Amway of Australia Pty Ltd v Vernall (No 2)

The New South Wales Court of Appeal considered an appeal by Amway of Australia Pty Ltd against a decision of the Supreme Court of New South Wales concerning the enforceability of a distributorship agreement. The dispute arose from allegations that Amway had engaged in misleading and deceptive conduct in contravention of the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (NSW) in its dealings with a former distributor, Mr Vernall.

The primary legal issues before the Court of Appeal were whether Amway had engaged in misleading or deceptive conduct by representing that distributors could earn substantial incomes, and whether the distributorship agreement itself was void or unenforceable due to such conduct. The court also had to determine the appropriate remedies available to Mr Vernall, including damages for losses allegedly suffered as a result of his distributorship.

The Court of Appeal, in its reasoning, focused on the representations made by Amway regarding the earning potential of its distributors. It applied principles of statutory interpretation to the relevant provisions of the Trade Practices Act and the Fair Trading Act, considering the objective meaning of the representations made and the likely effect on a reasonable consumer. The court examined evidence relating to Amway's training materials, promotional activities, and the actual income earned by distributors to assess the truthfulness and reasonableness of the representations. The court ultimately found that Amway had engaged in misleading and deceptive conduct and that the distributorship agreement was therefore voidable.

The Court of Appeal upheld the primary judge's finding of misleading and deceptive conduct and ordered that Amway pay damages to Mr Vernall. The quantum of damages was to be assessed, with liberty to the parties to seek further directions from the court if necessary.