AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v LUX DISTRIBUTORS PTY LTD (ACN 054 882 852)
File number:
VID 141 of 2013
Judges:
ALLSOP CJ, JACOBSON AND GORDON JJ
Date of judgment:
15 August 2013
Catchwords:
CONSUMER LAW – unconscionability – entry into consumers’ homes by ruse – sale of vacuum cleaners – breaches of State and Commonwealth consumer protection legislation – whether unconscionable
2.Orders 1 and 2 of the orders made by the Federal Court on 8 February 2013 be set aside and in lieu thereof it be ordered that:
(a)The Court declares that in or around February 2010, in trade or commerce and in connection with the promotion and supply of a Lux vacuum cleaner to Mrs Hazel Oxley at her home on 12 February 2010, the respondent engaged in conduct that was, in all the circumstances, unconscionable in contravention of s 51AB of the Trade Practices Act 1974 (Cth).
(b)The Court declares that in or around September 2010, in trade or commerce and in connection with the promotion and supply of a Lux vacuum cleaner to Mrs Mavis May at her home on 23 September 2010, the respondent engaged in conduct that was, in all the circumstances, unconscionable in contravention of s 51AB of the Trade Practices Act 1974 (Cth).
(c)The Court declares that in or around July 2011, in trade or commerce and in connection with the promotion and supply of a Lux vacuum cleaner to Mrs Margaret Baird at her home on 5 July 2011, the respondent engaged in conduct…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Details
AGLC
Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90
Case
[2013] FCAFC 90
Decision Date
CaseChat Overview and Summary
In the case of Australian Competition and Consumer Commission v Lux Distributors Pty Ltd, the Australian Competition and Consumer Commission (ACCC) sought to challenge the conduct of Lux Distributors Pty Ltd, which involved the deceptive entry into consumers' homes by ruse to sell vacuum cleaners. This conduct was alleged to breach both state and Commonwealth consumer protection legislation, with the ACCC arguing that Lux's actions were unconscionable. The Federal Court of Australia was tasked with determining whether Lux's conduct met the legal criteria for being deemed unconscionable under the Trade Practices Act 1974 (Cth) and the Australian Consumer Law (ACL).
The primary legal issue before the court was whether the conduct of Lux Distributors Pty Ltd constituted unconscionable behaviour as defined under section 21 of the ACL and section 51AB of the Trade Practices Act 1974. The ACCC argued that Lux's practice of offering a free maintenance check as a pretext to gain entry into consumers' homes and subsequently attempting to sell a new vacuum cleaner was misleading and took unfair advantage of the consumers, particularly the elderly women involved. The court had to evaluate the evidence presented regarding the telephone scripts used by Lux, the nature of the interactions between Lux's sales representatives and the consumers, and the overall context of the sales practices.
The court found that Lux's conduct was indeed unconscionable. Despite the primary judge's observation that Lux's representatives might have had a genuine intent to perform a maintenance check, the court concluded that the primary purpose of the visits was to facilitate sales. The deceptive nature of the initial offer to conduct a free maintenance check, coupled with the subsequent sales tactics, demonstrated a clear disregard for the consumers' interests. The court emphasised that the conduct in question was part of a broader institutional practice that exploited the vulnerabilities of elderly consumers.
The court set aside the earlier orders made by the Federal Court on 8 February 2013 and declared that Lux's conduct in relation to three specific instances was unconscionable. It further ordered that Lux pay the ACCC's costs in relation to these instances and also pay the ACCC's costs for the appeal. The case was remitted for further hearing regarding the conduct in connection with the promotion and supply of a Lux vacuum cleaner to Mrs Hazel Oxley, Mrs Mavis May, and Mrs Margaret Baird.
Orders
Orders of the court
1. The appeal be allowed.
2. Orders 1 and 2 of the orders made by the Federal Court on 8 February 2013 be set aside and in lieu thereof it be ordered that:
(a) The Court declares that in or around February 2010, in trade or commerce and in connection with the promotion and supply of a Lux vacuum cleaner to Mrs Hazel Oxley at her home on 12 February 2010, the respondent engaged in conduct that was, in all the circumstances, unconscionable in contravention of s 51AB of the Trade Practices Act 1974 (Cth).
(b) The Court declares that in or around September 2010, in trade or commerce and in connection with the promotion and supply of a Lux vacuum cleaner to Mrs Mavis May at her home on 23 September 2010, the respondent engaged in conduct that was, in all the circumstances, unconscionable in contravention of s 51AB of the Trade Practices Act 1974 (Cth).
(c) The Court declares that in or around July 2011, in trade or commerce and in connection with the promotion and supply of a Lux vacuum cleaner to Mrs Margaret Baird at her home on 5 July 2011, the respondent engaged in conduct that was, in all the circumstances, unconscionable in contravention of s 21 of the Australian Consumer Law.
(d) The applicant’s application for relief in relation to the conduct of Lux in connection with the promotion and supply of a Lux vacuum cleaner to:
(i) Mrs Hazel Oxley in or around February 2010;
(ii) Mrs Mavis May in or around September 2010; and
(iii) Mrs Margaret Baird in or around July 2011,
otherwise be remitted for hearing by a judge of this Court.
(e) The respondent pay the applicant’s costs in respect of Mrs Baird, Mrs Oxley and Mrs May.
3. The respondent pay the appellant’s costs of this appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 (Cth).
Background
Background to the litigation
It is important to appreciate that the case run by the ACCC was individually directed to the conduct that concerned each individual customer. No reliance was placed on tendency or coincidence evidence, and there is no call to consider the operation of ss 97 and 98 of the Evidence Act 1995 (Cth).Common facts Whilst it is important to understand that each alleged contravention had to be considered separately, there were common features to each case brought out by the institutional practices of Lux. The method employed by Lux was described by the primary judge in [2] – [3] of his reasons as follows:So far as is relevant in this case, the method employed by the respondent to make sales of its vacuum cleaners was broadly in accordance with the following. Using either its existing customer database (developed, for example, from previous sales) or the telephone directory, a member of the respondent’s staff would make a telephone call to a householder. The terms of the calls that were made in the present case were the subject of only very general evidence by the householders concerned, and were the subject of no evidence from the respondent’s staff member, or staff members, who made the calls. However, in evidence was a copy of the script which those staff members were instructed by the respondent to follow when making these calls. That script commenced as follows: Hi, is Mr or Mrs XXXXX there please?Great!Hi Mr(s) XXXXX , my name is #### and I’m calling on behalf of Lux Distributors, we look after all the Lux vacuum cleaners.How are you today Mr(s) XXXXX ?<Respond to their response>NOW,The main reason for my call today is we have someone in your area tomorrow giving a FREE maintenance check to all vacuum cleaners. What kind of cleaner do you use?<Wait for them to answer>Fantastic, now what would be the best time for us to check it for you, XXam or XXpm?As will be apparent, the indication given to the householder was that a representative of the respondent would call by for the purpose of making “a free maintenance check” on the householder’s existing vacuum cleaner. After the passage set out above, the script then dealt with various alternative courses that the conversation might take, in the event that the householder responded in ways which were negative, discouraging or indifferent. There is no need to refer to them here, since there is nothing in the evidence in the present case upon which I could find that any of the conversations upon which the applicant relies took a course that would make one or more of these alternative passages in the script relevant. For the moment, it will be sufficient to say that each of the five elderly women whose circumstances are relevant did agree to have a representative of the respondent call at her home for the purpose of carrying out a free maintenance check on her existing vacuum cleaner. Of course, the person who would be sent out to any person who agreed to a free maintenance check was a sales agent who would attend the home to carry out a maintenance check as part of an attempt to sell the person a new vacuum cleaner. Stripped of any nicety, the telephone call was, at best, a deceptive half truth. It was plainly designed to create an expectation of a free service by someone who was otherwise intending to be in the area. This expectation and acceptance of the invitation for a free maintenance check was plainly designed to gain entry for the sales person to the home of the customer for the purpose of selling a vacuum cleaner. The ACCC’s case was that the offer to carry out the free maintenance check was a ruse to get the representative past the door, and the first part of the conduct that would lead seamlessly to the creation of an apparent need for a replacement machine. The primary judge appeared to accept the factual premises of this argument at [16] of the reasons, but said that he could not conclude that Lux’s representatives had no genuine intent to carry out a maintenance check.