Australian Competition and Consumer Commission & Another v Commonwealth Bank... [2003] FCA 1129 | Case summary

35 In relation to those statistics, Mr Blinkhorn stated in his first affidavit that '[d]ue to system limitations these figures exclude loans approved and funded in the same month, estimated to be up to 30% of all approvals and Viridian loans. In addition average monthly loan approvals [ie those referred to in the proceeding paragraph] are total approvals and so are greater in number than the figures to which the above table refers'. He further there stated that '[l]oans which are "approved" are not necessarily accepted by the applicants to whom they are offered, or, even where accepted, do not necessarily proceed because applicants may receive credit offers from other credit providers and decide to accept those offers'. Other reasons for approved loans not proceeding were said to include an inability of the applicant to satisfy other conditions for the loan (including security valuation) or simply deciding not to proceed. Mr Blinkhorn said that the Bank did not have statistics indicating the number of customers who enquired about, or made application for, a home loan in response to the 'no establishment fee' televised or in-branch advertising, nor was the Bank able to verify the accuracy of any individual customer's claim that he or she made an application on the basis of the 'cricket campaign'. My observation is that Mr Blinkhorn's statistical evidence, to the extent that it may be said to provide some indication of the extent of the customer or potential customer response to the Bank's advertising complained of, does not reflect any apparent upsurge in the Bank's home loan approvals which occurred in the context thereof. I should add that in the Bank's letter of 1 July 2002 to ACCC, it was stated (and not challenged) that '[the] Bank does not know and has no way of knowing which borrowers took out loans in response to the 'Cricket Home Loan Campaign advertisements'. 36 Mr Blinkhorn explained in his first affidavit the loan approval process which the Bank put in place to accommodate the three likely avenues of enquiry in response to the Bank's home loan advertising, namely enquiry at a branch of the Bank in person, or by telephone, or through the internet. In the case of enquiry in person, a brochure would be made available which described the facets of the three kinds of home loans referred to in [9] above. That brochure (Exhibit R7) is in evidence and contains none of the controversial representations. In the case of enquiry by telephone, the call centre operator was provided with a reference card (Exhibit R8) headed boldly on one side as follows: 'Special Offer $0 establishment fee' and which contained on that side, under a sub-heading in smaller size 'we can show you a way to pay no establishment fee', four examples of the scheme set out in[11(iii)] above, and an identification of the four Bank products described in [11(ii)] above. In the case of enquiry on the internet, a more detailed version of the call centre operator's reference card was provided. On the other side of the reference card appeared features of the three kinds of home loans identified in [9] above. 37 Mr Blinkhorn next stated in his affidavit that any complaints from customers about the terms of the advertised loan offers, or about the advertising campaign, irrespective of where initially made to the Bank, would in the usual course have been directed to his attention, yet the only complaint as to being misled by the Bank's so-called 'cricket campaign', that is, the subject advertising promotion complained of, which came to his attention, emanated from the abovementioned Ms Williams. 38 In his second affidavit, Mr Blinkhorn attached the instructions given to the Bank's branches concerning the in-house advertising the subject of the proceedings, together with copies of the various posters. He also provided estimates of the cost of the television commercials the subject of the corrective advertising orders sought by ACCC, which varied from $197,925.62 for one week to $3,166,810.00 for two months, with a cost of production of the television advertisement model of $24,530.00. Mr Blinkhorn's calculations were predicated upon the corrections foreshadowed by ACCC and involving a televised duration model of sixty seconds, which was twice the duration of the televised advertisements the subject of complaint. Moreover as explained in [4] above, that segment of the televised advertisements complained of was of a duration of only nine seconds. Mr Blinkhorn estimated the cost of corrective in-branch display posters etc in the sum of $94,500.00. 39 The Bank further tendered an affidavit of Lavinia Jeanne Strachan sworn 30 May 2003, the totality whereof was the subject of objection by ACCC, not on the ground of inadequacy of her expertise as a marketing psychologist, but on the basis that for her to purport to speak of the perceptions of ordinary consumers was to intrude upon essentially a 'jury question' or the ultimate issue for the Court to determine, and was therefore of no probative value. I allowed the material to be read upon the footing that the parties would make submissions as to the relevance thereof in final address. A concluding point which she made in her affidavit, and which I thought to be unexceptional, was that '… television advertising works in a cumulative way. Consumers cannot hope to absorb all of the information contained in a television commercial the first time they see that commercial'. As I have accepted elsewhere in these reasons, whilst evidence of actual deception is admissible, ultimately I must endeavour to determine the objective assessment of a person in the middle of the range of hypothetical television viewers and readers of posters etc, in terms of intelligence, perception and likely reaction. I have later cited longstanding authority for that principle. Consequently expert testimony provided by marketing psychologists is at best of limited or marginal value to my resolution of the issues arising in these proceedings. One of the Bank's emphatic submissions was that its television advertising merely caused the viewer to take the next responsive step which, in the case of a Bank home loan, would involve further inquiry, first by telephone, and thereafter in the course of interview with a Bank officer, and ultimately the signing of documents prepared internally by Bank officers, and by the time that process had run its course, an intending borrower would have disabused his or her mind from any initial impressions of the Bank's advertising. As will later be seen, whilst those propositions may well have a sound circumstantial basis, the same do not answer in law ACCC's case for misleading and deceptive conduct. 40 The Bank lastly tendered an affidavit of David Ronald Hedgecoe sworn 2 June 2003, to which no objection was raised by ACCC. He was the chief manager of the Banking Practice and Compliance section of the Bank. He testified as to the Bank's 'structured and up-to-date compliance programme for the Trade Practices Act', which included the provision of a 30 page handbook, which is 'updated as necessary', to every member of staff, together with the periodic distribution of a brochure, and the provision of a computer-based training module. Part of the emphasis of that material is the personal exposure of Bank employees to liability for misrepresentation. He said that the Banking Practice and Compliance, Businesses Services, Division of the Bank provides in-house services, and has access to the Bank's Legal Department. He also testified to a sign-off process for Bank personnel engaged in the production of advertising and promotional material for the Bank. Based on that unchallenged testimony, it is apparent that the Bank has addressed at all material times its obligations arising under the TP Act, but whether the Bank's judgment or decision-making was adequate and appropriate in relation to the subject television and in-branch advertising complained of, and its administration of the processes of enquiry and implementation pursuant thereto, is of course another matter. It was in the latter context that Mr Hodgecoe claimed that '[i]t never occurred to me, nor was it suggested to me by any other person to whom I spoke at the time, that the disclaimer included in the Bank's advertisements would not be displayed for sufficient duration to be read by the average person'. 41 Following upon internal enquiries made in respect of the subject 'no regrets' campaign, Mr Hedgecoe recorded that the Bank has revised its compliance guidelines in conjunction with its Legal Department, Marketing Communication and the so-called 360 agency, and changes to guidelines have been made, further staff training has been provided, and disclaimers for television commercials have been introduced to include the words 'conditions apply' as a voice-over, as well as being displayed as before in text form. Since its experience in relation to the subject 'no regrets' campaign, the Bank's Business Practice and Compliance division has introduced the following procedures for relevant employees: · viewing the completed video of all television advertisements to ensure that the disclaimers are of a satisfactory size and duration and are included in voice-over; · viewing press advertisements in their laid out form; · viewing all posters as they will be seen by customers to ensure disclaimers are legible from a reasonable distance (for example while customers are standing in a queue at the branch); and · listening to the audio tape of all radio commercials to ensure compliance. Mr Hedgecoe's evidence summarised in the last paragraph above relates essentially to the issue of penalty. ACCC's submissions and some preliminary observations thereon 42 The essence of ACCC's complaint, as formulated in final address, is that the Bank's television and in-branch advertising represented that persons could obtain home loans from the Bank upon the basis of 'no establishment fee' being payable to the Bank. That representation is asserted by ACCC to have been false, misleading and deceptive, within s 52 of the TP Act, in three separate or distinct ways, as follows: (i) not every type of home loan from the Bank was available upon the basis that no establishment fee was payable; (ii) even within those categories of home loans which were offered by the Bank through television and in-branch advertising the subject of the proceedings, not every home loan was available on the basis that no establishment fee was payable; and (iii) the Bank failed to disclose in the advertising material that except in only two instances, in order to obtain any of its three categories of home loans in return for a reduction (though not waiver) of the Bank's standard establishment fee of $600.00 (see [11(i)] above), a customer would either need to already hold, or to take out, depending upon the amount to be borrowed, one, two or three so-called products of the Bank as a condition of approval of the home loan. Those two instances of nil establishment fees appear in the third column of the table set out in [11(iii)] above. Put another way in short summary, ACCC's case was that the 'no establishment fee' the subject of the Bank's television and in-branch advertising did not reflect the Bank's loan establishment fee scheme set out in the tabular form in [11(iii)] above. 43 Subject to the qualifications described in [20(ii)] above in relation to two insurance policy requirements, said by ACCC not to affect the substance of its complaint, ACCC contended that the Bank had effectively admitted to making the 'no establishment fee' representation to its existing customers and other members of the public generally, in the context of its imposition nevertheless of the above three qualifications or conditions. In oral submissions in reply, ACCC acknowledged that as would be the case with any home financier, there would have been in force or operation 'normal conditions which would apply to whether or not you can get the loan, prudential conditions'. 44 ACCC invoked the following threshold principles as applicable to the Bank's conduct for the purpose of imputing contravention by the Bank of s 52 (and also s 53) of the TP Act: (i) ACCC was not required to establish the existence of an intent of the Bank to mislead or deceive, or of negligence on the Bank's part, and a contravention of s 52 may have occurred, even though the Bank may have acted honestly and reasonably: Hornsby Information Centre Pty Ltd and Another v Sydney Building Centre Pty Ltd (1978) 140 CLR 216 at 228; Parkdale Custom Built Furniture Pty Limited v Puxu Pty Limited (1982) 149 CLR 191 at 197; Yorke and Another v Lucas (1985) 158 CLR 661 at 666. (ii) Where, as was said to be the case here, a representation is made to the general public, albeit that existing customers of the Bank might be anticipated to provide more responses than the customers of other banks, a determination whether conduct is actionable as misleading or deceptive involves the following steps or considerations: · the relevant section of the public must be identified - here the persons involved would be existing or potential owners of homes in Australia, largely but not entirely located in metropolitan areas. · The issue as to the likelihood or otherwise of such persons being misled or deceived, or being likely to be misled or deceived, by the advertising, falls to be considered by reference to all people who come within that section of the public, including the astute and the gullible, the intelligent and the not so intelligent, the well educated and the poorly educated. · It is irrelevant to liability that there is no evidence of any member of the public having been actually misled or deceived, so long as the Court can conclude that the conduct was likely to mislead or deceive; however evidence that a particular person has in fact formed an erroneous conclusion, though not conclusive of the fact that the conduct is misleading or deceptive, may be persuasive: Taco Co of Australia Inc v Taco Bell Pty Limited (1982) 42 ALR 177 at 199 (Deane and Fitzgerald JJ). (iii) The Court is not concerned with a search for a single meaning of alleged representation which would be conveyed to all to whom it was directed, and if in a particular case, certain words would be likely to cause an erroneous belief to be adopted by a significant number of persons, then a contravention of s 52 (and s 53) may be established: Siddons Pty Ltd v The Stanley Works Pty Ltd (1991) 29 FCR 14 at 20 (Wilcox and Heerey JJ). (iv) The failure to reveal the existence of conditions is of particular significance where the representation is that something is 'free', and a representation as to 'no establishment fee' is alien to a representation that something is fee; in Nationwide News Pty Limited v Australian Competition and Consumer Commission (1996) 142 ALR 212 at 224, Lindgren J (with whom Spender and Lehane JJ agreed) said as follows: '… the cases to which I have referred demonstrate judicial recognition of the propensity of the word "free" in advertising to mislead or deceive. An advertiser relies on common understandings at its peril. Any respect in which goods or services offered as "free" may not be free should be prominently and clearly spelt out so that the magnetism of the word "free" is appropriately qualified.' ACCC submitted that '… first impressions in respect of an advertisement, that says something is free, leave very strong impressions, and if they are to be qualified, they may need to be clearly qualified'. 45 ACCC further invoked the following principles enunciated in the context of newspaper advertising, which it contended applied with similar or analogous force to television advertising: (i) a published advertisement is not selective as to the perceptibility of its readers; an advertiser may be assumed to know that the readers will include the shrewd and the ingenious, the educated and the uneducated, and the experienced and inexperienced, in relation to commercial transactions; an advertiser is not entitled to assume that the reader will be able to supply for himself or herself omitted facts, or to resolve ambiguities; an advertisement may be misleading, even though it fails to deceive more wary readers: CRW Pty Ltd v Sneddon (1972) AR 17 at 28 (Sheldon and Sheppard JJ presiding as members of the Industrial Commission); and (ii) many readers will not study an advertisement closely, but instead read it fleetingly and absorb its general thrust: Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1992) 111 ALR 61 at 64 (Sheppard J). 46 Emphasis was also accorded by ACCC to the following passage appearing in the unanimous reasons for judgment of the High Court in Campomar Sociedad, Limitada and Another v Nike International Limited and Another (2000) 202 CLR 45 at [105], in the context of conduct involving representations in trade or commerce relating to goods presented for retail sale in contravention of s 52 of the TP Act: 'Nevertheless, in an assessment of the reactions or likely reactions of the "ordinary" or "reasonable" members of the class of prospective purchasers of a mass-marketed product for general use, such as athletic sportswear or perfumery products, the court may well decline to regard as controlling the application of s 52 those assumptions by persons whose reactions are extreme or fanciful… Such assumptions… would not be attributed to the "ordinary" or "reasonable" members of the classes of prospective purchasers… The initial question which must be determined is whether the misconceptions, or deceptions, alleged to arise or to be likely to arise are properly to be attributed to the ordinary or reasonable members of the classes of prospective purchasers.' Of course, care needs to be taken in assessing the application to the circumstances of the present proceedings of judicial dicta enunciated in the context of proceedings involving mass-marketed products acquired by purchase over the counter. A consumer's response to a representation inducing application for the grant by the representor of a home loan, to be secured on realty, may well involve dynamics and implications, particularly in the light of an interval of time for implementation of documentation, at variance with or different to a consumer's response to a representation in the former circumstances. 47 In relation to the Bank's reliance upon the explicit qualifications of the televised advertisements identified by par (a) as extracted in [20(vii)] above, albeit to the limited extent that ultimately occurred, and the pre-contractual discussions normally involved before obtaining a home loan from a lending institution, ACCC referred me to authorities which have involved issues as to whether qualifications and disclaimers made by an advertiser may be sufficient in all the circumstances to subsequently nullify the consequences of an otherwise false, misleading or deceptive representation which induced affirmative consumer responses in the first place. Particular emphasis was given by ACCC to advertising or promotional material which used enticing words such as 'free'. An authority cited by ACCC additionally to Nationwide was Trade Practices Commission v Optus Communications Pty Ltdand Another (1996) 64 FCR 326 at 338-339, where the following dictum of Tamberlin J was said to exemplify at least the caution to be extended in those circumstances: 'The television advertisements must be viewed in the framework of a comprehensive and intensive newspaper and radio promotion, in which great emphasis is laid on the attractiveness of the offer of "free local weekend calls". In the course of this short television broadcast, there are mellifluous voice-overs which refer to and emphasis a free "local call" on three separate occasions. The word "free" is stressed… The word free has a particularly strong attraction and unless adequately qualified, where necessary, it can readily produce a wrong understanding… The viewer is left with the clear and dominant impression that the advertisement means what it says… The reference to "some exclusions" appears at the conclusion of the superscript and appears only once, which may not be reached by the ordinary reader. There is no forewarning of the specific wording of the exclusions. It is a very momentary and fleeting message in small print and plays a very subservient role in the advertisement… I doubt whether a reasonable viewer would appreciate that there was any significant exclusion which flew in the face of the dominant representation of free local calls.' His Honour thereafter spoke of the enticement of viewers into 'the marketing web' by the promotion there under scrutiny, antecedently to the signing of formal documentation, and the significance of the catchword 'free' in determining the point at which contravention of s 52 may have occurred. 48 It was by reference to Nationwide and Optus, and other authorities which have addressed the significance of exclusions, qualifications and disclaimers whether contained in advertising material or later presented to the consumer for signature, that ACCC submitted that '[e]ssentially, the issue becomes one of fact and degree' and further that '[h]ere, the qualifications and disclaimers in the advertising material were said to be so lacking in content and prominence as to be of no assistance to a prospective customer of [the Bank] and they do not dispel the otherwise misleading or deceptive nature of the representations made'. Referring to the Bank's defences which I have reproduced in [20(vii)] above, ACCC further submitted that even if it were the fact that customers became fully aware of the detail of the matters therein set out, that circumstance would not excuse or somehow cure the misleading and deceptive nature of the Bank's advertising in the first place. I was referred additionally in that context to the following passage from TEC & Thomas (Australia) Pty Ltd v Matsumiya Computer Co Pty Ltd (1984) 1 FCR 28 at 38 (Beaumont J): 'In my view, to induce the introduction of such a dealing is conduct which contravenes s 52, even if, ultimately, the consumer becomes aware that the equipment he is purchasing is not that of the Hattori Seiko group, the deception having occurred at an earlier stage: what is relevantly induced is the dealing, or the negotiations, as distinct from the subsequent purchase itself.' That dictum was thus an earlier reflection of the Optus notion of enticement into the marketing web as contravening conduct. 49 ACCC further submitted moreover that even if corrected in the same advertising display, or subsequently prior to a customer purchasing the advertised goods or services, that corrected advertising display may still contravene s 52 in two situations. First, if the correction is less prominent than the impugned statement, the overall impression may be such as to nevertheless attract a characterisation as misleading or deceptive. Secondly, since it is of course the function and purpose of advertising to attract the attention of consumers, the circumstance of misleading or deceptive conduct having occurred will not normally be removed as to its consequences by subsequent correction of the advertising by the promoter. Particular emphasis was consequently placed by ACCC on the principle that the conduct of advertisers, when in the nature of 'first contact deception', affords advertisers potentially unfair advantages over other advertisers of the same goods or services, and may also occasion inconvenience to consumers when such conduct is initially, albeit not ultimately, relied upon in the formation of a transaction (such as here in the case of a mortgage of realty) which is not capable of consummation instantaneously following upon an advertiser's representation. As stated by Lee J in Australian Competition and Consumer Commission v Target Australia Pty Ltd [2001] FCA 1326 at [15], '… it is often the case that the first impression will be the lasting impression'. ACCC emphasised, that it was not to be taken as submitting that the Bank's conduct was misleading and deceptive because it involved unfair competition with other banks. It was rather that for instance in determining certain appropriate relief to be granted for the misleading and deceptive conduct of the Bank directed at home loan applicants, an inevitable concomitant of the Bank's conduct was the taking of an unfair competitive advantage over its rivals. In Parkdale, Mason J (as he then was) spoke (at 204) of the statutory policy of Part V of the TP Act, and s 52 thereof in particular, namely '… that the interests of a consumer of goods or services will best be served when manufacturers compete vigorously without adopting restrictive practices and observe prescribed standards of conduct in their dealings with consumers'. 50 It followed, so ACCC continued upon this aspect of its submissions, that any attempt by an advertiser to escape liability under s 52, upon the basis that a misleading or deceptive statement was likely to have been corrected, in the events which subsequently would have happened during the process of finalisation discussions, formal loan application and subsequent legal documentation, should fail. Any purported correction should occur at the same time, and with the same prominence, as the making of the misleading or deceptive statement, ACCC duly added. Any such promptness of correction would be something unlikely to occur in reality, ACCC further submitted, otherwise than in circumstances of a bona fide mistake drawn promptly to the attention of the advertiser. Further authority cited by ACCC in that context included the following dictum of Northrop J in St Lukes Health Insurance v Medical Benefits Fund of Australia Ltd (1995) ATPR 41-428 at 40,823: '[E]ven if I accept - as I do accept - the fact that MBF would explain to persons applying for the cover what were [sic] the effect of the terms of the package that was entered into, that does not overcome any misleading or deceptive conduct which had occurred at any earlier stage when the member of the public seeing the advertisement, or hearing it, goes along to MBF to consider entering into it. The misleading or deceptive conduct occurs at the time of the publication of the television advertisement or of the publication of the newspaper advertisement.' That dictum has been subsequently cited and applied in a number of decisions of this Court. Of course, events subsequent to a representation may also be material to the measure of damage sustained, and in cases such as the present, of any penalty in the nature for instance of corrective advertising which should be imposed. 51 In the course of address, and in the light of some of the authorities which I have reviewed, senior counsel for ACCC fairly conceded that '… it is difficult to imagine that there would be people who got to the point of signing up who had not had the conditions drawn to their attention at this stage… (but) on liability… that makes no difference… misleading advertising… got them in the door'. ACCC submitted moreover that just as it is irrelevant to liability under s 52 that no person was actually misled or deceived, it was equally irrelevant to liability on the Bank's part that any person, who had been misled or deceived, suffered any loss as a result. The question of establishment of any such loss becomes material only where damages or other remedies such as corrective advertising are sought, a matter to which I will later return in the light of the nature and extent of corrective advertising sought by ACCC. Of course, in proceedings where ACCC is not an applicant for relief, the absence of proved loss would be fatal to an entitlement at least to general damages. 52 Nevertheless, as may be seen from the Bank's defences appearing for instance in pars (b), (c) and (d) of [20(vii)] above, the Bank has not, at least primarily, sought to attribute the significance of its formal mortgage lending requirements and other internal procedures only to remedies of injunction and corrective advertising, but has relied on the existence of such requirements and procedures as dismissive of the establishment in the first place of contravention of ss 52 and 53 of the TP Act. The resolution of this litigation has therefore involved considerations not confined to likely or conceivable consumer responses to advertising, and has extended to the significance or otherwise of formal Bank processes of subsequent written loan applications, and thus for instance the provision by consumers of information about their capacity to repay interest bearing borrowings, and the further significance or otherwise thereafter of entry into legal documentation, perhaps in some instances involving the retainer of a consumers' legal representatives. 53 ACCC concluded its initial written submissions on the issue of contravention of s 52 of the TP Act, primarily in relation to the television advertising of the Bank, though not to the exclusion of in-branch advertising, as follows: 'Taking into account the target audience, the prominence and attraction of the representation that home loans were available without payment of an establishment fee, the lack of appropriate disclaimers or qualifications, and the fact that some persons were in fact misled and deceived, namely Ms Williams and Messrs Humphries and De Jong, the ACCC submits that both the TV advertising and in-branch advertising contravened s 52 of the Act.' That submission of ACCC implicitly anticipated what the Bank did seek to characterise as a shortcoming inherent in ACCC's case, namely that the consequences of the alleged misleading and deception of those three abovenamed persons was confined to personal circumstances of annoyance and inconvenience by reason of personal time spent upon making abortive enquiries of the Bank upon the faith of the Bank's television advertising, and in Ms Williams' case, the in-branch advertising as well. 54 As I have already foreshadowed, the same scope of conduct of the Bank as that relied upon for contravention of s 52 of the TP Act was asserted by ACCC to have involved contraventions of pars (c), (e) and (g) of s 53 of the TP Act as well, both in relation to the television and the in-branch advertising. In that context, ACCC emphasised that to succeed in these proceedings, the standard of proof which it must meet is that of the balance of probabilities (Australian Competition and Consumer Commission v The Maritime Union of Australia (2001) 187 ALR 487), in contrast to proceedings brought under s 75AZC of Division 2 of Part VC of the TP Act which are criminal in purport and effect. ACCC emphasised also that no penalties were sought, nor indeed are available in the proceedings as presently structured. I did not understand the Bank to submit to the contrary of the latter proposition. 55 Addressing first par (c) of s 53 specifically, ACCC submitted that for the Bank to represent that no establishment fee was payable in respect of its home loans was to make a representation that its services of the nature of the provision of those loans had a 'benefit' which they did not have, and thus contravened par (c) of s 53. Reliance was placed by ACCC in that particular statutory context upon Australian Competition and Consumer Commission v Wizard Mortgage Corporation Limited (2002) ATPR 41-903, which also related to television advertising by a lending institution. Since the factual circumstances in Wizard bear a closer analogy to those in the present case than the other authorities which were cited by ACCC, and the relief granted in Wizard was based upon ss 53(c), and 53(e) (as well as s 53(aa)) of the TP Act, in addition to s 52 thereof, it is appropriate that I set out in full pars 1 to 4 of the reasons for judgment of Merkel J, which summarised the circumstances giving rise to those proceedings: '1. During June and July 2001 the respondent ("Wizard") caused a television advertisement, which promoted certain features of its loan products and services, to be broadcast in Victoria and Queensland. The advertisement featured the executive chairman of Wizard, Mr Mark Bouris, who made the following statements: "The question borrowers ask me most: What's the secret to paying off my mortgage faster? The secret's in the flexibility of the loan. Access and features such as direct salary crediting and changing from monthly payments to fortnightly or weekly and in not paying ongoing monthly fees. You can pay that saving into extra loan repayments. Of course flexibility and features should be matched by a great variable rate." 2. Following Mr Bouris's statements, there was a still frame on which the interest rate of "5.64% p.a." appeared in large type in the advertisement. Directly underneath, the words "variable rate" appeared and at the foot of the frame, in small print, the words "To approved applicants. Fees, charges and conditions apply" appeared. 3. The advertisement was false and misleading as Wizard's loan products and services did not include a product or service with all of the features offered in the advertisement. The only type of loan offered by Wizard with the features of: direct salary crediting, changing from monthly to fortnightly or weekly repayments and the absence of ongoing monthly fees carried, at the time of the advertisement, a variable interest rate of 6.47% per annum or a fixed interest rate of up to 7.4% per annum. The only loan product or service available from Wizard that was being offered at an interest rate of 5.64% per annum was Wizard's "Rate Breaker" loan, which was available for owner occupied residential property purchases but which did not provide for direct salary crediting or changing from monthly to fortnightly or weekly repayments. Any borrower who wished to obtain those features in respect of a "Rate Breaker" loan was required to pay an additional $1,000. 4. On 13 July 2001, after several Wizard branches had expressed their concern that the advertisement could be confusing, Wizard withdrew the advertisement.' The circumstance here the subject of an alleged misrepresentation of a benefit is of course the absence of any imposition of an establishment fee for the grant of a home loan. That bears an analogy to the misrepresentation in Wizard as to savings in interest. 56 As to its application to the circumstances of the present case of par (e) of s 53 of the TP Act, ACCC contended that the misrepresentation of the Bank related to 'the price' of its services, since an establishment fee for a home loan would constitute part of the price thereof to be paid by the borrower for the service constituted by each loan. The definition of 'price' contained in s 4(1) of the TP Act includes 'a charge of any description'. I was referred by ACCC to Australian Competition and Consumer Commission v Dell Computer Pty Limited (2003) ATPR 41-910, where it was held by majority (Branson and Stone JJ, Emmett J dissenting and agreeing with the primary judge Jacobson J) that since what was sold (ie computers) was a 'delivered product', ACCC was correct in its contention that the price of goods included, in the particular circumstances of that case, the cost of delivery thereof, with the consequence that a contravention of s 53(e) (in addition to s 52) had taken place. The minority view was to the effect that the 'sale' and 'delivery' constituted separate aspects of the seller's obligations. ACCC submitted, by way of analogy to the majority view, that in order to have obtained a home loan from the Bank, a customer was required to meet various fees and charges, which might otherwise include an establishment fee, and therefore the representation as to absence of an establishment fee related to the price of a home loan. 57 As to the further application of par (g) of s 53 of the TP Act, which relates to representations concerning 'the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy', ACCC submitted first, that a prospective customer of the Bank would not have been made aware by the Bank's advertising of the existence and effect of the 'condition' comprising the qualifications to 'no establishment fee'. It was said that each of Mr de Jong, Ms Williams and Mr Humphries claimed in their affidavit evidence not to have seen in the television advertisements any conditions relating in particular to any qualification of the Bank's 'no establishment fee', and Ms Williams said likewise in relation to what she saw of the in-branch advertising upon entering a branch of the Bank's premises. 58 Moreover it was submitted by ACCC that even if some persons had been able to read the purported qualifications and disclaimers in relation to the television advertising and the in-branch advertising, the contents thereof would not have conveyed to a reasonable viewer or reader that in order to obtain a home loan from the Bank without paying an establishment fee, other products of the Bank were required to be held or obtained, and that it could 'hardly be said' that such qualifications and disclaimers upon the Bank's offer were such that a reasonable viewer or reader would associate the same with that offer. Accordingly, so ACCC's submission continued, it became incumbent upon the Bank to bring that significant aspect of the Bank's television and in-branch advertising to television and in-branch viewers 'in some meaningful way', words such as 'conditions apply' being said to be 'grossly insufficient' for that purpose. The alleged failure of the Bank so to do was thus said to constitute contravention of the 'effect of any condition' within par (g) of s 53 of the TP Act. The Bank's submissions and some preliminary observations thereon 59 Addressing first the issues arising as to the Bank's televised advertising, the Bank said that it was 'content to accept' that the televised advertising 'generally' represented to existing and prospective customers that they could obtain from the Bank, in the sense that 'it was possible to obtain' or 'within the power or capacity of customers to obtain', home loans without paying an establishment fee. The Bank thereafter advanced the following contentions upon that basis, to which I have appended some preliminary observations: (i) the television commercials did not represent, explicitly or implicitly, that the Bank's offer was unconditional, or that 'every customer who wants a home loan will get one on this basis' that is, without payment of an establishment fee, or that there were no conditions or qualifications on an entitlement to obtain a home loan without payment of an establishment fee; (ii) any reasonable or ordinary viewer of the advertisements would assume or infer that the offer would be subject to some conditions, and that in order to find out about those conditions, it would be necessary to make contact with the Bank by telephoning the advertised number; (iii) each television commercial merely conveyed to the consumer that the Bank had a range of home loans to suit almost every consumer's needs, and invited the consumer to find out more about the range of home loans offered by the Bank; moreover each commercial invited the consumer to contact the Bank and find out which home loan might suit that consumer's 'changing needs, then and in the future'; (iv) in the case of the 'Blood Nut' and 'Where's the Action' televised commercials, the same 'merely tells the consumer/viewer that the Bank has a range of home loans starting from 4.89% per annum', and further that '[s]ome of those loans might also attract no establishment fee' and '[o]thers may attract no switching fee'; it was said further that the reasonable viewer would understand that some loans may have higher interest rates, whereas others may have a lower interest rate', and 'the viewer is left to speculate as to which loans attract a higher interest rate and which a lower interest rate'; (v) similarly in the case of the second or 'Sick Boy' commercial, it was submitted by the Bank that the consumer would understand therefrom that the Bank had available a home loan with the feature indicated in the commercial, and that the viewer was invited to contact the Bank to find out all of the features of that home loan, and to see whether that home loan was available to that viewer; those features were described as what conditions were on offer, and whether the viewer would qualify for a loan in accordance with the offer; and (vi) every reasonable consumer would further understand that banks and other financial institutions do not simply hand out loans to any person who applies for the same, and that he or she would need to meet various criteria relating to, inter alia, income, commitments and assets, and further that all such criteria could never be included in a 30 second television commercial, and further again that it would be during the course of subsequent discussions with the Bank when those details would be revealed; moreover the 'consumer evidence' (ie that of Messrs De Jong and Humphries and of Ms Williams), together with the documentary evidence, established that as soon as an interested person contacted the Bank, whether on the telephone, through the internet, by reading the Bank's brochure, or by attending in person at the Bank, 'the relevant qualifications were made abundantly clear'; upon that footing, it was submitted that the circumstance that the consumers may have been disappointed to have confirmed to them what (supposedly) must have been obvious, does not demonstrate that they were misled or deceived by the Bank. The observation needs to be made at once that the foregoing submissions tend not to confront the emphatic message of the television advertising to the effect that no establishment fees would be payable to the Bank in respect of the advertised home loans. 60 In purported support of the theme of the Bank's submissions, the Bank referred me to the notion of 'transient confusion' discussed in SAP Australia Ltd v Sapient Australia Pty Ltd (1999) 48 IPR 593 (per French, Heerey and Lindgren JJ). At 607, their Honours said that: '… it was rightly to be observed that misleading or deceptive conduct in trade or commerce is not limited to conduct which induces or is likely to induce entry into a transaction. So to propose would be to limit s 52 of the TP Act in a way not justified by its terms. Conduct which misleads a customer so that, under some mistaken impression of a trader's connection or affiliation, he or she opens negotiations or invites approaches may be misleading, even if the true position emerges before the transaction is concluded…' After then referring to authority, including Optus and TEC & Thomas, the Full Court observed (at 607) as follows: 'It is consistent with the general proposition, however, to accept that conduct may not be misleading or deceptive or likely to mislead or deceive, notwithstanding that it may engender temporary and commercial irrelevant error.' Once however the conclusion may rightly be drawn that misleading and deceptive conduct has in fact occurred, for instance as in the case here, by consumers being drawn into the advertiser's marketing web, the inference is open to be drawn that circumstances to the effect first cited from SAP have crystallised, thereby leaving no room for the operation of the kind of qualifying situation secondly cited above from SAP. 61 It is of critical importance to appreciate that in all three televised advertisements, the theme of pre-eminent emphasis was that of 'no establishment fee' being charged, in the event that the Bank would make available the advertised home loans. I observe incidentally that the 'Blood Nut' and 'Where's the Action' television advertisements, though not the 'Sick Boy' television advertisement, purported to qualify references to 'home loans' by the description 'selected'. That purported qualification was not apt to absolve the circumstance of home loans being in fact available by the Bank only upon the basis of any one or more of the establishment fee regimes set out in [11(iii)] above, subject only to the two exceptions where 'nil' appears in the final column, and which two exceptions required the acquisition by the home loan borrower in any event of two or three of the Bank's products respectively, normally at a monetary cost, directly or indirectly. I do not think incidentally that the word 'selected' purported to qualify in any event the expression 'no establishment fee', and the contrary proposition was not submitted by the Bank. 62 As I have therefore foreshadowed, it was no answer for the Bank to rejoin to the thrust of ACCC's complaint to the effect that the mind of misled consumers would most likely have been disabused of the Bank's televised representations as to 'no establishment fee' being payable, prior to commitment to any of the Bank's advertised home loans, given that the same did have the effect of misleading and deceiving television viewers, to the extent of inducing them into the marketing web. Authorities which I have earlier cited, commencing with St Lukes, have addressed the significance of misleading and deceptive conduct at the critical point of occurrence of that conduct. It is conduct to be contrasted with the notion merely of 'transient confusion' described in the second passage I have cited from SAP. 63 I am of the opinion that it must be concluded that even if, in the events which may have happened, the persons who subsequently took up the Bank's home loans, originally upon the inducement of the television advertisements, ultimately did so with knowledge subsequently gained that establishment fees were payable, pursuant to the scheme tabulated in [11(iii)] above, the Bank would have nevertheless remained exposed to the present proceedings brought at the instance of ACCC. The circumstances of this case attract in my view conclusions of the description reached in Nationwide, Optus, TEC & Thomas and St Lukes which I have earlier extracted. Moreover as was earlier pointed out by the High Court, in the course of its discussions of the implications of s 52 of the TP Act (Hornsby Building Information Centre and Parkdale Custom Built Furniture at [44(i)] above), the statutory requirement not to mislead and deceive was designed to create a level playing field by requiring rival entities engaged in trade and commerce to observe prescribed standards of conduct in their dealings with customers. It follows that the concession made by the Bank does not go to the critical point arising in these proceedings. 64 As ACCC rightly submitted, the Bank's 'no establishment fee' theme of advertising had the tendency or capacity to provide the Bank with an unfair advantage over its lending institution rivals, by attracting consumer enquiry per medium of that advertising. That is not to say, as ACCC emphasised, that the Bank's conduct was misleading and deceptive because it involved unfair competition in relation to its rivals in business and commerce. It was misleading and deceptive because it was wrong to assert that no establishment fee was payable in respect of the Bank's home loans, in the light of the circumstances exemplified in [11(iii)] above. Leaving aside the extent of the monetary significance appertaining to requirements for acquisition of the Bank's products, the Bank's advertised home loans thus involved the requirement for payment of an establishment fee, albeit in varying amounts, in all but two of the eleven circumstances described in [11(iii)] above. The Bank's representation as to 'no establishment fee' had the capacity to entice or induce into the Bank's marketing web, viewers of the television advertisements interested in acquiring home loans, and that is the critical point of the case. That the televised advertisements had the capacity to achieve that commercial advantage for the Bank is reflected in the initial reactions of the three members of the public who provided affidavit and viva voce testimony in the proceedings. Although it was only those three persons, together with one anonymous person, who took the trouble to register complaint with ACCC, it cannot be assumed that other television viewers might have been annoyed or inconvenienced, without bothering to register a complaint with ACCC. It appears incidentally that the Bank did not have in place a system for recording all telephone responses to its media advertisements. 65 The Bank further submitted that ACCC's case '… overstates the ability of a television commercial to convey the entirety of the facts regarding a home loan'. So much may be accepted. That circumstance renders all the more important the obligation of television advertisers to be careful not to misstate, in the course of televised advertising, the benefits and advantages of their goods and services. The Bank further submitted in that context '[a]ll that is conveyed by the [Bank's] television commercials… is that the [Bank] has a range of home loan products with a variety of features', and that each of the television commercials amounted to '… nothing more than an invitation to consumers to contact the Bank and find out all of the terms, conditions and features which apply in the case of each of the home loans'. That further submission tends to understate the promotional impact of the dominant theme or 'pull' of the 'no establishment fee' representation. 66 The Bank contended nevertheless that the circumstances of the case were to be distinguished from those in Optus, an authority upon which ACCC relied, where the impugned advertising as to 'free weekend local calls', up to a specified limit of $52 per month, did not disclose that a written contract would be required by Optus to be signed and would exclude mobile telephone calls from the advertised benefit. Tamberlin J found as follows (at 340): 'I am not persuaded that any or all of the post-broadcast steps leading to the signing of the contract would dispel the impression generated by the misleading message in the television broadcast in all or most cases.' As his Honour thereafter pointed out, once the viewer is enticed into 'the marketing web' by an advertisement, the end result is not predicable for all cases and in all circumstances. The proposition of the Bank that every (my emphasis) home loan borrower would have come to an appreciation, prior to ultimate commitment to borrowing by legal formalities, of the full implications of the 'no establishment fee' representation earlier made by the Bank's advertising on television, cannot be regarded as unexceptionable, notwithstanding, as senior counsel for ACCC frankly appeared to concede, that an ultimate appreciation to that effect on the part of borrowers generally would have been a likely outcome. In any event, there remains, in contexts such as the present, the factor of conceivably adverse consequences to a competitive market by misleading advertising on the part of one participant therein. 67 On a related theme, the Bank acknowledged that in the case of television commercials, the initial impression conveyed thereby may be critical, but submitted that initial impressions here must be appraised in the context of, and having regard to, the nature of the Bank's so-called products the subject of the television commercials. Every consumer would understand, so the Bank's submission continued, that the subject commercials were 'about a complicated and expensive product', which for most consumers may be 'one of the most important decisions they would make in their lifetime'. It was submitted to be inherently improbable that a consumer would form the impression, from a television advertisement of thirty seconds duration, twenty-one seconds whereof were devoted to a humorous incident, yet only nine seconds to the 'product', that the Bank was thereby communicating everything that was to be known about the Bank's home loans, including the conditions to which they would be subject if granted. Rather, so the submission continued, the overwhelming impression conveyed by the television advertisements was that the Bank had a range of home loan products available, having varying features including a 'no establishment fee' feature, and that it was necessary to contact the Bank to find out more, including any relevant conditions of that feature. That submission again fails to understand adequately the pre-eminence and impact of the unqualified 'no establishment fee' message of the television advertising, and the likelihood of consumers being thereby drawn into the marketing auspices of the Bank's consultants. 68 The Bank also contended that eligibility to qualify for its 'no establishment fee' home loan, in particular in relation to the only two cases of a 'nil' establishment fee appearing in [11(iii)] above), by obtaining two or three of the Bank's products (as the case may be), was 'not exactly onerous'. For example, the Bank's submission continued, Mr De Jong said that he was required by the bank officer to whom he spoke to first open an account with the Bank from which the loan repayments could be made, and secondly, either to obtain a credit card, for which he was not required to pay a fee on application, and which he was not required thereafter to use, and to attend an interview with an insurance consultant. (I should interpolate that after the first year, the Bank's credit card fees were to apply to home loan borrowers, and with all other credit card users, irrespective of use). Similar requirements were said to have been mentioned by the Bank to Mr Humphries. Other conditions, namely effecting home insurance and taking out mortgage protection insurance, were characterised by the Bank as matters that any borrower would ordinarily expect to be imposed in any lending transaction with a bank. There was no evidence however as to at least mortgage protection insurance being a usual lending institution requirement, and moreover the Bank's so-called 'product' requirements extended beyond home fabric insurance to home contents insurance, and to opening a current bank account with the Bank into which the borrower's net wage would be required to be deposited in order to meet at least home loan mortgage repayments. All of those requirements involved a cost to putative home loan borrowers. ACCC at least implicitly categorised the Bank's so-called products as involving a cost in the nature of an establishment fee. 69 The Bank next submitted on an analogous theme that to acquire a Commonwealth Bank credit card, which the borrower would not be required to thereafter actually use, would have been a relatively simple 'product' for a borrower to take up. However a home loan borrower might well think it to be important to his or her ongoing relationship with the Bank to use that facility to the exclusion of any of his or her prior credit card arrangements, and thus in any event to avoid the duplication of payment of credit card fees. To open a Commonwealth Bank deposit account for the borrower's 'direct salary credit' would presumably, for many borrowers, require as a practical matter the discontinuance of an existing bank (or credit union) account, and thus of an existing relationship of potentially ongoing significance with another financial institution, in order for the borrower to avoid incurring unnecessary fees and complication involved in the maintenance of two concurrent bank accounts. To change insurers of both home and contents risks to the Bank's nominated insurers could be conceivably onerous, or at least inconvenient, in its implications to some borrowers, for instance those with longstanding insurance associations with other insurers carrying accrued benefits of 'no claim' rebates, and other benefits of an intangible kind arising out of perhaps long established associations. The requirement to undertake mortgage protection insurance would also add to the cost of borrowing. Once again, the thrust of the Bank's submission involved the postulation that the expense of these further Bank products was in the nature of an establishment fee. It may be readily inferred, incidentally, that the Bank's nominated insurers in both instances, to whom reference has already been made, are corporately related to the Bank, and hence the financial benefit at least indirectly to the Bank in imposing those insurance requirements. 70 As to the Bank's in-branch advertising, the invitations to consumers thereby made were said by the Bank to be 'even clearer' in support of the Bank's contention as to an absence of breach of the TP Act. Each poster was described by the Bank as a statement or testimonial by an unidentified person disclaiming 'regret', consequentially upon taking out a home loan with (or 'switching' a home loan to) the Bank, and paying the advertised interest rate. The consumer was further told, so the contention continued, that this notional person also did not 'regret' non-payment of establishment fees. Thus, so the Bank submitted, the message the subject of its in-branch 'poster' representations was that the Bank was offering its customers a means of obtaining a home loan, at the nominated interest rate, without having to pay an establishment fee (or for that matter a switching fee), and that to find out more about all that, the in-branch advertising material invited customers to pick up a brochure. The in-branch advertising gave emphasis to the word 'no' in the prominently featured phrase 'paying no establishment fees', as may be seen from the copies of the in-branch advertising incorporated by way of annexure to these reasons. 71 What was presented by the Bank's in-branch promotional material to prospective home loan customers, so the Bank further contended, was simply a list of features of which a reasonable consumer could expect to be informed by the Bank. It was said moreover that the in-branch posters and other advertising material did not suggest that all of those features would be simultaneously acquired by the putative home loan borrower, or that they would be all available irrespective of the borrower's circumstances. So much was said to be 'clear' from the fact that 'a range' of interest rates was identified in the various advertisements over the period of the promotion (assuming of course that interested readers would have seen all of those differing interest rates, or most of them, at the successive times of publication thereof, prior to making any final commitment to the Bank), and further that the posters did not purport to describe any single home loan as available from the Bank. The reasonable consumer, so it was contended by the Bank, would have understood that the Bank's home loans had advantages which included one or more of the listed features, and further that the list was not exhaustive. Moreover it was contended by the Bank that the invitation 'Pick up a brochure. You won't regret it', appearing at the foot of the in-branch advertising material, invited the consumer to take the trouble to find out which particular features applied to which home loans, and for which home loans the customer might qualify. Even if all of those contentions are correct, what is of critical importance, as I have emphasised, was the prominence of the advertised theme 'paying no establishment fees', with the word 'no' appearing in larger letters than the other words of that theme. I would repeat here what I have already said as to the likely inducement of customers into the Bank's marketing web, in the context of my review of the Bank's submissions on television advertising. My conclusions upon the Bank's television advertisements 72 My conclusion upon the Bank's television advertisements is that for the Bank to have caused to be advertised on television that 'no establishment fee' was payable in relation to 'selected home loans' (that expression being the subject of the 'Blood Nut' and 'Where's the Action' television advertisements), and of 'a great home loan' (that expression being the subject of the 'Sick Boy' advertisement), rendered the Bank's television advertisements misleading and deceptive within the scope of operation of s 52 of the TP Act. It is a conclusion which I am comfortably satisfied should be reached in accordance with the Briginshaw test (Australian Competition and Consumer Commission v Maritime Union of Australia (2001) 187 ALR 487 at [52-54]), given that such authority applies to proceedings brought by ACCC for contravention of s 52, notwithstanding that it specifically related to contravention of the coercion provisions of s 60 of Part V of the TP Act. 73 That conclusion should at least principally follow, because as appears from the conditions of the Bank's home loan scheme reproduced by the evidence in the proceedings (see [11(iii)] above): (i) the Bank's then usual establishment fee of $600 was still to be payable in respect of home loans under $80,000, in circumstances where the borrower did not acquire any of the Bank's products; and (ii) an establishment fee varying in amount from $100 to $500, was to be payable, conditionally upon the amount to be borrowed, and the number of the Bank's products to be acquired, varying from one to three in number, in the case of eight further categories of home loans. 74 The circumstance that no establishment fee was to be payable at all in respect of the remaining two (ie out of the total of eleven) categories of the Bank's home loans, one relating to loans exceeding $200,000 where two of the Bank's products were to be in any event acquired, and the other being for loans between $80,000 to $199,999, where three of the Bank's products had to be in any event acquired, did not legitimise or sustain the 'no establishment fee' representation of the television advertising. Leaving aside for the moment the cost implications of fulfilment of conditions as to acquisition of products of the Bank in those two particular situations (as indeed also in the case of six of the other categories), it was not correct or sustainable to represent the Bank's home loan financing scheme as involving or featuring 'no establishment fee'. Establishment fees were to be paid in cash in nine of the eleven categories (see once again [11(iii)] above). That circumstance sufficed in my opinion to demonstrate that the 'no establishment fee' representation of the television and in-branch advertising was false or misleading. 75 In any event as to those two latter loan categories appearing in [11(iii)] above, where no establishment fee was stated therein to be payable, my review of the nature and incidence of the Bank's products indicates that each would have carried, except perhaps in the few exceptional circumstances I have identified, a financial cost to the putative home borrower, and conversely a financial benefit to the Bank directly or indirectly ('indirectly' by reference to the identity of the Bank's nominated insurers), being a cost additional of course to interest on the home loan. Whether that cost can be said to have fallen within the advertised expression 'establishment fee' raises an issue of some difficulty which is ultimately unnecessary for me to decide. Nevertheless I would add the further observations below, since it appears to have been the contention of ACCC that such was the case. 76 The evidence does not yield any definitive indication of the likely cost of each of the Bank's products, whether in respect of the first year of taking out a home loan, or otherwise, and understandably so, as the same would vary from case to case. It is reasonably open to be inferred that once a prospective home loan borrower responded affirmatively to the Bank's television advertised offers, there would have been presented to the Bank the opportunity to secure his or her patronage of the Bank's products, to the extent of the number of those products nominated for the respective loan segments set out in [11(iii)] above. Of course the Bank might find itself confined to some relatively unrewarding products in particular cases, but the opportunity for gaining financial rewarding outcomes from its products in other situations was presented to the Bank. I would incline to the view that in the context of the representation as to 'no establishment fee', the Bank's scheme for reduction (or in the two cases abovementioned abolition) of establishment fees, based upon the corresponding need for taking up a specified number of Bank products, was more probably than not, susceptible to being characterised as misleading. 77 I conclude that ACCC has established infringement on the part of the Bank of s 52 of the TP Act in relation to the representations of its televised advertising of its home loans.

Australian Competition and Consumer Commission & Another v Commonwealth Bank of Australia

At a glance

Court

Decision date

Before

Source

Judgment (13 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (14)

Cited By (3)