Supply of Goods and Services
Module 4
Summer 2010-2011
©MNoonan2010
This presentation and Copyright therein is the
property of Maureen Noonan and is prepared
for the benefit of students enrolled in the
Commercial Transactions course conducted by
the Law Extension Committee and is available
for their individual study. Any other use or
reproduction, including reproduction by those
students for sale without consent is prohibited.
©MNoonan2010
Sale/Supply of Goods and Services
In modules 4, 5and 6, we discuss
• The Contract for Sale/Supply of Goods and/or Services
• Conduct surrounding the supply.
• Relevant Statutory provisions which impose terms into contracts
for supply (SOGA), provide statutory remedies for breach of
particular provisions (ACL and TPA) or affect interpretation of
those contracts
At the end of these 3 modules, we will be able to advise a client on the
appropriate legal action to resolve their problem:
--in breach of contract where there is dissatisfaction by either party,
--actions for breach of specific statutory rights with access to statutory
remedies and
--whether other legal solutions may be available e.g. negligence.
--bearing in mind that there may also be risk management strategies,
practical solutions and ADR that are relevant.
©MNoonan2010
Legislation relating to the sale/supply of
goods and services
What is required knowledge of legislation?:
A good understanding of and ability to work with:
Most provisions of the Sale of Goods Act (NSW)
Various provisions of: Australian Consumer Law (most being the
same as, or similar to, those previously contained in Trade Practices Act and State
Fair Trading Acts, but note different legal structure and new provisions regarding
unfair standard form consumer contracts)
Sale of Goods (Vienna Convention) Act (NSW) for international sales
Limited other references
In Summer 2010-2011 Semester, Consumer Credit will not be covered.
©MNoonan2010
OVERVIEW
Our law is based on FREEDOM OF CONTRACT and it is up to the parties to
negotiate their bargain in most Business to Business (B2B) contracts.
The LAW OF CONTRACT applies to all contracts formed within Australia.
There can be ABUSE of power differentials.
Within Australia, there is a broad regulatory regime to curb certain
uncompetitive behaviour, unacceptable practices and marketing abuses (in
both B2B and Business to Consumer (B2C) transactions.
B2C Contracts can be very one sided with a large differential in bargaining
power. There are extensive provisions regulating many aspects of B2C
transactions. The latest of these are contained in the Australian Consumer
Law. (ACL)
There is some crossover between the laws regulating B2B transactions and
B2C transactions. E.g. the law of contract applies to all contracts,
misleading and deceptive conduct is unlawful in both. The Sale of Goods
Act applies to all “sales” of “goods” (whether they be B2B or B2C).
©MNoonan2010
Types of transactions considered
B2B In module 5, we will concentrate on
transactions between businesses and typically
be concerned with manufacturers,
importers/exporters, wholesalers, retailers,
and distributors of goods or services.
B2C In module 6, we will concentrate on product
and service liability in transactions between
business and consumers within Australia.
Note that there is some crossover
---small business may also be a “consumer”
©MNoonan2010
PRODUCT/SERVICE LIABILITY ANALYSIS
BREACH OF CONTRACT AGAINST SUPPLIER
including EXPRESS conditions and warranties
and/or those IMPLIED by common law, Statute
(SOGA, Vienna Convention), custom.
BREACH OF STATUTE (ACL)
UNFAIR PRACTICES Misleading, deceptive,
unconscionable conduct (ACL)
TORT- MISREPRESENTATION, NEGLIGENCE,
BAILMENT
©MNoonan2010
Change in the law 2011
As of 1/1/2011, many statutory provisions formerly
contained in the Trade Practices Act or State Fair Trading
Acts will be contained in the Australian Consumer Law
(ACL) or ASIC Act for financial transactions, in the same
or similar terms. There are also some new provisions.
Students will be expected to answer examination
questions using the new law but may find judgements or
text analysis referring to the TPA useful in reasoning or
argument if provisions are the same or similar, as there
are obviously no decided cases under the new law.
©MNoonan2010
Change in the law 2011
An important conceptual change between the
ACL and TPA
The TPA mimicked the SOGA implied terms,
so that a remedy for breach of these was in
contract (not Statute)-as with the SOGA.
The ACL makes these guarantees (not
implied terms) and subject to Statutory
remedies, rather than contract.
©MNoonan2010
PRODUCT AND SERVICE PRODUCT LIABILITY 2010
FACTS
LAW
REMEDIES
Goods/services
unsatisfactory
Consumer sale?
Formation of contract -breach
Express terms
Implied-SOGA, TPA -Div 2,2A
TPA s. 52 misleading,deceptive
Intnl sale? Vienna Convention
Tort
Financial Services? ASIC Act
Action in contract
Rescission/Damages
Equitable
TPA Orders
IT general law
Fines ACCC
Goods defective
causing loss, injury
Defendant taken
advantage of
serious inequality
harsh agreement
TPA Part VA manufacturer liability TPA remedies
defective goods
Unconscionable provisions
TPA remedies
51AA, 51AB, 51AC TPA
Contracts Review Act
Consumer Credit Act
Untruthful representation
Change in possession
without transfer of title
Tort/s. 52 TPA
Damages/TPA
Bailment?
Damages
©MNoonan2010
PRODUCT AND SERVICE LIABILITY B2B 2011
FACTS
LAW
REMEDIES
Goods/services
Existence Contract?
Breach contract
Express terms
Implied terms-SOGA,custom
Intnl sale? Vienna Conventn
Financial Services?
Action in contract
Rescission
Damages
Equitable
Fines ACCC
Unsatisfactory
Defendant taken
advantage of
serious inequality
harsh agreement
Untruthful
representation
Change in possession
without transfer of title
Misleading,
deceptive conduct
Small business?
Tort
Bailment?
Damages
Damages
©MNoonan2010
PRODUCT/SERVICE LIABILITY B2C 2011
FACTS
LAW
REMEDIES
Goods/services
unsatisfactory
Consumer sale?
Formation of contract -breach
Express terms
Implied-SOGA,
ACL Guarantees,Orders
Intnl sale? Vienna Convention
Financial Services?
Action in contract
Rescission/Damages
Equitable
Statutory
Fines,orders ACCC
Goods defective
causing loss, injury
ACL Part 3-5
defective goods
ACL remedies
Defendant taken
ACL misleading,deceptive
ACL remedies
advantage of
Unconscionable provisions
inequality
Unfair contracts
Untruthful representation Tort/ACL
Damages/ACL
remedies
Change in possession
without transfer of title
Bailment?
Damages
©MNoonan2010
IDENTIFICATION OF NATURE OF
TRANSACTION
In order to apply the correct law, we must first
know what we have.
Is it a SALE?-of “goods”, services, intangibles
Is it an agreement to sell in the future?
The SOGA only applies to these.
A SUPPLY?-but, not a sale?e.g.lease, Hire Purchase
The ACL applies to these.
Is it something else? GIFT, BARTER,
BAILMENT,FRANCHISE,SECURITY?
©MNoonan2010
DEFINITIONS
We must acquaint ourselves with statutory definitions so that we
can identify transactions within their scope. We must not assume
that the ordinary meaning of a word is the same as the statutory
definition. To illustrate, we will look at the following:
SALE
SUPPLY
GOODS
SERVICES
CONSUMER
PRICE
CONSUMER
SALE
LINKED
CREDIT
PROVIDER
©MNoonan2010
Sale
TYPICAL QUESTIONS
• Is it a sale?
• Is it an agreement to sell?
• When did sale take place?
• When did agreement to sell become a sale?
• Evidence of agreement?
©MNoonan2010
SALE OF GOODS
THE CONTRACT DEFINITIONS cont.
 SALE OF GOODS
s. 6 SGA:
A contract of sale of goods is a contract whereby the seller transfers
or agrees to transfer the property in goods to the buyer for a money
consideration called the price.
Where transfer at future time, or condition, contract is agreement to
sell.
Agreement to sell becomes a sale when time elapses or conditions
fulfilled subject to which property is to be transferred.
 MONEY CONSIDERATION
Must be money involved
Even if that is only part of consideration
Note purchase of car-part trade-in, part money
See Loyalty gift…Esso
©MNoonan2010
SALE OF GOODS
ESSO PETROLEUM CO. V. CUSTOMS & EXCISE
COMMISSIONERS (1976) 1 SLR 1
1.
2.
3.
4.
Esso promoted petrol
With loyalty gift
Coins with Soccer heroes
Collect the full set of thirty coins. One coin given when you bury
four gallons of fuel
5. Coins sold to public and tax on sales appropriate?
Legal relationship. Sale of goods?
COURT FOUND
 Coins not transferred for money consideration
 Consideration was the making of another contract
 To buy petrol
 No tax applicable
©MNoonan2010
SALE OF GOODS
JANSZ V. G M B IMPORTS (1979) VR 581
1.
2.
3.
4.
5.
6.
GMB Imports was licensed tobacco wholesaler.
Licence expired 31.5.76.
On 31.5.76 contracted to buy $5,000,000 tobacco.
And to sell $2,000,000 worth of that tobacco to Permewan.
Mid April 77, fulfilled obligation to Permewan.
Prosecuted for selling tobacco without licence.
When had sale taken place?
31.5.76 or April 77?
COURT FOUND:
• Unascertained goods and so s.21 Goods Act (Vic) applied:
“Where there is a contract for the sale of unascertained goods no
property in the goods is transferred to the buyer unless and until the
goods are ascertained.”
• Promise to sell on 31.5.76….agreement to sell only
• Sale not until later in 1977
©MNoonan2010
Goods
• Is it goods?
• Is it goods within the expanded meaning given in
definition of the particular Statute I wish to use?
• Or, is it work with materials supplied?
• A service?
• Supply of information?
• Two separate contracts?
• Neither?
©MNoonan2010
SALE OF GOODS
THE CONTRACT DEFINITIONS cont.
Articles 1 and 2 of Vienna Convention
1. Convention applies to contracts of sale of goods between
parties whose place of business are in different States.
2. Does not apply to sales:
 Of goods bought for personal, family or household use
 By auction
 On execution or otherwise by authority of law
 Of stocks, shares, investment securities, negotiable
instruments or money
 Of ships, vessels, hovercraft or aircraft
 Of electricity
©MNoonan2010
SALE OF GOODS
THE DEFINITIONS
 GOODS
s.5(1) SOGA :
Include all chattels personal other than things in action and money.The
term INCLUDES Emblements (crops resulting from human labour)and
things attached to or forming part of the land which are agreed to be
severed prior to sale (e.g. House to be removed Symes).
DOES NOT INCLUDE:
•Money (unless collection rather than currency)
•Intangibles
•Choses in action
•Intellectual property
CAN INCLUDE FUTURE GOODS: S. 10:
The goods which form the subject of a contract of sale may be either
existing goods owned or possessed by the seller or future goods.
Where by a contract of sale the seller purports to effect a present sale of
future goods, the contract operates as an agreement to sell the goods.
©MNoonan2010
SALE OF GOODS
SYMES V. LAURIE (1985) 2 QD R 547
Laurie bought house from owner and sold it to Symes. Under Contract
to take house to land and set it up.
Damaged in transit. Whose risk? Who bears loss?
Property of Symes or Laurie at relevant time?
 Sale of “Goods” within Sale of Goods Act?
 If so, risk & passing of title provisions in S of G Act apply.
COURT FOUND
Previous cases depended on relevant facts. No principle which
could be applied. House already in existence. House attached and
agreement to sever.
QSOGA s.20 transferred at time intention to transfer.
QSOGA s.21 rules for ascertaining intention.
resulted in property passing at time of contract.
RISK WITH SYMES.
©MNoonan2010
SALE OF GOODS
HEWETT V. COURT (1983) 149 CLR 639
1. Hewett family contracted with Ogilby for construction of transportable
house.
2. Cost $34,116 paid to $20,469.
3. Ogilby part finished, money troubles, handed over unfinished house.
4. Ogilby went into liquidation.
5. Preference?
6. Equitable lien?
“The distinction between a contract for the sale of goods and a contract
for the provision of work and materials is frequently a fine one and the
tests for distinguishing the one from the other are unsatisfactory and
imprecise”
Contract for work and materials?
Contract for sale of goods?
COURT FOUND:
• Contract for work.
©MNoonan2010
• Equitable lien available nevertheless.
DEFINITIONS Existing “old” law
TRADE PRACTICES ACT S. 4 Goods
“Goods” includes:
a) ships, aircraft and other vehicles;
b) animals, including fish;
c) minerals, trees and crops, whether on,
under or attached to land or not; and
d) gas and electricity;
Compare this definition
------------------with those in SOGA and ACL
©MNoonan2010
New law-Australian Consumer Law
Section 2 definition
Goods includes:
(a) ships, aircraft and other vehicles; and
(b) Animals, including fish; and
(c) Minerals, trees and crops, whether on, under or
attached to land or not; and
(d) Gas and electricity; and
(e) Computer software; and second-hand goods; and
(f) Any component part of, or accessory to, goods.
©MNoonan2010
Software
Note that definition in ACL overcomes (for
the purposes of that Statute) current dilemma
(see various cases) of
•whether software is goods or not
•If not goods, what is it?
•What law applies?
©MNoonan2010
IS A COMPUTER SYSTEM "GOODS”?
TOBY CONSTRUCTIONS PRODUCTS PL V. COMPUTA BAR SALES PL
Package consisting of 3 items hardware ($14,390)and 2 items
of software (business management and Wordstar ($2,160))
Vendor agreed to install, train staff and provide post sale
service.
Plaintiff alleged breaches of conditions or warranties implied
by SGA and TPA. Only applied if "goods".
Work to be done and materials provided and perhaps transfer
intellectual property?
•Rogers J:
•Sale of this computer system comprising both hardware and
software constitutes a sale of “goods” with both SGA and TPA.
•Important to him that the total system was off the shelf; not
individually crafted.
©MNoonan2010
SALE OF GOODS ACT
IS SOFTWARE A “GOOD”?
ST. ALBANS CITY AND DISTRICT COUNCIL V. INTERNATIONAL
COMPUTERS LIMITED
Court of appeal London 26/7/96
• Council invited tenders for provision of computerized rate system.
• Faulty software led the council to believe that they had more
ratepayers than in fact they did.
• Was the contract subject to any implied term as to quality or
fitness for purpose, and if so, what was the nature of that term?
Equivalent of Sale of Goods Act? Otherwise?
• Is software goods? (Software can involved a tangible disc onto
which a program is encoded and the intangible program itself.)
• For purposes of English Sale of Goods Act and Supply of Goods
and Services Act the definition of "goods" would include the disc
but not the program.
©MNoonan2010
SALE OF GOODS
IS SOFTWARE A “GOOD”?
ST. ALBANS CITY AND DISTRICT COUNCIL V. INTERNATIONAL
COMPUTERS LIMITED
Court of Appeal London 26/7/96
Cont.
• Considered Toby Construction…sale of whole computer
system…sale of Goods within NSW legislation.
• In this case however, defective program not sold and probably
not hired. Employee went to council premises taking with him a
disc and he transferred the program into the computer. Such a
transfer was not a transfer of goods, but if software inseparable
from physical medium (disk) it would be a “good”.
• Turned to the common law for situation when a term would be
implied…..An unexpressed term can be implied if and only if the
court finds that the parties must have intended that term to form
part of their contract…it must have been a term that went
without saying….Found to be the case in this situation.
©MNoonan2010
IS SOFTWARE a “GOOD”?
Gammasonics Institute for Medical Research P/L v. Comrad Medical systems P/L
[2010] NSWSC 267
Comrad provided packaged software to radiologists for management
of patient registrations, appointments and referrals. Purchased by
Gammasonics via internet download. G alleged it failed to comply
with statutory warranties of merchantable quality and fitness for
purpose under SOGA.
Found not to be a “good”, but common law assisted again and
warranties of fitness for purpose and merchantable quality were
implied.
Note that downloaded software may not be a “service” either. Merely
a licence to download and use.
©MNoonan2010
Software again?
Courts struggle with characterisation.
e.g.
Telstra v. Hurstville Council [2000] FCA 1887 discussed the
issue in relation to whether NSW Council charges for use
of public space for cables was a tax on a commodity/goods
and therefore unconstitutional. No, not goods in this case.
Amlink Technologies and Australian Trade Commission
[2005] AATA 359 dealt with an application for an export
grant for a disk containing events software. Originally
classified as IP and know how, it was more favourable to
applicant if classified as “goods”. It was.
©MNoonan2010
Software and “goods”
Matter now resolved for some purposes
(ACL) …in that “goods” definition in the
Australian Consumer Law (commencing
1/1/2011) now includes “computer
software”.
See definition of “goods” in section 2 of
Australian Consumer Law.
©MNoonan2010
Electricity & data transmission
Electricity is specifically defined as a “good”
in the Trade Practices Act and in the
Australian Consumer Law
Does that mean that electronic data and
signals are “goods”?
If not, what are they?
Is an email goods?
©MNoonan2010
ASX operations P/L (ASXO) and Australian Stock
Exchange Limited (ASX and Pont Data Australia P/L
(1991)ATPR
• Pont supplies electronically disseminated financial information
to stockbrokers market analysts etc. ASXO supplies electronic.
Proceedings concerned a contract between these two for the
supply of information by ASXO to Pont by electronically coded
signals and allegations of behaviour contrary to ss. 45, 46 and
49 of TPA requiring Pont to take certain data if it was to take
other data.
• On issue that affected and was discussed in the case was
whether the provision of information concerned was “services”
or “goods”. If services, no contravention of s. 49 and appeal
would succeed. If “goods”, it would be otherwise.
• Given the TPA definition of “goods” includes electricity, does
electricity include these encoded electrical impulses? While the
trial Judge thought so; on appeal, the court thought not.
©MNoonan2010
TPA s. 4
Definition “Supply”
Supply when used as a verb, includes:
a) in relation to goods-supply (including resupply) by way of sale, exchange, lease, hire
or hire-purchase; and
b) in relation to services-provide, grant or confer;
and, when used as a noun, has a
corresponding meaning, and “supplied” and
“supplier” have corresponding meanings.
NOTE: Same definition used in ACL.
©MNoonan2010
DEFINITIONS
S.13 SOGA
ASCERTAINMENT OF PRICE
(1) The price in a contract of sale may be fixed by the
contract, or may be left to be fixed in a manner
thereby agreed, or may be determined by the course
of dealing between the parties.
(2) Where the price is not determined in accordance with
the foregoing provisions, the buyer must pay a
reasonable price. What is a reasonable price is a
question of fact dependent on the circumstances of
each particular case.
©MNoonan2010
DEFINITIONS
S.14 SOGA
AGREEMENT TO SELL AT VALUATION
(1) Where there is an agreement to sell goods on the
terms that the price is to be fixed by the valuation of a
third party, and the third party cannot or does not
make the valuation, the agreement is avoided;
provided that if the goods or any part thereof have
been delivered to and appropriated by the buyer, the
buyer must pay a reasonable price therefor.
(2) Where the third party is prevented from making the
valuation by the fault of the seller or buyer, the party
not in fault may maintain an action for damages
against the party in fault.
©MNoonan2010
PRICE
Consider the Following:
• At a price to be agreed by the parties in writing
from time to time
• Price to abc=cost to xyz + percentage profit margin
• At valuation
• At a value to be fixed by a member of the Stock and
Station Agents Association to be chosen by S, the
seller
• I will take x million litres for y million dollars
©MNoonan2010
PRICE
Trawl Industries of Australia P/L v. Effem Foods P/L
(T/A Uncle Bens of Australia)
• UBA had pet food factory and wanted to launch a new product
using Jack Mackeral. UBA entered into an agreement with TIA to
buy Jack Mackeral under which TIA would incur the expense of
acquiring and installing a processing line conditional on UBA
purchasing Jack Mackeral for the period 1988-93 at a price which
would provide a reasonable commercial profit to TIA.
• These base Prices shall apply for calendar year 1988. In the
course of Nov 1988 and each subsequent Nov up to and including
Nov 1992, TIA and UBA shall confer and establish applicable
prices for the immediately following calendar year using the
following formula: Price to UBA = Cost to TIA + percentage profit
margin
• Void for uncertainty? No, capable of being worked out by court.
The fact that evidence would be required and might be difficult
not a bar. Incomplete? No, formula is sufficient.
©MNoonan2010
Vienna Convention
Price
• Art 53. The buyer must pay the price for the goods and take
delivery of them as required by the contract and this Convention
• Art 54. The buyers obligation to pay the price includes taking
such steps and complying with such formalities as may be
required under the contract or any laws and regulations to enable
payment to be made.
• Art 55. Where a contract has been validly concluded but does not
expressly or implicitly fix or make provision for determining the
price, the parties are considered, in the absence of any indication
to the contrary, to have impliedly made reference to the price
generally charged at the time of the conclusion of the contract for
such goods sold under comparable circumstances in the trade
concerned.
• Art 56. If the price is fixed according to the weight of the goods, in
case of doubt it is to be determined by the net weight.
• See also 9, 19, 57, 58 59
©MNoonan2010
Trade Practices Act s. 4 Services
“services” includes 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 without
limiting the generality of the foregoing, includes the rights benefits,
privileges or facilities that are, or are to be, provided, granted or conferred
under; 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;
• the provision of, or the use or enjoyment of facilities for, amusement,
entertainment, recreation or instruction; or
• the conferring of rights, benefits or privileges for which remuneration
is payable in the form of a royalty, tribute, levy or similar exaction;
• a contract of insurance;
• 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
• any contract for or in relation to the lending of moneys;
• but does not include rights or benefits being the supply of goods or the
performance of work under a contract of service;
©MNoonan2010
Australian Consumer Law
See section 2 definition.
Not identical, but virtually the same as TPA
definition.
©MNoonan2010
Problems with Services - SMH 06/03/03
Big Pond Ripples with Angry Users by Sue Lowe
• Telstra has spent almost $2m compensating customers of
its Internet cable service after widespread collapses in
January and February….Telstra yesterday acknowledged
repeated breakdowns of its high-speed cable network and
offered customers a rebate of 25% on their typical $60 to
$90 monthly bills.
• Telstra’s internet arm, Big Pond, is estimated to have
between 70,000 and 80,000 cable internet customers.….
• After a threatened class action lawsuit by customers of its
broadband internet network ADSL in 2001 Telstra
introduced a service guarantee for ADSL but it was not
extended to the cable network. Under the ADSL guarantee
customers are given a 10% rebate for every 7 hours and
24 minutes their service is unavailable.
©MNoonan2010
Linked Credit Provider
ACL definition in section 2, details of liability in Part 5-5 Div
1 sections 278-286.
Linked credit provider in relation to a supplier of goods or
services means a credit provider
(a) With whom the supplier has a contract, arrangement or
understanding relating to:
(i) the supply to the supplier of goods in which the
supplier deals; or
(ii) the business carried on by the supplier of supplying
goods or services; or
(iii) the provision to persons to whom goods or services
are supplied by the supplier of credit in respect of
payment for those goods or services; or
©MNoonan2010
Linked credit provider cont.-ACL
(b) To whom the supplier, by arrangement with the
credit provider, regularly refers persons for the
purpose of obtaining credit; or
(c) whose forms of contract, forms of application or
offers for credit are, by arrangement with the
credit provider, made available to persons by the
supplier; or
(d) With whom the supplier has a contract,
arrangement or understanding under which
contracts, applications or offers for credit from the
credit provider may be signed by persons at
premises of the supplier.
©MNoonan2010
ACL-Linked Credit Provider
Section 278
(1) If a consumer who is a party to a linked credit contract
suffers loss or damage as a result of:
(a) a misrepresentation…
(b) A breach of the linked credit contract or of a contract for
a related supply
(c) The failure of consideration…
(d) A failure to comply with a guarantee under ss
54,55,56,57,60,61,62
(e) A breach of a warranty implied in linked credit contract
by s. 12 ED of ASIC Act 2001
the linked credit provider …and supplier…are jointly and
severally liable…..
See rest of Part 5-5 Division 1 for details.
©MNoonan2010
TRADE PRACTICES ACT 1974- SECT 73
Linked Credit Provider
(1) Where: (a) a corporation (in this section referred to as the supplier )
supplies goods, or causes goods to be supplied, to a linked credit provider
of the supplier and a consumer enters into a contract with the linked credit
provider for the provision of credit in respect of the supply by way of sale,
lease, hire or hire-purchase of the goods to the consumer; or
(b) a consumer enters into a contract with a linked credit provider of a
corporation (in this section also referred to as the supplier ) for the
provision of credit in respect of the supply by the supplier of goods or
services, or goods and services, to the consumer; and the consumer
suffers loss or damage as a result of misrepresentation, breach of
contract, or failure of consideration in relation to the contract, or as a
result of a breach of a condition that is implied in the contract by virtue of
section 70, 71 or 72 or of a warranty that is implied in the contract by virtue
of section 74 of this Act or section 12ED of the Australian Securities and
Investments Commission Act 2001,
the supplier and the linked credit provider are, subject to this section, jointly
and severally liable to the consumer for the amount of the loss or damage,
and the consumer may recover that amount by action in accordance with
this section in a court of competent jurisdiction.
©MNoonan2010
TRADE PRACTICES ACT 1974 - SECT 74
Warranties in relation to the supply of services
(1) In every contract for the supply by a corporation in the course of a business of
services to a consumer there is an implied warranty that the services will be
rendered with due care and skill and that any materials supplied in connection with
those services will be reasonably fit for the purpose for which they are supplied.
(2) Where a corporation supplies services (other than services of a professional nature
provided by a qualified architect or engineer) to a consumer in the course of a
business and the consumer, expressly or by implication, makes known to the
corporation any particular purpose for which the services are required or the result
that he or she desires the services to achieve, there is an implied warranty that the
services supplied under the contract for the supply of the services and any materials
supplied in connection with those services will be reasonably fit for that purpose or
are of such a nature and quality that they might reasonably be expected to achieve
that result, except where the circumstances show that the consumer does not rely,
or that it is unreasonable for him or her to rely, on the corporation's skill or
judgment.
(3) A reference in this section to services does not include a reference to services that
are, or are to be, provided, granted or conferred under:
(a) a contract for or in relation to the transportation or storage of goods for the
purposes of a business, trade, profession or occupation carried on or engaged in by
the person for whom the goods are transported or stored; or (b) a contract of
insurance.
©MNoonan2010
What is a consumer sale (SOGA)
Why do we need to know?
Because implied terms in SOGA ss.18,19,20
can be excluded in a contract that is not a
consumer sale. i.e. only possible to know if
an exclusion clause is effective if one
knows whether the contract is for a
consumer sale or not.
©MNoonan2010
S. 62 SOGA
DEFINITION OF CONSUMER SALE
In this Part,
“consumer sale”
means a sale of goods (other than a sale by auction)
by a seller in the course of a business
where the goods:
are of a kind commonly bought for private use or
consumption;
and
are sold to a person who does not buy or hold
himself or herself out as buying them in the course
of a business.
©MNoonan2010
S. 63 SOGA
ONUS OF PROOF
In any proceedings
arising out of a contract
for a consumer sale,
the onus of proving
that the sale is not a consumer sale
lies upon the party so contending.
©MNoonan2010
Who is a “Consumer” (ACL)
Why do we need to know?
Because some provisions of the ACL only
apply to a consumer and in order to work
out potential remedies for a person, we need
to understand whether they have transacted
as a consumer or not. In certain cases, only
a defined class of consumer receives the
benefit of protection.
©MNoonan2010
Definition of Consumer -ACL
Section 3. Acquiring goods as a consumer
(1) A person is taken to have acquired particular goods as a consumer if, and only if:
(a)
The amount paid or payable for the goods, as worked out under subsections (4) to
(9) did not exceed:
(i) $40,000; or
(ii) if a greater amount is prescribed for the purposes of this paragraph-that
greater amount; or
(b) the goods were of a kind ordinarily acquired for personal, domestic or household use
or consumption; or
(c) the goods consisted of a vehicle or trailer acquired for use principally in the transport
of goods on public roads.
(2) However, subjection (1) does not apply if the person acquired the goods, or held
himself or herself out as acquiring the goods;
(a) for the purpose of re-supply or
(b) for the purpose of using them up or transforming them, in trade or commerce:
(i) in the course of a process of production or manufacture; or
(ii) in the course of repairing or treating other goods or fixtures on land.
©MNoonan2010
Definition of Consumer-ACL
Acquiring services as a consumer
(3) A person is taken to have acquired particular services as a
consumer if, and only if:
(a) the amount paid or payable for the services, as worked out
under subsections (4) to (9) did not exceed;
(i) $40,000; or
(ii) if a greater amount is prescribed for the purposes of subsection
(1)(a)-that greater amount; or
(b) the services were of a kind ordinarily acquired for
personal, domestic or household use or consumption.
NOTE that these definitions are very similar to but not
identical to those previously contained in s. 4B of TPA
©MNoonan2010
“consumer” - goods-TPA 4B
Unless contrary intention appears:
a person taken to have acquired goods as a consumer if:
Test 1
price does not exceed prescribed amount ($40,000)
or
where price exceeded prescribed amount, goods were of a kind
ordinarily acquire for personal, domestic or household use or
consumption or the goods consisted of a commercial road vehicle
AND
Test 2
Goods not for re-supply, using them up or transforming them in trade
or commerce in the course of a process of production, manufacture
repairing or treating other goods or fixtures
©MNoonan2010
“consumer” - services-TPA 4B
A person taken to have acquired services as
consumer if:
• the price did not exceed prescribed amount
OR
• where price exceeded prescribed amountthe services were of a kind ordinarily
acquired for personal, domestic or
household use or consumption
©MNoonan2010
Aspects of Contract
We will go over some general matters before
examining specific terms of contracts and
product/service liability. They are:
•
•
•
•
Express terms of contract
Conditions and warranties
Implied terms
Interaction of statute with the common law
©MNoonan2010
Problems involving Contract
When analysing problems involving Contract
Understand whether there is a Contract- formed? void?
If so, what are the express terms? Written?/oral?
Does the law limit these in any way? Void?
Are there any terms implied? By common law/custom/statute
If there are implied terms, what are they?
Is there any inconsistency between express and implied?
Which ones prevail?
Decide on the terms of the contract.
Consider the problem in light of this contract.
Is there any action in contract available?
What are the remedies available in contract?
©MNoonan2010
TERMS OF THE CONTRACT
CONDITIONS AND WARRANTIES
DISTINGUISH TERMS OF THE CONTRACT FROM:
1. Puffery
2. Mere representation
3. Leading to but not forming part of contract
CONDITION
 Essential
 Breach gives right to end contract
 And/or sue for damages
WARRANTY
Less important than condition
 Ancillary to main object of contract
 Breach gives right to damages
©MNoonan2010
OSCAR CHESS V. WILLIAMS (1957) 1 WLR 370
Williams bought Morris secondhand. Traded it in on new
Hillman from Oscar Chess. Williams told salesman
Morris was 1948 model. Registration book showed Morris
first registered 1948. £290 pounds allowed for trade in.18
months later OC discovered Morris was 1939 model. No
difference in model 39-48. OC sued for difference in
trade-in price.
DENNING J FOUND:
 Both parties mistakenly assumed Morris was 1948
 Fundamental to contract, but a term of contract?
 If prompt, equity might have set it aside.
 Now, only remedy damages and must prove warranty.
 Warranty = binding promise.
 Binding promise or only innocent misrepresentation?
 Proper inference from known facts?
Only latter. Loss must lie where it falls
©MNoonan2010
SALE OF GOODS
DICK BENTLEY PRODUCTIONS V. HAROLD SMITH
(MOTORS) (1965) 1 WLR 623
Dealer, Smith sold second hand Bentley to B. Smith told B car had
travelled only 20,000 miles since replacement engine and gearbox.
Speedometer showed 20,000 miles. Mileage more like 100,000.
INNOCENT MISREPRESENTATION? (NO DAMAGES)
OR
WARRANTY? (DAMAGES)
Question depends on conduct of parties, their words and behaviour
rather than thoughts.
 Statement an inducement to act?
 Smith in a position to know, or at least to find out, history of car.
 Different to Mr. Williams in Oscar Chess in that respect.
 Not dishonest, no fraud.
 Statement as to 20,000 without foundation.
Lord Denning found warranty in this case.
©MNoonan2010
INTERMEDIATE OR INNOMINATE TERMS
CEHAVE V. BREMER HANDELSGESELLSCHAFT
(1976) 1 QB 44
Bremer sold 3,400 tons of citrus pellets to Cehave for £100,000. They
were to be used for manufacture of cattle food. A clause in contract
read: “Shipment to be made in good condition”. A small amount was
damaged. Cehave rejected the lot and claimed a refund. The people
holding the pellets sold them for £30,000 and that buyer sold them to
Cehave for same amount.
Lord Denning MR
Was the clause in the contract a condition so that ANY breach
entitled the buyer to reject the goods? No, this was what he called an
Intermediate stipulation. No right to reject unless serious One is not
entitled to reject something because it is not perfect. Citrus pellets
were commonly bought for making cattle food. They were as fit for
that as was reasonable; shown by eventual use. Some damaged, but
not to such an extent to entitle rejection. Damage such as to entitle
buyer to an allowance off price. Apply good commercial sense.
©MNoonan2010
IMPLIED TERMS
•
•
•
•
•
Common law
SOGA
VIENNA CONVENTION
INCOTERMS
Custom
©MNoonan2010
Interaction
contract and common law
• Many statutes expressly preserve the
common law, or parts of it.
• Some codify or displace it.
• Some provide alternatives to the common
law.
©MNoonan2010
LEASON V. PRINCES FARM (1983) 2 NSWLR 382
Leason ran a stud. He wanted a filly sired by Grand Chaudiere.
Princes advertised a filly for sale. Said it was sired by Grand
Chaudiere. Leason bought the filly. 9 months later, he found out it was
not true.Leason sought to return and get refund. Princes refused.
Leason sued.
COURT FOUND
1. No doubt an innocent misrepresentation.
2. Right in equity for rescission?-Discussion of cases, in theory not
available in innocent misrepresentation after contract executed
This filly not what it wanted
Not what it was led to believe it was getting
Not what it paid for
©MNoonan2010
The relevance of Leason- interaction between law of contract (both express terms
and as implied by the SOGA, TPA and FTA) and “common law” (the law of Equityremedies for innocent misrepresentation).The SOGA expressly preserves
common law rules,but, should this be construed in a narrow sense to exclude
equitable remedies?. In NSW, Leason was authority for wider interpretation. In
equity, innocent representation does not give rise to damages; only rescission.
Even then, if contract affirmed, may not be available. Contradictory authorities
discussed in Leason, where it was decided rescission was available, despite
delivery of horse. However,no affirmation after lack of correct breeding
discovered. Debate continued. In 1988, NSW SOGA amended-s. 4(2A)- to make
very clear that rules of equity relating to effect of misrepresentation apply to
contracts for the sale of goods and permit rescission even where the
misrepresentation has become term of contract and/or contract performed. The
TPA (&FTA) have taken over now for many types of misleading / deceptive
conduct. Also, TPA may provide damages for innocent misrepresentation;
whereas equity does not. (damages available in Equity for fraudulent
misrepresentation though).If next we turn to law of contract, we must look at
express terms….including exclusion clauses to assess situation. If exclusion
clause effective, then it may prevent remedy. Some of the implied terms and
provisions of the SOGA can be modified in certain contracts and some cannot.See
s. 16 (2) and (3) when condition may have to be treated as a warranty where buyer
has accepted goods. In Leason, if this applied, returning the horse (breach of
condition) may not have been an option and only damages would have been
available (breach of warranty).The legislation and case law is not identical in the
various Australian jurisdictions. For the purpose of our course, concentrate on
©MNoonan2010
NSW. For purposes of professional life; bear that in mind.
NEGLIGENCE
1. EXISTENCE OF DUTY OF CARE recognised by the law
requiring conduct of a certain standard to protect others
from unreasonable risks.
2. BREACH OF THAT DUTY
3. MATERIAL INJURY RESULTING FROM BREACH
4. LOSS NOT TOO REMOTE
5. THE BREACH BEING THE PROXIMATE CAUSE.
Note: Defence of contributory negligence, limitation periods
and civil liability limits legislation, other possibilities.
©MNoonan2010
BREACH OF STATUTORY DUTY
•
•
•
•
PLAINTIFF IS PERSON TO WHOM DUTY OWED
INJURY type WITHIN RISK STATUTE AIMED AT
DEFENDANT IS PERSON CAUGHT BY STATUTE
CAUSAL LINK BETWEEN BREACH AND INJURY
PROOF OF BREACH OF STATUTORY DUTY MAY BE EVIDENCE OF
BREACH OF DUTY IN NEGLIGENCE
EXAMPLES
TRADE PRACTICES ACT-companies
s. 52A Unconscionable conduct
s. 52 Misleading or deceptive
s.53
False representation
s.55
Misleading conduct under Industrial Property Convention
(Paris Convention for the Protection of Industrial Property as revised
at Stockholm in 1967)
FAIR TRADING ACT NSW - individuals
©MNoonan2010
Contrast
Is the appropriate action one for breach of
contract?
If so, remedy also in common law-rescission,
damages, equity.
Or,
For breach of Statute with remedy specified in
that statute?
©MNoonan2010
Misleading and deceptive conduct
• ACL Part 2-1s.18. In Summer 2010/11
Semester s. 19 (exceptions for information
providers) not covered.
• Similar to TPA s. 52. This provision and
cases decided in relation to it relevant to
ACL s.18.
©MNoonan2010
s.18 ACL
18. Misleading or deceptive conduct
(1) A person must not, in trade or commerce,
engage in conduct that is misleading or
deceptive or is likely to mislead or
deceive.
(2) Nothing in Part 3-1 (which is about unfair
practices) limits by implication subsection
(1).
©MNoonan2010
s.52 TPA
52 (1) A corporation shall not, in trade or
commerce, engage in conduct that is
misleading or deceptive or is likely to
mislead or deceive.
(2) Nothing in the succeeding provisions of
this Division shall be taken as limiting by
implication the generality of subsection (1).
©MNoonan2010
s.18ACL and s.52TPA compared
s.52-limited to corporation due to
constitutional limits. Mirror provisions for
non corporations in State Fair Trading Acts.
s.18-uses person. Not limited to corporations
because of State and Federal agreement to
have single law
Must still be in trade or commerce.
Not limited to consumer transactions
©MNoonan2010
Approach
Taco Co of Australia Inc. v. Taco Bell Pty Ltd (1982)
42 ALR 177
Identify the relevant section of public likely to be
misled.
Once section established, matter to be considered by
reference to all within it, including astute and
gullible and intelligent and not so intelligent, the
well educated as well as the poorly educated
Evidence that some person has formed an erroneous
conclusion is admissable
Necessary to enquire why proven misconception has
arisen.
©MNoonan2010
Considerations
Is puffery –superlative or comparative that is a self evident
exaggeration, (normally found not to be a
misrepresentation or contractual term at common law)
excluded?-Not necessarily.
Can s.18 liability be excluded by use of an exclusion clause?
No, (as with s.52TPA) but a disclaimer (designed not to
exclude s. 52, but to prevent liability arising by preventing
the relevant conduct being construed as misleading or
deceptive…communicating information such that they are
not misled at all or did not rely on it)…or an indemnity can
achieve a similar effect.
©MNoonan2010
Can silence be misleading?
Metalcorp sold 77 tonnes of scrap copper cathode to MML. The companies had
been doing business together for 10 years. The copper had been stolen from
Western Mining (WMC) by persons unknown but had been acquired in good
faith by Metalcorp from a third party with whom it had previously dealt.WMC
informed MML about the theft and its suspicion that the copper had been stolen.
MML inspected the copper after delivery, noticed that less than promised had
been delivered and saw evidence it had been manufactured by WMC. MML
passed this info to WMC by fax at 8.51am on Feb 2, 2001.The established
arrangements between Metalcorp and MML were that deliveries by Metalcorp
were quarantined until inspected and accepted and there was a procedure for
disputes as to quality. During a telephone conversation between Metalcorp and
MML about 9am on Feb 2, 2001 MML said that it had inspected the copper and
asked about the short delivery. Metalcorp advised that it had received all the
copper available. MML believed the copper stolen but said nothing about its
belief, the theft WMC had advised it about, or the evidence it had found on
inspection and had passed on to WMC. Metalcorp believed that, as a result of the
9am conversation, MML had accepted the copper and intended to pay for it. At
11.30am that day, it gave a cheque to the company which supplied it. MML
refused to pay. Metalcorp was unable to recover the money it paid the supplier.
Metalcorp Recyclers P/L v. Metalmanufacturers 2003 NSWCA 213
©MNoonan2010
Metalcorp sued MML for misleading or deceptive conduct in breach of s.
52 TPA…in failing to inform it during the 9am conversation, after
inspection, that it believed the copper was stolen and that it would
probably not pay. In the normal course of events, (common law nemo dat
rule) Metalcorp could not have expected to recover anything because it
could not give good title.
CA (Handley JA, Hodgson JA, Gzell J; :
A finding of misleading conduct is open where the conduct, word or
deed conveys a misleading impression.The misrepresentation was
conveyed by silence. Silence is to be assessed as a circumstance…have
regard to all relevant circumstances; in particular the commercial
relationship between the parties and their procedures. The conduct took
place during a critical conversation. The critical conversation took place
against the background of the longstanding business relationship…which
had generated A substantial degree of mutual trust. The established course
of business involved inspection and notification of complaints. In the
circumstances, when the only complaint was short delivery, this was a
representation that this was the only problem. MML was running no
commercial risk, but knew that Metalcorp was about to take delivery of
copper which might be stolen without having any idea of the risk it was
running. Damages were recoverable because its loss was suffered by
MML’s misleading conduct and Metalcorp had acted in reliance upon it.
©MNoonan2010
Enforcement
•
•
•
•
•
•
•
•
•
No criminal or civil pecuniary penalties
Undertakings
Sch 1, item 1,Chapter 5, Part 5-1,Div 1
Substantiation notices Sch 1, item 1, Chapter 5, Part 5-1,Div 2
Public Warning Notices Sch 1, item 11,Chapter 5, Part 5-1,Div 3
Injunctions
Sch 1, item 1,Chapter 5, Part 5-2,Div 2
Damages
Sch 1, item 11,Chapter 5, Part 5-2,Div 3
Compensatory orders
Sch 1, item 11,Chapter 5, Part 5-2,Div 4A
Redress for non parties Sch 1, item 11,Chapter 5, Part 5-2,Div 4B
Non punitive orders
Sch 1, item 11,Chapter 5, Part 5-2,Div 5,s.246
©MNoonan2010
Unconscionable Conduct
• NEW-ACL Part 2-2. Sections 20,21,22
• OLD-TPA Sections 51AA,51AB,51AC and
ASIC Act equivalents for financial services
12CA,12CB,12CC
©MNoonan2010
Unconscionable Conduct
s.20-conduct that is unconscionable within the
unwritten law (common and equitable) from time
to time is unconscionable for the purposes of ACL
s.21-non exhaustive list of types of conduct which
may be unconscionable in the context of business
dealings with consumers
s.22-non exhaustive list of types of conduct that may
be unconscionable in the context of business
dealings with other businesses. Note exclusion of
listed public companies (big business should look
after itself?)
©MNoonan2010
Unconscionable Conduct
Courts have tended to construe
unconscionable conduct as especially heinous
conduct in the common law (s.20)…i.e.
narrower than government policy. Hence, the
specific provisions to guide courts in
particular cases (21),(22) and specific
provisions covering standard form consumer
contracts (unfair provisions Part 2-3).
©MNoonan2010
Unconscionable Conduct
20.(1) 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.
(2) This section does not apply to conduct that
is prohibited by section 21 or 22
©MNoonan2010
ACCC v. Lux Pty Ltd
re scope of TPA 51AB
An agent of Lux came to the Standings residence to service an old vacuum
cleaner. Mrs. S was home alone. The agent examined the vacuum cleaner and
told her that it would “blow up”. He then demonstrated a new vacuum cleaner
and Mrs. S agreed to purchase it.
The ACCC alleged contravention of s.51AB and undue harassment and coercion
in contravention of s.60.Nicholson J. “The word unconscionable . . . bears its
ordinary meaning of showing no regard for conscience, irreconcilable with what
is right or reasonable.” Mrs.. S substantially illiterate and did not understand
commercial matters in any depth. Should have been apparent. She had trouble
filling out the form. She was not offered the opportunity of independent advice,
nor were the terms explained to her.
The court granted a declaration that Lux had engaged in unconscionable
conduct.
ACCC press release: “Businesses and sales agents have a responsibility to
ensure that they do not take unfair advantage of vulnerable consumers.”
©MNoonan2010
CG Berbatis Holdings Pty Ltd v.
ACCC (2001) FCA 757
A shopping centre landlord acted unconscionably in refusing to agree to
the grant of a lease of a shop to prospective purchasers of a business,
unless the vendor release the landlord from litigation in the
Commercial Tribunal of WA.
A full court reversed the conclusion because it drew a distinction between
an opportunistic approach to strike a hard bargain and acting
unconscionably. It concluded the fact that the lease was due to expire
was not appropriately characterised as a special disadvantage.
In upholding the full court, the majority of the High Court gave a narrow
interpretation of the term ‘unconscionability’. They focused on the
difference between the notion of a special disability which they felt
would attract protection and a hard bargain which the Court felt was a
commercial reality and not the concern of the Court. See decision for
discussion of what is “unconscionable”.
©MNoonan2010
Unconscionable Conduct
21.(1) A person must not, in trade or
commerce, in connection with the supply or
possible supply of goods or services to
another person, engage in conduct that is, in
all the circumstances, unconscionable.
©MNoonan2010
s.21(2) Relevant matters
Without limiting matters to which a court may
have regard in supplier to consumer
transactions:
1. Relative bargaining strength
2. Conditions not reasonably necessary for
protection supplier
3. Whether consumer understood documents
4. Undue influence, pressure, unfair tactics
5. Cost etc of equivalent goods or services.
©MNoonan2010
Consumer in s. 21
Note that definition in s. 3 is not applied.
Limited by (5) to goods or services of a kind
ordinarily acquired for personal, domestic
or household use or consumption.
Supply does not include supply or possible
supply for re supply or for using them up or
transforming them in trade or commerce
(6).
©MNoonan2010
s.22 Business transactions
(1) A person must not, in trade or commerce, in
connection with:
(a) the supply or possible supply of goods or
services to another person (other than a listed
public company: or
(b) the acquisition or possible acquisition of
goods or services from another person (other
than a listed public company);
engage in conduct that is in all the circumstances,
unconscionable
©MNoonan2010
s.22 Relevant matters
In addition to those mentioned in s. 21
• Extent of consistency with other similar
transactions
• Requirements of an applicable or relevant
industry code
• Failure to disclose effects of conduct
• Ability to negotiate terms and conditions
• Ability to vary unilaterally terms and conditions
• Whether parties acted in good faith.
©MNoonan2010
Unconscionable conduct-enforcement
Civil pecuniary penalty -$1.1, $220,000
Undertakings
Substantiation notices
Public warning notices
Injunctions
Damages
Compensatory orders
Redress for non-parties
Non-punitive orders
Infringement notices
©MNoonan2010
Representations
NEW
ACL ss. 29,33,34 Offences in 151, 155,156
OLD
TPA s. 53
©MNoonan2010
ACL s.29 Representations
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
false or misleading representations re
standard , quality, grade, composition, style,
model, history, testimonial, sponsorship,
price, facilities for repair, conditions,
warranties, right or remedy.
©MNoonan2010
ACL ss.33,34 representations
33. A person must not, in trade or commerce,
engage in conduct that is liable to mislead
the public as to the nature, the
manufacturing process, the characteristics,
the suitability for their purpose or the
quantity of any goods.
34. Same, re services.
Note reference to “public” in 33,34-a need for
conduct to have a public element
©MNoonan2010
False/Misleading Representations
Penalties for contravention
CRIMINAL See ss. 151.155,156 offences,
Pecuniary penalties-Corporation $1.1mPerson $220,000. Strict liability, no intent
required. Defences in Part 4-6 ss. 206, 207,
208-honest and reasonable mistake,
contravention caused by another or accident
despite precautions, advertiser had no
reason to suspect a contravention.
©MNoonan2010
False/Misleading Representations
Penalties for contravention
CIVIL See s. 224 for penalties $1.1m,$220,000
Undertakings
Sch 1, item 1, Chapter 5 Part 5-1, Div 1
Substantiation notices
Sch 1, item 1, Chapter 5,Part 5-1,Div 2
Public warning notices
Sch 1, item 1, Chapter 5, Part 5-1, Div 3
Injunctions
Sch 1, item 1, Chapter 5, Part 5-2, Div 2
Damages
Sch 1, item 1, Chapter 5, Part 5-2, Div 3
Compensatory orders
Sch 1, item 1, Chapter 5, Part 5-2, Div 4A
Redress for non parties
Sch 1, item 1, Chapter 5, Part 5-2, Div 4B
Non punitive orders.
Sch 1, item 1, Chapter 5, Part 5-2, Div 5, s.246
See also Chapters 14 and 15 for further information
Also infringement notices Schedule 2, Item 1, Part XI, Division 5.
©MNoonan2010
TPA provisions
Many of the decisions under the TPA are still
relevant in view of the similarity of
provisions and the following slides cover
these provisions and various examples for
reference purposes.
©MNoonan2010
Misleading, deceptive conduct
• S. 52
General….misleading, deceptive
• S. 53
False representations
• S. 55A Services
©MNoonan2010
Misleading, Deceptive Conduct - s. 52
TPA
A corporation shall not, in trade or commerce, engage in conduct that is
misleading or deceptive or is likely to mislead or deceive.
Not limited to consumer.
No need for intent.
Endless application.
e.g. use of another trader’s distinctive words, products, features,
slogans, similar business names, defamatory comments, misleading
conduct in employment, representations in connection with sale of real
estate, businesses, goods, services, silence where there is an obligation
to disclose.
Note also s. 53-representations re false representations as to standard,
quality, value or grade of goods and services.
©MNoonan2010
In Taco Bell Inc. v. Taco Bell Pty Ltd (1982) 42 ALR 177,
the Australian Federal Court suggested a 4 step approach
•
•
•
•
Identify the relevant section of the public who may be misled or deceived.
The relevant section may be the public at large.
Whether the conduct is misleading or deceptive must then be judged by the
effect of the conduct on all those who fall within the relevant section of the
public; the shrewd and ingenuous, the educated and uneducated, the
experienced and inexperienced. Conduct will not, however, be misleading
or deceptive if it would only mislead incredibly stupid persons and in most
cases, the question will be whether a reasonable member of the relevant
section of the public would be misled.
Evidence that consumers are in fact suffering from a misconception may be
persuasive but is not essential.
It must be established that the misconception has arisen as a result of the
conduct complained of and not some other factor.
Note: Intent of defendant not relevant. Not enough to cause mere confusion.
The conduct must actually mislead or deceive, or be likely to. That is a point
of difference with a passing off action…where it is enough to establish that
it is confusing.
©MNoonan2010
s.52 Analysis
•Corporation?
•Trade & Commerce?
•Conduct?
•Conduct misleading or deceptive or likely to mislead or deceive?
IF YES TO ALL
s.52 breach
Remedies - injunction, damages, orders
IF NO to ANY, not a breach of s. 52
©MNoonan2010
Conduct
Doing or refusing to do any act and includes:
• Representations and promises
• Exaggerated sales talk
• Silence
• False warranties or guarantees
Objective test
Real and not remote chance of misleading/deceiving
Confusion not enough
Exclusion clauses cannot be relied upon but disclaimers can be
effective if they modify the “conduct” so it is not misleading
or deceptive. E.g. disclosing that one is passing on information
supplied by another without any knowledge or belief in its
©MNoonan2010
truth or falsity…art galleries, real estate agents.
METALCORP RECYCLERS P / L V. METALMANUFACTURERS Ltd
2003 NSWCA 213
Metalcorp sold 77 tonnes of scrap copper cathode to MML. The companies had
been doing business together for 10 years. The copper had been stolen from
Western Mining (WMC) by persons unknown but had been acquired in good faith
by Metalcorp from a third party with whom it had previously dealt. WMC informed
MML about the theft and its suspicion that the copper had been stolen. MML
inspected the copper after delivery, noticed that less than promised had been
delivered and saw evidence it had been manufactured by WMC. MML passed this
information on to WMC by fax at 8.51am on Feb 2, 2001.
The established arrangements between Metalcorp and MML were that deliveries by
Metalcorp were quarantined until inspected and accepted and there was a
procedure for disputes as to quality. During a telephone conversation between
Metalcorp and MML about 9am on Feb 2, 2001 MML said that it had inspected the
copper and asked about the short delivery. Metalcorp advised that it had received
all the copper available. MML believed the copper stolen but said nothing about its
belief, the theft WMC had advised it about, or the evidence it had found on
inspection and had passed on to WMC.Metalcorp believed that, as a result of the
9am conversation, MML had accepted the copper and intended to pay for it. At
11.30am that day, it gave a cheque to the company which supplied it. MML refused
to pay. Metalcorp was unable to recover the money it paid the supplier.
©MNoonan2010
Metalcorp cont (2)
Metalcorp sued MML for misleading or deceptive conduct in
breach of s. 52 TPA…in failing to inform it during the 9am conversation, after
inspection, that it believed the copper stolen and that it would probably not pay. In
the normal course of events, (common law nemo dat rule) Metalcorp could not
have expected to recover anything because it could not give good title.
Found by CA (Handley JA, Hodgson JA, Gazell J; :A finding of misleading
conduct is open where the conduct, word or deed conveys a misleading
impression.The misrepresentation was conveyed by silence. Silence is to be
assessed as a circumstance…have regard to all relevant circumstances; in
particular the commercial relationship between the parties and their procedures.
The conduct took place during a critical conversation. The critical conversation took
place against the background of the longstanding business relationship…which
had generated A substantial degree of mutual trust. The established course of
business involved inspection and notification of complaints. In the circumstances,
when the only complaint was short delivery, this was a representation that this was
the only problem. MML was running no commercial risk, but knew that Metalcorp
was about to take delivery of copper which might be stolen without having any idea
of the risk it was running. Damages were recoverable because its loss was
suffered by MML’s misleading conduct and Metalcorp had acted in reliance upon it.
©MNoonan2010
SEELEY INTERNATIONAL PTY LTD V. CINTRO PTY LTD
(Newtronics) 2002 ASAL 55-075 and text extract
Seeley made domestic rooftop evaporative airconditioners and contracted in
1992 with Newtronics to design a radio frequency control unit to safely and
satisfactorily control the on off function. In 1994, Seeley contracted with
Newtronics to manufacture 3,000. Seeley believed them safe and unaware that
overheating and fire were possible if it failed. 3 fires occurred.
It was found that Seeley relied on expertise of Newtronics and terms of fitness
for purpose and merchantable quality implied into contract by SA SOGA.
Also claim that s. 74 applied. Newtronics said it only applied to “services”.
Found that Newtronics was contracted to design and manufacture remote
control package to be integrated into the AC….design, not merely
supply=services. Note onus of disproving S was a consumer was on N.
Also found a breach of duty of care and misleading and deceptive conduct
because they did not have the expertise and competence they represented that
they had.
©MNoonan2010
E-commerce and s. 52 Trade Practices Act
A corporation shall not, in trade or commerce, engage in conduct
that is misleading or deceptive or is likely to mislead or deceive
Consider also ancillary liability(s.75B…aids, induces, conspires, directly or
indirectly knowingly concerned or a party to it).The conduct must have taken place
in Australia. Where were the representations made? Normally where they have
effect…e.g. misrepresentations by telephone are heard in Australia….relevant
conduct is the misrepresentation not the state of mind of those who made it.
No need for an active representation to be conduct. In certain circumstances
silence can amount to relevant conduct. For example, where information has been
provided but is incomplete, where changes have occurred after information has
been given or where there is a reasonable expectation that information will be
disclosed.
Examples of areas for problems in ecommerce:
Advertising website design, logos, product description, Domain names
Metatags and cyberstuffing-keywords to attract search engines.
Linking and framing
Distributing software without permission
Contract terms
Whether conduct is misleading and deceptive is a question of fact to be
considered in light of all the circumstances of the individual case
©MNoonan2010
WARNOCK V. ANZ BANKING GROUP LIMITED
G322 of 1987 FC( NSW)
(1989) 5 Insurance Cases 60-897
Mr W borrowed $39,000 from ANZ under a new lending product-insured personal
loans-insured against inability to repay loan instalments because of sickness and
accident to $50,000. Policy contained declaration: I declare that I am….in good
health and unaware of any illness, disease or physical defect which could result in
a claim. Mr. W said that he could not sign the declaration because of his rheumatoid
arthritis but was told that the declaration pertained only to life cover. The bank did
not draw Mr. W’s attention to the exclusion clause. Subject to the provisions of the
Credit Act 1984, the company shall not be liable to make any payments for death,
disablement or unemployment caused directly or indirectly as a result of illness or
unemployment which exists at or commences within 28 days of the commencement
of this insurance. After some time Mr. W’s arthritis flared up and he was unable to
meet the loan repayments.
Found to be misleading (s. 52 TPA) and to involve lack of due care and skill on the
part of the bank manager (s. 74TPA), The damages measured as the cover Mr.
Warnock would have obtained had the bank manager told him the truth. i.e. Policy
limit of $50,000 less an additional premium of $1,000. Plus an order under s. 87 TPA
varying personal loan agreement from inception in to avoid the default complained
of as the basis of the cross claim by the bank.
©MNoonan2010
Appropriate Remedies
An illustration of a case where it was not possible to imply fitness for
purpose because there was not reliance on skill and judgement, but another
remedy was available pursuant to ss 52 and 82 of TPA Clyde Industries Pty Ltd v.
Golden West Refining Corp (text).
Golden West refined gold using a process involving hydrochloric acid. It was
important that there was not any fluorine in the acid as glass vessels and
condensers were used. Daly Laboratories supplied acid to Golden from CSBP,
but needed ore than they could supply. So it turned to Ajax, a division of Clyde.
When Golden used the Ajax acid, condensers and vessels were damaged and
$62,132.46 worth of solution containing gold was lost.
Trial judge found no reliance for the purpose of implying term of fitness for
purpose.Found that Golden did not rely on Daly representation that Ajax acid was
same as CSFB acid and did not contain fluorine because executives of Golden
knew from their own experience that Ajax acid might contain some fluourine. So,
this representation did not cause the damage and so no s.82 damages available
for breach of s. 52. However, they did rely on the technical data sheet put out by
Clyde that the acid may contain up to but not more than approximately 100ppm
fluorine. At that level, it would not cause damage.
©MNoonan2010
False Representations - TPA s.53
FALSE REPRESENTATIONS:
•That goods or services are a particular standard, quality, grade,
composition, style, model
•That goods are new
•That a particular person has agreed to acquire the or that goods or
services have sponsorship, approval, performance characteristics,
benefits they do not have.
•Need to show conduct was deliberate but with strict liability.
FALSE OR MISLEADING REPRESENTATION:
•As to price
•As to availability of facilities for repair or spares
•As to origin
•As to existence, exclusion or effect of any condition, warranty guarantee,
right or remedy.
©MNoonan2010
Conduct Prohibited by Section 53
False Representations that goods were of a particular standard, quality, value, grade,
composition, style or model or have had a particular history or a particular previous use.
•A manufacturer of microwave ovens advertised that its ovens were approved by
Standards Association of Australia. This was false. Sharp Corp of Australia Pty Ltd v.
Hartnell (1975) ATPR 40-003.
•An advertisement described “silver rings from teaspoons” when the rings contain no
silver at all. Thompson v. Magnamail Pty Ltd (2) (1977) ATPR 40-033.
•A shop advertised “top quality” shoes. They were in fact seconds. Macfarlane v. John
Martin & Co. Ltd (1977) ATPR 40-034.
•Demonstrated photocopiers were sold without disclosing that history. Hollis v. A B E
Copiers Pty Ltd (1979) ATPR 40-115.
•False odometer readings. Given v. CV Holland (Holdings) P/L (1977) 29FLR 212.
•False statements about the origin of goods. Barton v. Croner Trading Pty Ltd (1985)
ATPR 40-525. Korczynski v. Wes Lofts (Aust) Pty Ltd (1986) ATPR 40-707.
•False statements about the quality of wine. Van Berg v. Trade Practices Commission
(1977) ATPR 41-545.
©MNoonan2010
Section 53 - False Representations that
Services are of a Particular Standard,
Quality, Value or Grade
An example of this is an advertisement for the three day Rio
Tennis Tournament in Canberra which said “Lendl v.
McEnroe nightly at 7.30pm”. In fact, these two players were
scheduled to meet only once.
Kylie v. Lysfar Pty Ltd (1985) ATPR 40-614.
©MNoonan2010
False Representations that Goods are New
The legitimate expectations of a new item are much greater than if it is secondhand. The
decision to buy new rather than used goods may involve the consumer in other
arrangements such as financing. To be misled in such a matter prevents the consumer
from making an informed judgement about value for money. The problem is that
“new” can have several meanings. In Annard & Thompson Pty Ltd v. Trade Practices
Commission (1979) 25ALR91, it was explained that:
• the meaning of the word “new” particularly in relation to motor vehicles, has been
considered several times in the Courts. It seems that there are at least five possible
meanings which the word may bear when used to describe a vehicle. They are:
1. That the vehicle has not been previously sold by retail, that is, not secondhand
2. That the vehicle is a current and not superceded model.
3. That the vehicle has not suffered significant deterioration or been used to any
significant extent.
4. That the vehicle is of recent origin.
5. That the vehicle is one which has suffered a measure of damage but damage has been
quite effectively repaired, any damaged part replaced and the vehicle is otherwise new.
A breach would occur where a demonstration model, a superceded model or a
reconditioned item were represented as new. A failure to disclose something is also a
breach of the Section.
©MNoonan2010
False Representations that a Particular
Person has Agreed to Acquire Goods or
Services
This was apparently added to the Act to counter
the practice of asserting that a person, recently
deceased, had ordered goods and then demanding
payment from relatives.
©MNoonan2010
False Representations that Goods or Services
have Sponsorship Approval, Performance
Characteristics, Accessories, Uses or Benefits
• At the time World Series Cricket was introduced the Australian
Cricket Board used 53(c) to prevent World Series matches from
being promoted as “test or super test matches”. The use of the
term “test” suggested sponsorship by the official body. Parish v
World Series Cricket Pty Ltd (1977) ATPR 40-040.
• An advertisement said that a particular type of vehicle was fitted
with rear stabiliser bars when some models were not. Ducret v
Nissan Motor Company (Australia) Pty Ltd (1979) ATPR 40-111.
• A claim that by fitting its car burglar alarm a person would
qualify for a reduction of insurance premium when this was not
so. Given v Optional Extras (1976) ATPR 40-051.
• An advertisement implied that Olympic champion swimmer
©MNoonan2010
Keiran Perkins was a member of a swimming team sponsored by
False Representations that a Corporation has
a Sponsorship Approval or Affiliation
• Where a corporation falsely claimed that it was a member of a body such as
the Master Builders Association. This would create an impression it could
be trusted when it might not be the case.
• If a corporation were falsely to advertise in a way that suggested approval of
the Royal Family or that it was associated in some way with the Olympic
Games.
• A computer company sold computers which were similar to those of a high
profile rival and supplied with them the operating manual of that other
companies computer, thus creating an unsubstantiated impression that its
computers were associated with a more prominent brand. Apple Computer
Inc v. Computer Edge Pty Ltd (1984) ATPR 40-453.
• The use of a similar trading name and trademark were found to amount to a
breach of 53(c) and (d). Australian Home Loans Limited (trading as Aussie
Home Loans) v. Phillips (1998) ATPR 41-626.
©MNoonan2010
False or Misleading Representations with
Respect to the Price of Goods or Services
• The Trade Practices Act defines price to include a charge of any description.
Section 4. It would include delivery charges, installation charges, taxes, finance
charges, insurance, on road charges and any other cost added to the basic cost. It
follows that a supplier must inform a consumer of the total prices. There is no
room for hidden extras.
• A price that is described as reduced or discounted or special must be just that. It is
a breach of 53(e) to claim as a discounted price the regular price or to inflate the
regular price and then sell at the normal price and claim it is a discounted price.
• Price comparison is important and when an advertisement is based on comparing
the advertisers price with those of competitors, accuracy is essential. If the price
difference were exaggerated, even by mistake, it is a breach of the Act. The safe
way to engage in price comparison is to say “we will guarantee to beat a
competitors price by ‘x’ dollars” and you will notice that this frequently happens.
• The advertising must leave no wrong impression as to what is available for the
price. If an extra is shown in an advertisement, the ad must make it clear that they
come at an extra cost.
©MNoonan2010
False or Misleading Representations with
Respect to the Price of Goods or Services
cont.
• There was a price tag where the higher price was crossed out and replaced by a
lower price written in. Giving the impression that the higher price is what would
normally be paid if the retailer had not decided to reduce the price. The goods
had not previously been offered at the higher price. TPC v Cue Designs Pty Ltd
(1996) ATPR 41-475.
• Optus advertised free weekend local calls but failed to mention that the offer did
not apply to calls from one mobile to another. TPC v Optus Communications
(1996) ATPR.
• In response to the launch of telephone calls at 20c. Telstra stated that under its
pricing plan local calls would be available at 21c. In fact the cost ranged from
21.8c to 25c. Australian Competition & Consumer Commission v Telstra (1997)
ATPR 41-540.
©MNoonan2010
False or Misleading Representations
Concerning the Availability of Facilities for
the Repair of Goods or Spare Parts for Goods
This is all the more important where relatively
expensive high technology goods are involved.
©MNoonan2010
False or Misleading Representations
Concerning the Place of Origin
Product (Produce of Australia) can be used only where
the local content is 100% or close to it. To use ‘Made in
Australia’ it is necessary that at least 50% of the cost of
producing the product was incurred in Australia. Trade
Practices Act, Part V, Division 1AA, Section 65AA to
65AM inacted in 1998.
©MNoonan2010
Making a False or Misleading Representation
Concerning the Need for any Goods or Services
It was common for pest exterminators to tell old age pensioners
that their houses were infested with termites and to panic them into
having unnecessary work done. Likewise a mechanic would
profitably extend a transaction by telling the customer that in the
course of a simple repair job it became apparent that more
substantial work was necessary.
The need of goods or services can exist when it is only desirable or
preferable. It is important to establish that the goods (service) were
not needed.
A private health insurance fund told patients that if they wished to
be able to choose who should treat them they would be well
advised to maintain membership of the fund. This was incorrect.
Keehn v. Medical Benefits Fund of Australia Limited (1977) ATPR 40-047.
©MNoonan2010
The Making of a False or Misleading
Representation Concerning the Existence,
Exclusion or Effect of any Condition,
Warranty, Guarantee, Right or Remedy
• Calculators were sold with a pamphlet stating they carried a one
year warranty when in fact it was only 90 days. Ballard v.
Sperry Rand Australia Limited (1975) ATPR 40-006.
• An insurance agent gave wrong information about the wording
of a clause in a disability insurance policy. He said it applied to
the consumer being incapable of carrying out his normal
occupation when in fact it applied to any occupation. The
impression was that the policy operated in a more generous way
than the standard disability. Dates v. City Mutual Life
Assurance Society (1982) ATPR 40-311.
©MNoonan2010
Misleading Conduct re Services
s. 55A TPA
A corporation shall not, in trade or commerce, engage in conduct that
is liable to mislead the public as to the nature, the characteristics, the
suitability for their purpose or the quantity of any services.
Note LIABLE TO MISLEAD requires a public element and is narrower
than LIKELY TO MISLEAD.
In Dawson v. World Travel Headquarters P/L (1981) 53 FLR 455,
World Travel took a booking for a 16 day tour when the duration had
been changed to 15 days. Brochures, which contained the incorrect
information, were displayed by World Travel. It was held to have
breached ss. 53(c) 55A and 58 (accepting payment while intending
not to supply or unable to supply).
©MNoonan2010
False representation re business
activities
s.59(1) prohibits a corporation from making false or
misleading statements in a material particular
concerning the profitability or risk of business
activities that can be carried out at home.
59(2) aimed at extravagant claims re franchises e.g.
Wilde v. Menville Pty Ltd (1981) used truck dealer
as to earnings by purchasers using truck or ACCC v.
Murray (2002) FCA 1252 concerning franchises to
make Wills..represented it could be lawfully done by
non lawyers.
©MNoonan2010
Harassment and Coercion - TPA 60
A corporation shall not use physical force or undue harassment or
coercion in connection with the supply or possible supply of goods or
services to a consumer or the payment for goods or services by a
consumer.
ACCC v. Davis (2003) FCA 1227. Respondent pinned consumer to
ground until their vehicle was removed from consumer’s premises.
ACCC v. McCaskey (2000) 104 FCR 8 French J distinguished between
harassment and “undue harassment”. Repeated unwelcome
approaches to buy could easily be undue harassment. Whereas,
legitimate demands for payment of moneys owing might be frequently
but legitimately made. If calculated to intimidate or demoralise etc rather
than convey the demand, they will be undue.
©MNoonan2010
Unconscionable conduct
• S.51AA
• S.51AB
• S.51AC
©MNoonan2010
Unconscionable Conduct
S.51AA TPA Adopts General Law of Equity. A corporation
must not, in trade or commerce engage in conduct that is
unconscionable within the meaning of the unwritten law, from
time to time, of the States and Territories Commonwealth
Bank v. Armadio Note need for special disadvantage.
51AB extends meaning re goods or services of a kind
ordinarily acquired for personal, domestic or household use
or consumption.
Extended to small business by way of 51AC-limit of $3m.
Large business taking advantage of small business. E.g
franchises, landlord and tenant.
Circumstances must have been foreseeable.
©MNoonan2010
Unconscionable Conduct analysis
1. Corporation?
2. Trade or commerce?
3. Conduct unconscionable?
 under common law?,
 51AB ? Supply of goods/services to a
consumer
 51AC?protection to small business against
unfair conduct by large business. Note longer
checklist and wider remedies from 51AB.
©MNoonan2010
s.51AB
s. 51AB -supply of consumer goods or services
to a person….of a kind ordinarily acquired for
personal, domestic or household use or
consumption…note restricted definition of
“goods”.
Non exhaustive list of matters Court may have
regard to in subs. (2)-bargaining strength,
conditions more than required to protect
legitimate interests, level of understanding,
undue influence, alternatives available.
©MNoonan2010
TRADE PRACTICES ACT 1974- SECT 51AC
Unconscionable Conduct in Business Transactions
(1) A corporation must not, in trade or commerce, in connection with:
(a) the supply or possible supply of goods or services to a person (other
than a listed public company); or
(b) the acquisition or possible acquisition of goods or services from a
person (other than a listed public company);
engage in conduct that is, in all the circumstances, unconscionable.
(2) A person must not, in trade or commerce, in connection with:
(a) the supply or possible supply of goods or services to a corporation
(other than a listed public company); or
(b) the acquisition or possible acquisition of goods or services from a
corporation (other than a listed public company);
engage in conduct that is, in all the circumstances,unconscionable.
©MNoonan2010
TPA51AC cont.
Matters the court may have regard to include:
(a) the relative strengths of the bargaining positions;
(b) conditions that were not reasonably necessary for protection of legitimate
interests;
(c) whether the business consumer was able to understand any documents;
(d) whether any undue influence or pressure or any unfair tactics were used;
(e) the price and circumstances the business consumer could have acquired identical
or equivalent goods or services;
(f) the extent to which the supplier's conduct towards the business consumer was
consistent with the supplier's conduct in similar transactions between the supplier
and other like business consumers;
(g) the requirements of any applicable industry code;
(h) the requirements of any other industry code;
(i) the extent to which the supplier unreasonably failed to disclose to the business
consumer: (i) any intended conduct of the supplier that might affect the interests of
the business consumer; and (ii) any risks to the business consumer arising from the
supplier's intended conduct (being risks that the supplier should have foreseen would
not be apparent to the business consumer);
(j) the extent to which the supplier was willing to negotiate the terms and conditions;
and
(k) the extent to which the supplier and the business consumer acted in good faith.
©MNoonan2010
Pressure to Purchase Property
Found to be Unconscionable
A Magistrate's Court has found three property companies behaved unconscionably
under Victoria's Fair Trading Act.The Ballarat Magistrates Court determined single
mother of three Kellie Brown was a victim of misleading, deceptive and unconscionable
conduct by Livio Cellante, Perna Pty Ltd and Astvilla Pty Ltd, and awarded her $31,584.
Mr Cellante and employees of his companies persuaded Ms Brown to purchase a house
in Warracknabeal, initially under a vendor term contract, for $55,000 that they were only
in the process of purchasing for $25,600.Vendor term contracts are often a last resort
for those on low incomes, frequently exorbitant interest rates and repayment terms.
Further, sales pressure was used to conceal the true value of the house from Ms
Brown, preventing her from looking around and gathering advice.The companies and
their employees represented that she had to pay a deposit immediately to secure the
house, which they claimed was in demand, when it actually had been on the market for
at least seven years. All 3 defendants found to have contravened section 7 of the Fair
Trading Act, by engaging in unconscionable conduct in their dealings with a person
who could not match them in terms of knowledge or experience. The magistrate also
found breach of s 9 of the Fair Trading Act when they engaged in misleading and
deceptive conduct. Magistrate also ordered them to stop making representations that
they are the owners of properties when they are not, and that they pay the costs of the
case in the public interest despite the fact that the offences had occurred three years
©MNoonan2010
ago. 24 June, 2004.
ACCC, Westfield Settle Unconscionable Conduct Matter
The ACCC accused Westfield in 2001 of breaching the unconscionable conduct
provisions of TPA during settlement of private litigation with former retail tenants of
a shop at the Indooroopilly Shopping Centre in Brisbane (managed by Westfield at
the time). It was alleged that Westfield acted unconscionably by making it a
condition of the settlement that the former tenants would sign a deed of release
containing a certain clause releasing liability. Amongst other things, the clause
required that the former tenants not commence, recommence or continue any
action in connection with the subject matter of their private litigation, including
commencing, recommencing or continuing any administrative or governmental
investigation against Westfield (or other parties involved in the private litigation).
The ACCC considered that the condition might have impeded the tenants from
approaching or assisting the ACCC in any investigation into Westfield’s conduct.
Westfield acknowledged that the condition may have had the effect of discouraging
the tenants from approaching or assisting the ACCC, but denied that the effect was
intended. Condition was not reasonably necessary for the protection of Westfield’s
legitimate interests in ensuring the finality of the private action between Westfield
and the former tenants, and arose in circumstances where there was a significant
difference in the relative bargaining strengths.
©MNoonan2010
ACCC and Westfield cont (2)
As part of the settlement, Westfield paid an agreed amount to the former tenants
and has undertaken to the Federal Court of Australia that, in future, it will use a
specific release of liability clause when entering into settlement agreements with
retail tenants. ACCC Chairman, Mr Graeme Samuel, said that the matter had raised
significant public interest issues."The ACCC wanted to ensure it or any other law
enforcement agency is not unduly fettered in its investigative functions or inhibited
in the performance of its public duties", Mr Samuel said "The resolution of this
matter provides some clarification for landlords and shopping centre managers
about the ACCC's expectations in dealing with tenants. It also preserves the
freedom of citizens to co-operate with enforcement agencies and ensures that the
public interest is served," he added. "The ACCC regards as a high priority the
prohibitions on unconscionable conduct in Part IVA of the Act. All businesses must
be careful not to inappropriately use any power they may have in their dealings with
small business. The ACCC is, and will continue to be, a strong enforcer of the law,
without fear or favour," Mr Samuel warned.
Westfield will contribute to the ACCC’s legal costs.
18 June, 2004
©MNoonan2010
Student Question 1
When we are considering “goods”, we have both the
SOGA and TPA/ACL. When is it better to bring
an action under one or the other?
1. When there is only one available. E.g. a non
consumer may only have the implied terms of the
SOGA, if any at all.
2. When a choice provides a better, easier, cheaper
or more appropriate remedy.
©MNoonan2010