Summary Notes – Consumer Law

• The Australian Consumer Law (ACL) is a Schedule to the Competition and Consumer
Act 2010 (Cth).
• S3 of the ACL states that a person is a consumer if they have acquired goods or
services:
– of a kind ordinarily acquired for personal, domestic or household use or
consumption; and
– that have not been acquired for the purpose of re-supply or for use in a
manufacturing process.

Section 18 – Misleading and Deceptive Conduct

Section 18 (1) of the ACL states: ‘a person must not, in trade or commerce, engage in
conduct that is misleading or deceptive or is likely to mislead or deceive’.
• Under s18, intention or fault is irrelevant (plaintiff need not show intention) and
liability cannot be avoided by use of a disclaimer.
See: ACCC v Telstra (2007).
The range of remedies provided by the ACL for breach of s18 is much wider than that
available at common law for misrepresentation or breach of contract – including injunctions
(s 232), damages (s 236) and compensatory orders under ACL Ch5
• The words in s18 do not restrict who can bring an action.
• s18 can be relied upon not only by consumers but also by members of the public,
lobby and public interest groups, other businesses and competitors.

Requirement 1: ‘A person must not’

• Can be either a person, an incorporated body or an unincorporated business entity.

Requirement 2: ‘in Trade or Commerce’

• Trade and commerce are defined under section 2 of the ACL
• ‘Trade’ and ‘Commerce’ are ordinary terms which describe all the mutual
communing, the negotiations verbal and by correspondence, the bargain, the
transport, and the delivery which comprised commercial arrangements.

In Trade or Commerce
Case Re Ku-Ring-Gai Co-operative Building Society (1978).

Requirement 3: ‘Engage in Conduct’

• Section 2(2) of the CCA defines ‘engaging in conduct’ as ‘doing or refusing to do an
act’.
• A person will ‘engage in conduct’ if they make a statement, claim or promise,
perform an action, or refuse to do any of these things.
• It includes both actions (doing things) or non-actions (refusing to do things) if the
definition applies.
• Important: in certain circumstances, even silence can be conduct.
Engage in Conduct
 Case Henjo Investments v Collins (1988)
FACTS:
Henjo investments was negotiating the sale of a restaurant to Collins.
When Collins viewed the restaurant, it had seating for 128 people.
However, the restaurant licence limited the seating capacity to only 84
people. When following the sale Collins learned of the limit in the
licence, it commenced proceedings against Henjo.

HELD:
The court decided that Henio’s silence on that point was misleading
and deceptive conduct.

Requirement 4: ‘Misleading or Deceptive’

Weitman v Katies (1977) defined the terms as follows:
– ‘mislead’: to lead astray in action or conduct; to lead into error; to cause to
err.
– ‘deceive’: to cause to believe what is false; to mislead as to a matter of fact;
to lead into error; to impose upon, delude, take in.
– The conduct will be caught under s18 not only if it has actually misled or
deceived others, but even if it has not actually misled or deceived anyone yet,
it still has the potential or likelihood to do so.

Taco v Taco Bell – 2 Tests

The two tests come from: Taco v Taco Bell (1982). They are then assisted by the test in
Annand & Thompson v TPC (1979).
• First, it is necessary to identify the relevant section (or sections) of the public by
reference to whom the question of whether the conduct is, or is likely to be,
misleading or deceptive falls to be tested. ASK: who is the relevant target
group/audience whom the defendant’s conduct targeted or directed at?
Second, once the relevant section of the public is established, the matter is to be considered
by reference to all who come within it, including the astute and the gullible, the intelligent
and the not so intelligent, the well-educated as well as the poorly educated, men and
women of various ages pursuing a variety of vocations

In relation to the second test in Taco Bell:

• Broadly speaking, it is fair to say that the question is to be tested by the effect on a
person, not particularly intelligent or well-informed, but perhaps of somewhat less
than average intelligence and background knowledge, although the test is not to be
determined by the effect on a person who is, eg. quite unusually stupid.
• Only a small % of the target audience needs to be misled or deceived or be capable
of being misled or deceived.

S4 ACL – Misleading Representations with respect to Future Matters

Section 18 may apply to future promises (s4 ACL) – if:
 1. A person makes a representation with respect to any future matter (including the
doing of, or the refusing to do, any act); and
2. The person does not have reasonable grounds for making the representation;
3. The representation is taken, for the purposes of this Schedule, to be misleading.

Misleading Representations
Case ACCC v Powerballwin.com (2010)
FACTS:
Powerballwin.com offered a 100% guarantee that it could correctly
predict Powerball numbers. The company set up a website and
distributed 163,000 leaflets to the household around Australia claiming
‘an amazing discovery that disputes the theory of random probability
and has totally shocked the experts. The scheme required consumers
to pay $59 subscription fee in order to receive a series of predicted
numbers to help win all divisions. The predicted numbers failed to
produce any dividend for subscribers.

HELD:
The court decided that Powerballwin had engaged in misleading or
deceptive conduct: it was impossible to predict future Powerball
numbers. It restrained the further promotion of the scheme and
ordered that Powerballwin pay $48,163 compensation to subscribers
and leaflet distributors and pay the ACCC costs.

S29 – False Representations

S29 ACL – 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… make certain false and misleading representations.
Can be used by Competitors (in conjunction with s18).

Includes making false and misleading representations:

a) That its goods are of a particular standard, quality, value, grade, composition, style or
model or have had a particular history or particular previous use.
See: ACCC V Cadbury (2004);
b) That its services are of a particular standard, quality, value or grade;
c) That its goods are new;
g) That the goods or services have a sponsorship, approval, performance characteristics,
accessories, uses or benefits. See: Hartnell v Sharp (1975);
i) With respect to the price of its goods or services;
k) Concerning the place of origin of its goods.

ACL Implied Consumer Guarantees – S54 (Acceptable Quality)

ACL s54 – In every contract for the supply of goods to a consumer in trade or commerce
(other than by auction), there is a guarantee that the goods will be of acceptable quality
(s2):
 – fit for all the purposes for which goods of that kind are commonly supplied;
and
– acceptable in appearance and finish; and
– free from defects; and
– safe; and
– 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.

Acceptable Quality
Case Licciardo v Plush Think Sofas Pty Ltd [2015] VCAT 2044

Mitchell v Oz Design Furniture Pty Ltd [2016] VCAT 108

ACL Implied Consumer Guarantees – S55 (Fit for Purpose)

(1)– If a person supplies, in trade or commerce, goods to a consumer… there is a guarantee
that the goods are reasonably fit for any disclosed purpose, and for any purpose for which
the supplier represents that they are reasonably fit.
(2) A disclosed purpose is a particular purpose (whether or not that purpose is a purpose for
which the goods are commonly supplied) for which the goods are being acquired by the
consumer and: the consumer makes known, expressly or by implication, to:
(a) the supplier, or a person by whom any prior negotiations or arrangements in
relation to the acquisition of the goods were conducted or made (Eg. agent); or
(b) to the manufacturer.
(3) This section does not apply if the circumstances show that the consumer did not rely on,
or that it was unreasonable for the consumer to rely on, the skill or judgment of the
supplier, manufacturer etc.

Fit for Purpose

Case ACCC v C.I. & Co Pty Ltd [2010] FCA 1511
Facts:
• Court penalised wholesaler when they misled the public by
labelling and selling cartons of eggs labelled 'free range' when a
substantial proportion of the eggs were not free range.
• North J: “the conduct involved a high level of dishonesty. The
conduct was also extremely difficult to detect because, once the
eggs were placed in the cartons, it was impossible to determine
whether they were free range or not… the 2nd Res must have
known that it was dishonest to a high degree.
• “The conduct amounts to a cruel deception of consumers who
seek out free range eggs as a matter of principle.”
• Held: The wholesaler infringed (under old Act): s52 (M&D), s53
(false rep), s55 (fit for purpose).
Decision:
• Justice North noted that the maximum penalty for each
contravention is $220,000 and stated: “it is unlikely that other
 operators in the industry could be in any doubt about the court’s
view of the gravity of the deception visited upon unsuspecting
and often well motivated consumers... the quantum of the
penalty should signal to the suppliers of eggs that to mislabel
free range eggs will be viewed as a very serious contravention of
the Act, attracting severe penalties, even for a short period of
trading.”

Unconscionable Conduct – S20

Unconscionable conduct within the meaning of the unwritten law.
• s20: A person must not, in trade or commerce, engage in conduct that is
unconscionable within the meaning of the unwritten law from time to time.
• This section applies to ‘unconscionable conduct’ of a corporation that is recognized
now and in the future as part of the common law and equitable principles developed
by of the Courts such as Cth v Amadio and any future developments.
• Note: Section 20 does not apply where the conduct of the person falls specifically
within ss21 and 22.

Section 20
Case CTH v Amadio

Unconscionable Conduct – S21

• Considers unconscionable conduct in connection with goods or services.
• Section 21: A person must not, in trade or commerce, in connection with:
(a) the supply or possible supply of goods or services to a person; or
(b) the acquisition or possible acquisition of goods or services from a person…
engage in conduct that is, in all the circumstances, unconscionable.
• S21 protection generally limited to consumers and small business – not listed public
companies

• S21(4): It is the intention of the Parliament that: (c) In considering whether conduct
to which a contract relates is unconscionable, a Court’s consideration of the contract
may include consideration of:
(i) The terms of the contract; and
(ii) The manner in which and the extent to which the contract is carried out;
and is not limited to consideration of the circumstances relating to formation of the contract

Unconscionable Conduct – S22

• Section 22: Looks at a range of matters that a Court may consider determining
whether a person has contravened section 21.
• Section 22 (1) and (2) takes into account both procedural and substantive
unconscionability, to determine a breach of s21, including:
 - Relative strengths of the bargaining positions;
- Imbalance in the terms (favours stronger party);
- Whether the consumer was able to understand any related document;
- Whether a party has a contractual right to vary unilaterally a term or
condition of a contract.

Examples of Procedural Unconscionability

Inequality of bargaining power between parties due to factors like age, infirmity of mind or
illiteracy;
Harsh or oppressive behaviour (undue influence or pressure); unfair tactics used by the
stronger party.
Section 22 (1) (a), (c) and (d) and (2) (a), (c) and (d) deal with procedural unconscionability.
IMPORTANT: The equitable doctrine in Cth v Amadio focuses on procedural
unconscionability.

Examples of Substantive Unconscionability

1. Imbalance in the terms (leaning towards the stronger party);
2. Harsh, oppressive or unreasonable terms;
3. Exclusion clauses or excessive payment clauses advantaging the stronger party;
4. Overall terms of the contract that operate to benefit the stronger party and are
unduly one-sided from the perspective of the weaker party;
• Section 22 (1) (b), (j) and (k) and (2) (b), (j) and (k) provide examples of substantive
unconscionability.

Unfair Terms – ACL

Sections: 23, 24, 25, 27.
A term of a contract will be unfair, in contravention of ACL s23 and therefore void if:
1. The contract is a consumer contract;
2. The contract is a standard form contract; and
3. The term is unfair.

Consumer contract: s23(3) – a contract for the supply of goods, services or an interest in
land to an individual whose acquisition of the goods, services or interest is wholly or
predominantly for personal, domestic or household use or consumption;
Note: not applicable when contract is for business use.

Standard form contract: s27 – Not individually negotiated for each customer– the same
standard terms for all?
s27(2) sets out matters to determine if a contract is a standard form contract or not.

Unfair term: S24(1) – a term of a consumer contract is ‘unfair’ if:

1. It would cause a significant imbalance in the parties’ rights and obligations arising
under the contract – it has to be significant, not minor or trivial;
2. It is not reasonably necessary to protect the legitimate interests of the party who
would be advantaged by the term. Businesses do have the right to protect their
 legitimate interests, but was this a legitimate interest that was reasonably necessary
to protect in the circumstances;
3. It would cause detriment (whether financial or otherwise) to a party if it were to be
applied or relied on – often financial but it could also be inconvenience, delay or
distress.

Unfair Terms – possible defence

• Section 24 (2): In determining whether a term of a contract is unfair under ss(1), a
court may take into account such matters as it thinks relevant, but must take into
account the following:
                     (a)  the extent to which the term is transparent;
                     (b)  the contract as a whole.
(3) A term is transparent if the term is:
(a) expressed in reasonably plain language; and
(b) legible; and
(c) presented clearly; and
(d) readily available to any party affected by the term

Remedies for breach of ACL

Remedies that can be granted by a court for contravention of the ACL include:
• Pecuniary penalties;
• Rescission of contract;
• Injunctions (s232);
• An order that the business pay damages to any person who has suffered loss
because of the contravention (S236);
• A compensation order for injured persons;
• An order declaring a contract void, varying a contract, refusing to enforce a contract,
ordering a refund, ordering compensation, ordering repair of the goods, or ordering
the provision of services;
• Non-punitive orders including orders directing the business to perform a community
service or to establish compliance and education programs for its employees;
• An adverse publicity order; and
• An order disqualifying a person from managing a corporation.
• The ACCC may take investigative, administrative or court actions against parties in
breach of the ACL and the CCA.