transparency, ......................... [5.220], [5.235] unfair sales techniques, ............................. [7.05] bait advertising, ................................... [7.45] harassment or coercion, .................... [7.225] promotional offers, .............................. [7.30] pyramid selling, ................................. [7.145] referral selling, .................................... [7.205] unauthorised advertisements, ........ [7.100], [7.110] unsolicited credit and debit cards, ... [7.75] wrongly accepting payment, ............. [7.60] Wallis Committee, .................................... [3.255] wrongly accepting payment, ................... [7.60] Fines — see also Civil pecuniary penalties ACCC, public proceedings by, .............. [14.10] aiding and abetting, ................................ [13.25] assessment of amount, .............. [13.55]–[13.75] compensation to victims has preference, .......................................................... [13.85] conspiracy, ................................................. [13.35] corporate offences, ................................... [13.25] criminal offences, ........................ [13.55]–[13.75] failure to pay, ............................................ [13.80] general deterrence, .................................. [13.60] imprisonment for non-payment, ........... [13.80] liability to pay, .......................................... [13.25] multiple offences, ....................... [13.75], [13.90] orders in addition to, ............................ [13.135] parity principle, ........................................ [13.65] previous convictions, ............................... [13.95] recovery of, ............................................... [13.80] specific deterrence, .................................. [13.60] totality principle, ...................................... [13.70] Fitness for purpose goods — see Consumer guarantees for goods services — see Consumer guarantees for services Fixtures consumer guarantees, ................. [8.145], [9.40] defective goods actions, ........................ [12.110] goods, as, ......................... [8.145], [9.40], [11.25]

Index Fixtures — cont manufacturer’s liability where destroyed or damaged, ..................................... [12.110] Food industry death or serious illness, reporting, ..... [11.250] Food and Grocery Code of Conduct, ... [4.150] Food Standards Australia New Zealand (FSANZ), ........................................ [11.25] labelling — see Food labelling product safety reporting requirements, ........................................................ [11.250] regulation of industry, ............................. [11.25] unconscionable conduct, ......................... [4.150] Food labelling country of origin — see Country of origin representations false or misleading representations, ....... [6.45] “free-range” eggs, ................................ [6.50] place of origin, ..................... [6.160], [6.170] premium claims, .................................. [6.50] Foreign corporations application of ACL — see Corporations corporation, definition, ............................. [2.10] definition, .................................................... [2.15] Forfeiture unconscionability and relief against, ...... [4.15] unfair forfeiture term, ............................. [14.30] Franchising Code of Conduct, ......... [4.140], [4.145], [4.175] New Code, ............................ [4.145], [4.175] Old Code, ............................................ [4.145] false or misleading representations, ..... [6.290] franchise agreement definition, ............................................ [4.100] good faith, ............... [4.145], [4.175], [4.185] termination, ......................................... [4.175] misleading or deceptive conduct, ........... [3.20] silence as, ............................................. [3.105] reasonable expectation of disclosure, .................................................... [3.105] unconscionable conduct, ........... [4.100], [4.125] exploitative pricing, ........................... [4.130] Franchising Code of Conduct, ........ [4.140], [4.145] good faith, lack of, ............... [4.175], [4.185] imbalance of bargaining power, ...... [4.100] inconsistent treatment, ...................... [4.135] refusal to consent to transfer, ......... [4.145], [4.175], [4.185] refusal to negotiate, ........................... [4.165] systematic defrauding, ...................... [4.185] termination of agreement, .. [4.175], [4.185]

741

undue influence or pressure, ........... [4.125] Freedom of contract unfair contract terms protection and, .... [5.05] Future matters misleading or deceptive conduct, ......... [3.135] ACL and TPA compared, ................... [1.65] case examples, .................................... [3.140] contractual promises, ........................ [3.145] evidentiary burden, ........................... [3.135] opinions, .............................................. [3.150] reliance, .................................. [3.135], [3.165] reasonable grounds for making representation, .............................. [3.135]

G Gas consumer goods, regulation of, ............. [11.25] consumer guarantees, ............................... [9.50] ACL and TPA compared, ................... [1.65] goods, included in definition of, .......... [8.120], [9.50], [12.25] standard form contracts, ........................... [5.05] inequality of bargaining position, ..... [5.05] General consumer protections — see Misleading and deceptive conduct — see Unconscionable conduct — see Unfair contract terms Gifts consumer guarantees for recipients, .... [8.160] promotional offers — see Rebates, gifts or prizes Good faith franchise agreements, .. [4.145], [4.175], [4.185] unconscionable conduct where lack of financial services, ............................... [4.215] franchise agreements, .......... [4.175], [4.185] unfair terms contrary to, ............ [5.15], [5.115] Goods chattels, ...................................................... [8.165] affixed to land, ........................ [8.145], [9.40] computer software, ...... [8.135], [8.140], [12.25] consumer goods, definition, ....... [8.75], [11.25] consumer guarantees — see Consumer guarantees for goods consumer of — see Consumer defective — see Defective goods definition, ..................................... [8.120]–[8.150] mixed supply, ..................................... [8.130]

742

The Australian Consumer Law

Goods — cont services distinguished, ........ [8.125]–[8.150] digital products, ......................... [8.135], [8.140] electricity as, ................... [8.120], [9.50], [12.25] false or misleading representations — see False or misleading representations fixtures as, ....................... [8.145], [9.40], [11.25] gas as, ............................... [8.120], [9.50], [12.25] misleading conduct concerning nature of, .......................................................... [6.275] civil liability, ............................ [6.05], [6.275] criminal liability, .................... [6.05], [6.280] defences, .............................................. [6.280] liable to mislead, ................................ [6.275] product recalls — see Product recalls product safety — see Product safety residential dwellings, .............................. [8.150] services distinguished, ............................ [8.125] supply of, .................................................. [8.160] consumer guarantees — see Consumer guarantees for goods definition, .............................. [7.175], [8.160] donations, ................................ [1.65], [8.160] hire or lease, .......................................... [8.90] mixed supplies, ...................... [8.85], [8.130] unconscionable conduct — see Unconscionable conduct transitional provisions, ............................. [1.60] unfair sales techniques — see Unfair sales techniques unsafe action against manufacturer — see Defective goods actions recall — see Product recalls unsolicited — see Unsolicited goods or services wrongly accepting payment for — see Wrongly accepting payment Governance Forum of Consumer Affairs (CAF), ............................................................ [1.45] Guarantees — see Consumer guarantees Gym membership contracts standard form, ............................................ [5.05] transparency, ............................................. [5.150] unfair contract terms, .............................. [5.150] inequality of bargaining power, ........ [5.05] information imbalance, ..................... [5.150]

H Harassment or coercion ACL and TPA compared, ........... [1.65], [7.210] ASIC Act, ................................................... [7.225]

civil liability, .................................. [6.05], coercion, meaning, ................................... criminal liability, .......................... [6.05], Debt Collection Guideline, ..................... defences, .................................................... financial products, ................................... prohibition, .................................... [7.05], undue, .......................................... [7.210],

[7.210] [7.210] [7.220] [7.225] [7.220] [7.225] [7.210] [7.215]

High pressure sales techniques consumer detriment, ................................. [1.20] “limited time” sales, .................................. [1.20] Hire of goods consumer, definition, ................................. [8.90] consumer guarantees, ............................... [8.90] title guarantee not applicable, ......... [8.185] undisclosed securities, ...................... [8.195] undisturbed possession, ................... [8.190]

I IGA — see Intergovernmental Agreement for the Australian Consumer Law (IGA) Imbalance of bargaining power — see Inequality of bargaining power Implied terms regime ACL replacing — see also Consumer guarantees background, ....... [1.75]–[1.85], [8.10]–[8.60] CCAAC recommendations, ... [1.80], [1.85], [8.45]–[8.55] commencement date, ............... [8.05], [8.60] comparison, ........................................... [8.15] NEIAT study findings, ....................... [1.85], [8.20]–[8.45] policy objectives, .................................. [8.55] Productivity Commission recommendations, .............. [1.75], [1.80] remedies compared, .......................... [15.10] single enterprise theory, ...................... [8.45] defective goods actions and, ................ [12.170] linked credit providers, ........................ [15.215] merchantable quality, .. [8.205], [8.210], [8.230] definition, .............................. [8.205], [8.210] durability, ............................................ [8.215] purpose or purposes of goods, ....... [8.215] time for determining, .......... [8.215], [8.305] Trade Practices Act, ............. [8.210], [8.215] uncertainty about meaning, . [8.30], [8.345] NEIAT study findings, ...... [1.85], [8.20]–[8.45] awareness, ............................................. [8.25] clarity, ..................................................... [8.30]

Index Implied terms regime — cont compliance incentives, ........................ [8.40] dispute resolution mechanisms, ........ [8.35] remedies, ................................................... [15.10] linked credit providers, .................. [15.215] loss of right to reject goods, ............ [15.55] tiers of implied terms, ....................... [15.10] Sale of Goods Acts, .......... [1.75], [8.15], [15.10] ACL compared, .................................... [8.15] application of, ....................................... [8.15] correspondence with description, ... [8.385] fitness for purpose, ............................ [8.350] loss of right to reject goods, ............ [15.55] merchantable quality, .......... [8.205], [8.215] remedies, ............................................. [15.10] TPA provisions and, ................ [1.75], [8.10] undisturbed possession, ................... [8.190] services, ........................................................ [9.05] due care and skill, ................... [9.65], [9.85] fitness for purpose, ............................ [9.100] transportation or storage excluded, . [9.30] States and Territories Fair Trading Acts, ................................ [8.05] Sale of Goods Acts, .............................. [8.15] Trade Practices Act, ....................... [1.75], [8.10] ACL replacing, background, . [1.75]–[1.85], [8.10]–[8.60] ambiguities, ........................................... [8.30] clarity, lack of, ...................................... [8.30] compliance incentives, lack of, .......... [8.40] consumer awareness, .......................... [8.25] correspondence with description, ... [8.385] dispute resolution mechanisms, ........ [8.35] due care and skill, ................... [9.65], [9.85] fitness for purpose, ............. [8.355], [8.360], [9.100] linked credit providers, .................. [15.215] merchantable quality, ......... [8.210], [8.215], [8.345] NEIAT study findings, ....................... [1.85], [8.20]–[8.45] quiet possession, ................................ [8.190] reasons for ineffectiveness, ..... [8.20]–[8.45] remedies, ............................................. [15.10] review of, ............................................... [1.80] right to sell, ......................................... [8.185] sample, compliance with, ................. [8.390] uncertainty as to meanings, ............... [8.30] Industry codes of conduct definition, .................................................. [4.155] Food and Grocery Code, ........................ [4.150] Franchising Code, ........ [4.140], [4.145], [4.175] mandatory, ................................................ [4.140] overview, ................................................... [4.140] unconscionable conduct identified by, ............................................ [4.140]–[4.155] voluntary, ................................................... [4.155]

743

Inequality of bargaining power standard form contracts, ............... [5.05], [5.95] unconscionable conduct, .............. [4.75], [4.95], [4.100], [5.95] deliberate misuse, ................................ [4.75] financial services, ............................... [4.200] franchise agreements, ........................ [4.100] landlord and tenant, .......................... [4.160] special disadvantage, ........................ [4.100] unfair contract terms, .................... [5.05], [5.95] information imbalance, ..................... [5.150] standard form contracts, ......... [5.05], [5.95] Information asymmetry consumer detriment from, ....................... [1.15] misleading or deceptive conduct, ......... [3.155] scientific or medical basis, ............... [3.155] specialist knowledge or expertise, .. [3.155] Information provider defence civil proceedings, ................................... [13.330] criminal prosecutions, ........................... [13.125] exceptions, ... [3.235], [3.245], [13.105], [14.245] false or misleading representations, .... [6.300], [13.105] ASIC Act, ............................................. [6.305] misleading and deceptive conduct, ..... [3.230], [3.235], [14.245] ACL and TPA compared, ................... [1.65] advertisements, ........ [3.40], [3.235], [3.240], [13.330], [14.245] definition of information provider, . [3.235] exceptions, ............. [3.235], [3.245], [14.245] publication of advertisement, .......... [3.240] scope, .................................................... [3.235] sponsored links, ................................... [3.45] Information standards — see Product safety Infringement notices amount of penalty, ................................. [13.380] discretionary power, .............. [13.340], [13.375] enforcement of ACL, ............................... [13.15] failure to comply, ................... [13.380], [13.385] false or misleading representations financial services, ............................... [6.225] sponsorship or affiliation, ................. [6.120] two-price advertising, ....................... [6.155] issue by ACCC, ...................................... [13.375] lay-by agreement breach, ..................... [10.125] misleading or deceptive conduct excluded, ........................................................ [13.375] misleading promotional offers, ................ [7.30] overview, ................................... [13.15], [13.375] past conduct, relating to, ...................... [13.375] penalties, .................................................. [13.380] amount, .............................................. [13.380]

744

The Australian Consumer Law

Infringement notices — cont civil pecuniary penalties distinguished, ........................................................ [13.155] consequences of non-payment, ..... [13.385] power of regulator to issue, ................. [13.340] Productivity Commission recommendations, ........................................................ [13.140] proof of transaction breach, ................... [9.130] reasonable grounds to believe contravention, ........................................................ [13.375] Injunctions ACCC, public proceedings by, .............. [14.10] accessory bound by, .............................. [13.275] ACL and TPA compared, ........ [1.65], [13.250], [14.230] ACL regulator may apply, .................... [13.250] application for, ........................................ [14.230] balance of convenience, ........................ [14.235] civil proceedings, in .............................. [13.250] condition precedent, .............................. [13.250] consent of parties, .................................. [13.255] corrective advertising, ........................... [13.280] court’s discretion, ................................... [13.270] court’s powers, ....................................... [13.250] criminal prosecutions, ........................... [13.135] discretion to grant, ................................ [14.230] final injunctions, ..................................... [14.240] impending conduct, .............................. [13.260] interim injunctions, ................................ [14.235] jurisdiction to grant, .................. [1.150], [1.155] lay-by agreement breach, ..................... [10.125] matters relevant to grant, ..................... [13.270] misleading or deceptive conduct, .......... [1.35], [3.85], [3.95], [3.215] overview, ................................. [13.250], [14.230] passing off, against, ................................. [3.215] past conduct, ........................................... [13.265] private remedies, .................................... [14.230] proof of transaction breach, ................... [9.130] terms, ........................................................ [13.275] threatened conduct, ............................... [13.260] TPA compared, ........... [1.65], [13.250], [14.230] undertaking, to enforce, ........................ [13.335] unfair contract terms, . [5.135], [5.180], [5.185], [5.190], [13.150] who may apply, ...................................... [14.230] Insurance ASIC Act application, .............................. [1.110] contracts consumer guarantees, ......................... [9.35] extended warranties, ......................... [6.240] misleading conduct, silence as, ....... [3.100] unfair terms relief, ............................... [5.45] utmost good faith, .............................. [1.110] exclusion from ACL, ................................ [1.110] financial product, as, ................... [1.110], [9.35]

overview, .................................................... [1.110] regulation, .................................................. [1.110] Intention accessorial liability, ................ [14.175], [14.180] false or misleading representations, ....... [6.25] misleading or deceptive conduct, .......... [3.05], [3.70], [3.225] advertising, ......................................... [3.170] intentional or deliberate silence, ...... [3.25], [3.30] Interests in land — see Land Intergovernmental Agreement for the Australian Consumer Law (IGA) consumer detriment, ................................. [1.10] future amendments to ACL, regulating, .......................................................... [1.140] investor protection provisions, .............. [1.105] policy objects, ............................................. [1.40] International sale of goods Vienna Convention, ................................. [8.175] application in Australia, ................... [8.175] Internet application of ACL and, ............. [1.100], [2.40] auctions and consumer guarantees, ..... [8.170] misleading or deceptive conduct advertising, ........................... [3.170], [3.185] social media, advertising on, ........... [3.195] sponsored links, ................................... [3.45] pyramid selling schemes, ....................... [7.130] Interpretation ACL reforms, .............................................. [1.65] damages provision, .................................. [14.35] definitions — see Definitions key provisions, ........................................... [2.05] misleading or deceptive conduct, ........... [3.60] overview, ..................................................... [2.05] policy objectives and, ................................ [1.40] “purposive” approach, .............................. [1.40] unconscionable conduct, .............. [1.05], [4.05], [4.45]–[4.70] carrying out of contract, ..................... [4.70] conduct of dominant party, ............... [4.65] equitable concept, ................................ [4.60] terms of contract, ................................. [4.70] Involved in — see Accessorial liability Ipp Report, ................................... [14.250], [15.280] Itemised bills ACL and TPA compared, ......................... [1.65] consumer services, for, ............................ [9.135]

Index Itemised bills — cont minimum information, ........................... [9.135] request for, ................................................ [9.135]

J Joint liability defective goods, ..................................... [12.155] linked credit providers, ........ [15.215], [15.220] amount of liability, ........................... [15.240] pre-existing link, .............................. [15.220] manufacturers, ........................................ [12.155] Jurisdiction Federal Circuit Court, ............................. [1.150] Federal Court, ........................................... [1.150] criminal prosecutions, ....................... [13.40] overview, ................................................... [1.150] State and Territory courts, ........ [1.150], [1.155] State and Territory Crowns, ..................... [2.65] State and Territory tribunals, ................. [1.155]

L Land consumer contract for, .............................. [5.60] unfair terms, ......................................... [5.60] defective goods actions, ........................ [12.110] false or misleading representations about, ............................................ [6.250]–[6.260] ACL and TPA compared, ..... [1.65], [6.250] civil liability, ............................ [6.05], [6.250] criminal liability, ...... [6.05], [6.255], [6.260] defences, .............................................. [6.255] financial services, ............................... [6.260] price, ..................................................... [6.250] specific prohibition, ........................... [6.250] fixtures, .......................................... [8.145], [9.40] consumer goods, as ........................... [11.25] consumer guarantees, ........... [8.145], [9.40] interest in definition, ............................................ [6.250] false or misleading representations about, .......................................................... [6.250] publication of matter in connection with, .......................................................... [3.245] manufacturer’s liability where destroyed or damaged, ..................................... [12.110] Landlord and tenant unconscionable conduct, ......................... [4.160] Lay-by agreements ACL and TPA compared, ......................... [1.65] ACL reforms, .............................. [1.65], [10.100]

745

background to ACL regime, .. [10.05], [10.100] consumer detriment, ................... [1.20], [10.05] criminal offences, ................................... [10.130] defences, ............................................ [10.135] definition, ................................................ [10.105] enforcement powers, ............................. [10.125] form of agreements, .............................. [10.105] key principles, ........................................ [10.100] overview, ................................... [10.05], [10.100] penalties for breach, .............................. [10.125] remedies, ................................................. [10.125] single national law, ................................ [10.100] State and Territory laws, ...................... [10.100] termination consumer, ........................................... [10.110] effect, .................................................. [10.120] refund of payments, ........................ [10.120] supplier, ............................................. [10.115] transparency, ........................................... [10.105] unfair terms, .............................................. [5.110] Lease consumer contract, ..................................... [5.60] unfair terms, ......................................... [5.60] consumer, definition, ................................. [8.90] consumer guarantees, ............................... [8.90] title guarantee not applicable, ......... [8.185] undisturbed possession, ................... [8.190] Limitation period compensation orders, .............. [5.190], [14.200] criminal prosecutions, ............................. [13.50] damages action, ........................ [14.35], [14.120] personal injury or death, ................ [14.225] manufacturer, action against, . [12.15], [12.150] Linked credit providers consumer guarantees, ............... [9.20], [15.215] ACL applicable, ...................... [3.250], [9.20] amount of liability, ........................... [15.240] exceptions to liability, ...................... [15.235] joint actions, ...................................... [15.230] joint liability, ..................... [15.215], [15.220] remedies in relation to, ... [15.215]–[15.245] supplier and credit provider liable inter se, ........................................................ [15.245] contract, arrangement or understanding, ........................................................ [15.220] definition, ................................................ [15.220] liability, ........................................ [1.65], [15.215] amount of, ......................................... [15.240] exceptions to, .................................... [15.235] joint, .................................... [15.215], [15.220] pre-existing link, .............................. [15.220] linked credit contract, definition, ........ [15.220] tied continuing credit contract, ........... [15.235] tied loan contract, .................................. [15.235]

746

The Australian Consumer Law

Linked credit providers — cont TPA compared, ........................... [1.65], [15.215] Litigation criminal prosecutions — see Criminal prosecutions enforcement by, ........................................ [13.15]

M Manufacturer consumer guarantees, .............. [8.180], [15.110] defective goods actions and, .......... [12.170] exclusion of liability, ........................ [15.270] express warranties, .............. [8.180], [8.400] indemnification of supplier, .. [1.65], [8.05], [8.55], [15.140] remedies — see Consumer guarantees: remedies repair facilities, ................................... [8.395] spare parts, .......................................... [8.395] warranties against defects, ............... [8.405] defective goods action against — see Defective goods actions definition, .................................................. [12.10] ACL and TPA compared, ................... [1.65] deemed manufacturers, .................... [12.10] duty of care, .............................................. [11.25] express warranties, .................... [8.180], [8.400] indemnification of supplier, ........ [1.65], [8.05], [8.55], [15.140] statutory causes of action against, .......... [8.10] Manufacturer’s liability — see Defective goods actions Market failure bounded rationality and, .......................... [1.15] consumer detriment and, ......................... [1.15] Ministerial Council for Corporations (MINCO), .......................................................... [3.250] Ministerial Council on Consumer Affairs (MCCA) consumer policy, ............................ [1.40], [1.85] lay-by agreements, ................................. [10.100] product safety, .......................................... [11.05] replacement by CAF, ................................. [1.45] single national law, .................................... [8.50] unsolicited consumer agreements, ........ [10.05] Misleading or deceptive advertising accessorial liability, .................................. [3.195] knowledge of contravention, ........... [3.195]

assessment of impact, ............................. [3.200] asterisk, use of, ......................................... [3.185] business connection, falsely implying, .. [3.95] causation, ................................................... [3.170] choice of medium, ................................... [3.185] comparative advertising, ........................ [3.205] consumer detriment, ................... [1.10], [3.170] personal, .................................. [1.10], [3.170] structural, ................................ [1.10], [3.170] declaration, ................................................ [14.25] disclaimers, small print, ......................... [3.190] dominant message, .................................. [3.190] elucidators, small print, .......................... [3.190] entirety of advertisement, ........ [3.170], [3.190] ephemeral vs static forms, ....... [3.185], [3.190] failure to remove, ..................................... [3.195] general principles — see Misleading or deceptive conduct information provider exemption, ........... [3.40], [3.235], [3.240] intention not necessary, .......................... [3.170] internet, ........................................ [3.170], [3.185] knowledge base of target, ...................... [3.175] reasonable member of class, .............. [3.90] medium used, ............................. [3.170], [3.185] overview, ....................................... [3.20], [3.170] publication of advertisement, ................ [3.240] puffery or exaggeration, ......................... [3.180] qualifying statements, ............................. [3.190] small print disclaimers/elucidators, .... [3.190] social media, ............................................. [3.195] strict liability, ............................................ [3.195] target audience, .......................... [3.170], [3.175] assessment of impact on, .................. [3.200] identifying, .......................................... [3.175] knowledge base of, ............................ [3.175] ordinary and reasonable standard, . [3.190] professional, ........................................ [3.175] public at large, .................................... [3.170] trade or commerce, what constitutes, .... [2.80] Misleading or deceptive conduct ACL and TPA compared, ......................... [1.65] advertising — see Misleading or deceptive advertising agents, .............................................. [3.40]–[3.55] conduit defence, ....................... [3.40], [3.45] disclaimers, ................................ [3.40]–[3.55] endorsement of representations, ....... [3.50] application of ACL, ................................. [1.100] ASIC Act, ....................... [1.105], [3.250]–[3.290] complementary operation with ACL, .......................................................... [3.255] consistency with ACL, ...................... [3.250] financial services — see Financial products and services overlap with ACL, ............................. [3.290]

Index Misleading or deceptive conduct — cont rationale for regulation, .................... [3.255] business connection, falsely implying, .. [3.95] business protection, ....................... [1.35], [3.10] business-to-business transactions, ......... [1.35], [3.10] causation, ......... [3.165], [3.170], [14.35]–[14.65] civil liability, ................................................ [6.05] civil pecuniary penalties not applicable, ........................................................ [13.165] class of persons aimed at, ........................ [3.85] hypothetical individual, ...................... [3.85] knowledge base of reasonable member, ............................................................ [3.90] sub-classes, ............................................ [3.90] commercial negotiations, .......................... [3.80] silence as misleading conduct, ........ [3.105] Commonwealth, whether carrying on business, .......................................... [2.55] compensation orders — see Compensation orders conduct as a whole, ................................... [3.60] conduct constituting, ................................. [3.10] conduct, definition, .................. [3.25], [3.30] contractual representations, ............... [3.20] doing any act, ....................................... [3.20] engaging in conduct, meaning, ........ [3.15], [3.20] false representations distinguished, . [6.10] identifying, ............................................ [3.15] implied representations, ..................... [3.35] intermediaries, .......................... [3.40]–[3.55] refusing to do any act, ........................ [3.25] silence — see Silence conduit defence, ............................. [3.40], [3.45] confusion or uncertainty distinguished, ............................................................ [3.95] consumer protection, ................................. [3.05] context, ............................................. [3.60], [3.75] contractual representations, ..................... [3.20] exclusion clauses, ............................... [3.160] promise about future matter, ........... [3.145] corporations, ............................................... [3.05] Corporations Act, ......... [1.105], [3.250], [3.285] complementary operation with ACL, .......................................................... [3.255] consistency with ACL, ...................... [3.250] disclosure documents, ....................... [3.285] literal truth, ......................................... [3.130] opinion, ................................................ [3.150] takeover documents, ......................... [3.285] credit facilities, ........................... [3.270], [3.285] overlap of ACL and ASIC Act, ........ [3.290] damages — see Damages declaration of non-reliance, ..... [3.160], [14.75], [14.80] defective goods actions and, ................ [12.170] disclaimers, ...................................... [3.40]–[3.55]

747

advertising, ......................................... [3.190] agent or intermediary, ............. [3.40]–[3.55] contemporaneous, ................................ [3.55] effectiveness, ............................. [3.50], [3.55] endorsement of representation, ......... [3.50] small print, .......................................... [3.190] disclosure documents, ............................. [3.285] elements of contravention, ....................... [3.05] employment matters, ................ [6.265], [6.270] engaging in conduct, meaning, ... [3.15], [3.20] silence, ........................................ [3.25], [3.30] erroneous impression silence causing, ................................... [3.110] whether conduct caused, .................. [3.165] evidentiary burden, ................................. [3.135] exclusion clauses and, ............................. [3.160] declaration of non-reliance, .............. [3.160] fact/opinion distinction, ......................... [3.150] failure to take care of own interests, ..... [3.05], [3.65] false or misleading representations distinguished, ....................................... [6.10] overlap of provisions, ........... [6.25], [6.105] financial products and services, ........... [1.105], [3.250]–[3.290] ACL not applicable, ............. [1.105], [3.250] ASIC Act, ................. [1.105], [3.250]–[3.290] Corporations Act, ... [1.105], [3.250], [3.285] financial product advice, .................. [3.275] general prohibition, ............. [3.260], [3.285] predictions, .......................................... [3.285] rationale for regulation, .................... [3.255] securities dealings excluded, ........... [3.285] future matters, .......................................... [3.135] ACL and TPA compared, ................... [1.65] case examples, .................................... [3.140] contractual promises, ........................ [3.145] evidentiary burden, ........................... [3.135] opinions, .............................................. [3.150] reasonable grounds for making representation, .............................. [3.135] reliance, ................................................ [3.135] goods, nature of, ........................ [6.275], [6.280] identified persons, aimed at, ................... [3.75] commercial negotiations, .................... [3.80] pre-contractual representations, ........ [3.75] identifying conduct, ....................... [3.15]–[3.55] implied representations, ............. [3.35], [3.145] inaction, whether, ........................... [3.10], [3.25] deliberate refusal to act, ..................... [3.25] inadvertent failure to act, ................... [3.25] information asymmetry and, ................. [3.155] information processing errors, .............. [3.100] information provider exemption, ......... [3.230], [3.235] ACL and TPA compared, ................... [1.65]

748

The Australian Consumer Law

Misleading or deceptive conduct — cont advertisements, ........ [3.40], [3.235], [3.240], [13.330] definition of information provider, . [3.235] exceptions, ............................. [3.235], [3.245] publication of advertisement, .......... [3.240] scope, .................................................... [3.235] sponsored links, ................................... [3.45] infringement notices not applicable, .. [13.375] injunction against — see Injunction intention, ............................ [3.05], [3.70], [3.225] deliberate silence or inaction, ........... [3.25], [3.30] lack of, .................................................... [3.70] intermediaries, ................................ [3.40]–[3.55] adoption of representation, ................ [3.50] conduit defence, ....................... [3.40], [3.45] disclaimers, ................................ [3.40]–[3.55] endorsement of representation, ......... [3.50] internet advertising, ........................... [3.170], [3.185] sponsored links, ................................... [3.45] interpretation, ............................................. [3.60] knowledge base of target, ...................... [3.175] reasonable member of class, .............. [3.90] likely to mislead or deceive, ....... [3.10], [3.15], [3.60] target audience, ........................ [3.65]–[3.90] literal truth, ............................................... [3.130] manufacturer’s liability and, ................ [12.170] misleading impression, ........................... [1.130] misleading or deceptive, meaning, ......... [3.60] confusion or uncertainty distinguished, ............................................................ [3.95] context, ....................................... [3.60], [3.75] intention, ................................................ [3.70] objective test, ........................................ [3.65] question of fact, .................................... [3.60] natural persons, .......................................... [3.05] non-disclosure as — see Silence objective test, .............................................. [3.65] onus of proof, ........................................... [3.135] opinions, .................................................... [3.150] ordinary person standard, ........................ [3.05] overlap of provisions, ................. [6.25], [6.105] overview, ......................................... [1.05], [3.05] passing off and, .......................... [3.210]–[3.225] design features or shape, .................. [3.220] get up, .................................................. [3.225] intention, .............................................. [3.225] name, .................................................... [3.215] passing on representations, ...................... [3.40] adoption or endorsement, .................. [3.50] agent or intermediary, ............. [3.40]–[3.50] conduit defence, ....................... [3.40], [3.45] disclaimers, ................................ [3.40]–[3.55] policy objectives, ........................................ [1.35] pre-contractual representations, .............. [3.75]

commercial negotiations, .................... [3.80] future statements, .............................. [3.135] identified persons, directed at, ......... [3.75], [3.80] opinions, .............................................. [3.150] premium claims, ........................................ [1.35] principles for determining, ...................... [3.10] private remedies compensation orders — see Compensation orders damages — see Damages declaration — see Declarations injunction — see Injunction public at large, directed at, .......... [3.75], [3.85] advertising, ......................................... [3.170] class of persons, ................................... [3.85] knowledge base of reasonable member, ...................................................... [3.90] sub-classes, ........................................ [3.90] publisher’s defence, ............... [13.330], [14.245] puffery or exaggeration, ......................... [3.180] question of fact, .......................................... [3.60] reasonable person standard, .................... [3.05] refusal to act, .............................................. [3.25] reliance on representation, ..................... [3.135] declaration of non-reliance, ............. [3.160], [14.75], [14.80] failure to verify representation, ....... [14.70] proof of, ................... [14.50], [14.55], [14.70] scientific or medical representations, ... [3.155] scope of provision, ..................................... [1.05] services, nature of, ..................... [6.275], [6.280] financial services, ............................... [6.285] silence as — see Silence small business protection, ........................ [1.35] specialist knowledge or expertise, ........ [3.155] strict liability, ............................ [3.230], [14.245] information provider exemption, ... [3.230], [14.245] takeover documents, ............................... [3.285] target audience, .......................................... [3.65] advertising, ........................... [3.170], [3.175] class of persons, ................................... [3.85] hypothetical individual, ...................... [3.85] identified persons, ............................... [3.75] knowledge base of, ................ [3.90], [3.175] misleading in relation to, ................... [3.65] ordinary, reasonable person, .. [3.05], [3.75] public at large, ............. [3.75], [3.85], [3.90], [3.170] sub-classes, ............................................ [3.90] trade or commerce, in — see also Trade or commerce application of ACL, ............... [1.100], [2.75] definition, ..................... [1.100], [2.75]–[2.90] employee or agent, ............................ [2.100] “in” requirement, ................................. [2.95]

Index Misleading or deceptive conduct — cont Trade Practices Act s 52, ... [1.05], [3.05], [3.10] norm of conduct imposed by, ............ [3.05] unintentional non-disclosure, .................. [3.25] unusually stupid or obtuse persons, ..... [3.05], [3.65] Misleading promotional offers — see Rebates, gifts or prizes Mistake defence — see Reasonable mistake of fact defence unconscionability and rescission for, ..... [4.15] Motor vehicles accidents, reporting requirements, ...... [11.250] consumer goods, regulation of, ............. [11.25] consumer guarantees acceptable quality, .. [8.235], [8.280], [8.290] damages for failure of, ...................... [15.70] disputes, evidence in, ........................ [8.340] due care in repairs, .............................. [9.90] hire, ....................................................... [8.190] inspection by purchaser, ................... [8.335] linked credit contract, ....................... [8.375] private sales, ....................................... [8.155] product recalls and, ......................... [12.170] repair and spare parts, ...................... [8.395] undisclosed securities, ...................... [8.195] undisturbed possession, ................... [8.190] standard form consumer contracts, ........ [5.05] inequality of bargaining position, ..... [5.05] voluntary recalls, .................................... [12.170] Multiple pricing ACL and TPA compared, ......................... [1.65] civil liability, .................................. [6.05], [7.150] criminal liability, .......................... [6.05], [7.160] defences, .................................................... [7.160] displayed price, definition, .................... [7.150] false or misleading representations and, .......................................................... [6.125] prohibition, .................................... [7.05], [7.150] retraction of prices, .................................. [7.155]

N

749

National Partnership Agreement to Deliver a Seamless National Economy, .......... [1.05], [1.120] Natural persons application of ACL, ........ [1.90], [1.100], [2.05], [2.40] corporations power relied on, where, ............................................................ [2.05] defective goods action by dependant, ........................................................ [12.120] engaged in trade or commerce, ....... [1.100] forms of conduct, ................................. [2.40] law of the Commonwealth, as, ......... [2.40] overseas conduct, ..................... [1.95], [2.40] unfair contract terms, .............. [2.40], [5.50] direct liability under ACL, ....................... [2.40] States and Territories, .......................... [2.45] misleading or deceptive conduct, ........... [3.05] overview, ..................................................... [2.40] Negligence defective goods actions compared, ..... [12.170] Ipp Report, .............................. [14.250], [15.280] manufacturer’s duty of care, .................. [11.25] misleading and deceptive conduct action compared, ........................................ [3.05] personal injuries or death, ................... [14.250] supplier’s duty of care, ........................... [11.25] NEIAT — see National Education and Informatory Advisory Taskforce New Zealand consumer guarantees acceptable quality, ....... [8.205], [8.220], [8.240], [8.255]–[8.265] ACL regime based on, .................. [8.45], [8.50] Consumer Guarantees Act 1993, ..... [8.10], [8.45] due care and skill, ......................... [9.70], [9.85] loss allocation mechanism, ....................... [8.55] remedies damages for consequential loss, ... [15.105] failure of a substantial character, ... [15.20], [15.25] rejection of goods, ................ [15.50], [15.60] repair by supplier, ............................. [15.80] residential dwellings as goods, ............. [8.150] single enterprise theory, ............................ [8.45] Non-disclosure — see Silence

National Credit Code consumer credit regulation, ................... [3.250] overview, ................................................... [1.105] National Education and Informatory Advisory Taskforce (NEIAT) consumer guarantees regime, .................. [1.85] implied terms regime, ....... [1.85], [8.20]–[8.45]

Non-party redress orders application of regulator, on, ................. [13.395] enforcement proceeding not instituted, ........................................................ [13.395] Non-profit activity “trade or commerce”, definition, ............ [2.90]

750

The Australian Consumer Law

Notices infringement — see Infringement notices product recall — see Product recalls public warning — see Public warning notices safety warning notices, ......................... [11.210] substantiation — see Substantiation notices Notifiable diseases reporting requirements, ........................ [11.250]

O Online auctions consumer guarantees, ............................. [8.170] Onus of proof abnormal use exclusion, ......................... [8.305] applicant bearing, .................................... [14.10] breach of ACL, ......................................... [14.10] country of origin defences, .................. [13.405] criminal prosecution, ............................... [13.45] evidential burden, .................................. [13.405] country of origin defences, ............ [13.405] misleading or deceptive conduct, ... [3.135] unfair contract terms, ................ [5.115], [5.225] Orders adverse publicity orders, ...... [13.135], [13.315] banning orders, ...................... [13.320], [13.325] community service orders, ................... [13.295] compensation — see Compensation orders corrective advertising, ........... [13.280], [13.310] criminal prosecutions, ........................... [13.135] disclosure orders, ................................... [13.305] disqualification orders, ........ [13.135], [13.320], [13.325] non-party redress orders, ..................... [13.395] non-punitive, .......................... [13.135], [13.290] community service, ......................... [13.295] compliance programs, ..................... [13.290] corrective advertising, ..... [13.280], [13.310] disclosure orders, ............................. [13.305] probation orders, .............................. [13.300] preservation of property, ...................... [13.285] probation orders, .................................... [13.300] Overseas conduct application of ACL, ..................... [1.95], [1.100] carrying on business in Australia, .... [1.95] natural persons, to, .................. [1.95], [2.40] pyramid selling schemes, ....................... [7.130]

P Parity principle civil pecuniary penalties, ...................... [13.200]

criminal fines, ........................................... [13.65] Party plan events definition, .................................................. [10.30] invitation, definition, ............................... [10.30] unsolicited consumer agreement exemption, ............................................ [10.15], [10.30] Passing off cashing in on reputation, ........................ [3.225] common law action, ................................ [3.210] business goodwill, protection of, .... [3.210] statutory action compared, .. [3.05], [3.210] context, ....................................................... [3.215] design features or shape, ........................ [3.220] generic or descriptive words, ................ [3.215] get up, ........................................................ [3.225] intention to mislead, ............................... [3.225] interim injunction .................................... [3.215] misleading and deceptive conduct and, ................................ [3.20], [3.210]–[3.225] name, .......................................................... [3.215] statutory action under s 18, ....... [3.05], [3.210] Payment asserting right to meaning, .................................. [7.85], [7.100] unauthorised entries or advertisements — see Unauthorised entries or advertisements unsolicited goods or services — see Unsolicited goods or services orders to prohibit, .................................. [13.285] service, payment of money as, .............. [8.125] wrongly accepting — see Wrongly accepting payment Penalty infringement notices — see Infringement notices pecuniary — see Civil pecuniary penalties unconscionability and relief against, ...... [4.15] Performance characteristics false or misleading representations, .............................................. [6.90]–[6.110] environmental claims, ......................... [6.95] health benefits, ................................... [6.100] privacy and data security, ................ [6.110] product safety, .................................... [6.105] Person ACL applicable to, .......... [1.90], [1.120], [2.05], [2.40] States and Territories, .......................... [2.45] unconscionable conduct, ..................... [4.05]

Index Personal injury or death compensation orders, ............................ [14.205] defective goods, .................... [12.75]–[12.90] injured person party to proceedings, ........................................................ [14.205] limitation period, ............................. [14.200] limits, .................................................. [14.210] loss or damage, meaning, .............. [14.215] misleading or deceptive conduct, . [14.210] smoking or tobacco products, ....... [14.210] types of orders, ................................. [14.220] unfair practices, ................................ [14.210] damages, .................................. [14.125], [14.250] aggravated damages abolished, .... [14.275] consumer guarantees, ..................... [15.135] exemplary damages abolished, ..... [14.275] gratuitous care, ................................. [14.280] limits, .. [14.125], [14.250]–[14.260], [15.135] loss of earnings, ............................... [14.260] manufacturer, against, ..................... [15.135] maximum amount, .......................... [14.255] negligence reforms, .......................... [14.250] non-economic loss, .......................... [14.270] smoking or tobacco products, ...... [14.125], [14.250] structured settlements, .................... [14.285] threshold for, ..................................... [14.265] TPA compared, ................................. [14.250] Ipp Report, .............................. [14.250], [15.280] manufacturer, action against, ................. [12.75] causation, ............................................. [12.85] claimants, ............................................. [12.80] contributory fault, ............ [12.145], [14.290] dependants, claim by, ....... [12.95], [12.100] elements of action, ............................. [12.75] measure of damages, ......................... [12.90] reporting requirements, ......... [11.215]–[11.255] ACCC guide, ....... [11.05], [11.225], [11.230] awareness of death or injury, ......... [11.230] causal link, awareness of, ............... [11.215] confidentiality of notices, ................ [11.245] contents of notice, ............ [11.215], [11.240] criminal offences, .............................. [11.255] death or serious injury or illness, .. [11.10], [11.215] exemptions, ....................................... [11.250] notice not admission of liability, ... [11.215] other laws requiring, ....................... [11.250] penalties for non-compliance, ........ [11.255] product-related services, ................. [11.220] Productivity Commission report, .... [11.10] reportable information, ................... [11.240] supplier’s obligation, ....................... [11.235] time limit, .......................... [11.215], [11.235] triggering events, ............................. [11.230] Place of origin — see also Country of origin essential character test, ........................... [6.165]

751

false or misleading representations, ..... [6.165] food labelling, ..................................... [6.170] Policy objectives — see Consumer protection policy Postal services ACL and TPA compared, ......................... [1.65] application of ACL, ................................. [1.100] natural persons, to, .............................. [2.40] Premium claims false or misleading, ....................... [1.35], [6.50] Preservation of property orders kinds of orders, ...................................... [13.245] Price — see also Pricing advertising comparative, ......................... [3.205], [6.150] false or misleading, .............. [6.125]–[6.155] two-price advertising, ........... [1.20], [6.155] bait advertising, ......................................... [7.35] comparative advertising, ........................ [6.150] definition, .......................... [6.125], [7.35], [8.75] false or misleading representations, ............................................ [6.125]–[6.155] advertised price not total price, ...... [6.140] comparative advertising, .................. [6.150] definition, ............................................ [6.125] delivery charge, .................................. [6.125] discount or rebate, ............................. [6.145] drip pricing, ............................ [1.35], [6.140] “free”, use of, ........................ [6.130], [6.135] land, ...................................................... [6.250] overlap with other provisions, ........ [6.125] two-price advertising, ........... [1.20], [6.155] price escalation clause, .............................. [5.35] unfair contract terms, .......................... [5.35] reference pricing, ......... [1.20], [6.155], [13.345] single price specification, ....................... [7.165] application of provision, ....... [7.05], [7.165] component pricing, ............. [7.165], [7.170], [7.180] criminal liability, .................... [6.05], [7.190] drip pricing, ........................................ [7.170] false or misleading representations and, .......................................................... [6.125] minimum quantifiable consideration, .......................................................... [7.175] non-quantifiable charges, ................. [7.175] optional charges, ................................ [7.180] prohibitions, ........................................ [7.165] prominent way, .................................. [7.185] single price, definition, ..................... [7.165] supply, definition, .............................. [7.175]

752

The Australian Consumer Law

Price — cont TPA compared, ................................... [7.165] two-price advertising, . [1.20], [6.155], [13.345] upfront price payable financial services contracts, .............. [5.215] meaning, .................................... [5.20], [5.30] small business contracts, .................... [5.85] unfair terms exclusion, .......... [5.20], [5.30], [5.35] financial services, ............................ [5.215] Pricing — see also Price component pricing, ...... [7.165], [7.170], [7.180] drip pricing, .................... [1.35], [6.140], [7.170] exploitative, as unconscionable conduct .......................................................... [4.130] financial services, ............................... [4.210] multiple pricing, ....................................... [7.150] ACL and TPA compared, ................... [1.65] civil liability, ............................ [6.05], [7.150] criminal liability, .................... [6.05], [7.160] defences, .............................................. [7.160] displayed price, definition, .............. [7.150] false or misleading representations and, .......................................................... [6.125] prohibition, .............................. [7.05], [7.150] retraction of prices, ............................ [7.155] Privacy false or misleading representations, ..... [6.110] Private remedies compensation orders — see Compensation orders contracts breaching ACL, ......... [14.05], [14.10] damages — see Damages declaration — see Declarations evidence, .................................................... [14.10] injunctions — see Injunctions Prizes — see Rebates, gifts or prizes Probation orders purpose, ................................................... [13.300] requirements, .......................................... [13.300] Product liability ACL and TPA compared, ......................... [1.65] civil pecuniary penalties, ...................... [13.165] defective goods — see Defective goods false or misleading representations and, .......................................................... [6.105] policy objectives, ........................................ [1.25] Trade Practices Act transitional provisions, ....................... [1.60]

Product recalls ACCC guidelines, ....... [11.05], [11.35], [11.110] communication plan, ....................... [11.120] recall strategy/plan, ......... [11.115]–[11.125] suppliers’ responsibilities, ............. [11.110], [11.115] written recall notices, ...................... [11.120] ACL and TPA compared, ............ [1.65], [11.15] administration of regime, ....................... [11.15] compulsory recalls, .................... [11.15], [11.50] actions by suppliers, .......................... [11.75] Commonwealth recall notice, .......... [11.70] conference requirement, .................... [11.60] contents of recall notice, ................... [11.75] exported goods, .................................. [11.80] intention of provisions, ..................... [11.60] penalties for non-compliance, .......... [11.85] proposed recall notice, ...................... [11.60] publication of recall notice, .............. [11.50] refunds, ................................................ [11.75] State or Territory recall notice, ........ [11.65] Commonwealth notice overriding, . [11.70] triggering events, ............................... [11.55] consumer goods, ...................................... [11.25] specialist categories, .......................... [11.25] consumer guarantees and, ...... [11.90], [12.170] defective goods actions and, ................ [12.170] definitions consumer goods, ................................ [11.25] product-related services, ................... [11.30] reasonably foreseeable use or misuse, .......................................................... [11.20] responsible Minister, .......................... [11.45] serious injury or illness, .................... [11.40] supplier, ............................................... [11.35] exported goods compulsory recall notice, .................. [11.80] voluntary recall notice, ................... [11.130] national scheme, ....................................... [11.15] notice, compulsory recall, ....................... [11.50] contents, ............................................... [11.75] exported goods, .................................. [11.80] publication, .......................................... [11.50] State or Territory, ................................ [11.65] Commonwealth notice overriding, . [11.70] notice, voluntary recall, ........................ [11.100] contents, ............................................. [11.105] exported goods, ................................ [11.130] minimum requirements, ................. [11.120] written recall notice, ........................ [11.120] overview, ...................................... [11.05], [11.15] penalties for non-compliance, ............... [11.85], [11.135] Product Safety Australia website, ....... [11.140] Productivity Commission report, .......... [11.10] reasonably foreseeable use or misuse, . [11.20] injury, possibility of causing, ........... [11.15]

Index Product recalls — cont responsible Minister, ................................ [11.45] publication of recall notice, .............. [11.50] States and Territories alignment of laws, ............................. [11.15] mandatory recall notice, ................... [11.65] Commonwealth notice overriding, . [11.70] supplier, ..................................................... [11.35] communication plan, ....................... [11.120] compulsory recall, .............................. [11.75] definition, ............................................. [11.35] obligations, ........................... [11.35], [11.110] recall strategy/plan, ......... [11.115], [11.120] ACCC assessment of, ................... [11.125] refunds, ................................................ [11.75] voluntary recall, ................................ [11.110] triggering events, ..................................... [11.15] compulsory recalls, ............................ [11.55] reasonably foreseeable use or misuse, .......................................................... [11.20] voluntary recalls, ................................ [11.95] voluntary recalls, ........................ [11.15], [11.90] ACCC guidelines, ............. [11.110]–[11.125] communication plan, ....................... [11.120] consumer guarantees and, ............... [11.90], [12.170] contents of notice, ............................ [11.105] exported goods, ................................ [11.130] motor vehicles, ................................. [12.170] notification requirements, ............... [11.100] penalties for non-compliance, ........ [11.135] strategy/plan, .................... [11.115], [11.120] ACCC assessment of, ................... [11.125] triggering events, ............................... [11.95] written recall notice, ........ [11.120], [11.130] Product safety ACCC guidelines, .................................... [11.05] mandatory reporting law, .............. [11.225], [11.230] product recalls — see Product recalls ACL reforms, ................................ [1.65], [11.15] background to ACL regime, ................... [11.05] civil pecuniary penalties, ...................... [13.165] consumer goods, definition, ................... [11.25] defective goods — see Defective goods defences to contravention, ................... [13.130] false or misleading representations, ..... [6.105] information standards, ............ [11.10], [11.170] content, ............................................... [11.175] criminal offences, .............................. [11.180] defences to contravention, ............. [13.130] mandatory, ......................................... [11.170] penalties for non-compliance, ........ [11.180] Productivity Commission report, .... [11.10] transitional provisions, ....................... [1.60] manufacturer’s liability — see Defective goods actions

753

overview, .................................... [11.05], [11.145] policy objectives, .......................... [1.25], [11.10] product recalls — see Product recalls product-related services definition, ............................................. [11.30] regime applies to, ............................. [11.145] reporting requirements, .................. [11.220] safety standards, ............................... [11.155] Product Safety and Information Standards, .......................................................... [11.10] Product Safety Australia website, ....... [11.140] Productivity Commission report, ........... [1.70], [11.05] mandatory reporting, ........ [11.10], [11.215] safety and information standards, .. [11.10] reporting requirements, ......... [11.215]–[11.255] ACCC guide, ....... [11.05], [11.225], [11.230] causal link, awareness of, ............... [11.215] confidentiality of notices, ................ [11.245] contents of notice, ............ [11.215], [11.240] criminal offences, .............................. [11.255] death or serious injury or illness, .. [11.10], [11.215] awareness of, ................................. [11.230] exemptions, ....................................... [11.250] mandatory reporting of accidents, . [11.10], [11.215] notice not admission of liability, ... [11.215] other laws requiring, ....................... [11.250] penalties for non-compliance, ........ [11.255] product-related services, ................. [11.220] Productivity Commission report, .... [11.10] reportable information, ................... [11.240] supplier’s obligation, ....................... [11.235] time limit, .......................... [11.215], [11.235] triggering events, ............................. [11.230] safety bans, .............................................. [11.185] conference requirement, .................. [11.200] criminal offences, .............................. [11.205] interim bans, ..................... [11.185], [11.190] list of, .................................................. [11.185] penalties for non-compliance, ........ [11.205] permanent bans, ............... [11.185], [11.195] who may make, ................................ [11.185] safety standards, ....................... [11.10], [11.150] ACL and TPA compared, ................... [1.65] content, ............................................... [11.155] criminal offences, .............. [11.165], [13.130] defences to contravention, ............. [13.130] mandatory, ......................................... [11.150] nomination of standard, ................. [11.160] penalties for non-compliance, ........ [11.165] product-related services, ................. [11.155] Productivity Commission report, .... [11.10] transitional provisions, ....................... [1.60] safety warning notices, ......................... [11.210] serious injury or illness

754

The Australian Consumer Law

Product safety — cont definition, ............................................. [11.40] reporting incidents causing, ............. [11.10] single national law, .... [11.05], [11.10], [11.145] transitional provisions, ............................. [1.60] website, .................................................... [11.140] Productivity Commission background to ACL, ...................... [1.70]–[1.85] consumer guarantees, ......................... [1.85] differences in legislation, .................... [1.75] one regulator model, ......................... [1.120] product safety report, ......................... [1.70] consumer policy framework, .................. [1.10], [1.40]–[1.85], [5.135] behavioural economics, ...................... [1.20] insurance, ............................................. [1.110] enforcement, recommendations on, .... [13.140] banning orders, ................................ [13.320] infringement notices, ....................... [13.375] public warning notices, .................. [13.370] substantiation notices, ..................... [13.345] implied terms regime, ................... [1.75], [1.80] policy objectives, ................ [1.05], [1.10], [1.40] product safety report, .................. [1.70], [11.05] mandatory reporting, ........ [11.10], [11.215] safety and information standards, .. [11.10] unfair terms regime, ....... [5.10], [5.90], [5.135], [5.140] ex ante model, .................................... [5.135] ex post model, .................................... [5.135] excluded terms, .................................... [5.90] test of unfairness, ... [5.120], [5.135], [5.140] Professional activities “trade or commerce”, definition, ........... [2.85], [2.95], [2.105] Professional advisers accessorial liability, ................................ [14.180] Promotional offers — see Rebates, gifts or prizes Proof of transactions ACL and TPA compared, ......................... [1.65] definition, .................................................. [9.125] enforcement powers, ............................... [9.130] examples, ................................................... [9.125] remedies, ................................................... [9.130] Proportionate liability apportionable claim, .............. [14.145], apportionment of loss, .......... [14.145], relevant factors, ................................ circumventing provisions, .................... concurrent wrongdoers, ........ [14.145], definition, .......... [14.145], [14.155],

[14.150] [14.160] [14.160] [14.165] [14.155] [14.170]

excluded wrongdoer, ............................. [14.155] involvement in contravention, ............ [14.145] limited operation of provisions, .......... [14.145] misleading conduct, for, ....................... [14.145] objective, .................................................. [14.145] overview, ..................................... [1.50], [14.145] State legislation, ......................... [1.50], [14.170] Public enforcement — see Enforcement Public warning notices discretionary power, .............................. [13.340] first notice issued by ACCC, ............... [13.370] lay-by agreement breach, ..................... [10.125] power of regulator to issue, . [13.340], [13.370] Productivity Commission recommendations, ........................................ [13.140], [13.370] proof of transaction breach, ................... [9.130] Publisher’s defence — see Information provider defence Pyramid selling accessorial liability, .................................. [7.135] ACL and TPA compared, ............ [1.65], [7.115] application of prohibition, ........................ [7.05] ASIC Act, ................................................... [7.145] characteristics of schemes, ..................... [7.120] civil liability, .................................. [6.05], [7.115] criminal liability, .......................... [6.05], [7.140] extraterritorial operation, ....................... [7.135] financial products, ................................... [7.145] inducing another person to participate, .......................................................... [7.115] internet-based, application of ACL, ..... [1.100] online scheme, .......................................... [7.135] overview, .................................................... [7.115] participation in, .......................... [7.115], [7.135] participation payments, ............ [7.120], [7.130] entirely or substantially induced, meaning, .......................................................... [7.125] link with recruitment payment, ...... [7.130] prohibited conduct, ........ [4.120], [7.05], [7.115] pyramid scheme, definition, .................. [7.120] recruitment payments, .............. [7.120], [7.130] bonus promotional payments, ......... [7.130] customer acquisition bonuses, ......... [7.130] “in relation to”, meaning, ................. [7.130] link with participation payment, .... [7.130] personal commissions, ...................... [7.130] residual override commissions, ....... [7.130] referral selling compared, ......... [7.115], [7.195] telecommunications, ................................ [7.130]

R Radio broadcasts application of ACL, ..................... [1.100], [2.40]

Index Radio broadcasts — cont natural persons, to, .............................. [2.40] misleading and deceptive conduct advertising, ......................................... [3.185] information provider exemption, .... [3.235] unfair contract terms, ................................ [2.40] Reasonable mistake of fact defence bait advertising, ......................................... [7.40] criminal prosecutions, ........................... [13.115] false or misleading statements, ............. [6.215] business activities, ............................. [6.295] land, ...................................................... [6.255] lay-by agreement breach, ..................... [10.135] misleading conduct employment, ....................................... [6.270] nature of goods and services, .......... [6.280] overview, .................................................. [13.115] promotional offers, .................................... [7.25] pyramid selling, ....................................... [7.140] referral selling, .......................................... [7.200] Trade Practice Act, ................................. [13.115] unsolicited consumer agreements, ........ [10.95] unsolicited credit and debit cards, ......... [7.70] Rebates, gifts or prizes false or misleading representations, .... [6.145], [7.10] misleading promotional offers, .... [1.65], [7.10] ACL and TPA compared, ................... [1.65] application of prohibition, .................. [7.05] ASIC Act, ............................................... [7.30] civil liability, .............................. [6.05], [7.10] criminal liability, ...................... [6.05], [7.25] exemptions, ........................................... [7.20] failure to provide in reasonable time, ............................................................ [7.10] determining reasonable time, ........... [7.10] exemption where beyond control, .... [7.20] false or misleading representations and, .......................................................... [6.125] financial services, ................................. [7.30] “free”, meaning, ................................... [7.15] intention of not providing, ................. [7.10] prohibition, ................................ [7.05], [7.10] substitute items, ................................... [7.20] Recreational services consumer guarantees, ............... [1.50], [15.280] damages for reasonably foreseeable loss, ........................................................ [15.285] independent of contract, ................. [15.285] limitation of liability, .......................... [1.50], [15.280]–[15.290] reckless conduct of supplier, ......... [15.285] remedies for failure to comply, ..... [15.285] States and Territories, .......... [1.50], [15.290]

755

definition, ................................ [15.280], [15.285] TPA provisions, ...................................... [15.280] Referral selling application of prohibition, .......... [7.05], ASIC Act, ................................................... avoiding contravention, .......................... civil liability, .................................. [6.05], consumers, dealings with, ...................... criminal liability, .......................... [6.05], defences, .................................................... financial products, ................................... prohibition, .................................... [7.05], pyramid selling compared, ...... [7.115],

[7.195] [7.205] [7.195] [7.195] [7.195] [7.200] [7.200] [7.205] [7.195] [7.195]

Regulations commencement dates, ............................... [1.55] exemptions, ............................................... [1.140] future modifications to ACL, ................. [1.140] overview, ..................................................... [1.55] unfair terms prescribed by, .................... [5.165] Regulators — see ACL regulators Related bodies corporate application of ACL, ................................... [2.35] meaning, ...................................................... [2.35] Remedies ACL and TPA compared, ......................... [1.65] compensation orders — see Compensation orders consumer guarantees — see Consumer guarantees: remedies damages — see Damages declaration — see Declarations inadequate, consumer detriment, ........... [1.10] injunctions — see Injunctions lay-by agreements, ................................. [10.125] orders — see Orders private, ....................................................... [14.05] proportionate to harm, ............................ [13.05] public, ........................................................ [13.05] Repairs ACL and TPA compared, ......................... [1.65] consumer guarantees, ............... [8.180], [8.395] auction sales excluded, ..................... [8.170] exemption from liability, .................. [8.395] importers, ............................................ [8.395] manufacturers, .................................... [8.395] reasonableness test, ........................... [8.395] warranties against defects, ............... [8.405] false or misleading representations, ..... [6.160] manufacturer’s liability, repairers excluded, .......................................................... [12.10]

756

The Australian Consumer Law

Representative proceedings compensation orders, ............................ [13.390] defective goods actions, ........................ [12.160] regulator may bring, ............. [12.160], [13.390] Rescission of contract compensatory order, .............................. [14.220] equitable principles, .............................. [14.220] unconscionability and, .............................. [4.15] Residential dwellings consumer guarantees, ................. [8.150], [9.45] goods or services, ........................ [8.150], [9.45] Review of Australia’s Consumer Policy Framework, 2008, .............. [1.70]–[1.80], [1.110], [5.90], [5.135], [5.135], [5.140], [13.140] Review of the Australian Consumer Product Safety System, 2006, ....... [1.70], [11.05]

S

Safety defects action against manufacturer — see Defective goods actions product recall — see Product recalls Safety of products — see Product safety Sale of business consumer guarantees and non-consumer use, .......................................................... [8.110] misleading or deceptive conduct, ........... [3.20] stock-in-trade not consumer goods, ..... [8.110] Sale of goods legislation implied terms — see Implied terms regime international sale of goods, .................... [8.175] Sale of land consumer contract, ..................................... [5.60] unfair terms, ......................................... [5.60] false or misleading representations, ............................................ [6.250]–[6.260] ACL and TPA compared, ..... [1.65], [6.250] civil liability, ............................ [6.05], [6.250] criminal liability, ...... [6.05], [6.255], [6.260] defences, .............................................. [6.255] financial services, ............................... [6.260] price, ..................................................... [6.250] specific prohibition, ........................... [6.250] fixtures and consumer guarantees, ....... [8.145]

Scams consumer detriment, ................................. [1.10] Services building services — see Building services business detriment, .................................... [1.35] consumer, definition — see Consumer consumer guarantees — see Consumer guarantees for services definition, ............ [8.120], [8.125], [9.15], [9.45] goods distinguished, ............ [8.125]–[8.150] mixed supply, ..................................... [8.130] digital products, ......................... [8.135], [8.140] false or misleading representations — see False or misleading representations financial — see Financial products and services goods distinguished, ............................... [8.125] digital products, ................... [8.135], [8.140] implied terms, ............................................ [9.05] due care and skill, ................... [9.65], [9.85] fitness for purpose, ............................ [9.100] transportation or storage excluded, . [9.30] itemised bills, ............................................ [9.135] ACL and TPA compared, ................... [1.65] minimum information, ..................... [9.135] request for, .......................................... [9.135] misleading conduct concerning nature of, .......................................................... [6.275] civil liability, ............................ [6.05], [6.275] criminal liability, .................... [6.05], [6.280] defences, .............................................. [6.280] financial services, ............................... [6.285] liable to mislead, ................................ [6.275] mixed supply of goods and, ...... [8.85], [8.130] payment of money as, ............................ [8.125] product-related services — see Product safety recreational — see Recreational services supply of consumer guarantees — see Consumer guarantees for services definition, .............................. [7.175], [8.160] mixed supplies, ...................... [8.85], [8.130] unconscionable conduct — see Unconscionable conduct trade or commerce, conferred in, .......... [8.125] transitional provisions, ............................. [1.60] unfair contract terms — see Unfair contract terms unfair sales techniques — see Unfair sales techniques unsolicited — see Unsolicited goods or services wrongly accepting payment for — see Wrongly accepting payment Ships unfair terms exclusions

Index Ships — cont carriage of goods contract, ................. [5.45] charterparty, .......................................... [5.45] salvage or towage contract, ............... [5.45] Silence conduct, whether, ............. [3.25]–[3.35], [3.100] false or misleading representation, ......... [6.15] misleading or deceptive conduct, .......... [3.25], [3.100] agency agreement, non-disclosure of, .......................................................... [3.115] bid-rigging arrangement, non-disclosure of, .................................................... [3.115] case examples, .................................... [3.125] commercial negotiations, .... [3.105], [3.110] course of conduct as a whole, ........... [3.10] duty to disclose, ................... [3.100], [3.105] engaging in conduct, ............... [3.25]–[3.35] general principles, .............................. [3.100] implied representations, ....... [3.35], [3.120] inadvertent, ........................................... [3.25] intentional or deliberate, ........ [3.25], [3.30] isolated silence, ........................ [3.30], [3.35] other conduct and, ............................... [3.35] pre-contractual negotiations, .......... [3.105], [3.110] qualifying earlier statement, ............ [3.120] reasonable expectation of disclosure, ............................................ [3.100]–[3.125] subsequent change in circumstances, .......................................................... [3.120] unintentional non-disclosure, ............ [3.25] unusual or unexpected matters, ...... [3.115] reasonable expectation of disclosure, ............................................ [3.100]–[3.125] cases where found/not found, ........ [3.125] change in circumstances, .................. [3.120] commercial negotiations, .... [3.105], [3.110] contextual factors, .............................. [3.110] course of dealing, ............................... [3.105] fiduciary duty, .................................... [3.105] specific transactional requirements, .......................................................... [3.110] unusual or unexpected matters, ...... [3.115] Single enterprise theory consumer guarantees, ................. [8.45], [8.180] Single price specification application of provision, ............. [7.05], [7.165] component pricing, ...... [7.165], [7.170], [7.180] criminal liability, .......................... [6.05], [7.190] defences to contravention, ..................... [7.190] drip pricing, .............................................. [7.170] false or misleading representations and, .......................................................... [6.125]

minimum quantifiable consideration, .. non-quantifiable charges, ....................... optional charges, ...................................... prohibitions, .............................................. prominent way, ........................................ requirement, .............................................. single price, definition, ........................... supply, definition, .................................... TPA compared, .........................................

757 [7.175] [7.175] [7.180] [7.165] [7.185] [7.165] [7.165] [7.175] [7.165]

Small business business, definition, ................................... [5.75] business-to-business transactions, .......... [1.30] contract, definition, ...................... [5.70], [5.205] misleading conduct protection, ............... [1.35] number of employees, .................. [5.70], [5.80] unfair contract terms protection, ........... [5.55], [5.70]–[5.85] business, definition, ............................. [5.75] extension to, .................. [1.30], [5.10], [5.70] financial services, ................. [5.195], [5.205] not-for-profit business, ........................ [5.75] small business contract, definition, . [5.70], [5.205] upfront price, ........................................ [5.85] Social media misleading advertising on, ..................... [3.195] Spare parts consumer guarantees, ............... [8.180], auction sales excluded, ..................... exemption from liability, .................. importers, ............................................ manufacturers, .................................... reasonableness test, ........................... false or misleading representations, .....

[8.395] [8.170] [8.395] [8.395] [8.395] [8.395] [6.160]

Sponsorship false or misleading representations, ...... [6.90], [6.115], [6.120] environmental claims, ......................... [6.95] infringement notices, ......................... [6.120] meaning, ...................................... [6.115], [6.120] Standard form contracts areas where common, ............................... [5.05] definition, .................................................... [5.90] inequality of bargaining power, .. [5.05], [5.95] negotiated contracts compared, .............. [5.90] rebuttable presumption, ......................... [5.100] unfair terms — see Unfair contract terms State and Territory courts injunction, power to grant, .................... [1.155] jurisdiction, ................................. [1.150], [1.155]

758

The Australian Consumer Law

State and Territory courts — cont transfer of proceedings to/from, .......... [1.160] unfair terms, proceedings for, ............... [5.170] States and Territories ACL regulators, ........................................ [1.145] adoption of ACL, ..................................... [1.120] amendments to ACL, .............................. [1.140] application of ACL, ........ [1.05], [1.50], [1.120], [2.05] application legislation, ........... [1.50], [1.55], [1.120]–[1.135] Australian Consumer Law text, ....... [1.50], [1.120] commencement dates, ......................... [1.55] Crown, ................................................... [2.05] differences in provisions, .................... [1.50] double jeopardy, ................................. [1.135] doubling-up of liabilities prevented, .......................................................... [1.135] extraterritorial application, ............... [1.130] future amendments, .......................... [1.140] natural persons, .................................... [2.45] “person”, ............................................... [2.45] principal acts, ..................................... [1.120] background to ACL, .................................. [1.75] consumer credit, ....................................... [1.105] consumer guarantees, ............................... [8.15] Fair Trading Acts, ................................ [8.05] recreational services, ........... [1.50], [15.290] residential dwellings, .......................... [9.45] contributory negligence, .......... [1.50], [14.130], [14.140] corporation incorporated in a territory, . [2.30] Corporations Agreement, 2002, ............. [1.105] courts — see State and Territory courts criminal prosecutions, ............................. [13.20] Crown, application of ACL to, .... [2.05], [2.65] carrying on business, .............. [2.05], [2.65] exceptions, ........................................ [2.70] enforcement, ................................ [1.120], [13.20] Fair Trading Acts, ........................ [1.50], [1.120] doubling-up of liabilities, ................. [1.135] jurisdiction under, ................ [1.150], [1.155] key provisions, ..................................... [2.05] transitional provisions, ....................... [1.60] implementation of ACL, ........................... [1.55] lay-by agreements, ................................. [10.100] legislative powers, ................................... [1.120] policy objectives, ........................................ [1.40] product recalls, ......................................... [11.15] alignment of laws, ............................. [11.15] mandatory recall notice, ................... [11.65] Commonwealth notice overriding, . [11.70] proportionate liability, ............... [1.50], [14.170] referral of powers, ..................... [1.105], [1.120] sale of goods legislation implied terms — see Implied terms regime

international sale of goods, .............. [8.175] tribunals, jurisdiction of, ........................ [1.155] unfair contract terms, .............................. [5.180] commencement of proceedings, ...... [5.170] NSW, .................................................... [5.180] overlap of ACL with Applications Acts, .......................................................... [5.175] Vic, .... [5.05], [5.15], [5.120], [5.125], [5.180] “State of the art” defence consumer guarantees, .............. [8.265], [8.370], [12.170] defective goods actions, ......... [12.05], [12.130], [12.170] Statutory unconscionability — see Unconscionable conduct Stock-in-trade consumer guarantees, .............................. [8.110] Storage services consumer guarantees, ............................... [9.30] Strict liability consumer guarantees imposing, ............. [8.50] acceptable quality, .............................. [8.205] fitness for purpose, ............................ [8.355] false or misleading representations, ..... [6.215] land, about, ........................... [6.255], [6.260] manufacturer, .............................. [12.05], [12.45] misleading or deceptive conduct, ........ [3.230], [14.245] information provider exemption, ... [3.230], [14.245] social media, advertising on, ........... [3.195] publisher’s defence, ............................... [14.245] Structured settlement definition, ................................................ [14.285] personal injury damages, ..................... [14.285] Substantiation notices advertising claims, ................................. [13.345] compliance with, .................................... [13.350] contents, ................................................... [13.355] country of origin claims, ...................... [13.405] discretionary power, .............................. [13.340] failure to comply, ................................... [13.365] civil pecuniary penalties, ................ [13.165] criminal offences, ............................. [13.365] follow up action, .................................... [13.360] lay-by agreement breach, ..................... [10.125] made in Australia claims, ..................... [13.405] obligation to provide information, ..... [13.350] overview, ................................................. [13.345]

Index Substantiation notices — cont power of regulator to issue, ................. [13.340] Productivity Commission recommendations, ........................................ [13.140], [13.345] proof of transaction breach, ................... [9.130] purpose, ................................................... [13.345] Suppliers consumer guarantees goods — see Consumer guarantees for goods services — see Consumer guarantees for services definition, ................................................... [11.35] duty of care, .............................................. [11.25] indemnification by manufacturers, ........ [1.65], [8.05], [8.55], [15.140] itemised bills, ............................................ [9.135] ACL and TPA compared, ................... [1.65] linked credit providers — see Linked credit providers overseas, application of ACL to, ............. [1.95] product recalls — see Product recalls product safety — see Product safety proof of transactions, ................ [9.125], [9.130] ACL and TPA compared, ................... [1.65] Supply of goods or services chattels, ...................................................... [8.165] consumer contracts definition, .................... [5.60], [5.65], [5.200] standard form, .......................... [5.05], [5.90] unfair terms — see Unfair contract terms consumer guarantees — see Consumer guarantees definition, .................................... [7.175], [8.160] donations, ...................................... [1.65], [8.160] gifts, ............................................................ [8.160] mixed supply, ............................. [8.130], [8.145] overview, ................................................... [8.160] unconscionable conduct — see Unconscionable conduct unsolicited — see Unsolicited goods or services

T Telecommunications services — see also Telephonic services consumer guarantees, ............................... [9.50] ACL and TPA compared, ................... [1.65] extended warranties and, ................. [6.205] pyramid selling schemes, ....................... [7.130] unfair contract terms, ................................ [2.40] inequality of bargaining power, ........ [5.05] significant imbalance, ........................ [5.125]

759

standard form contracts, ..................... [5.05] Telegraphic services ACL and TPA compared, ......................... [1.65] application of ACL, ..................... [1.100], [2.40] conduct outside Australia, ... [1.95], [1.100] internet, use of, ....................... [1.100], [2.40] natural persons, to, .............................. [2.40] unfair contract terms, ................................ [2.40] Telemarketing regulation of, ............................................. [10.45] Telemarketing Industry Standard, ........ [10.45] unsolicited agreements — see Unsolicited consumer agreements Telephonic services — see also Telecommunications services ACL and TPA compared, ......................... [1.65] application of ACL, ..................... [1.100], [2.40] conduct outside Australia, ... [1.95], [1.100] natural persons, to, .............................. [2.40] unfair contract terms, ................................ [2.40] inequality of bargaining power, ........ [5.05] standard form contracts, ..................... [5.05] Television broadcasts application of ACL, ..................... [1.100], [2.40] natural persons, to, .............................. [2.40] misleading and deceptive conduct advertising, ......................................... [3.185] information provider exemption, .... [3.235] unfair contract terms, ................................ [2.40] Testimonials false or misleading, ............ [6.10], [6.70]–[6.85] celebrity testimonials, .......................... [6.85] consumer testimonials, ....................... [6.80] evidentiary onus, ................................. [6.70] expert testimonials, .............................. [6.75] fictitious testimonials, ......................... [6.70] presumption that misleading, ........... [6.70] Therapeutic goods product safety reporting requirements, ........................................................ [11.250] regulation of industry, ............................. [11.25] Therapeutic Goods Administration (TGA), .......................................................... [11.25] Title to goods consumer guarantee, ... [8.180], [8.185], [8.200] hire or lease excluded, ...................... [8.185] limitation of liability not permitted, ........................................................ [15.260] limited title, ........................... [8.185], [8.200]

760

The Australian Consumer Law

Title to goods — cont remedy by supplier, .......................... [15.85] right to dispose, ................................. [8.185] specific or ascertained goods, .......... [8.185] unascertained goods, ......................... [8.185] undisturbed possession and, ........... [8.190] implied condition, .................................... [8.185] supplier curing defect, ............................ [15.85] Totality principle civil pecuniary penalties, ...................... [13.195] criminal fines, ........................................... [13.70] disqualification orders, ......................... [13.325] Trade or commerce agents, ........................................................ [2.100] application to conduct in, ......... [1.100], [2.05], [2.75]–[2.105] carrying on a business, distinction, ........ [2.55] chattels, supply in, ................................... [8.165] conduct not constituting, ........................ [2.105] consumer guarantees, ..... [2.75], [2.85], [8.155] definition, . [1.100], [2.75]–[2.90], [6.40], [12.30] email as, ....................................................... [2.80] employees, ................................................. [2.100] terms of employment representations, ............................................................ [2.95] examples, ..................................................... [2.80] false or misleading representations, ....... [6.40] “in”, requirement, ...................................... [2.95] manufacturer’s liability, .......................... [12.30] misleading or deceptive conduct in, ... [1.100], [2.75], [2.95] employee or agent, ............................ [2.100] natural persons engaged in, ..... [1.100], [2.40], [2.45] non-profit activities, .................................. [2.90] others, of, ................................................... [2.100] overview, ....................................... [2.75], [2.105] personal transactions, ................................ [2.75] professional activities, ..... [2.85], [2.95], [2.105] purpose or intention, ................................. [2.75] services conferred in, .............................. [8.125] Trade Practices Act 1974 — see also Competition and Consumer Act 2010 ACL compared, .............................. [1.65], [6.05] false or misleading representations, . [6.10] background to ACL, ...................... [1.75], [1.85] commencement dates of amendments, . [1.55], [4.05] consumer protection provisions, ............. [1.85] criminal liability, ........................................ [6.05] defective goods actions, ........... [12.05], [12.15], [12.170] false or misleading representations, ...... [1.65], [6.10]

implied terms — see Implied terms regime manufacturer’s liability, ........... [12.05], [12.15], [12.170] contributory acts or omissions, ..... [12.145] misleading or deceptive conduct (s 52), .................................... [1.05], [3.05], [3.10] norm of conduct imposed by, .................. [3.05] policy objectives, ........................................ [1.40] renumbering and renaming, .................... [1.55] transitional provisions, ....................... [1.60] unconscionable conduct, .. [1.65], [4.05], [4.50], [4.85] Trading corporations application of ACL — see Corporations constitution, ................................................ [2.20] corporation, definition, ............................. [2.10] definition, .................................................... [2.20] overview, ..................................................... [2.20] substantial current activities test, ............ [2.20] Transfer of proceedings Federal Court, ........................................... [1.160] State and Territory Courts, ..................... [1.160] Transportation services consumer guarantees, ............................... [9.30] fitness for purpose, ............................ [9.105] Travel services drip pricing, ................................ [6.140], [7.170] unfair contract terms cancellation clause, ............................ [5.130] change fee, .......................................... [5.155] contract as a whole, ........................... [5.155] forfeiture term, ................................... [14.30] inequality of bargaining power, ........ [5.05] legitimate interests, whether necessary to protect, ........................................... [5.130] standard form contracts, ..................... [5.05] Two-price advertising consumer detriment, ................................. [1.20] false or misleading, ................................. [6.155] use of, ............................................. [1.20], [6.155]

U

Unauthorised entries or advertisements asserting right to payment for, .............. [7.100] ACL and TPA compared, ..... [1.65], [7.100] ASIC Act, ............................... [7.100], [7.110] civil liability, ............................ [6.05], [7.100] criminal liability, .................... [6.05], [7.105] defences, .............................................. [7.105]

Index Unauthorised entries or advertisements — cont definition, ............................................ [7.100] exemptions, ......................................... [7.100] financial products and services, ..... [7.100], [7.110] prohibition, .............................. [7.05], [7.100] Unconscionable conduct accumulation of minor incidents, ........... [4.65] ACL and TPA compared, ......................... [1.65] acquisition of goods or services, . [4.45], [4.95] statutory factors, ..................... [4.95]–[4.185] application of ACL, ..................... [1.100], [2.75] ASIC Act, ....................... [1.105], [4.195]–[4.215] bargaining positions, ....... [4.75], [4.95], [4.100] deliberate misuse, ................................ [4.75] imbalance of, ............. [4.75], [4.100], [4.160] unmeritorious, .................................... [4.165] business detriment, .................................... [1.30] business-to-business transactions, ......... [1.30], [4.05], [4.10], [5.65] applicable arrangements, ........ [4.90], [4.95] special disadvantage, .......................... [4.35] statutory factors, ..................... [4.95]–[4.185] undue influence or pressure, ........... [4.125] business-to-consumer transactions, ....... [4.05], [4.10], [4.45] statutory unconscionability, .... [4.45]–[4.90] undue influence or pressure, ........... [4.120] categories of, ............................................... [4.05] civil pecuniary penalties, ...................... [13.165] commercial relationship, in connection with, .......................................................... [4.180] compensation orders — see Compensation orders concept, ............................................ [4.15], [4.50] conduct constituting, ........ [4.35], [4.45], [4.85], [4.190] commercial context, ............................. [4.50] financial services, ............................... [4.195] statutory factors, ....... [4.95]–[4.185], [4.195] consumer detriment, ................................. [1.20] consumer transactions, ................. [4.05], [4.10] contract, in relation to, .............................. [4.95] standard term contract, ..................... [4.100] terms and conditions, ........................ [4.170] conduct in compliance, ................... [4.175] unreasonable, ...................... [4.80], [4.105] different interpretations, ............... [4.85]–[4.90] equity, ............................................... [4.15]–[4.35] categories of case, ................................ [4.15] concept in, ................................. [4.15], [4.60] interpretative principles and, ............ [4.60] special disadvantage, . [4.15]–[4.35], [4.100] unwritten law, ...................................... [4.15] exploitative pricing, ................................. [4.130] financial services, ............................... [4.210] “fact-dependent” finding, ......................... [4.05]

761

financial services, ....................... [1.105], [4.195] court’s considerations, ...................... [4.195] exploitative pricing, ........................... [4.210] good faith, lack of, ............................. [4.215] imbalance of bargaining power, ...... [4.200] unreasonable conditions, .................. [4.205] franchising, .................................. [4.100], [4.125] Code of Conduct, ... [4.140], [4.145], [4.175] exploitative pricing, ........................... [4.130] good faith, lack of, ............... [4.175], [4.185] imbalance of bargaining power, ...... [4.100] inconsistent treatment, ...................... [4.135] refusal to consent to transfer, ......... [4.145], [4.175], [4.185] refusal to negotiate, ........................... [4.165] systematic defrauding, ...................... [4.185] termination of agreement, .. [4.175], [4.185] undue influence or pressure, ........... [4.125] general prohibition, ....................... [4.05], [4.10] good faith, lack of, ......... [4.95], [4.175], [4.185] financial services, ............................... [4.215] inconsistent treatment, ............................ [4.135] industry codes, ............... [4.95], [4.140]–[4.155] definition, ............................................ [4.155] Food and Grocery Code, .................. [4.150] Franchising Code of Conduct, ........ [4.140], [4.145] mandatory, .......................................... [4.140] voluntary, ............................................. [4.155] inequality of bargaining power, . [4.75], [4.95], [4.100], [5.95] financial services, ............................... [4.200] franchise agreements, ........................ [4.100] landlord and tenant, .......................... [4.160] special disadvantage, ............ [4.100], [5.95] insurance contracts, ................................... [5.45] interpretative principles, .. [1.05], [4.05], [4.45], [4.55]–[4.85] carrying out of contract, ..................... [4.70] conduct of dominant party, ............... [4.65] equitable concept and, ........................ [4.60] terms of contract, ................................. [4.70] landlord, .................................................... [4.160] list of factors, .............................................. [4.05] meaning, ................ [1.05], [4.45], [4.55], [4.195] different interpretations, ........ [4.85]–[4.90], [4.190] interpretative principles, ........ [1.05], [4.05], [4.45]–[4.85] moral obloquy, .............................. [4.85], [4.190] non-disclosure, ............................. [4.95], [4.160] non-negotiable terms, ................................ [5.95] overview, ..................................................... [4.05] equitable, ............................................... [4.15] statutory, ................................................ [4.45] pattern of behaviour, ................................. [4.65] person, by, ................................................... [4.05]

762

The Australian Consumer Law

Unconscionable conduct — cont private remedies compensation orders — see Compensation orders damages — see Damages declaration — see Declarations procedural unconscionability, ..... [4.35], [4.70], [4.75] prohibition, ...................................... [4.10], [4.40] reform proposals, ....................................... [4.05] refusal to negotiate, ..................... [4.95], [4.165] scope of provisions, ....................... [1.05], [4.45] unwritten law, ...................................... [4.10] special disadvantage, ......... [4.15]–[4.35], [4.65] actual knowledge of, ........................... [4.30] classes of circumstance, ...................... [4.25] combinations of circumstance, .......... [4.25] constitutional disadvantage, .............. [4.25] dependency, .......................................... [4.35] elements, ................................................ [4.20] inequality of bargaining power, ..... [4.100], [5.95] lack of education or language ability, ............................................................ [4.25] unconscientious exploitation of, ....... [4.20], [4.35], [4.60] statutory, ............................ [4.10], [4.40]–[4.190] commercial relationship, ................... [4.180] compliance with terms and conditions, .......................................................... [4.175] exploitative pricing, ........................... [4.130] factors to consider, ................. [4.95]–[4.185] failure to disclose, .............................. [4.160] financial services, ................. [4.195]–[4.215] good faith, lack of, ............................. [4.185] imbalance of bargaining power, ....... [4.75], [4.100], [4.160] inconsistent treatment, ...................... [4.135] industry codes, ..................... [4.140]–[4.155] refusal to negotiate, ........................... [4.165] terms and conditions, .......... [4.105], [4.170] understanding of documents, .......... [4.110] undue influence or pressure, ............................................ [4.115]–[4.125] unfair tactics, ......................... [4.115]–[4.125] unreasonable conditions, .................. [4.105] substantive unconscionability, .... [4.35], [4.70], [4.80], [4.170], [4.180] supply of goods or services, ....... [4.10], [4.45], [4.95] statutory factors, ..................... [4.95]–[4.185] system of conduct, ..................................... [4.65] terms of contract, ......................... [4.70], [4.170] conduct in compliance, ..................... [4.175] unreasonable, .......................... [4.80], [4.105] trade or commerce, in, .............................. [2.75] Trade Practices Act provisions, .. [1.65], [4.05], [4.50], [4.85]

ACL compared, .................................... [1.65] understanding of documents, .... [4.95], [4.110] undue influence or pressure, .................. [4.95], [4.115]–[4.125] business-to-business, ......................... [4.125] business-to-consumer, ....................... [4.120] unfair contract terms and, ...................... [5.130] inequality of bargaining power, ........ [5.95] non-negotiable terms, .......................... [5.95] standard compared, ............................. [5.10] unfair tactics, ............................... [4.115]–[4.125] unreasonable conditions, ............ [4.95], [4.105] financial services, ............................... [4.205] unsolicited consumer agreements, ........ [4.120] unwritten law, .................... [4.05], [4.10], [4.15] equity as, ............................................... [4.15] meaning, ................................................ [4.15] scope of provisions, ............................. [4.10] special disadvantage, ............... [4.15]–[4.35] vulnerable target, ......................... [4.80], [4.100] Undertakings ACCC public register, ........................... [13.335] breach of, ................................................. [13.335] enforcement of ACL by, .......... [13.15], [13.335] injunction against breach, ..................... [13.335] lay-by agreement breach, ..................... [10.125] power to enforce, ................................... [13.335] proof of transaction breach, ................... [9.130] purpose, ..................................... [13.15], [13.335] Undue harassment — see Harassment or coercion Undue influence unconscionable conduct, .......................... [4.95], [4.115]–[4.125] business-to-business, ......................... [4.125] business-to-consumer, ....................... [4.120] Unfair contract terms ACCC bringing proceedings for, .......... [5.185] ACCC guide, .................. [5.95], [5.130], [5.160] ACL regime, .................................... [1.65], [5.10] operative provisions, ........................... [5.50] overlap with Applications Acts, ...... [5.175] acts performed in reliance on, ............... [14.30] application of ACL, ..................... [1.100], [5.50] corporations, ............... [5.50], [5.60], [5.175] natural persons, ........................ [2.40], [5.50] small business, .............. [1.30], [5.10], [5.70] ASIC Act, ..................................... [5.195]–[5.245] business detriment, .................................... [1.30] business-to-business transactions, .......... [1.30] commencement date of provisions, ........ [1.55] commencement of proceedings, ............ [5.170] Commonwealth, ....................................... [5.175]

Index Unfair contract terms — cont compensation orders — see Compensation orders constitutions excluded, ............................. [5.45] consumer contracts, ......... [5.50]–[5.65], [5.200] definition, .................... [5.60], [5.65], [5.200] dual purposes, ...................................... [5.65] financial services, ................. [5.195], [5.200] individual, supply to, .............. [5.60], [5.65] purposes of acquisition, ...................... [5.60] standard form contracts, ......... [5.05], [5.90] substantial purpose, ............................ [5.65] time for ascertaining purpose, .......... [5.65] consumer, definition, ................................. [5.65] consumer detriment, ..................... [1.10], [1.20] contextual considerations, ...................... [5.140] financial services, ................. [5.220], [5.230] contract as a whole, ................... [5.155], [5.240] corporation, supply by, ... [5.50], [5.60], [5.175] court’s considerations context, ................................... [5.140], [5.220] contract as a whole, ............. [5.155], [5.240] financial services, ................. [5.220]–[5.240] transparency, ......................... [5.150], [5.220] unfairness, test of, .. [5.105]–[5.135], [5.220] declaration of, ........... [13.150], [14.30], [14.225] ACCC proceedings, ........................... [5.185] Commonwealth, ................................. [5.175] compensation orders, ..... [13.150], [14.205], [14.225] private litigant, ................................... [5.190] States and Territories, ........................ [5.180] definition, ............ [1.05], [5.15], [5.105]–[5.135], [5.225] detriment, ...................... [5.110], [5.120], [5.135] applied or relied on, ............ [5.135], [5.225] business detriment, .............................. [1.30] evidence of actual detriment, .......... [5.135] financial detriment, ............................ [5.135] financial services, ............................... [5.225] non-financial, ...................................... [5.135] elements of unfairness, .............. [5.110]–[5.135] enforcement, .............................................. [5.185] examples, ..................................... [5.160], [5.245] excluded contracts, ........................ [5.20], [5.45] ASIC Act, ............................................. [5.210] financial services, ............................... [5.210] negotiated contracts, ........................... [5.90] excluded terms, .............................. [5.20]–[5.40] ASIC Act, ............................................. [5.215] expressly permitted by law, . [5.40], [5.215] financial services, ............................... [5.215] main subject matter, .............. [5.25], [5.215] upfront price, .............. [5.30], [5.35], [5.215] Fair Trading Act 1999 (Vic), ........... [5.05], [5.15] Federal Court proceedings, ...... [5.170], [5.185] financial services, ....................... [5.195]–[5.245] ACL not applicable, ............................. [5.45]

763

ASIC Act regime, .................. [5.195]–[5.245] consumer contracts, ........................... [5.200] context, ................................... [5.220], [5.230] contract as a whole, ........................... [5.240] contracts covered, ................. [5.195]–[5.205] excluded contracts, ............................ [5.210] excluded terms, .................................. [5.215] grey list, ................................. [5.220], [5.245] inequality of bargaining power, ........ [5.05] operative provisions, ......................... [5.195] requirements, ...................................... [5.195] significant imbalance, ........................ [5.225] small business contracts, .................. [5.205] standard form contracts, ..................... [5.05] test of unfairness, ................. [5.220]–[5.240] transparency, ......................... [5.220], [5.235] forfeiture term, ......................................... [14.30] freedom of contract and, .......................... [5.05] general protection against, ....................... [5.05] good faith, contrary to, ............... [5.15], [5.115] grey list, ......................................... [5.35], [5.160] financial services, ................. [5.220], [5.245] individual, supply to, .................... [5.60], [5.65] inequality of bargaining power, .. [5.05], [5.95] information imbalance, ........................... [5.150] injunction, ....... [5.135], [5.180], [5.185], [5.190], [13.150] insurance contracts, ................................... [5.45] involvement in contravention, ............ [14.225] land, acquisition of, ................................... [5.60] lay-by contracts, ....................................... [5.110] legitimate interests, .................................. [5.130] establishment of, ................................ [5.130] whether necessary to protect, .......... [5.130] main subject matter, term defining, ....... [5.25] exclusion, ................................... [5.20], [5.25] natural person, supply by, ........... [2.40], [5.50] negotiated contracts excluded, ................ [5.90] new national law, ............... [1.05], [1.30], [1.65] NSW legislation, ...................................... [5.180] operative provisions, ................................. [5.50] order to redress loss or damage, .......... [5.185] postal services, ........................................... [2.40] prescribed terms, ...................................... [5.165] price escalation clause, .............................. [5.35] procedural aspects, .................... [5.140], [5.145] proceedings for, .......................... [5.170], [5.185] Productivity Commission recommendations, .................. [5.10], [5.115], [5.135], [5.140] radio broadcasts, ........................................ [2.40] regulation, terms prescribed by, ............ [5.165] remedies Commonwealth, ................................. [5.175] compensation orders — see Compensation orders damages — see Damages declaration — see Declarations

764

The Australian Consumer Law

Unfair contract terms — cont injunctions — see Injunctions private, ................................... [5.190], [14.05] public, .................................................. [5.185] States, ................................................... [5.180] requirements under ACL, ......................... [5.50] requirements under ASIC Act, .............. [5.195] scope of provision, ..................................... [1.05] second contract, forced entry into, ....... [14.30] severance of offending part, .................. [14.30] ships, excluded contracts relating to carriage of goods contract, ................. [5.45] charterparty, .......................................... [5.45] salvage or towage contract, ............... [5.45] significant imbalance in rights and obligations, ...................... [5.110]–[5.125] contract as a whole, ........................... [5.120] element of unfairness, ....................... [5.110] examples, ............................................. [5.125] financial services, ................. [5.220], [5.225] inappropriate behaviour, encouraging, .......................................................... [5.115] lack of transparency, .......................... [5.115] liability to pay, .................................... [5.125] onus of proof, ....................... [5.115], [5.225] significant, meaning, ............ [5.115], [5.120] suspension of services, ...................... [5.125] termination of agreements, .............. [5.120] United Kingdom, ............................... [5.115] variations, ............................................ [5.125] Victoria, ...................... [5.15], [5.120], [5.125] small business contracts, ... [5.55], [5.70]–[5.85] business, definition, ............................. [5.75] definition, ................................ [5.70], [5.205] extension of protection to, ..... [1.30], [5.10], [5.70] financial services, ................. [5.195], [5.205] not-for-profit business, ........................ [5.75] number of employees, ............ [5.70], [5.80] upfront price, ........................................ [5.85] standard for establishing unfairness, ..... [5.10] Victorian legislation, ............................ [5.15] standard form contracts, .. [5.05], [5.20], [5.50], [5.90] definition, .............................................. [5.90] inequality of bargaining power, ....... [5.05], [5.95] negotiated contracts compared, ........ [5.90] oral contracts, ....................................... [5.95] rebuttable presumption, ................... [5.100] relevant considerations, ...................... [5.90] States and Territories, .............................. [5.180] commencement of proceedings, ...... [5.170] NSW, .................................................... [5.180] overlap of ACL with Applications Acts, .......................................................... [5.175] remedies, ............................................. [5.180] Vic, .... [5.05], [5.15], [5.120], [5.125], [5.180]

substantive aspects, ................................. [5.150] telecommunications services, ................... [2.40] inequality of bargaining power, ........ [5.05] significant imbalance, ........................ [5.125] standard form contracts, ..................... [5.05] television broadcasts, ................................ [2.40] test of unfairness, ......... [5.105]–[5.125], [5.220] time for assessing unfairness, .................. [5.50] trade or commerce not required, ............ [5.50] Trade Practices Act compared, ................ [1.65] transparency, ............................... [5.145], [5.150] financial services contract, ............... [5.220] lack of, .................................... [5.115], [5.145] reasonably plain language, .............. [5.145] travel contracts cancellation clause, ............................ [5.130] change fee, .......................................... [5.155] forfeiture term, ................................... [14.30] standard form, ...................................... [5.05] unconscionable conduct and, ................ [5.130] inequality of bargaining power, ........ [5.95] non-negotiable terms, .......................... [5.95] standard compared, ............................. [5.10] unfair, meaning, .......................... [5.105]–[5.135] detriment applied or relied on, ...... [5.135], [5.225] elements of unfairness, ....... [5.110], [5.220] financial services, ................. [5.220], [5.225] four-part test, .......... [5.105]–[5.135], [5.220] not reasonably necessary to protect interests, ........................... [5.130], [5.225] relevant considerations, ........ [5.15], [5.110] significant imbalance, ......... [5.115]–[5.125], [5.225] unilateral rights, ....................................... [5.160] United Kingdom, ..................................... [5.115] upfront price payable excluded terms, ........... [5.20], [5.30], [5.35], [5.215] financial services, ............................... [5.215] meaning, ...................... [5.20], [5.30], [5.215] price escalation clause, ........................ [5.35] small business contracts, .................... [5.85] use of unfair terms, ................................. [5.140] Victorian legislation, ........ [5.05], [5.15], [5.180] relevant considerations, ...................... [5.15] significant imbalance, ........... [5.15], [5.120], [5.125] void, .................... [5.50], [5.185], [5.245], [14.30] declaration, .......................................... [14.30] offending part only, ........................... [14.30] second contract, .................................. [14.30] Unfair sales techniques ACL and TPA compared, ......................... [1.65] ACL reforms, .............................................. [1.65] application of prohibitions, ...................... [7.05]

Index Unfair sales techniques — cont ASIC Act, ..................................................... [7.05] bait advertising — see Bait advertising civil pecuniary penalties, ...................... [13.165] coercion — see Harassment or coercion consumer, dealings with, .......................... [7.05] consumer detriment, ..................... [1.10], [1.20] gifts — see Rebates, gifts or prizes harassment — see Harassment or coercion “limited time” sales, .................................. [1.20] multiple pricing — see Multiple pricing overview, ..................................................... [7.05] promotional offers — see Rebates, gifts or prizes pyramid selling — see Pyramid selling rebates, offering — see Rebates, gifts or prizes referral selling — see Referral selling single price specification — see Single price specification specific prohibitions, ................................. [7.05] unauthorised entries or advertisements — see Unauthorised entries or advertisements unsolicited cards — see Unsolicited credit and debit cards unsolicited goods or services — see Unsolicited goods or services wrongly accepting payment — see Wrongly accepting payment Unfair terms — see Unfair contract terms United Kingdom consumer guarantees due care and skill, ............................... [9.70] fitness for purpose, .............. [8.355], [8.365] merchantable quality, ........................ [8.210] Unsafe goods action against manufacturer — see Defective goods actions recall — see Product recalls Unsolicited consumer agreements ACCC report, ............................................ [10.05] ACL and TPA compared, ......................... [1.65] ACL Guide on Sales Practices, ................. [10.10] ACL reforms, ................................ [1.65], [10.05] business contracts, ................................... [10.20] calling hours, ............................................ [10.45] regulation-making power excluded, .......................................................... [10.85] cancellation of agreement, ...................... [10.65] consumer detriment, ................... [1.20], [10.05] consumer rights and obligations, ......... [10.55] cancellation of agreement, ................ [10.65] cooling off period, .............................. [10.60]

765

passing of property, ........................... [10.75] post-contractual behaviour, .............. [10.80] termination of agreement, .. [10.65]–[10.80] content of agreements, ............................ [10.50] cooling off period, ......... [1.20], [10.05], [10.50], [10.60] emergency exemption, ...................... [10.85] mandatory, .......................................... [10.05] provision of information about, ...... [10.50] copies of agreement, ................................ [10.50] criminal liability, ...................................... [10.95] dealer, definition, ....................... [10.10], [10.45] dealer obligations, ...................... [10.45], [10.50] definition, .................................................. [10.10] disclosure obligations, ............................. [10.50] discontinued negotiations agreements, .......................................................... [10.25] “do not knock” sign, ............................... [10.90] door-to-door sales, ....................... [1.65], [10.05] unconscionable conduct, ................... [4.120] elements, .................................................... [10.10] emergency repairs, ................................... [10.85] enforcement powers, ............................... [10.90] exemptions, ............................................... [10.15] business contract, ............................... [10.20] discontinued negotiations agreement, .......................................................... [10.25] party plan event, ................................ [10.30] renewable agreement of same kind, .......................................................... [10.35] subsequent agreement of same kind, .......................................................... [10.40] form of agreements, ................................ [10.50] identification requirements, ................... [10.45] invitation by consumer, .......................... [10.10] leaving premises if requested, ............... [10.45] limitation of application, ........................ [10.85] negotiation, ............................................... [10.10] new national regime, ................................. [1.65] overview, ..................................... [10.05], [10.10] party plan events, .................................... [10.30] passing of property, ................................. [10.75] penalties for breach, ................................ [10.90] post-contractual behaviour, .................... [10.80] price paid or payable, ............................. [10.10] prohibited conduct, ................... [4.120], [10.90] rebuttable presumption, ......................... [10.10] regulations, ................................................ [10.85] remedies for breach, ................................ [10.90] renewable agreements exempt, ............. [10.35] right to cancel, .......................................... [10.65] single national law, .................................. [10.05] subsequent agreements exempt, ........... [10.40] telemarketing, ........................................... [10.45] termination of agreement, ...................... [10.70] effect of, ............................................... [10.70] passing of property, ........................... [10.75]

766

The Australian Consumer Law

Unsolicited consumer agreements — cont post-contractual behaviour, .............. [10.80] right of, ................................................ [10.65] unconscionable conduct, ......................... [4.120] Unsolicited credit and debit cards ASIC Act, ..................................................... [7.75] civil liability, .................................... [6.05], [7.65] credit card, meaning, ................................. [7.65] criminal liability, ............................ [6.05], [7.70] debit card, meaning, .................................. [7.65] defences, ...................................................... [7.70] prohibition, ...................................... [7.05], [7.65] TPA compared, ........................................... [7.65] Unsolicited goods or services ACL and TPA compared, ......................... [1.65] asserting right to payment for, .. [4.120], [7.80] application of prohibition, ...... [7.05], [7.80] civil liability, .............................. [6.05], [7.80] criminal liability, ...................... [6.05], [7.90] defences, ................................................ [7.90] definition, .............................................. [7.85] “false billing”, ....................................... [7.80] financial products or services, ........... [7.95] invoice or other document, ................ [7.85] prohibition, ................................ [7.05], [7.80] damage or loss, liability for, .................... [7.95] definition, .................................................... [7.80] invoice, requirements for, ......................... [7.85] liability of recipient, .................................. [7.95] ownership of goods, .................................. [7.95] request for payment, requirements, ....... [7.85]

V Vernon Report, ................................................ [8.45] Vicarious liability common law of, ........................................ [2.110]

corporate liability, .................................... [2.110] Vienna Convention application in Australia, ......................... [8.175] international sale of goods, .................... [8.175]

W Wallis Committee, ......................................... [3.255] Warranties — see also Consumer guarantees — see also Implied terms regime express warranties collateral contracts, ............................ [8.400] consumer guarantee in relation to, .. [8.05], [8.400] definition, ............................................ [8.400] warranties against defects distinguished, .......................................................... [8.405] extended — see Extended warranties false or misleading representations, ..... [6.180] extended warranties, ........... [6.190]–[6.205] warranties against defects, ..................... [8.405] Wrongly accepting payment ACL and TPA compared, ............. [1.65], application of prohibition, ............ [7.05], ASIC Act, ..................................................... civil liability, .................................... [6.05], criminal liability, ............................ [6.05], defences, .......................................... [7.50], elements of contravention, ....................... financial services, ....................................... intent or knowledge, ................................. prohibition, ...................................... [7.05], reasonable time, determining, .................

[7.50] [7.50] [7.60] [7.50] [7.55] [7.55] [7.50] [7.60] [7.50] [7.50] [7.50]