CTHFCA

Australian Competition and Consumer Commission v Lux Pty Ltd

[2004] FCA 926

Federal Court of Australia|2004-07-16|Before: Nicholson J

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Source facts

Court

Federal Court of Australia

Decision date

2004-07-16

Before

Nicholson J

Source

Original judgment source is linked above.

Judgment (64 paragraphs)

[1]

The first respondent, in connection with the supply of a vacuum cleaner to Janice Standing on 26 August 1999, engaged in unconscionable conduct in contravention of s 51AB of the Trade Practices Act 1974 (Cth)('the Act').
The second respondent in engaging in the conduct found by the Court in these reasons has been directly knowingly concerned in and a party to the contravention of s 51AB of the Act, namely the engagement in unconscionable conduct.

[2]

In relation to the application for injunctive relief, the giving of a public notice and the implementation of a compliance program: a. Relief in the form sought in the application is refused. b. Within 21 days the applicant file and serve any alternative formulation for relief in relation to those matters together with written submissions. c. Within 21 days from the date of service upon the respondents of any submission in accordance with paragraph 'a' the respondents file and serve any written submissions in response. d. Within a further 10 days the applicant file and serve any written submissions in reply. e. The issue of further relief in any of the above terms then stand reserved.
The claims for undue harassment and for coercion be dismissed.
The application for a further order of findings of fact be dismissed.
At the same time as each of the parties complies with order 3, each of them also address the issue of costs in written submissions. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

[5]

evidence 3 The witnesses called for the applicant were Mr and Mrs Standing; her mother Mrs Stella Boyce; Ms Tamala Jeffery-Cooper, Local Area Coordinator for the Disability Services Commission in Western Australia; Ms Joan Rudd, a financial counsellor at the Armadale Information & Referral Service (Inc). Ms Nada Murphy, clinical psychologist who was called as an expert witness. 4 The respondent's witnesses were Ms Maria Piteo, Ms Bronwyn Kitson, Ms Mary Hutchison, Ms Joanne Connelly, Mr Anthony Ween, Ms Sharon Nicolle, Mr Jason Jamieson, Mr Vasco Drallini, Mr Trevor McBride and Mr Dennis Podger. Associate Professor Susan Hayes was called as an expert witness for the respondents. 5 The case for the applicant accepts that the findings which it invites the Court to make are dependent upon the Court preferring the evidence of Mrs Standing and her husband ('Mr Standing') to that of Mr Podger. There are consequently issues of credibility which require resolution. 6 The applicant seeks the making of a general adverse credibility finding in respect of Mr Podger. It contends that the evidence of Mr and Mrs Standing should be seen as having remained consistent on key issues despite their obvious distress at times concerning the process of giving evidence. On the other hand it contends that the evidence of Mr Podger should be seen as inconsistent, self-serving and unreliable. Reference is made to three written statements provided by Mr Podger prior to trial which failed to take the opportunity to set out in a detailed, meaningful or adequate way his account of what took place at the Standings' home. Reliance is also placed on a table in which alleged inconsistencies are set out. 7 The respondents submit that Mr Standing was an entirely unreliable witness due to his lack of memory of events and his apparent nervousness in the witness box. They further submit that Mrs Standing's evidence showed that her memory was affected by the lapse of time since the events in question and the number of times she had been asked to recall events. 8 It is the case that Mr Podger's evidence contained inconsistencies on a number of issues between his initial written statement and his oral evidence. These were in large measure the difference between general statements and particularised statements. I did not form the impression that these were as the consequence of the witness being self-serving or that they were so fundamental as to be viewed that way. Furthermore it is apparent that the evidence of both Mr and Mrs Standing was in some respects affected by the factors raised by the respondents. 9 In those circumstances I do not consider the evidence here can be dealt with on the basis of a general adverse credibility finding against any of these persons. Such a general finding would require the Court to prefer the evidence of witnesses other than the witness against whom the finding had been made. That would not be appropriate in this case. The alleged inconsistencies are more appropriately dealt with in the context of the particular issues concerning which they arise.

[8]

initial contact with the consumer 12 On the morning of Monday 26 August 1999 Mr Podger had a conversation with Mr Standing. There is no support for Mrs Standing's evidence that this occurred on the previous night. The conversation took place at McDonald's Restaurant, Port Pirie. 13 On the applicant's case it is said that Mr Standing, prompted by identification of an Electrolux badge being worn by Mr Podger, spoke to him. Exchanges led to Mr Standing stating that he and his wife had an Electrolux vacuum cleaner. Mr Podger asked Mr Standing if he would like him to come around and look at the vacuum cleaner ('the old vacuum cleaner'). Mr Standing replied that he would. On the respondents' case Mr Standing indicated to Mr Podger that the old vacuum cleaner was 'playing up' and requested that Mr Podger visit his home for the purpose of arranging the purchase of a new vacuum cleaner. The applicant says Mr Standing did not tell Mr Podger the vacuum cleaner was 'playing up' and that Mr Podger told Mr Standing that he would come to the Standing's home to give their old vacuum cleaner a service. 14 Mr Podger's evidence was that Mrs Standing was seated at a table close by. Her evidence was that when her husband talked to Mr Podger the latter said he would come around and check Mrs Standing's vacuum cleaner to see if it was all right. She agreed Mr Podger was invited to come to the home. As Mrs Standing did not speak to Mr Podger on that occasion, that evidence is to be understood as meaning that Mr Standing invited him. 15 Mr Podger's initial position that Mr Standing had told him the vacuum cleaner was 'playing up' was not one he maintained in those terms in cross-examination. There he said that Mr Standing had just said the vacuum cleaner was making 'a funny noise.' In his written statement the only reference to Mr Standing referring to the old vacuum cleaner making 'a funny noise' was when Mr Podger arrived at the home. 16 The evidence of Mr and Mrs Standing is to the same effect. The change of evidence by Mr Podger in cross-examination and the inconsistency of that with his written statement in this respect leads me to prefer their evidence on this issue. I find that Mr Podger said he would come around to the Standings' residence and give the old vacuum cleaner a service and did so without Mr Standing having said that it was 'playing up' or making a 'funny noise.'

[18]

Consumer's illiteracy 41 Mr Podger gave Mrs Standing an application for credit for completion. He testified that she could only complete her name, address and date of birth. He said she had told him she was having trouble filling in the form because she could not spell very well. Mr Podger accepted he had taken over the completion of the application after the reference to the postcode. 42 In his written statement Mr Podger said that after Mr Standing had declared an interest in taking the new vacuum cleaner he had said to the Standings that there was quite a lot of paper work involved. He said Mrs Standing then said 'I can't spell too good', and Mr Standing had said the same thing. He then asked them whether they could read and they responded affirmatively. In cross-examination on this evidence Mr Podger testified that he had asked Mrs Standing whether she could read and she had answered affirmatively. He understood Mrs Standing to be able to read the questions but unable to complete the answers because she could not do the spelling. In an earlier unsigned statement he had said that after Mrs Standing had said she could not spell, she had asked him to read it to her. He denied having changed that statement other than to state the true position. When asked whether in any event it had been obvious to him that the Standings' literacy level was very low, he did not accept that was the case. He claimed that credit application forms were always filled in the way the one here had been completed. 43 In her evidence in chief Mrs Standing she had told Mr Podger she could not read the document he had passed to her. He had replied that she did not have to read it, only sign it. In cross-examination she stated she had handed the document back to Mr Podger but had not asked him to complete it. There is further evidence set out below concerning the manner in which the Lux Contract was completed. 44 Ms Jeffery-Cooper gave evidence that she assisted the Standings with reading and writing in 2000. This involved explaining to them words in documents. 45 The applicant invites the Court to find that Mrs Standing told Mr Podger she could not read. Mrs Standing's evidence that she said she could not read is supported by the circumstances in which the documents were completed and I accept her evidence. In any event I find that Mr Podger was on notice of Mrs Standing's substantial illiteracy by reason of her telling him that she was having trouble filling out the form and could not spell very well.

[24]

Resistance to purchase 61 In the opening for the applicant it was contended that Mrs Standing told Mr Podger on more than one occasion that she did not want a new vacuum cleaner. However, that was not supported by any evidence and the applicant correctly concedes that she did not so advise Mr Podger. 62 However, the applicant submits that the evidence establishes that Mrs Standing gave Mr Podger the clear impression that she did not wish to purchase the vacuum cleaner. This submission is founded on evidence that she repeatedly told Mr Podger that the old vacuum cleaner was 'fine' and 'all right' and she did not need to be shown how the new vacuum cleaner worked, with the implication that she did not want to purchase it. The applicant submits that it should be found that Mr Podger knew (or ought to have known) that Mrs Standing did not want to purchase the new vacuum cleaner. 63 Mr Standing's evidence was that Mrs Standing told him that she was frightened of Mr Podger because he pushed the vacuum cleaner on to her. On his return to the home he found her to be shaking because she was frightened and it was necessary for him to take her to hospital. 64 The respondents submit that no such finding is open in the following circumstances in particular. The Standings had invited Mr Podger to their home. The old vacuum cleaner was playing up and not working. (The evidence was that the old vacuum cleaner was working but making a grinding noise). Mr Standing said they would take the new vacuum cleaner. Mrs Standing signed the contract and provided details to Mr Podger to enable him to fill out the documentation. She accepted a trade-in for her old vacuum cleaner. She discussed direct debit as a means of payment of the instalment payments. She and her husband later arranged the instalment variations and requested a missing part. 65 They submit that Mrs Standing wished to acquire the new vacuum cleaner and has been happy to retain it. In cross-examination she accepted the new vacuum cleaner worked and was a good one. When asked whether she preferred to keep it, she responded 'it doesn't worry me'. 66 The evidence of Mr Standing must be discounted on the basis of the earlier finding that he was not present. 67 I do not consider that the inference which the applicant seeks follows from the premises relied upon. Reluctance to purchase is more likely than not a daily feature of many sales negotiations and the focus of their endeavours. In the light of the applicant's concession I do not consider the inference can be fairly drawn from the remaining evidence.

[26]

Expert reports 70 The applicant's expert Ms Murphy testified that her assessment of Mrs Standing's intellectual functioning confirmed Mrs Standing as having 'an intellectual disability.' She made other observations based on her impressions of Mrs Standing including her limited reading ability and her inability to demonstrate understanding of key terms used in the Lux Contract. 71 The respondent's expert Associate Professor Hayes gave evidence that apart from the application of an IQ test, Ms Murphy did not attempt to apply any recognized adaptive behaviour test and that there are various weaknesses in using an IQ test. In particular she testified that Ms Murphy's assessment was not undertaken with the most recent and accurate version of the WAIS-R test applicable to intellectual disability and intellectual functioning. She said use of the more up to date WAIS-III together with the Australian adaptation of the record forms with Australian scoring would have been preferable. She was also critical of the use by Ms Murphy of the role play method, regarding it as unvalidated and unreliable. 72 The respondents also point to other difficulties in the report of Ms Murphy. It was based on affidavit evidence rather than evidence called in the proceeding. The evidence was not prepared in compliance with the Court's Practice Direction concerning Guidelines for Expert Witnesses. No history was taken from the Standings. Statements in the report expressed opinions on issues for decision by the Court. Supporting test results and notes were not tendered in evidence. 73 In these circumstances I am not assisted by the report of the applicant's expert. 74 Although the written submissions for the applicant repeat reliance upon earlier submissions concerning the report by Ms Murphy, I agree with the submissions for the respondents that the applicant now relies on a number of other matters including the impression and presentation of Mrs Standing in court as evidence of intellectual impairment. That is, the principal thrust of the applicant's case on this issue derives from elements in the case other than the report of its expert. 75 Although I approach that evidence with a mind open to be persuaded according to the balance of probabilities, a court would not usually expect to reach a finding of fact on a matter such as this state of mind without the assistance of expert diagnosis and description. Furthermore while the submissions address intellectual impairment, the pleadings address intellectual disability and the difference, if any, between these descriptions is not a matter on which the Court is assisted by evidence.

[29]

Understanding of other contracts 79 The respondents submit that even if illiteracy is established it does not establish that Mrs Standing was unable to make worthwhile or voluntary judgements. Reliance is placed on evidence that she was quite capable and used to making independent and voluntary judgements concerning what she purchased. 80 It is not in issue between the parties that certain prior contracts were entered into by Mrs Standing alone or with her husband. These comprised a loan contract with Toyota Finance Australia Ltd for a Toyota Corona Sedan ('the Toyota') concluded on 18 January 1993; a contract for the purchase of a property at 10 Ninth Street, Port Pirie concluded around 17 August 1994; completion of a Homestart Application Form on 9 September 1994; signature of a Homestart Loan Acceptance around 15 September 1994; and signature of Homestart Loan fortnightly Payment Authorities around October and December 1994. 81 The respondents point to evidence which they say establishes Mrs Standing was able to and did make worthwhile judgments relating to the purchase of goods. It is submitted that the evidence shows she knew she had obligations in connection with the borrowing of money and convinced other persons she understood the nature of a contract. The evidence relied on derives from testimony by Mr Ween, Ms Connelly, Ms Hutchinson and Ms Kitson. 82 The applicant contends that evidence of prior contracts is not evidence of understanding and in any event it discloses a poor record of performance under the contracts from which a lack of understanding of obligations can be inferred. It is also submitted that compliance with contractual obligations by the Standings only occurred where there was a direct debits system in place. 83 In reply the respondents contend that the evidence shows that the Standings understood that if they wanted to purchase something they had to pay for it; they could purchase goods by instalments; and when they did not have enough money to pay all their bills they would pay a smaller amount of each bill, or choose which bills to pay and not others. Furthermore it is said that Mrs Standing entered into a contract to purchase a Honda car prior to the Toyota car and paid instalments of $50 a fortnight, so it cannot be said contractual compliance by her only occurred as the consequence of the utilisation of a direct debit system. 84 I do not consider the evidence relating to the prior contracts establishes the proposition that Mrs Standing (or her husband) understood all the implications of entering a contract. However, it does support a finding, which I make, that they were prepared to enter into contracts for purchase, understood the amount and frequency of payments to be made as a consequence but were not heedful of the consequences of the failure to make payments. I am not able to conclude they did not understand the consequences of non-compliance, only that for reasons they considered important they ignored those consequences. 85 I do not consider that the precise character of the understanding by Mrs Standing of the Lux Contract is open to inference from the nature of her approach to prior contracts. Rather her understanding of the Lux Contract may be inferred from the evidence relating to how that contract was concluded by her. I find she knew she was signing an agreement for the purchase of a vacuum cleaner, although her evidence was she did this to rid herself of the presence of the salesman. She was not aware of the implications of default although she understood that payments were to be made.

[34]

requirements of the law 93 The applicant seeks a declaration against Lux in respect of the alleged unconscionable conduct in contravention of s 51AB of the Act. A declaration is also sought against the second respondent for being directly knowingly concerned in or a party to those contraventions of the first respondent. 94 Section 51AB(1) provides that a corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services to a person, engage in conduct that is, in all the circumstances, unconscionable. Section 51AB(2) provides a list of non-exclusive matters to which a court may have regard for the purposes of determining whether a corporation has contravened s 51AB(1). These are the relative bargaining strength of the parties; whether the stronger party imposed conditions that were not necessary to protect legitimate business interests; whether the consumer was able to understand any relevant documents; whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the consumer; and whether the consumer could have obtained better terms and/or price for the supply elsewhere. To ground a finding of contravention of s 51AB, there must be some circumstance other than the mere terms of the contract itself which renders reliance on the terms of the contract unconscionable: Hurley v McDonald's Australia Ltd (2000) ATPR 41-741 at [31]. It is not material therefore that the applicant does not place any reliance upon the terms of the contract. 95 The words 'engage in conduct' refer to both the doing and refusing to do any act: s 4(2). A company may be deemed to have engaged in a conduct by the conduct of its servants or agents acting within the scope of their actual or apparent authority: s 84(2). 96 The words 'in connection with' have a wide connotation requiring merely a relationship between one thing and another: Our Town FM Pty Ltd v Australian Broadcasting Tribunal (1987) 16 FCR 465 at 479. Here it is not in dispute that the conduct of which complaint is made was in connection with the supply of the new vacuum cleaner to Mrs Standing. 97 The words 'the supply…of goods…to a person' apply to a good of a kind ordinarily acquired for personal, domestic or household use (s 51AB(5)) and encompass the new vacuum cleaner. 98 The word unconscionable is not a term of art. It is not limited to traditional equitable or common law notions of unconscionability: Australian Competition & Consumer Commission v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253 at [31]. It bears its ordinary meaning of 'showing no regard for conscience, irreconcilable with what is right or reasonable': Australian Competition & Consumer Commission v Samton Holdings Pty Ltd (2002) 117 FCR 301 at [44]; Hurley at [19]-[20]; Qantas Airways Ltd v Cameron (1996) 66 FCR 246 at 262. What is required is 'serious misconduct or something clearly unfair or unreasonable': Hurley at [19]-[20]. It will be relevant whether advantage is taken of an innocent party who, though not deprived of an independent and voluntary will, is unable to make a worthwhile judgement as to what is in his or her best interests: Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 461. 99 Whether there was any reliance on the terms of the Lux Contract by Lux in seeking to enforce the contract is not a factor material to the issue of the unconscionability of the conduct of Lux and Mr Podger on 26 August 1999 (Hurley at [31]).

[35]

Relative bargaining strengths: s 51AB(2)(a) 100 The applicant submits that the relative bargaining strengths of Mrs Standing and Mr Podger should be understood in the context of the following factors. Mrs Standing was illiterate and had 'the reasonable appearance of intellectual disability.' I have accepted that she was substantially illiterate and did not understand commercial matters in any depth, matters which were apparent to Mr Podger. As for the issue of intellectual disability, I have already found that the applicant's case in that respect has not been made out. 101 Next it is said she had a limited ability to assess the financial impact of purchasing the new vacuum cleaner and whether it was in the interests of her and her husband. I accept this follows by inference from the evidence. A related claim that Mrs Standing was unable to afford the new vacuum cleaner is not supported, although she gave evidence that generally she did not know what she could afford to buy. 102 It is also said Mrs Standing was home alone at the time of the sale. I have so found. 103 Then the applicant says that she was denied the opportunity to obtain independent advice. The respondents say that she did not seek such an opportunity. The facts as found are that Mr Podger considered whether Mrs Standing should obtain independent advice but, satisfied by her that she could read, he did no more. That finding must be considered in the context of the further finding that he had been told by her she could not read and in any event was on notice of her substantial illiteracy. In all the circumstances it is significant that Mr Podger did not act on his thought that Mrs Standing should have independent advice. 104 Additionally it is said Mrs Standing was scared of Mr Podger and wanted him to leave her home. The evidence shows that Mrs Standing was initially frightened by Mr Podger but after she moved around the lounge that fear substantially diminished and she regarded Mr Podger as being both friendly and acting normally. 105 The respondents also say on this heading that the Standings invited Mr Podger to their home. The finding has been made that Mr Podger said he would come to their home to service the old vacuum cleaner. 106 The respondents also say that the issue of relative strengths is to be considered in the context that the Lux Contract was a standard regulated contract. That characterisation of the Lux Contract does not assist in addressing the issue of comprehension of it by Mrs Standing.

[40]

requirements of the law 114 The applicant seeks a declaration against the first respondent that it used undue harassment in connection with the supply of the new vacuum cleaner to Mrs Standing in contravention of s 60 of the Act. It also seeks a declaration against the second respondent on the basis of him having been, directly or indirectly, knowingly concerned in or a party to such contravention. 115 Section 60 provides that a corporation shall not use physical force or undue harassment (or coercion) in connection with the supply or possible supply of goods or services to a consumer or the payment for goods or services by a consumer. 116 The meaning of 'harassment' was examined by French J in Australian Competition & Consumer Commission v McCaskey (2000) 104 FCR 8 at [47]. He referred to the dictionary definition of the verb 'harass' as: '1 Trouble by repeated attacks. Now Freq; subject to constant molesting or persecution. 2 Lay waste, devastate. 3 Tire out, exhaust. 4 Overwhelm with cares and misfortunes etc...': New Shorter Oxford English Dictionary (Clarendon Press, Oxford, 1993) p 1188. The noun of that verb is 'harassment.' His Honour considered it important to have regard to its context in considering its application in s 60. He said that it describes a range of conduct which involves applying repeated pressure to a consumer who is under no pre-existing obligation to acquire goods or services. French J considered that the word 'undue' added an extra layer of evaluative judgement, although more relevant to debt recovery than to sale of goods or services. 117 His view was that repeated unwelcome approaches to a potential acquirer of goods or services could in his view qualify as harassment and could require very little additional evidence to attract the characterisation of undue harassment. In the case of recovery from a debtor, he said that if the frequency, nature or content of the approaches and communications associated with them are such that they are calculated to intimidate or demoralise, tire out or exhaust a debtor rather than convey the demand and an associated legitimate threat of proceedings, the harassment will be undue. 118 In Australian Competition & Consumer Commission v Maritime Union of Australia (2001) 114 FCR 472 at [62] Hill J generally followed the views expressed by French J in McCaskey. His Honour said that the word 'undue' suggests that what is done must, having regard to the circumstances in which the conduct occurs, extend beyond that which is acceptable or reasonable. He said it ensures that conduct which amounts to harassment will only amount to a contravention of the section where what is done goes beyond the normal limits which, in the circumstances, society would regard as acceptable or reasonable and not excessive or disproportionate. (The applicant's submissions put emphasis upon the words 'in the circumstances'.) He also stated that 'harassment' connotes conduct which can be less serious than conduct which amounts to coercion. The reasonableness of that conduct was a matter which his Honour considered was relevant to whether what is harassment constitutes undue harassment.

[57]

injunctive relief 138 The power of the Court to grant injunctions in respect of contraventions of the Act is provided for in s 80. Subsection 80(4) and subs 80(5) make apparent that the Court may grant an injunction to restrain an act or require an act whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of the contravening kind. It has been accepted that the Court may nevertheless grant an injunction where a declaration has been made and there is little likelihood that the respondents might engage in the restrained behaviour, if it is in the public interest to do so. For that purpose, the public interest is to be understood in the context of the role of the applicant in establishing normative processes in relation to the operation of the whole market by ensuring that a person in that market has a fair opportunity to obtain what the market should, over time, deliver. See Australian Competition & Consumer Commission v 4WD Systems Pty Ltd (2003) 200 ALR 491 at 557-558 [216]-[217]. 139 The form of the injunctions sought by the applicant in the application are directed to restraints upon Lux and Mr Podger in two respects. The first is a restraint in respect of making sales of any Lux product 'to a potential customer who reasonably appears to suffer from an intellectual impairment'. The second is a restraint from 'persistently urging the potential customer to purchase a Lux product or maintaining a prolonged close physical presence to the potential customer' in relation to such sales to such persons. Neither of these foundations reflects the facts as found in this proceeding. Moreover the application alleged that the relevant circumstances to be found in respect of the Standings was that they were illiterate to the extent they were unable to read or write other than simple words and their respective names, and were intellectually disabled so they were unable to understand contracts. The injunctions do not seek to address the issue of illiteracy or of intellectual disability but rather address 'intellectual impairment.' 140 The applicant submits that in the event the Court does not accept all of the applicant's submitted findings of fact but nevertheless finds the respondents have breached the Act and that the general form of remedial orders are acceptable, a further opportunity should be offered to the parties to submit in relation to the final form of orders. I do not consider that the injunctions in pars 5-8 of the application can be granted because the circumstances of the case and the breach as found do not support any injunction being made in such terms. I have doubts whether any injunction can be crafted in the circumstances which could safely be regarded as able to be complied with. On the other hand there are public interest considerations to be weighed which may support the issue of an injunction in the event one could be safely formulated. 141 In such circumstances I consider it is appropriate that the parties have the opportunity to consider these reasons and submit further on the issue of injunctive relief and its formulation in the light of these reasons.

Australian Competition and Consumer Commission v Lux Pty Ltd - [2004] FCA 926 - FCA 2004 case summary — Zoe