Australian Competition and Consumer Commission v Jayco Corporation Pty Ltd

1. Pursuant to s 224(1) of the ACL, the respondent pay to the Commonwealth of Australia a pecuniary penalty in the total amount of $75,000 in respect of the contravention of s 29(1)(m) of the ACL referred to in the declaration above.
2. The proceeding otherwise be dismissed.
3. The respondent pay twenty per cent of the applicant's costs of and incidental to the proceeding, up to and inclusive of the publication of reasons on liability on 20 November 2020, such costs to be taxed in default of agreement.
4. The applicant pay eighty per cent of the respondent's costs of the proceeding, up to and inclusive of the publication of reasons on liability on 20 November 2020, such costs to be taxed in default of agreement.
5. There be no order as to the costs of the proceeding in relation to the period after 20 November 2020. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 The respondent (Jayco Corp) is a manufacturer of caravans, campervans, camper trailers, and other recreational vehicles (together, RVs), and is the largest manufacturer of RVs in Australia. Jayco Corp's manufacturing business is significant and it has more than 1,000 employees. In the mid-2010s, which is the period the subject of this proceeding, it sold between 8,000 and 10,000 RVs per annum. In total, it has sold more than 200,000 new RVs. New Jayco RVs are generally sold to consumers in Australia by independent dealers, many of which use the word "Jayco" in their name. 2 The applicant (the ACCC) brought this proceeding against Jayco Corp alleging that in relation to four consumers Jayco Corp had engaged in unconscionable conduct, and conduct that was misleading or deceptive or likely to mislead or deceive, and that it had made false and misleading misrepresentations in contravention of the Australian Consumer Law (ACL), which is in Schedule 2 of the Competition and Consumer Act 2020 (Cth). On 20 November 2020, I published reasons and made findings following a hearing relating to liability issues: Australian Competition and Consumer Commission v Jayco Corporation Pty Ltd [2020] FCA 1672. I found that most of the ACCC's claims against Jayco Corp were not established. However, I found that Jayco Corp had contravened ss 18 and 29(1)(m) of the ACL on one occasion in respect of one consumer (Consumer RH). 3 Following the publication of the liability reasons, the parties conferred and have now presented to the court a joint submission relating to relief and to the disposition of the proceeding. The parties submitted that the court should - (1) make a declaration under s 21 of the Federal Court of Australia Act 1976 (Cth) in relation to those contraventions that were established; (2) make an order under s 224 of the ACL that Jayco Corp pay a pecuniary penalty of $75,000 to the Commonwealth of Australia in respect of its contravention of s 29(1)(m); (3) make orders that the proceeding be otherwise dismissed; and (4) make certain orders as to costs. 4 For the reasons that follow, the relief proposed by the parties is appropriate and I will make orders accordingly.

Background 5 The findings of contravention by Jayco Corp were made at [532]-[533], and [645]-[652] of the liability judgment. In summary, Consumer RH experienced problems with a new RV manufactured by Jayco Corp that she had purchased from a dealer, Jayco Newcastle. Consumer RH sent an email to a member of Jayco Corp's warranty team concerning the problems that she was experiencing and requested a full refund, or a replacement RV. In reply, a member of Jayco Corp's warranty team wrote - I am in warranty. So from Jayco I can approve warranty repairs. I cannot help you with another van or money back. You have to go back to the place you have your contract of sale with. That being Jayco Newcastle. I cannot guarantee this will be the outcome for you as the terms and conditions of warranty are to repair van. I'll let you contact Jayco Newcastle about your request. 6 The vice with this reply is that it represented that the only remedy to which Consumer RH could be entitled was repair, because that was the claimed effect of Jayco Corp's warranty. That was not the case, because the warranty did not affect the rights of a consumer under the ACL to reject the goods and to seek a refund or replacement goods in the event that there was a "major failure" to comply with a statutory consumer guarantee: ACL, s 259(3), s 260, s 263(4). I upheld the ACCC's claim that by making this communication to Consumer RH Jayco Corp engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18(1) of the ACL, and that in addition, Jayco Corp made a false or misleading representation in contravention of s 29(1)(m) of the ACL concerning the existence of a right or remedy.

Analysis 7 In my analysis of the parties' submissions, I will address three main issues: (1) the principles that are applicable where parties to a civil penalty proceeding make joint submissions; (2) whether a declaration should be made in the terms sought; and (3) the question of an appropriate penalty.

(1) Joint submissions 8 The principles that are to be applied to the consideration of an order for a civil penalty where the parties have made joint submissions are settled by binding authority, and can be summarised as follows. 9 The court is not bound by the parties' proposal, but is to consider the question whether the proposal can be accepted as fixing an appropriate amount, "and for that purpose the court must satisfy itself that the submitted penalty is appropriate": Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 at [48] (French CJ, Kiefel, Bell, Nettle and Gordon JJ) (Agreed Penalties case), citing NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; 71 FCR 285 at 291 (Burchett and Kiefel JJ) (NW Frozen Foods). If the Court is persuaded that the agreed proposed penalty is appropriate in all the circumstances, it is desirable for the Court to accept the parties' proposal, owing to the importance of promoting the predictability of outcome in civil penalty proceedings: Agreed Penalties case at [46], [58]. Rather than there being a single appropriate penalty, there is a permissible range of penalties in which "a particular figure cannot necessarily be said to be more appropriate than another": Agreed Penalties Case at [47], citing Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72; ATPR 41-993 (Mobil Oil) at [51] (Branson, Sackville and Gyles JJ). A penalty may be considered appropriate if it falls within the permissible range, though the Court is not "bound to start with the proposed penalty and then limit itself to considering whether that penalty is within the permissible range": Volkswagen Aktiengesellschaft v Australian Competition and Consumer Commission [2021] FCAFC 49 at [127]-[128] (Wigney, Beach and O'Bryan JJ) (Volkswagen), referring to NW Frozen Foods at 290-291, and Mobil Oil at [47], [51] and [54].

(2) Declaration 10 The Court has a discretionary power to make declarations under s 21 of the Federal Court of Australia Act 1976 (Cth). The parties jointly submitted, by reference to Forster v Jododex Australia Pty Ltd [1972] HCA 61; 127 CLR 421 at 437-438 (Gibbs J) and Ainsworth v Criminal Justice Commission [1992] HCA 10; 175 CLR 564 at 581-582 (Mason, Dawson, Toohey and Gaudron JJ), that it is appropriate to make a declaration reflecting my findings of Jayco Corp's contraventions of ss 18 and 29(1)(m) for the following reasons - (1) There is a real and not a hypothetical question: the proposed declaration relates to conduct that the Court has found to contravene the ACL and the terms of the declaration accurately identify and particularise the contravening conduct; (2) The applicant has a real interest in raising it: The ACCC has a genuine interest, as the statutory regulator discharging its functions in the public interest, in seeking the declaration and for the declaration to be made; and (3) There is a proper contradictor: Jayco Corp, which contested its liability for the alleged contraventions, has a true interest in opposing the relief. This remains so notwithstanding its agreement to the proposed orders. … the declaration is desirable and appropriate because it will record the Court's findings and disapproval of the contravening conduct, vindicate the ACCC's claim that Jayco Corp contravened the ACL, assist the ACCC in carrying out the duties conferred on it by the [Competition and Consumer Act 2010 (Cth)], assist in clarifying the law, inform consumers of the contravening conduct, and make clear to other would-be contraveners that such conduct is unlawful. 11 I accept the parties' submissions. The Court will accordingly make a declaration substantially in the form submitted by the parties.

(3) Pecuniary penalty 12 If the Court is satisfied that a person has contravened Part 3-1 of the ACL, which relevantly includes s 29(1)(m), the Court may order the person to pay a pecuniary penalty in respect of the contravention as the court determines to be appropriate, but not exceeding a maximum prescribed by statute: ACL, s 224. Section 224(2) requires that in determining the appropriate penalty the Court must have regard to - (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 Chapter 4 or this Part to have engaged in any similar conduct. 13 There is no provision for the imposition of a pecuniary penalty for contraventions of s 18 of the ACL. 14 As I have mentioned, the parties jointly submitted that a penalty of $75,000 should be imposed on Jayco Corp in respect of its contravention of s 29(1)(m), and provided supporting submissions which I have considered. 15 Having regard to the principles outlined at [9] above, the starting point for the assessment of a pecuniary penalty, notwithstanding the parties' agreement, is s 224(1) of the ACL: Volkswagen at [123]. Necessarily, this requires that attention be given to the mandatory considerations in s 224(2) that are set out at [12] above. 16 Maximum penalty. In fixing a penalty, it is necessary to have regard to the maximum penalty: Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Commissioner (The Non-Indemnification Personal Payment Case) [2018] FCAFC 97; 264 FCR 155 at [26] (Allsop CJ, White and O'Callaghan JJ). The parties agreed, and I accept, that the maximum penalty that may be imposed on Jayco Corp for its contravention is $1.1 million: item 2 of s 224(3) of the ACL, as in force at the relevant time. 17 Nature and extent of contravening conduct, including loss or damage. The extent and duration of the contravention found by the Court in the present case is limited to a single instance of a breach of s 29(1)(m). Whilst acknowledging that a false or misleading representation made to a consumer about their rights under the consumer guarantees in contravention of s 29(1)(m) of the ACL by a representative of a business the size of Jayco Corp is serious, I also acknowledge that this is not a case of systemic or repeated contravening conduct. The parties submitted that the conduct of Jayco Corp did not amount to a deliberate contravention, and was not undertaken with an intention to mislead or deceive, but was inadvertent. Having heard all the evidence, I accept this submission. 18 There is no claim that Consumer RH suffered specific monetary loss or damage as a result of the contravening conduct, and conversely, there is no claim that Jayco Corp profited, or sought to profit from the contravention. 19 Circumstances of the contravening conduct. The Jayco Corp employee who engaged in the contravening conduct was not in senior management: he was a customer service manager of 10 years' experience with Jayco Corp with limited authority who reported to more senior employees and escalated matters as necessary. However, Jayco Corp is a major manufacturer of consumer goods in Australia, and by the joint submission Jayco Corp accepted that the contravention that has been found was serious. 20 Previous findings of similar contravening conduct. The parties agreed that Jayco Corp has not previously been found to have contravened the ACL or its predecessor, the Trade Practices Act 1974 (Cth), or to have engaged in similar conduct.

Deterrence 21 The principal purpose of a pecuniary penalty is to place a price on contravention that is sufficiently high to deter repetition by the contravener, and by others: the Agreed Penalties case, at [55] (French CJ, Kiefel, Bell, Nettle and Gordon JJ), citing Trade Practices Commission v CSR Ltd [1990] FCA 762; 13 ATPR 41-076 at 52,152 (French J). See also Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; 250 CLR 640 at [65] (French CJ, Crennan, Bell and Keane JJ). That purpose informs the assessment of an appropriate penalty. 22 In respect of deterrence, I accept the following propositions advanced by the parties in the joint submissions - (1) It is important that consumers have accurate information from businesses, particularly those of the size and presence of Jayco Corp, as to the remedies that are available to them for products that are not of acceptable quality. (2) An appropriate penalty should deter businesses from risking the payment of a penalty in order to gain profit from failing to implement a strong compliance program sufficient to pick up and address conduct of the present kind. It is acknowledged, however, that Jayco Corp was not motivated to break the law in order to profit and risk paying a penalty. (3) The penalty imposed in this case can be expected to be of interest to consumers of RVs, the public, and to the RV sector. The imposition of appropriate deterrent penalties will validate the behaviour and efforts of compliant businesses and send a warning to non-compliant ones. (4) Consumers dealing with products that are not of acceptable quality may experience stress due to the deficiencies associated with the relevant products. Misrepresentations about consumer guarantee rights can accentuate and compound these stresses, as consumers must face additional and unnecessary hurdles in rectifying or replacing the relevant products. (5) The contravention in this case was of a limited nature, being a single representation to a single consumer by one employee. While this means that specific deterrence is a less significant consideration, it is notable that the contraventions occurred in circumstances where, as I found at [746] of the liability reasons, members of the Jayco Corp warranty team had an imperfect understanding of the operation of the ACL and any compliance system in place did not prevent the contravention that occurred. (6) Jayco Corp has agreed to the penalty sought.

An appropriate penalty 23 By the parties' joint submission Jayco Corp stated that it "greatly regrets that it has contravened the ACL and by this submission informs the Court that it intends to ensure that its contravening conduct does not reoccur". At the hearing today, senior counsel for Jayco Corp repeated that Jayco Corp regretted the contravention, and on behalf of Jayco Corp apologised to Consumer RH. 24 This is a case where general deterrence is of greater significance than specific deterrence. Having regard to all of the circumstances, including especially that the contravening conduct was engaged in on one occasion by one employee who was not a senior manager, I have determined that the parties' proposal that I order Jayco Corp to pay a penalty of $75,000 is appropriate. I am persuaded that a pecuniary penalty in this amount will sufficiently deter Jayco Corp and others in its position from maintaining systems that allow for conduct akin to the contravening conduct to occur. Conversely, I am satisfied that such deterrence will encourage Jayco Corp and others in its position to employ systems which are directed to ensuring that warranty staff at all levels are aware of consumers' entitlements under the ACL, and do not communicate incorrect information on that topic to consumers. 25 The proposed penalty of $75,000 is considerably lower than the maximum penalty available for the contravention. However, any penalty must be proportionate to the contravention. While the contravention here was serious, all the circumstances point to an appropriate penalty at about the level that the parties propose. The penalty that I propose to impose of $75,000 should be understood as being a significant penalty for the single contravention that occurred, and which is calculated to have an appropriate deterrent effect.

Costs 26 In relation to costs, the parties were agreed that costs orders should be made by consent, such that - (1) Jayco Corp pay 20% of the ACCC's costs incurred up to and including the date of publication of the liability reasons; (2) the ACCC pay 80% of Jayco Corp's costs incurred up to and including the date of publication of the liability reasons; and (3) there be no order as to costs in respect of the period thereafter.

Conclusions 27 I will make a declaration and orders substantially in the form proposed by the parties. I will order that Jayco Corp pay to the Commonwealth of Australia a penalty for its contravention of s 29(1)(m) of the ACL in the total sum of $75,000. Orders as to costs will reflect those jointly proposed by the parties. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wheelahan.