Australian Consumer Law Tutorial Answers

Studmaster Pty Ltd was a landlord that owned a shopping complex in Bourke Street, Melbourne. Mrs Tran operated the “Vietnamese Lunch Box” outlet in the food court. She had little ability to speak or read English, which the representatives for Studmaster knew about. Studmaster proposed a three year renewal of her lease at $48,000 per annum plus GST for the first year and CPI increments in the second and third years.

A representative for Studmaster told Mrs Tran that:

• “We believe the new rent is very reasonable and below the market value”; and • “The rent is lower than the rental paid by other tenants in the Food Court”

Both statements were incorrect. Studmaster gave Mrs Tran 7 days to agree to the lease renewal, but provided no reason for giving this limited time frame. Advise Mrs Tran as to whether Studmaster Pty Ltd has breached the Competition and Consumer Act 2010 (previously referred to as Trade Practices Act 1974 (Cth)) and if so, her available remedies.

Issue: Were the statements misleading or deceptive in breach of the Australian Consumer Law?

Law:

• Section 18, Schedule 2 to the Competition and Consumer Act 2010 (Cth) (or alternatively you can say Section 18 Australian Consumer Law which is the title for Schedule 2) • Section 4 (“presumption of misleading”)

• Eveready Australia Pty Ltd v Gillette Australia Pty Ltd OR Taco Company of Aust Inc v Taco Bell Pty Ltd (“objective test”)

Application:

• Explain which of the statements was an opinion and why the law presumes it was misleading (ie was there any basis for making the opinion?) • Apply the objective test to the second statement made by the Studmaster representative. In particular: (what will be the target market and why would a reasonable person from that target market be misled or deceived?)

Issue: Did Studmaster engage in unconscionable conduct?

Law:

• Section 22 Australian Consumer Law
• Miller v Gunther & Ors OR Commercial Bank of Australia v Amadio

Application:

• Explain why section 21 and not section 20 applies
• Explain why Studmasters’ conduct was in trade or commerce • Explain what the conduct was and why it was unconscionable, with reference to the factors listed in section 22 of the Australian Consumer Law. In particular: o The superior bargaining position of Studmaster

o Ability to understand documents
o Undue pressure and tactics used

Issue: Did Studmaster make a false or misleading representation?

Law:

• Section 29(1)(i) Australian Consumer Law

Application:

• Explain why the statements were false regarding the price of a service, in particular noting what the relevant price is and what the service is in the question.

Issue: What are the remedies?

Law: Section 236 (damages); Section 232 (injunction); Section 243 (other orders)

Application:

• Explain the remedies that Mrs Tran would be seeking as you are advising her and not the ACCC. In particular: o Explain what an injunction would do and why Mrs Tran would want this remedy; o Explain when Mrs Tran would be entitled to damages and how damages would be calculated o Explain when Mrs Tran would want to vary the contract and what the variation would be o Explain when Mrs Tran would want to void the contract and what the effect of voiding the contract would be Conclusion:

• Studmaster has engaged in misleading and deceptive conduct, unconscionable conduct and made a false or misleading representation in respect of the price of a service. Mrs Tran can seek a variety of remedies including damages, fine and injunction.

Note to students: Facts based on the decision of ACCC v Dukemaster Pty Ltd

QUESTION 2

Waverley Woollen Mills Pty Ltd (“WWM”) sells jumpers under the “Work Wear” brand. WWM labelled jumpers as a “Product of Australia”. Fibre for the jumpers was spun in Australia, but the jumpers were woven in Vietnam and imported into Australia. Advise ACCC.

Issue: Has Waverley Woollen Mills breached the Australian Consumer Law?

Law:

• Section 18 (“misleading or deceptive conduct”)
• Eveready Australia Pty Ltd v Gillette Australia Pty Ltd OR Taco Company of Aust Inc v Taco Bell Pty Ltd (“objective test”) • Section 29(1)(k) (“false or misleading representation concerning the place of origin of the goods”) • Netcomm (Aust) v Dataplex Pty Ltd (p 616 of textbook)

Application:

• Explain what “place of origin” means with reference to the discussion at the bottom of p 615 top of p 616 of the textbook • Explain why the label “product of australia” was misleading as to the place of origin of the jumpers. • Apply the objective test to explain why the woollen jumpers were misleading under section 18. In particular identify the target market and why a reasonable person would be misled about the label “Product of Australia”.

Issue: What are the remedies?

Law:

• Section 232 (injunction); Section 246 (corrective advertising; management to undertake training); Section 151 (fine); Section 218 (court enforceable undertakings)

Application:

• Explain that the remedies can be covered in court enforceable undertakings or ordered by the Court. • Explain what an injunction and corrective advertising would do • Explain the maximum penalty of a fine for WWM and why the ACCC can pursue a fine.

Conclusion

WWM has made a false representation concerning the label of the woollen jumper which enables the ACCC to pursue a variety of remedies.

QUESTION 3

New Roofs Ltd, a company which renovates tiled roofs for houses, employed Jack as their salesman. Jack attended the home of Colin Farrell to promote New Roofs Ltd’s roof renovations. Colin was a 75 year old disability pensioner, suffering from severe arthritis and blindness in one eye due to his war service in Vietnam. Colin’s disabilities prevented him from writing, and he found it difficult to read. Jack was aware of Colin’s medical conditions. Jack filled in the roof renovation contract on behalf of Colin. Jack did not recommend that Colin get independent advice. Jack’s conduct towards Colin was overbearing as he wished to make the sale so that he would win “Salesperson of the Month”.

Issue: Did New Roofs Ltd engage in unconscionable conduct?

Law:

• Section 21 Australian Consumer Law

• ACCC v Lux Pty Ltd

Application:

• Explain why section 21 applies and not section 20

• Explain what the conduct was and why it was unconscionable with respect to the unconscionable factors in particular:

o Bargaining strengths of supplier and consumer:

o Understanding of any documents relating to the supply of services:

o Whether undue influence or pressure exerted or unfair tactics used against the consumer:

Issue: What are the remedies?

Law: Section 232 (injunction); Section 243 (other orders)

Application:

• Explain what an injunction would do in this case
• Explain when Colin would want to void or vary the contract and what the effect of voiding the contract would be or alternatively varying the contract • Explain when Colin would want to obtain a refund for money paid to New Roofs Ltd

Conclusion:

New Roofs Ltd engaged in unconscionable conduct which entitles Colin to various remedies including voiding of the contract and refund of any money paid for the roof renovations.

QUESTION 4 (SHORT ANSWER)

Cheap-as-chips Pty Ltd sold pairs of socks labelled “Pure Cotton” for $1.99 each. The socks, in fact, were composed of only 77.9% cotton, the remainder of the sock being made from polyester.

Answer: Breach s. 29(1)(a) – regarding the composition of the sock, as Cheap-as- chips Pty Ltd, a company has commercially supplied (sold) the goods and has falsely represented that the goods are of a particular composition. The socks are said to be “Pure cotton” being 100% cotton, whereas the socks are only composed of 77.9% cotton. Also a breach of s. 18 as the company in selling the socks has advertised them as “pure cotton” so that the ordinary reasonable consumer (Taco Bell Case) would believe the socks are manufactured of 100% cotton.

QUESTION 5 (SHORT ANSWER)

Rand Ltd sold calculators with a pamphlet stating that calculators carried a “one-year warranty”. In actual fact the warranty period was only 90 days.

Answer: Breach s.29(1)(m) as Rand Ltd, a corporation has in selling the goods made a false representation concerning the existence of the warranty. Rand Ltd represented that there was a 12 month warranty, when there was not. The warranty only exists for 90 days. Again, also consider breach of s.18 as the ordinary reasonable consumer (Taco Bell Case) would consider that that the warranty period was of greater duration than it actually was.

QUESTION 6 (SHORT ANSWER)

Barbara wanted to clean her driveway by removing dirt and oil stains. She obtained a product called “Eradicate” manufactured by No Stains Ltd from her local hardware store. The instructions on the Eradicate bottle did not warn against exposing the product to direct sunlight. Barbara poured the product over her driveway. Exposure to the sunlight caused a chemical reaction creating an acidic surface over the driveway. Barbara was injured when her feet were badly burned.

Answer: No Stains Ltd has breached section 138 ACL by manufacturing a defective product causing injury to Barbara. The defect is the failure to provide any instructions or warnings on the product regarding exposure to sunlight would amount to a safety defect (s 9 ACL). The manufacturer should have known that product would be used indoors and outdoors for cleaning purposes (case: Glendale Chemical Products Pty Ltd v ACCC).