LAWS 13015 Principles of Commercial Law: Study Guide Week 3 2016

LAWS13015 PRINCIPLES OF COMMERCIAL LAW

Study Guide Week 3

Version 2.01 - 2016

LAWS 13015 Principles of Commercial Law: Study Guide Week 3 2016

From the Course Coordinator

Welcome to the Topic Consumer Protection. You probably have studied the Australian Consumer Law (“ACL”) in other courses. I hope you see that my approach is somewhat different as I bring to the task my research into the judicial interpretation of statutory rules.

Australian Consumer Law is a lively and interesting topic that affects us all. It is also intensely political.

Dr Christopher Walshaw

I welcome your feedback and suggestions for future content. You can email me at .

Christopher Walshaw, Course coordinator, Principles of Commercial Law

Discipline of Law

School of Business and Law

CQUniversity Australia

Bruce Highway, Rockhampton,

QLD 4701

Telephone: +61 07 49 23 2741

Facebook: https://www.facebook.com/CQU-Law-192901937531609/

iTunesU: Colleges and Universities> CQUniversity

Website: http://www.cqu.edu.au/law

LAWS 13015 Principles of Commercial Law: Study Guide Week 3 2016

LAWS 13015 Principles of Commercial Law: Study Guide Week 3 2016 i

CONTENTS

CONSUMER PROTECTION 1

1 Preview 1

1.1 Objectives 1

1.2 Prescribed Reading 1

1.3 Additional Reading 2

1.4 Key Terms 2

2 Framework of the ACL 3

3 Misleading or deceptive conduct 4

3.1 Misleading or deceptive conduct – general approach 4

3.2 Misleading or deceptive conduct – some guidelines 5

4 Unconscionable conduct 8

4.1 Unconscionable conduct within the meaning of the unwritten law 8

4.2 Unconscionable conduct in the supply of goods or services to consumers 9

4.3 Unconscionable conduct in business transactions 10

4.4 Activity 1 10

5 Unfair contract terms 11

5.1 Activity 2 12

6 Specific false representation provisions 13

7 Unfair practices 13

7.1 Enforcement and remedies for contravention of the unfair practices provisions 14

8 Consumer Guarantees 16

9 Manufacturers’ liability for defective goods 19

10 Other consumer protection provisions 20

11 review 21

11.1 Tutorial Problems 21

11.2 Debrief 21

LAWS 13015 Principles of Commercial Law: Study Guide Week 1 2016 ii

CONSUMER PROTECTION

1  Preview

The Australian Consumer Law (“ACL”) is Schedule 2 of the Competition and Consumer Act 2010 (Cth). It is based on and largely incorporates the Trade Practices Act 1974 (Cth) and the Fair Trading Acts of various States, notably the Fair Trading Act 1989 (Qld). Now by agreement between the States, Territories and Commonwealth there is one uniform law that governs consumer transactions. The groundbreaking work of Lionel Murphy in the 1970s has stood the test of time and should not be overlooked. Surely he was a great Australian. A remarkable feature of the trade practices legislation is its combination of consumer protection with protection given to traders and the public generally against anti-competitive trade practices, one being a trade off against the other. Restrictive Trade Practices is the subject of the next Topic.

These two topics are intensely political and are at the interface of law and politics. Your study of these topics should enable you to make an intelligent contribution to the ongoing debate.

It will be seen that case law interpreting and applying the previous Trade Practices legislation is still useful. Some cases (such as the Google case discussed below) are still decided under TP legislation. Most of the key concepts have been retained and in the same words.

The consumer protection provisions of the former Trade Practices Act 1974 were generally directed towards conduct engaged in by corporations, since that Act was based on the Commonwealth’s power under the Constitution to make laws with respect to corporations: Constitution, s 51(xx). By contrast, the Australian Consumer Law has a much broader application to conduct engaged in by persons.

The Australian Consumer Law applies to conduct engaged in outside Australia by Australian citizens or persons who are ordinarily resident in Australia: Competition and Consumer Act 2010 (Cth), s 5(1)(c). The Act applies to natural persons engaged in conduct involving postal, telegraphic or telephonic services: Competition and Consumer Act 2010 (Cth), s 6(3). The Internet is a telegraphic or telephonic service: Australian Competition and Consumer Commission v Sensaslim Australia Pty Ltd (No 1) (2011) 196 FCR 566 at [17], [28] (telephonic); Australian Competition and Consumer Commission v Jutsen (No 3) (2011) 206 FCR 264 at [100] (telegraphic).

Essentially this Topic is a tour of the most important provisions of the ACL.

1.1  Objectives

After studying Topic 3 you should be able to:

·  Explain the framework and scope of the ACL;

·  Describe the prohibitions;

·  Describe the consumer guarantees and other provisions for the protection of consumers;

·  List and explain the enforcement provisions and remedies for breach of the ACL.

1.2  Prescribed Reading

·  Clive Turner, Australian Commercial Law (30th ed, 2015) Ch 17 (Turner).

·  Cases: there is no substitute for reading actual cases to get a “feel” for the content of the Topic. You will see that some cases are prescribed reading.

1.3  Additional Reading

·  Shayne Davenport and David Parker, Business and Law in Australia (2012) Ch 17 (Davenport).

·  Dilan Thampapillai and others, Australian Commercial Law (2015) Chs 11, 12, 13, 14, 15 and 16 (Thampapillai).

·  http://www.consumerlaw.gov.au/

·  http://consumerlaw.gov.au/the-australian-consumer-law/legislation/

·  http://www.austlii.edu.au/au/legis/cth/consol_act/caca2010265/sch2.html

·  See also the further reading set out in Turner at the end of Chap 17, pages 381-2.

1.4  Key Terms

The following are key terms for Topic 3. As with the Sale of Goods Acts the key terms set parameters for the application of the ACL.

·  Goods – goods are defined in the ACL as including (a) ships, aircraft and other vehicles, (b) animals, (c) minerals, trees and crops, whether on, under or attached to land or not, (d) gas and electricity, (e) computer software, (f) second-hand goods, and (g) any component or accessory to goods. Clearly the term includes (and may be broader than) goods for the purpose of the Sale of Goods Acts and again tangibility and movability are characteristics of goods. Recent cases discuss “goods” with reference to both topics.

·  Services – the ACL provides that “services” includes:

(a)  any rights (including rights in relation to, and interests in, real or personal property), benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce; and

(b)  without limiting paragraph(a), the rights, benefits, privileges or facilities that are, or are to be, provided, granted or conferred under:

i.  a contract for or in relation to the performance of work (including work of a professional nature), whether with or without the supply of goods; or

ii.  a contract for or in relation to the provision of, or the use or enjoyment of facilities for, amusement, entertainment, recreation or instruction; or

iii.  contract for or in relation to the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; or

iv.  a contract of insurance; or

v.  a contract between a banker and a customer of the banker entered into in the course of the carrying on by the banker of the business of banking; or

vi.  any contract for or in relation to the lending of money;

but does not include rights or benefits being the supply of goods or the performance of work under a contract of service.

Whilst the definition of services is very broad it must be noted that it will only extend to professional or other services that are provided in trade or commerce. Also there are express modifications in respect of transportation and insurance services in respect of the consumer guarantees discussed below.

·  Consumer – a person acquires goods as a consumer if the amount payable for the goods did not exceed $40,000, or if more than that sum, of a kind ordinarily acquired for personal, domestic or household use or consumption or the goods consist of a vehicle or trailer acquired for use principally in the transport of goods on public roads.

A person acquires services as a consumer if, and only if the amount paid or payable for the services did not exceed $40,000, or if for greater amount and the services were of a kind ordinarily acquired for personal, domestic or household use or consumption.

In both respects there are specific rules for calculating the applicable amount.

·  Trade or commerce – means trade or commerce within Australia; or trade or commerce between Australia and places outside Australia; and includes any business or professional activity (whether or not carried on for profit). When related to conduct it concerns activities that can be characterised as being in the nature of trade or commerce as opposed to purely private arrangements. See also Turner [17.50]. Trade or commerce characterises the conduct and not the person alleged to be in breach.

2  Framework of the ACL

The ACL covers the following topics:

·  Prohibition of misleading and deceptive conduct;

·  Prohibition of unconscionable conduct;

·  Prohibition of unfair contract terms;

·  Specific false representation provisions;

·  Prohibition of other unfair practices;

·  Enforcement and remedies for contravention of the unfair practices provisions;

·  Consumer guarantees;

·  Manufacturers’ liability for defective goods; and

·  Other consumer protection provisions (some of which are found in other related legislation).

The ACL is a document with which you should become familiar. It is divided into five convenient chapters:

Chapter 1 provides definitions and interpretation provisions about consumer law concepts.

Chapter 2 provides general protections which create standards of business conduct in the market and includes:

·  A prohibition of misleading and deceptive conduct in trade or commerce;

·  A prohibition of unconscionable conduct in trade or commerce and specific prohibitions of unconscionable conduct in consumer and some business transactions; and

·  The inclusion of unfair contract terms in consumer contracts void.

Chapter 3 provides protection in respect of specific forms of conduct such as:

·  Unfair practices in trade or commerce;

·  Unsolicited consumer agreements such as door-to-door sales and telemarketing;

·  Provision of non-excludable warranties into consumer transactions for goods or services; and

·  Provision of standards for safety of consumer goods and product and related services and for rendering manufacturers liable for goods with safety defects.

Chapter 4 sets out consequences for breach of the ACL including the provision of criminal offences relating to certain matters covered in Chapter 3.

Chapter 5 provides for national enforcement powers and remedies.

Source: http://www.consumerlaw.gov.au/content/Content.aspx?doc=home.htm

3  Misleading or deceptive conduct

Section 18 (1) ACL provides that “a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”. This is a replication of s 52 of the former Trade Practices Act 1974 (Cth) with the exception that “person” has been substituted for “corporation”, so following the Fair Trading Acts.

There is no precise definition of “misleading or deceptive”. Each case is decided on its own facts and the following material is a guide only to application of s 18 ACL, notwithstanding the attempts made by courts to interpret s 18 in advance of application. In effect previous cases provide analogous material that will be of more or less help in deciding a particular case. There is a tendency by courts and academics to set out “principles” often under discrete headings but these must be treated with some caution. They are not rules that provide a substitute for the words of s 18. This is particularly so because of what has been said recently by the High Court of Australia in two important cases that so far have been rather neglected.

3.1  Misleading or deceptive conduct – general approach

In nearly 40 years of application of rules equivalent to s 18, the High Court of Australia has come to recognize that the task is “[t]he application of a statutory text, expressed in general terms, to particular facts.” [Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [80]]. This approach was approved recently in Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304. French CJ in his treatment of an equivalent of s 18 describes the court’s task as one of “characterisation of the conduct.” French CJ sets out the relevant statutory framework and then considers the characterisation of conduct as misleading or deceptive. His description of the interpretative process is instructive and includes the following (references omitted):

Characterisation is a task that generally requires consideration of whether the impugned conduct viewed as a whole has a tendency to lead a person into error. … it involves consideration of a notional cause and effect relationship between the conduct and the state of mind of the relevant person or class of persons. The test is necessarily objective.

Following a description of the “practical distinction” between the approach to characterisation of conduct as misleading or deceptive when the public is involved on the one hand and where the conduct occurs in dealings between individuals on the other the following advice is given:

… In the case of an individual it is not necessary that he or she be reconstructed into a hypothetical “ordinary” person. Characterisation may proceed by reference to the circumstances and context of the questioned conduct. The state of knowledge of the person to whom the conduct is directed may be relevant, at least in so far as it relates to the context and circumstances of the conduct.

It is important in considering whether conduct is misleading or deceptive to identify clearly the conduct to be characterized …

In a joint judgment in the same case Gummow, Hayne, Heydon and Kiefel JJ expressly approve a citation from the judgment of McHugh J in Butcher v Lachlan Elder Realty Pty Ltd:

The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether contravention of s 52 has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the corporation’s conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct …