Australian Competition and Consumer Commission v Chrisco Hampers Australia Limited

Federal Court of Australia|2016-03-04|Before: Edelman J

The respondent (Chrisco), during the period from 1 January 2011 to December 2013 in trade or commerce and in connection with the supply or possible supply of goods, by making a statement in its order confirmations and on its website to the effect that consumers could not terminate their lay-by agreements after the final payment was made but before delivery of the goods, made a false or misleading representation concerning the existence, exclusion or effect of a condition, warranty, right or remedy in contravention of section 29(1)(m) of the Australian Consumer Law (the ACL) (Schedule 2 of the Competition and Consumer Act 2010) because at all material times section 97(1) of the ACL provided that a consumer who is a party to a lay by agreement can terminate the agreement at any time prior to delivery of the goods.
Where there is a term providing for a HeadStart Plan in a consumer contract entered into by Chrisco for the delivery of a Christmas Hamper in 2014 which provided: (a) as stated in Chrisco's website terms and conditions, for the 2014 year, that: "HeadStart Plan Your direct debit payments will continue until your order is fully paid for (no later than 24th October 2014). After the 24th October 2014, a HeadStart Plan will be created for you and direct debit payments will continue accordingly. A HeadStart Plan allows you to make payments towards next year's order, while giving you time to decide exactly which products you want. We will write to you to confirm your HeadStart Plan payments prior to commencing your direct debits. Your HeadStart Plan is fully refundable at no cost to you, should you change your mind…"; or (b) as stated in the 2014 Chrisco Catalogue Terms and Conditions, that: "How does a HeadStart Plan work? Your Direct Debit payments will continue until your order is fully paid (no later than 24th October 2014). After the 24th October 2014, a HeadStart Plan will be created for you and payments will continue accordingly. A HeadStart Plan will be created for you and payments towards next year's order, while giving you time to decide exactly what products you want We will write to you to confirm your HeadStart Plan payments prior to commencing Direct Debits."; and (c) as stated in the 2014 Catalogue Order Form and 2014 Online Order Form, that: "When your 2014 (…) Order is fully paid you will automatically roll into a 2015 HeadStart Plan for the following year. Your HeadStart Plan is fully refundable. You can choose not to have this option by ticking here"; and (d) as stated in the 2014 Order Confirmation, that: "Unless you've advised us otherwise, we'll keep your payments going for any fully paid Hamper 2014 order, so that you can keep saving for next years order. Please see above for your final payment date"; it is an unfair term within the meaning of section 24 and section 250 of the ACL because it: (e) caused a significant imbalance in the parties' rights and obligations arising under the contract, in a context in which the terms were not presented clearly, and in sufficiently plain language, to the consumer; (f) was not reasonably necessary in order to protect the interests of Chrisco; and (g) would cause financial detriment to the consumer if it were to be applied or relied upon by Chrisco. and is void pursuant to section 23(1) of the ACL.

The respondent pay 15% of the applicant's costs in relation to preparation and hearing on 4-5 November 2015 concerning liability, save as to the costs of the amendments occasioned by the fourth and fifth amended statements of claim including the costs of the directions hearing on 12 October 2015.
The applicant pay 50% of the respondent's costs in relation to the hearing as to penalty and other consequential issues on 1 March 2016 and the hearing on 4 March 2016. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 Following the delivery of my reasons in relation to the remedies hearing in this matter (Australian Competition and Consumer Commission v Chrisco Hampers Australia Limited (No 2) [2016] FCA 144) two further issues arose. I expressed preliminary views about those issues in my reasons. The parties conferred and properly agreed proposed orders in relation to the first issue, concerning the appropriate form of declarations to be made. The second issue concerns the appropriate order as to costs. The parties were unable to agree. The ACCC sought an oral hearing on costs which has now been held. Very shortly before the hearing the ACCC provided written submissions on costs. One of the submissions sought to reagitate matters already decided. Other submissions represented that the ACCC had been successful overall in relation to the remedies hearing despite the fact that almost none of the orders it sought were made. One of the major issues at the hearing had concerned an injunction that the ACCC sought. That was refused. The declaration sought by the ACCC had to be redrafted. The penalty sought by the ACCC was 300% more than the penalty awarded. 2 For the reasons below, the declaration now proposed by the parties should be made. And the appropriate order as to costs is that (i) Chrisco pay 15% of the ACCC's costs in relation to the hearing concerning liability, save as to the costs of the amendments occasioned by the fourth and fifth amended statements of claim including the costs of the directions hearing on 12 October 2015, and (ii) the ACCC pay 50% of Chrisco's costs of the hearing as to penalty and other consequential issues on 1 March 2016 and of the hearing on 4 March 2016.

Declarations 3 In light of my reasons concerning remedies, delivered on 1 March 2016 at [8]-[12], the parties conferred and agreed upon a minute of proposed declarations. 4 The proposed declarations are as follows: (1) The Court declares that the respondent (Chrisco), during the period from 1 January 2011 to December 2013 in trade or commerce and in connection with the supply or possible supply of goods, by making a statement in its order confirmations and on its website to the effect that consumers could not terminate their lay-by agreements after the final payment was made but before delivery of the goods, made a false or misleading representation concerning the existence, exclusion or effect of a condition, warranty, right or remedy in contravention of section 29(1)(m) of the Australian Consumer Law (the ACL) (Schedule 2 of the Competition and Consumer Act 2010) because at all material times section 97(1) of the ACL provided that a consumer who is a party to a lay by agreement can terminate the agreement at any time prior to delivery of the goods. (2) The Court declares that where there is a term providing for a HeadStart Plan in a consumer contract entered into by Chrisco for the delivery of a Christmas Hamper in 2014 which provided: a. as stated in Chrisco's website terms and conditions, for the 2014 year, that: "HeadStart Plan Your direct debit payments will continue until your order is fully paid for (no later than 24th October 2014). After the 24th October 2014, a HeadStart Plan will be created for you and direct debit payments will continue accordingly. A HeadStart Plan allows you to make payments towards next year's order, while giving you time to decide exactly which products you want. We will write to you to confirm your HeadStart Plan payments prior to commencing your direct debits. Your HeadStart Plan is fully refundable at no cost to you, should you change your mind…"; or b. as stated in the 2014 Chrisco Catalogue Terms and Conditions, that: "How does a HeadStart Plan work? Your Direct Debit payments will continue until your order is fully paid (no later than 24th October 2014). After the 24th October 2014, a HeadStart Plan will be created for you and payments will continue accordingly. A HeadStart Plan will be created for you and payments towards next year's order, while giving you time to decide exactly what products you want We will write to you to confirm your HeadStart Plan payments prior to commencing Direct Debits."; and c. as stated in the 2014 Catalogue Order Form and 2014 Online Order Form, that: "When your 2014 (…) Order is fully paid you will automatically roll into a 2015 HeadStart Plan for the following year. Your HeadStart Plan is fully refundable. You can choose not to have this option by ticking here"; and d. as stated in the 2014 Order Confirmation, that: "Unless you've advised us otherwise, we'll keep your payments going for any fully paid Hamper 2014 order, so that you can keep saving for next years order. Please see above for your final payment date"; it is an unfair term within the meaning of section 24 and section 250 of the ACL because it: e. caused a significant imbalance in the parties' rights and obligations arising under the contract, in a context in which the terms were not presented clearly, and in sufficiently plain language, to the consumer; f. was not reasonably necessary in order to protect the interests of Chrisco; and g. would cause financial detriment to the consumer if it were to be applied or relied upon by Chrisco. and is void pursuant to section 23(1) of the ACL. 5 I am satisfied that these declarations address the matters raised in my remedies judgment and that they are appropriate.

Costs 6 My preliminary findings as to costs were set out at [60]-[67] of my remedies judgment. I expressed a preliminary view that an appropriate order was that there be no order as to costs. This would save the parties from the expense of preparing for, and engaging in, a taxation of costs which could easily result in no net payment of costs and would only serve the purpose of generating additional legal fees. I deferred making an order as to costs until after the parties had conferred in light of my reasons. Prior to the hearing today, Chrisco pragmatically submitted that in light of my reasons there be no order as to costs (and that the court vacate a previous costs order in its favour concerning costs of the amendments occasioned by the fourth and fifth amended statements of claim). The ACCC submitted that a stand-alone order should be made that Chrisco pay all its costs of the remedies hearing. 7 There are three discrete matters in relation to costs. 8 The first concerns the liability hearing. The parties made submissions about these costs at the remedies hearing. For the reasons I expressed in my remedies judgment, the appropriate order is that Chrisco pay 15% of the ACCC's costs. That is the appropriate proportion of the ACCC's costs for the reasons I gave (where I said that the proportion should be around one sixth or one seventh of the ACCC's costs). 9 The second costs issue concerns the costs of amendments to the fourth and fifth statement of claim. That order has already been made. It is that the ACCC pay Chrisco's costs of the amendments occasioned by the fourth and fifth amended statements of claim, including the costs of the directions hearing on 12 October 2015. 10 The third costs issue concerns the costs of the remedies hearing. The remedies hearing was only necessary because Chrisco was found to be in breach of the Australian Consumer Law. In usual circumstances, as the ACCC submitted, Chrisco would pay some or, often, all of the ACCC's costs of that remedies hearing: see e.g. ACCC v Global One Mobile Entertainment Limited [2011] FCA 393 [15] (Bennett J); ACCC v Kingsland Meatworks & Cellars Pty Ltd [2013] FCA 48 [83]-[84] (Murphy J). That would be so even if the penalty ordered differed, possibly even substantially, from that which was sought by the ACCC. This case is quite different, although it is necessary to take into account that (i) the need for the remedies hearing and (ii) key issues in the remedies hearing were the result of my findings of contravention by Chrisco. 11 In this case, every order sought by the ACCC in the remedies hearing where there was substantial time and effort expended, was either refused or required substantial changes essentially for the reasons submitted by Chrisco. The remedies hearing was substantially lengthened by some surprising submissions. The injunction sought by the ACCC occupied a substantial part of the penalties hearing. Senior counsel for the ACCC submitted that there was a novelty in the award of an injunction for an unfair term and that the submissions were not unreasonable. I accept that there was some novelty in an injunction for an unfair term but the injunction was not refused for reasons of novelty. It was refused, broadly for the reasons submitted by Chrisco. It went well beyond any finding of liability that I had made. It went beyond any finding of liability that might conceivably have been made and sought to prohibit matters which were only contextual. It was expressed in vague and uncertain terms. It also did not address the fact that on the new terms and conditions adopted by Chrisco, almost every contextual matter raised in my reasons had been addressed and there was no real prospect of infringement in the terms I had found or similar terms. The penalty sought by the ACCC, $600,000, was also vastly in excess of the appropriate penalty and my award was not far in excess of that which had been submitted by Chrisco. One basis upon which the ACCC has concluded that a penalty might be appropriate (including relying on matters which were contrary to what the ACCC had pleaded) was also misconceived. Orders as to costs in favour of the ACCC were made but reduced from those sought by the ACCC. Even the only declaration sought about which submissions were made, which were the least controversial matter at the hearing and occupied very little time, needed to be substantially reworked broadly for the reasons that Chrisco submitted. In other words, almost all of the remedies hearing was occupied by matters upon which the ACCC was unsuccessful. Even evidence at the hearing was contested when, shortly prior to it, the ACCC made submissions about the allegedly inappropriate nature of uncontradicted financial evidence. This necessitated the provision of further and substantial affidavit evidence based on audited financial reports provided to the Australian Securities and Investments Commission. 12 In the unusual circumstances of this case, it is appropriate the ACCC pay 50% of Chrisco's costs of the remedies hearing. 13 I was initially attracted to making a single order that there be no order as to costs, and I was hopeful that the parties might also adopt that approach, acting sensibly and pragmatically with a view to ensuring that the costs of hearings about costs do not exceed the costs themselves. But in circumstances in which I cannot accurately, even on a broad brush approach, balance the value of 50% of the costs of the remedies hearing against 15% of the costs of the liability hearing it is appropriate that the orders be made separately. One can only hope that the parties confer before proceeding to a taxation of three costs orders where the taxation might ultimately do little more than increase legal fees.

Conclusion 14 A declaration in the form proposed by the parties after conferral is appropriate. And the appropriate order as to costs is that (i) Chrisco pay 15% of the ACCC's costs in relation to the hearing concerning liability, save as to the costs of the amendments occasioned by the fourth and fifth amended statements of claim (which include the costs of the directions hearing on 12 October 2015), and (ii) the ACCC pay 50% of Chrisco's costs of the hearing as to penalty and other consequential issues on 1 March 2016 and of the hearing today (to reflect its substantial success at the hearing today). I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edelman .

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