Australian Competition & Consumer Commission v Esanda Finance Corporation Ltd

1 The first respondent engaged in conduct that was unconscionable in contravention of section 51AB of the Trade Practices Act 1974 (the 'TPA') in connection with the supply of goods and services by the first respondent to Mr McPhee, pursuant to the "McPhee Agreement" referred to in par 10 of the Statement of Claim filed in the proceeding, by reason of:

1.1 it causing to be served on Mr McPhee a notice of demand for delivery up of the "McPhee vehicle" in a form that conveyed, or was capable of conveying, the meaning to Mr McPhee that the first respondent would not, or could not lawfully, repossess the "McPhee vehicle" without a court order authorising such action and then, by its agents or sub-agents, repossessing that vehicle without having obtained any such order; and

1.2 its failure to terminate or suspend the instruction given to its agents and/or sub-agents to repossess the "McPhee vehicle" when it had reasonable cause to apprehend that a physical confrontation may occur if that instruction was carried out or if attempts were made to carry it out.

2 The first respondent, by operation of section 84(2) of the TPA, engaged in conduct that was unconscionable in contravention of section 51AB of the TPA in connection with the supply of goods and services by the first respondent to Mr McPhee, pursuant to the "McPhee Agreement", by reason of the following conduct of the first respondent's agents and/or sub-agents:

2.1 entering the "McPhee residence" by jumping over a gate for the purpose of opening the garage door from the inside of the garage; and

2.2 failing to desist from their attempts to repossess the "McPhee vehicle" when they had reasonable cause to apprehend that a physical confrontation may occur if they continued in those attempts.

3 The first respondent has, by operation of subsection 84(2) of the TPA, used undue harassment in connection with the payment for services by Mr McPhee in contravention of section 60 of the TPA, by reason of the following conduct of the first respondent's agents and/or sub-agents:

3.1 the repeated attendances of the agents and/or sub-agents at the "McPhee residence", including their attendances to undertake surveillance at that residence; and

3.2 the third respondent approaching Mrs McPhee at her place of work, asserting that the McPhee vehicle was sold, hidden and/or stolen and demanding to know the whereabouts of the "McPhee vehicle", AND ORDERS THAT:

4 The first respondent, whether by itself, its servants or agents or otherwise, be restrained for 3 years:

4.1 from making any demand upon a consumer for the delivery up of mortgaged, leased or hired goods in the form of the document A8-1 in the Bundle of Agreed Documents filed in the proceeding;

4.2 from instructing its agents and sub-agents, on a 'results only' basis, to seek to repossess mortgaged, leased or hired goods from consumers without the consumer's consent, in circumstances where the first respondent is aware of both the current place of residence of the consumer and the current place at which the goods are usually located.

5 The first respondent be required within 4 weeks of the date of this order to amend the document ('Procedures Guide for Esanda Agents') marked MWB1 and exhibited to the affidavit of Michael William Baines filed in the proceeding on 19 March 2003 to provide that agents and sub-agents are not permitted to repossess mortgaged, leased or hired goods from consumers from enclosed areas on private property (such as a garage with a closed door or a driveway with closed gates) without first obtaining the consent of an occupier of that property (unless the first respondent has obtained an order of a court or tribunal permitting repossession in those circumstances) .

6 The first respondent be required at all times during the 3 year period from the date of this Order:

6.1 to ensure that any demand made by the first respondent (including by its agents and sub-agents) upon a consumer for the delivery up of mortgaged, leased or hired goods states that the action that the first respondent may take to recover the goods may include repossession of the goods without the consumer's consent'in certain circumstances';

6.2 to instruct each of the agents that it engages for the purpose of seeking to repossess mortgaged, leased or hired goods from consumers in the terms set out in the Schedule hereto and to require that its agents give those same instructions to any sub-agents acting on behalf of the first respondent;

6.3.1 all 'Relevant Staff' (as defined in the first respondent's discovered document number 0098 in the proceeding) of each of the agents engaged by the first respondent for the purpose of seeking to repossess mortgaged, leased or hired goods from consumers and sub-agents engaged by the first respondent's agents; and

6.3.2 all existing and new staff of the first respondent who, as part of their usual employment duties, are responsible for engaging, instructing or dealing with any such agents

training in relation to agents' and sub-agents' obligations in accordance with the requirements of item 6.2 above; and

6.4 to suspend or terminate any instruction that it has given to an agent to repossess mortgaged, leased or hired goods from a consumer if and when it believes that there is a real prospect that a physical confrontation may occur if that instruction is carried out, or if attempts are made to carry out that instruction.

7 The operation of item 6.1 be stayed for 1 month from the date of this order and the operation of item 6.3 be stayed for 3 months from the date of this order.

8 The first respondent pay Mr and Mrs McPhee compensation in the amounts of $15,000.00 and $5,000.00 respectively.

9 The "McPhee Agreement" be varied such that the amount owing by Mr McPhee under that agreement be reduced by the total amount of $1,892.73, with effect from 11 July 2000.

10 The first respondent pay the applicant's costs of the proceeding in an amount to be agreed, or if not agreed, to be taxed.

SCHEDULE "Agents must not contact customers by attending or telephoning them at their place of employment unless: (a) they have been requested to do so by the Customer; (b) there is no effective alternative means to contact the Customer; or (c) the Customer is a proprietor or a director of a business to which the relevant contract relates.

Contact should only be made by Agents with a member of a Customer's family if the purpose of that contact is to seek to contact or to locate the Customer. Agents must not contact Customers by attending at their home or place of employment on more than 5 occasions in total unless:

(a) they are specifically requested to do so by the Customer for the purposes of a Repayment Arrangement or for the voluntary surrender of the Asset;

(b) a repayment Arrangement has been made by the Customer, but has subsequently been breached (following which up to 5 further contracts may be made); or

(c) they are specifically authorised to do so by the Agent's Controller.

Agents must not repeatedly observe a Customer or a third party in or around their home or place of employment.

Agents may repossess an Asset that is not subject to a mortgage that is regulated by the Consumer Credit Code from residential premises only if:

(b) immediately prior to the repossession, the Asset is situated in an open area (including driveways) or in an open garage.

Agents and their Relevant Staff must not make contact with a Customer or an Asset, and must always withdraw from any situation, if there is any indication that a physical confrontation with the Customer or another person may result."

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

AND: ESANDA FINANCE CORPORATION LTD (ACN 004 346 043)

REASONS FOR JUDGMENT LEE J: 1 In this matter the applicant ("the ACCC") and the first respondent ("Esanda") have reached an accord as to the disposal of the proceeding by consenting to orders being made in the terms set out in a minute filed in the Court. The parties seek the Court's endorsement of the minute. 2 The ACCC commenced the proceeding pursuant to authority vested in it by the Trade Practices Act 1974 (Cth) ("the Act") and sought declarations and injunctive relief in respect of conduct engaged in by Esanda in relation to the seizure of a motor vehicle owned by a customer of Esanda, ("the consumer") and subject to a chattel mortgage in favour of Esanda. The ACCC alleged that in respect of the seizure of the motor vehicle Esanda engaged in conduct in connection with the supply of goods and services by Esanda to the consumer that was unconscionable and contravened s 51AB of the Act and used undue harassment, coercion, or physical force in connection with the payment for services by the consumer in contravention of s 60 of the Act. 3 The parties have filed a statement of agreed facts. Counsel agree that insofar as it is necessary to refer to affidavits filed in the proceedings in clarification of the facts agreed it is permissible for the Court to do so. 4 The relevant facts may be shortly stated as follows. 5 In about July 1998 Esanda advanced to the consumer a sum of $15,092.02, applied by the consumer to the purchase of a motor vehicle from Esanda. The sum advanced, and interest, was to be repaid to Esanda by forty‑eight monthly payments of $373.20. The first payment was to be made on 24 July 1998. The total amount repayable to Esanda inclusive, of interest, was $17,913.60. As noted above the sum owing to Esanda was secured by a chattel mortgage over the vehicle. 6 From time to time the consumer defaulted in payment of the monthly instalments, due, in part, to adverse circumstances suffered by the consumer in his employment. The consumer sought to replace the Esanda loan with a loan from another financier and also sought to obtain from Esanda a variation in the terms of the repayments. None of these steps was successful. 7 By April 2000 the arrears exceeded $1,800 and in that month, by service of a formal notice, Esanda demanded that the consumer cure his default under the mortgage. 8 On 20 June 2000 the vehicle was "repossessed". The amount outstanding at that time was approximately $2,180. The allegations made against Esanda by the ACCC in this proceeding arise out of the manner in which the "repossession" was effected. 9 Esanda instructed agents and sub-agents to recover the vehicle, on terms that no remuneration would be paid by Esanda unless the agents succeeded in obtaining possession of the vehicle or payment in full of the arrears due. The agents and sub-agents of Esanda made numerous attendances on the consumer, or made it known to the consumer that the consumer's movements were being monitored or kept under surveillance by them. In addition, an agent of Esanda attended at the place of work of the consumer's wife in circumstances which caused that person embarrassment and humiliation. 10 Seizure of the vehicle was carried out by six persons who entered the property of the consumer without consent. One of the agents jumped a gate, entered the garage in which the vehicle was situated, and released the securing mechanism on the inside of the garage door. Agents instructed by Esanda understood that the consumer may attempt to prevent seizure of his property and that if he did so it may be necessary that he be restrained to allow recovery of the vehicle to be effected. Events occurred as anticipated. The consumer's threat to use force to protect his property was overborne and the consumer was pinned to the ground whilst a tow truck was attached to his vehicle and the vehicle towed away. 11 In the orders proposed in the minute of consent Esanda concedes that declarations may be made that Esanda engaged in unconscionable conduct in contravention of s 51AB of the Act by: (a) causing to be served on the consumer a notice of demand for delivery up of the vehicle in a form that conveyed, or was capable of conveying, an understanding that it would not, or could not lawfully, repossess the vehicle without a Court order authorising such action and then acting to repossess the vehicle without obtaining such an order; and

(b) failing to cease the instruction it had given to its agents to repossess the vehicle when it had reasonable cause to apprehend that physical confrontation may occur if the instruction was carried out. 12 Furthermore Esanda concedes that by the conduct of its agents Esanda engaged in unconscionable conduct in contravention of s 51AB of the Act by the agents: (a) entering the consumer's residence by jumping over a gate for the purpose of opening the garage door from the inside of the garage; and (b) failing to desist from attempts to repossess the vehicle when the agents had reasonable cause to apprehend that a physical confrontation may occur if they continued with their attempt. 13 Further, Esanda concedes that declarations may be made that Esanda contravened s 60 of the Act by using undue harassment in connection with the payment for services by the consumer by reason of the conduct of its agents in making repeated attendances at the consumer's residence, carrying out surveillance of the residence and by entering at the place of work of the wife of the consumer and asserting to the wife at her place of work, in the presence of colleagues or members of the public, that the vehicle had been sold, hidden and/or stolen, and demanding to know the whereabouts of the vehicle. 14 The parties have agreed the terms of prohibitory and mandatory orders to be made binding Esanda to corrective conduct. In addition it is agreed that orders may be made providing for compensation in agreed amounts to be paid to the consumer and his wife. 15 I have read the statement of agreed facts and the material relevant thereto and I am satisfied that orders may be made by the Court in the terms of the minute of consent filed by the parties. In particular, I am satisfied that there is utility in making the injunctive orders proposed. 16 Each party has had the benefit of advice from senior counsel and the task for the Court is to satisfy itself that it has jurisdiction in the matter and that the orders proposed by the parties are within the power of the Court and, where relevant, are an appropriate exercise of the Court's discretion. 17 Plainly the Court has jurisdiction in the matter and the orders proposed are within powers provided in the Court by the Act. Insofar as the making of injunctive orders involves a particular exercise of the Court's discretion, as noted above I am satisfied it is appropriate to so exercise it. The proposed injunctive orders are expressed with sufficient clarity to avoid Esanda, as the party bound thereby, being uncertain or in doubt as to the meaning or scope of the orders. The period of operation of the proposed orders appears to be reasonable. 18 There is a significant public interest in litigation being resolved in the manner proposed by the parties subject to it being plain that the accord is freely arrived at and that the parties have had the opportunity to be fully advised thereon. There is no issue in that regard in this matter. The principles to which the Court may have regard in considering compromised procedures in the nature have been discussed in detail by French J in ACCC v McCaskey (2000) 183 ALR 159 at [30] as follows: "The approach of the Court to the making of consent orders is informed by a general principle of judicial restraint. It is not the function of the Court to impede settlements between parties who are legally represented and able to understand and evaluate the desirability of agreeing to a settlement. Nor will the Court refuse to give effect to the terms of a settlement by refusing to make orders or accept undertakings where they are within jurisdiction and otherwise unobjectionable. The Court will not substitute orders which it thinks appropriate if those proffered are within power and within the range of appropriate dispositions of the case. But in making orders by consent or otherwise, the Court must ensure that the orders are within power and appropriate for it is exercising a public function in doing so and must have regard to the public interest - Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 95 FCR 114 at 131. In considering the orders proposed in this case, I have regard to the observations about the scope of the injunctive power under s 80 and the power to order corrective advertising under s 80A discussed in ACCC v REIWA and the cases there mentioned at 132-134." 19 Applying the same principles I am satisfied that orders should be made in terms of the minute of consent filed by the parties insofar as they are now reflected in the minute of orders attached to these reasons. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lee.

Counsel for the Applicant: S Owen-Conway QC; DJ Pratt

Counsel for the First Respondent: RL Le Miere QC, JP Moore

Date of Judgment: 7 November 2003