Australian Competition and Consumer Commission v Oxteha Pty Ltd
[2014] FCCA 1428
•27 February 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ACCC v OXTEHA PTY LTD | [2014] FCCA 1428 |
| Catchwords: CONSUMER LAW – Penalties – imposition of penalty – agreed penalty – factors to be considered – course of conduct – penalty imposed. |
| Legislation: Competition and Consumer Act 2010 (Cth), ss.18, 29, 54, 259 |
| Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Visy Packaging Pty Ltd (No.4) [2013] FCA 930 |
| Applicant: | Australian Competition and Consumer COMMISSION |
| Respondent: | OXTEHA PTY LTD |
| File Number: | BRG 743 of 2013 |
| Judgment of: | Judge Burnett |
| Hearing date: | 27 February 2014 |
| Date of Last Submission: | 27 February 2014 |
| Delivered at: | Brisbane |
| Delivered on: | 27 February 2014 |
REPRESENTATION
| Counsel for the Applicant: | Mr P. Hastie QC |
| Solicitors for the Applicant: | Norton Rose Fulbright Australia |
| Counsel for the Respondent: | Mr V. Brennan |
| Solicitors for the Respondent: | Brown Wright Stein |
ORDERS
THE COURT DECLARES THAT:
Pursuant to section 16 of the Federal Circuit Court of Australia Act 1999, the Respondent made the following five oral statements to a consumer - the first three on about 12 June 2012 and the other two on about 26 June 2012 - in the course of discussions about problems with a home theatre system (Home Theatre System) supplied to the consumer by another company that had previously conducted a retail business similar to, and at the same store as, the retail business that the Respondent was conducting at the time when the oral statements were made and in connection with the consumer’s attempts to obtain a remedy:
(a)when asked for a refund or replacement in respect of a Home Theatre System, “Because the system is three months old, we can choose whether to repair the product, to replace it with another product or provide a refund…”;
(b)when asked for a refund or replacement on the basis that the Home Theatre System suffered from a major fault, “It is not up to you to determine whether the home entertainment system has a major or minor fault. Sony will tell us whether to offer a repair, refund or replacement after assessing the product.”;
(c)when asked for a refund or replacement on the basis that the Home Theatre System suffered from a major fault, “It’s up to Sony to determine whether to offer a repair, refund or replacement. It is not up to you to determine whether a product has a major or minor fault. You will have to bring the product in for assessment, and we will decide what action to take after that.”;
(d)when asked for a refund in respect of a Home Theatre System, “Which retailer would give you a refund in our position?”; and
(e)in response to the observation that the consumer had never had an issue obtaining a refund on the spot from a hardware retailer known as Bunnings in respect of goods supplied, “That’s a different situation. We are an electrical retailer so we have different rights to other retailers”,
and, by doing so, the Respondent has, in trade or commerce:
(f)made representations in connection with the supply or possible supply of goods or services that were false or misleading and concerned the existence, exclusion or effect of any guarantee, right or remedy available under the consumer guarantee provisions in Division 1 of Part 3-2 of Schedule 2 of the Competition and Consumer Act 2010 (ACL), and/ or other remedies relating to those guarantees in Part 5-4 of the ACL in contravention of section 29(1)(m) of the ACL; and
(g)thereby engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 18 of the ACL.
THE COURT ORDERS THAT:
Injunction
Pursuant to section 232 of the ACL, for a period of three years from the date of these Orders, the Respondent is restrained (whether by itself, its servants, agents or otherwise howsoever) from making representations (whether oral or written) to any customer to the effect:
(a)that a supplier including the Respondent when it has supplied the goods or services (Supplier):
(i)does not have any obligation to provide a consumer with his or her choice of remedy (as determined by him or her) in relation to potentially faulty goods supplied by the Supplier in any circumstances where the good/s have been supplied 3 months or more previously or a similarly restricted period of time unrelated to the nature of the goods;
(ii)does not have an obligation to provide a consumer with his or her choice of remedy (as determined by him or her) in relation to potentially faulty goods supplied by the Supplier regardless of the circumstances and the consumer guarantee provisions of Division 1 of Part 3-2 and/ or the remedies relating to those guarantees in Part 4-5 of the ACL;
(iii)and/or the manufacturer has the discretion to choose whether to offer a consumer a remedy in relation to goods supplied by it and the type of remedy in all circumstances after assessing the relevant good/s;
(iv)will not provide a refund to a consumer in relation to goods supplied by it regardless of the circumstances and the consumer guarantee provisions of Division 1 Part 3-2 and/ or the remedies relating to those guarantees in Part 5-4 of the ACL, and other retailers in its position also will or would not provide such refunds;
(v)does not have any obligation to provide a refund in relation to goods supplied by it regardless of the circumstances and the consumer guarantee provisions of Division 1 of Part 3-2 and/or the remedies relating to those guarantees in Part 5-4 of the ACL; and
(vi)has different legal rights and obligations (given that it is an electrical retailer) in relation to providing remedies to consumers in comparison to other retailers such as Bunnings, which are not electrical retailers; and
(b)that the manufacturer (and not the Supplier) will determine whether to offer a consumer a repair, refund or replacement in relation to a good supplied by the Supplier after assessing that good.
Pecuniary penalty
Pursuant to sections 224(1)(a)(ii) and 228 of the ACL, within 28 days of the date of these Orders, the Respondent is to pay to the Commonwealth a pecuniary penalty in respect of the contraventions of section 29(1)(m) of the ACL in the amount of $26,000.00.
Publication orders
Pursuant to section 246(2) of the ACL, within 28 days of the date of these Orders, the Respondent is to prominently display a copy of the summary of consumer rights under the ACL at Annexure A of these Orders at the point of sale of every product supplied by the Respondent during the operation of a retail sales service undertaken under the name Harvey Norman for a period of three years from that date.
Compliance program
Pursuant to sections 246 and 232 of the ACL:
(a)within 28 days of the date of these Orders or by 18 April 2014, whichever is the later (Commencement Date), for a period of one year following the Commencement Date, the Respondent is to implement its own compliance program to be undertaken by each employee of the Respondent with respect to the rights available to consumers under the ACL including the consumer guarantee provisions of Division 1 of Part 3-2 and/or the remedies relating to those guarantees in Part 5-4 of the ACL (Consumer Law Compliance Program). The Consumer Law Compliance Program must conform to the compliance standards set out in the Australian Standards on Compliance Programs (AS 3806-2006);
(b)for a period of two years after the expiry of the said one year period, the Respondent is to participate in a consumer law compliance program to be recommended by subsidiaries of Harvey Norman Holdings Limited to all franchisees trading under the “Harvey Norman ®” name in Australia and made available for the participation of their employees; and
(c)by no later than 14 days after the Commencement Date, the Respondent is to serve on the Applicant an affidavit verifying that in conformity with these Orders it has displayed the notice referred to at Order 4 above and it has implemented the Consumer Law Compliance Program.
Costs
Each party is to bear its own costs of the proceeding and all previous costs orders against either party in the proceeding are to be vacated.
| FEDERAL CIRCUIT COURT AT brisbane |
BRG 743 of 2013
| AUSTRALIAN COMPETITION AND CONSUMER COMMISSION |
Applicant
And
| OXTEHA PTY LTD |
Respondent
REASONS FOR JUDGMENT
(Ex Tempore)
This application brought by the Australian Competition and Consumer Commission involves a common misunderstanding on the part of some retailers. It warrants granting the relief sought in the application including declarations and injunctions and making orders in terms of the parties’ jointly submitted orders.
The events arise out of representations and statements made on or about 11 March 2012. At that time, the respondent conducted, as a franchisee, a Harvey Norman store in the western suburbs of Brisbane. Although at that time it was the relevant operator of the store, the equipment the subject of these difficulties was sold by the previous franchisee.
Background facts
It appears that on 11 March 2012, the previous franchisee sold a “Sony BDV-E980W home theatre system” to Mr Matthew Paull. Its retail value appears to have been something in the order of $725.00. The system obviously had some problems because by mid-June it was giving Mr Paull difficulties. He telephoned the store twice on 12 June 2012 and spoke to one of the sales representatives of the respondent, complaining about the difficulties he was having with the product.
It appears that it was not producing sound to accompany the television display, and it was not recognising the playing content from Blu-ray discs. He says, and it is agreed, that in response to his request for a refund or replacement the sales representative he spoke to made oral representations during the first telephone conversation:
“Because the system is three months old, we can choose whether to repair the product, to replace it with another product or provide a refund …”
Further, in the course of that conversation, in response to a further request for a refund or replacement on the basis of the goods suffering from a major fault, the sales representative said:
“ … It’s not up to you to determine whether the home entertainment system has a major fault or minor fault. Sony will tell us whether to offer a repair, refund or replacement after assessing the product.”
In a second conversation that day, Mr Paull had a further discussion with a sales representative of the respondent. He made a repetition of his request for a refund or replacement on the basis that the goods suffered from a major fault. On that occasion the representative said:
“It’s up to Sony to determine whether to offer a repair, refund or replacement. It is not up to you to determine whether a product has a major or minor fault. You will have to bring the product in for assessment, and we will decide what action to take after that.”
Mr Paull then attended the store on 16 June 2012 and left the home theatre system there for assessment. He followed this up on 26 June 2012 by telephone inquiry. At that time he spoke to a sales representative who made statements to this effect in response to his request for a refund:
“Which retailer would give you a refund in our position?”
The following statement was made in response to Mr Paull’s observation that he had never had an issue obtaining a refund from the hardware store known as Bunnings:
“That’s a different situation. We are an electrical retailer so we have different rights to other retailers.”
Ultimately, on 28 June 2012, he was contacted by representatives of the respondent. He was told that the system had been repaired, and he then collected the system from the store.
On 6 July 2012 Mr Paull telephoned the store and spoke to the manager of the AV/IT department to inform him that he was still having trouble with the home theatre system, that the Blu-ray playback was freezing and that the player would vibrate loudly when this happened, observing that the system had already been repaired on a previous occasion. He was understandably unhappy and he requested a refund. That did not occur.
He then made a complaint to the ACCC which resulted in the respondent providing a full refund on 11 July 2012. It is accepted that there is no evidence that the respondent drew to Mr Paull’s attention or otherwise attempted to rely upon the fact that the previous franchisee, Oxley Superstore Pty Ltd, had sold the home theatre system. At all times the respondent conducted itself as if it had been the supplier, and did not turn its mind to the fact that the previous franchisee, rather than it, had supplied the product.
They are the basic background facts, and it is in respect of those facts that the applicant alleges a contravention of the Competition and Consumer Act 2010 (Cth) (“ACL”) occurred.
Competition and Consumer Act 2010 (Cth)
It is broadly accepted that the circumstances constituted representations that were false or misleading under Parts 5-4 and 3-2 of the ACL (“the consumer guarantee provisions”) and that by reason of those matters the respondent contravened the relevant provisions of the ACL.
Section 18 of the ACL provides:
“A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”
Section 29 of the ACL concerns false or misleading representations about goods and services.
The consumer guarantee provisions, which are contained in Part 3-2 Division 1 Subdivision A, include the statutory consumer guarantees in s.54 which deal with the acceptable quality requirements in respect of consumer goods. The ACL provides that if goods do not satisfy the acceptable quality requirements there are various actions available to a consumer.
Section 259 details the remedies which are available to a consumer. That scheme particularly provides that the election, which is an important issue in this case, lies with the consumer and not with the retailer. Of course, there are limits on the consumer’s ability, but that is subject to the question of whether or not there has been a major failure; proof of failure is not an issue here. Although, as the statements reveal, the manner in which the issue of a major failure is determined is not one left solely to the election of the retailer.
Accepting those facts, and there is no reason, in my view, not to accept them, it appears that the contraventions that have been alleged on the part of the applicant and admitted by the respondent are satisfied. That is, the respondent has admitted to five oral statements constituting false representations made by two sales representatives in its employ who acted with the apparent authority of the respondent.
Penalty
The parties have submitted a draft order which proposes declarations, injunctions and a pecuniary penalty. The principles related to the imposition of penalty and treatment of agreed penalties have recently been restated in Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Visy Packaging Pty Ltd (No.4) [2013] FCA 930.
My deference to that decision should not suggest that I do not accept the matters contained in the joint submissions, which are extremely comprehensive. However, the observations made by Murphy J in Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Visy Packaging Pty Ltd (No.4) provide a helpful summary of the matters which have been detailed in the joint submissions.
Commencing at [16], his Honour observed that:
“[16] The purposes to be served by the imposition of penalties are threefold:
1. Punishment — which must be proportionate to the offence in accordance with prevailing standards;
2. Deterrence — both specific and general; and
3. Rehabilitation.
…
[17] Courts exercising industrial jurisdiction have identified a range of factors for assessing the appropriate penalty which, while not mandatory considerations, may be relevant to the circumstances of a particular case. These include:
(a) the nature and extent of the conduct;
(b) the circumstances in which the conduct took place;
(c) the period of the conduct;
(d) the nature and extent of any loss or damage sustained as a result of the conduct;
(e) whether there has been similar previous conduct by the respondents;
(f) whether the contraventions arose out of one course of conduct;
(g) whether senior management was involved in the conduct;
(h) whether any contrition has been exhibited;
(i) whether any corrective action has been taken;
(j) the cooperation of the respondents; and
(k) the need for deterrence.
…
[18] However, the court’s task in assessing penalty is one of “instinctive synthesis”: Australian Ophthalmic Supplies at [27] per Gray J and [55] per Graham J. This process requires the court to take all relevant factors into account to arrive at a single result which takes due account of them all: Wong v R (2001) 207 CLR 584 at [74]–[76] per Gaudron, Gummow and Hayne JJ; Markarian v R (2005) 228 CLR 357 at [37] per Gleeson CJ, Gummow, Hayne and Callinan JJ. Care should be taken with the use of a checklist setting out the range of relevant factors as they give rise to a risk of transforming the process of instinctive synthesis into the application of a rigid catalogue of matters for attention: Australian Ophthalmic Supplies at [89]–[91] per Buchanan J.
[19] Proportionality and consistency commonly operate as a final check on the penalty assessed, but the penalty should not be derived from comparing the case which is the subject of the assessment with any other particular case: Australian Ophthalmic Supplies at [54], [56]–[57] per Graham J and at [87] per Buchanan J.
[20] The totality of the penalties imposed must also be appropriate. The totality principle requires that the total penalty for all related contraventions ought not exceed what is proper for all contravening conduct involved: Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41–375 at [20] per Burchett J. The rationale of the principle is to ensure that the proposed penalty is proportionate when the contraventions are viewed collectively.
The approach to an agreed penalty
[21] While the parties have not agreed on the exact penalties to be imposed, they have agreed as follows:
(a) The instigation and conducting of the investigation into Mr Zwart’s conduct, and his suspension from employment, should be treated as arising from the same course of conduct and be considered as a single breach;
…
[22] The proper approach of the court in respect of an agreed submission as to the quantum of penalty is set out in Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72 at [51] per Branson, Sackville and Gyles JJ, where the court explained:
“…
(iii) There is a public interest in promoting settlement of litigation …
…
(vi) Where the parties have jointly proposed a penalty, it will not be useful to investigate whether the court would have arrived at that precise figure in the absence of agreement. The question is whether that figure is, in the court’s view, appropriate in the circumstances of the case. In answering that question, the court will not reject the agreed figure simply because it would have been disposed to select some other figure. It will be appropriate if within the permissible range.”
See also: Australian Securities & Investments Commission v Vizard (2005) 145 FCR 57 at [45] per Finkelstein J.
[23] I respectfully agree with the observations of Jessup J in Wells v Locarno Management Pty Ltd [2008] FCA 1034 at [23]. As his Honour explained:
“The predictability involved in the resolution of penal proceedings in accordance with a pre-trial agreement reached by the parties is something which should, as a matter of public policy, be regarded as beneficial.”
[24] The question is whether the agreed range of penalties is within the “permissible range”, that is whether such a penalty is neither manifestly inadequate or manifestly excessive: See Ponzio at [129] per Jessup J.”
Although his Honour’s remarks were made in the context of imposing penalties for a contravention of the Fair Work Act 2009 (Cth), the principles apply with equal force to the imposition of penalties in this context. The only other matter I note in passing concerns the application of the totality principle. The parties agree in their joint submissions that this case involves a course of conduct. They have not made any alternative submissions to deal with the case on the basis that it involves discrete events and that, by implication of the totality principle, one would come to the same result. My view is, having regard to the facts and circumstances, that this is a course of conduct case, and, accordingly, the former approach is to be preferred when considering the penalty.
Having regard then to the discrete issues to be considered concerning the nature and extent of the conduct, as I have noted, the statements were made during three telephone conversations. There is no evidence to show, and it is not contended, that the statements were made with any intention to mislead or deceive. A great number of electrical appliances are bought by consumers from retailers such as the respondent and the manufacturer, Sony, in Australia every day. It is not unusual for a consumer to take a new electrical appliance back to the store from which it was purchased because the product has some defect or is not of acceptable quality.
However, it is apparent here that the processes in the store were not sufficiently adequate to ensure that, if goods were not of acceptable quality when sold, those in the store knew that consumers could obtain the remedy which they are entitled to by law. There is plainly a need for this respondent to introduce better systems of training and incur the associated costs to ensure that its sales staff develop and maintain a culture of compliance with the ACL. This, of course, also includes introducing better levels of supervision. On that basis, it was contended, and I accept, that an appropriate penalty should take into account the need to deter other retailers from encouraging or permitting similar contraventions of the ACL.
It is obvious, having regard to the circumstances, that the conduct occurred over only a very short period and that the nature of the loss sustained as a result of the conduct was minimal. The consumer was ultimately afforded a new product. However, he had to endure the inconvenience of repeated trips to the store and the anxiety that would have been occasioned by the misinformation spread while these matters were being resolved. There is no evidence of any previous conduct and, as was earlier noted, I have come to the view that the contraventions arise out of one course of conduct, that is, they concern one consumer in respect of one product over a very short period of time.
I note that there were possibly two staff members involved, but that of itself, in my view, is not of any great moment. The conduct did not directly involve senior management. Indirectly, however, it did involve management insofar as there was a failure to put in place appropriate systems. The respondent is not a small organisation. It has a turnover of about $40,000,000 a year, and one would expect that an organisation with that sort of turnover would have better systems in place to ensure that sales staff at all levels are aware of the consumer’s rights and the respondent’s duties in respect of defective or sub-quality products.
I am satisfied that the respondent has exhibited contrition. That is evidenced itself by the fact that the respondent has at a very early stage agreed to penalties and the joint submissions now before the Court. It has spared the public and the taxpayers considerable expense in the conduct of what would have been a lengthy and complex trial. I take into account that there is now corrective action being taken; that is incorporated in the draft order.
Deterrence
There is a need for both general and specific deterrence. The issue of general deterrence is addressed by the issue of a penalty, which will no doubt be broadcast among the broader community. I also expect that it will afford general deterrence in the overall retail sector, particularly that part controlled by the franchisor, which is one of the largest operators in this particular segment of the retail market.
Having regard to the process of instinctive synthesis, and taking into account all the relevant factors including proportionality and consistency (which may be identified by reference to the comparative cases which are presented as a table in Exhibit 3), it does seem to me that the imposition of the proposed pecuniary penalty of $26,000 is appropriate and within the range that I would have imposed had the matter been left for me to determine without the assistance of the parties.
Declarations and injunctions
The parties also propose declarations and injunctions. Joint submissions have been made in respect of the basis for declarations. In my view, it is an appropriate case for declarations to be made. The declarations relate to the contravening conduct. There is a public interest in the declarations being made, and there is no question that the declarations are not theoretical. There is a real legal controversy which is being resolved, and the public and the applicant have a genuine interest in seeking the declaratory relief. Furthermore, the declaratory relief has a proper contradictor in the presence of the respondent.
In relation to the injunctive relief, I think it is appropriate, as has been contended by senior counsel for the applicant, that injunctions be granted for a period of three years. The risk of breach proceedings will put the respondent on notice as to its duties and obligations, and ensure that its systems of training and supervision are improved.
I will make the orders as proposed.
I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of Judge Burnett
Associate:
Date: 4 July 2014
Annexure A
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