REASONS FOR JUDGMENT
1 Camavit Pty Ltd ("Camavit") has a Harvey Norman franchise in Campbelltown, an outer western suburb of Sydney. It operates a retail outlet known as the Harvey Norman AV/IT Superstore Campbelltown from which it sells electronic goods. In November 2011 Camavit sold a Toshiba television set to a customer of the store. The customer was David Mouat. About four months later Mr Mouat reported a problem with the television to the store manager, who told him he would have to contact Toshiba. Subsequently, however, Camavit replaced the television. Mr Mouat was dissatisfied with the replacement and raised the matter with a sales representative. Mr Mouat said he was entitled to a refund but the sales representative insisted he was not and said the store would replace the television. Consequently, Mr Mouat received a third television. About a month later Mr Mouat's wife, Anne, attended the store and asked for a refund but her request was denied. She was told she could only have a replacement or a store credit and when she requested a store credit for a month the request was refused. Camavit admits that in each case the statements of Camavit's representatives contravened ss 18 and 29(1)(m) of the Australian Consumer Law ("ACL"), which can be found in Sch 2 of the Competition and Consumer Act 2010 (Cth) ("CCA") (formerly the Trade Practices Act 1974 (Cth)). These statements amounted to representations "concerning the existence, exclusion or effect of [a] warranty, guarantee, right or remedy" and the representations were false or misleading.
2 The regulator, the Australian Competition and Consumer Commission ("ACCC"), seeks declaratory and injunctive relief, pecuniary penalties and other orders. This case is one of a series of cases in which the ACCC has successfully obtained orders of a similar kind against Harvey Norman franchisees. Earlier this month in Melbourne Middleton J made orders against four franchisees, two operating in Victoria and two in Tasmania: Australian Competition and Consumer Commission v HP Superstore Pty Ltd [2013] FCA 1317 ("HP Superstore"); Australian Competition and Consumer Commission v Salecomp Pty Ltd [2013] FCA 1316 ("Salecomp"); Australian Competition and Consumer Commission v Launceston Superstore Pty Ltd [2013] FCA 1315; Australian Competition and Consumer Commission v Moonah Superstore Pty Ltd [2013] FCA 1314.
3 The parties have agreed upon the facts and the orders and made joint submissions. The agreed facts are annexed to these reasons and marked "A". Still, the court is obliged to determine whether the facts are to be accepted as true and to determine what weight should be given to them: Minister for the Environment, Heritage and the Arts v PGP Developments Pty Ltd [2010] 183 FCR 10 at [35]. I accept the facts as true. They are inherently credible and the narrative is coherent. The facts establish the agreed contraventions. The agreed orders were also reduced to writing. Nevertheless, the Court must be independently satisfied that it has the power to make the orders and that the orders are appropriate: See NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285; Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd (2004) ATPR 41-993 at [51]. See, too, Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc. (1999) 161 ALR 79 at [18] per French J. For the following reasons I am so satisfied and will make orders in terms of the draft short minutes prepared by the parties.
4 Section 18(1) of the ACL provides:
A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
5 Section 29(1)(m) states:
A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:
…
(m) make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (including a guarantee under Division 1 of Part 3-2).
6 This case is concerned with the guarantees under Div 1 of Part 3-2 of the ACL, which are statutory guarantees relating to the supply of goods to consumers. They include the guarantee offered by s 54 that goods supplied in trade or commerce to a consumer otherwise than by way of sale by auction are "of acceptable quality". Subsection 54(2) provides that goods are of acceptable quality if they are as:
(a) fit for all the purposes for which goods of that kind are commonly supplied; and
(b) acceptable in appearance and finish; and
(c) free from defects; and
(d) safe; and
(e) durable;
as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods), would regard as acceptable having regard to the matters in subsection (3).
7 The matters listed in subsection (3) for the purposes of subsection (2) are:
(a) the nature of the goods; and
(b) the price of the goods (if relevant); and
(c) any statements made about the goods on any packaging or label on the goods; and
(d) any representation made about the goods by the supplier or manufacturer of the goods; and
(e) any other relevant circumstances relating to the supply of the goods.
8 In these proceedings the television set and each of the two replacements were new. That circumstance raised a question about whether in each case the appliance was supplied in breach of the above guarantee. It was possible, too, that the problems Mr Mouat encountered with the televisions were "major failures" within the meaning of s 260 of the ACL. Had that been the case, Mr Mouat having rejected the appliances, Camavit would have been obliged to comply with his request for a refund. Section 263(4) relevantly states:
The supplier must, in accordance with an election made by the consumer;
(a) refund:
(i) any money paid by the consumer for the goods; and
(ii) an amount that is equal to the value of any other consideration provided by the consumer for the goods; or
(b) replace the rejected goods with goods of the same type and of similar value, if such goods are reasonably available to the supplier.
9 Regardless of whether the defects of which Mr Mouat complained were "major failures", if the Mouats had suffered a loss, the loss was reasonably foreseeable and was caused by one or more of the contraventions, Camavit would have been liable to compensate them. Section 259 of the ACL gives a consumer a right to damages in these circumstances.
10 In the present case there is no evidence that any of the products sold or supplied to Mr Mouat were not of acceptable quality. Indeed, there is no evidence that there was in fact a defect with any of the television sets. Nor is there evidence that any consumer suffered loss or damage as a result of one or more of the contraventions. The agreed facts, however, establish that an employee or agent of Camavit made representations to both Mr and Mrs Mouat about their consumer rights which were false or misleading or likely to mislead or deceive them about their rights to legal remedies. Section 139B(2) of the CCA relevantly provides that any conduct engaged in on or on behalf of a body corporate by an employee or agent of the body corporate within the scope of his or her actual or apparent authority is taken for the purposes of the ACL to have been engaged in by the body corporate as well.
11 I now turn to the relief sought.
12 First, the claim for declaratory relief. Section 21 of the Federal Court of Australia Act 1976 (Cth) gives the Court the power to make declarations of right. The discretion is a broad one. While "[i]t is neither possible nor desirable to fetter [the Court's discretion] by laying down rules as to the manner of its exercise" (Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437 per Gibbs J), the discretion "is confined by the considerations which mark out the boundaries of judicial power" (Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 582). Consequently,
(a) the declaration must be directed to the resolution of a legal controversy and not to the determination of an abstract or hypothetical question;
(b) the applicant must have "a real interest";
(c) the declaration must produce foreseeable consequences for the parties; and
(d) there must be a proper contradictor.
13 I accept the parties' submissions that these conditions are satisfied in this case. The proposed declaration relates to conduct that contravenes the ACL. It is directed to the resolution of a legal controversy rather than to an abstract or hypothetical question. As the public regulator under the ACL the ACCC has a genuine interest in seeking the relief and there is a public interest in making the declaration. Camavit's conduct is the subject of the declaration and is therefore a proper contradictor (having made admissions that it has contravened the ACL). The declaration is appropriate because it serves to record the Court's disapproval of the contravening conduct, to vindicate the ACCC's claim that Camavit has contravened the ACL, and to inform consumers of the perils arising from Camavit's contravening conduct. It will assist the ACCC to carry out the duties conferred upon it by the CCA and deter other corporations from contravening the ACL. In its terms, the declarations provide sufficient indication of the manner in which and the reasons why the conduct complained of is unlawful.
14 Next, the parties are agreed upon an injunction. There is no doubt that the Court has power to make such an order. The terms of the injunction are neither vague nor imprecise and the continuing supervision of the Court is not required. The injunction is appropriate to deter a repetition of the conduct.
15 The ACL also confers on the Court the power to make orders in the nature of compliance training for the purpose of ensuring that a person who has engaged in contravening conduct of this kind does not engage in that or similar or related conduct during a maximum three year period. See s 246(2)(b). The agreed orders incorporate such an order. The order proposed is a proper one. The agreed orders also provide for a notice to be prominently displayed at points of sale summarising the consumer's rights under the ACL. That order, too, is both proper and desirable. The order is limited to a three year period but it is, in my opinion, highly desirable that Camavit continue to display the notice indefinitely.
16 Finally, there is the question of pecuniary penalties.
17 A contravention of s 18 of the ACL does not attract a pecuniary penalty. But a contravention of Pt 3-1 (including s 29) does. Section 224 of the ACL relevantly confers power on the Court to order that a person whom the Court is satisfied has contravened s 29 pay to the Commonwealth "such pecuniary penalty, in respect of each act or omission by the person … as the court determines to be appropriate". In the case of a body corporate the maximum penalty for each act or omission is $1.1 million: s 224(3), item 2.
18 Section 224(2), provides that in determining the appropriate pecuniary penalty the Court must have regard to all relevant matters, including:
(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 Ch 4 or Pt 5-2 to have engaged in any similar conduct.
19 As the parties submitted, the main object of the penalty under s 224 is deterrence, both general and specific. Consequently, the Court must fix a penalty which is sufficiently high so as not to be treated by the contravener or others who might otherwise be tempted to follow suit "as an acceptable cost of doing business" (SingTel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249; [2012] FCAFC 20 at [62]) and at a level which will be seen as eliminating any prospect of gain (Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited (2001) ATPR 41-815 at [13] (Finkelstein J)).
20 Other relevant considerations include whether or not a contravention was deliberate, systematic and/or covert; whether or not the contravention arose out of the conduct of senior management; the period over which the contravening conduct took place; whether the contravener has engaged in similar conduct in the past; the size and financial position of the contravener; whether the contravener has a corporate culture conducive to compliance with the legislation; and whether the contravener has shown the disposition to cooperate with the authorities responsible for the enforcement of the legislation. See Australian Competition and Consumer Commission v AGL Sales Pty Ltd [2013] FCA 1030 at [51]-[52] (Middleton J) and the authorities referred to therein.
21 In this case, the conduct consisted of four oral statements made by three sales representatives and a store manager on three separate occasions over a three month period. The statements related to a potentially faulty television set and two replacement sets. There is no evidence that the statements were made with an intention to mislead or deceive consumers or to misrepresent the existence, exclusion or effect of any warranty, guarantee, right or remedy. It is common ground, indeed I believe I can take judicial notice of the fact that every day in this country a large number of electrical appliances are purchased by consumers from retailers like Camavit. It is not unusual for consumers to return electrical appliances to retailers because, or because they believe that, the goods are faulty or were otherwise of unacceptable quality at the time of purchase.
22 As I indicated earlier, there is no evidence in this case of loss or damage to a consumer arising from the contravening conduct. Camavit has not previously been found by a court to have contravened any provision of the ACL or to have engaged in conduct similar to the contravening conduct. With the single exception of the statements made in response to Mr Mouat's enquiries in March 2012, there is no evidence of senior employee or managerial involvement. But the penalty imposed should be sufficient to encourage senior employees and management, not only of Camavit, but of other retailers to take appropriate steps to prevent contraventions of the ACL.
23 Camavit has provided some compliance training in relation to the consumer law provisions of the CCA of the kind described in general terms in the final paragraph of Annexure A. The circumstances of this case, however, demonstrate that that training was inadequate.
24 Camavit has agreed to put in place additional compliance measures. Indeed I was today informed that these measures had already started to be deployed. It has cooperated with the ACCC by admitting liability and by agreeing on both the facts and the orders. By doing so at a relatively early stage of the proceedings the company has ensured that costs have been kept to a minimum. The affected consumers have been spared the need to attend court and undergo cross-examination and precious court resources have been saved. These considerations entitle Camavit to a substantial discount.
25 Camavit is not a large enterprise. It has only been in business since about March 2010. It operates a single retail store. As at 18 November 2013 it had 25 employees engaged full-time, 8 part-time and 18 engaged on a casual basis. In the last two financial years its net annual profit averaged about $312,000. The proposed penalty represents, then, about 10% of the company's net annual profit. I do not regard the amount as oppressive and it is well within the range of penalties for this class of contravention. I note that in the other cases involving Harvey Norman franchisees to which I referred earlier in these reasons the penalties ranged from $28,000 to $32,000 and the circumstances in those cases were similar to those here.
26 I accept the joint submissions that it is appropriate to view the contraventions as a course of conduct, rather than as individual acts or omissions amounting to separate contraventions. The various representations were made over a period of about 12 weeks in 2012. The representations were made to one consumer and his wife. They were made in relation to one appliance and its replacements. Middleton J took a similar approach in HP Superstore, where the facts were similar. In that case, sales staff made four statements of the same kind on separate occasions to two consumers who had jointly purchased one laptop computer. In Salecomp seven oral statements over a period of eight or nine months to the one consumer, arising out of problems he had with a laptop computer, were treated as a single course of conduct.
27 I note that the parties have agreed to bear their own costs.
28 I therefore make the following declarations and orders: