Australian Competition and Consumer Commission v Smart Corporation Pty Ltd (No 3)
[2021] FCA 347
•15 April 2021
FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Smart Corporation Pty Ltd (No 3) [2021] FCA 347
File number: WAD 215 of 2019 Judgment of: JACKSON J Date of judgment: 15 April 2021 Catchwords: CONSUMER LAW - application for remedies under the Australian Consumer Law - respondent company in business of hiring out four wheel drive vehicles - knowing involvement of second and third respondents
CONSUMER LAW - misleading or deceptive conduct - false or misleading representations - website and certain emails represented that vehicles were fully insured - vehicles not fully insured - contract term giving discretion to first respondent not to make claim against insurer even if vehicle insured and instead claim damage from hirer - finding that respondents had engaged in misleading or deceptive conduct
CONSUMER LAW - unfair contract terms - contract term permitted first respondent to track hire vehicles by global positioning system (GPS) - GPS data used to create reports alleging that hirers had engaged in driving behaviour which caused 'excessive wear and tear' - contract term allowing first respondent to deduct $500 from hirers' bonds per incident - contract term giving discretion to first respondent not to make claim against insurer even if vehicle insured and instead claim damage from hirer - contract term providing that hirers must not denigrate first respondent in any way after hire period had expired - terms found to be unfair
CONSUMER LAW - unconscionable conduct - bonds retained after hire - aggressive emails advising customers of bond retention - emails threatened customers with litigation, referral to authorities on basis of GPS data - emails intended to intimidate customers into not challenging the retention of the bonds - conduct found to be unconscionable
CONSUMER LAW - remedies - declarations including that contract terms are unfair - penalties - unknowable number of contraventions - course of conduct - non-party consumer redress orders
Legislation: Acts Interpretation Act 1901 (Cth) s 15AB
Australian Securities and Investments Commission Act 2001 (Cth) Part 2, Division 2
Bankruptcy Act 1966 (Cth) ss 58, 82
Competition and Consumer Act 2010 (Cth) ss 83, 155, 137H Schedule 2 (Australian Consumer Law) ss 2, 15, 16, 18, 21, 22, 23, 24, 29, 84, 87, 224, 232, 237, 238, 239, 243, 248, 250
Federal Court of Australia Act 1976 (Cth) s 21
Cases cited: AB v Western Australia [2011] HCA 42; (2011) 244 CLR 390
Aqua-Marine Marketing Pty Ltd v Pacific Reef Fisheries (Australia) Pty Ltd (No 5) [2012] FCA 908
Attorney‑General of New South Wales v World Best Holdings Ltd [2005] NSWCA 261; (2005) 63 NSWLR 557
Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113; (2017) 254 FCR 68
Australian Competition and Consumer Commission v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Limited) [2015] FCA 368
Australian Competition and Consumer Commission v Ashley & Martin Pty Ltd [2019] FCA 1436
Australian Competition and Consumer Commission v Black on White Pty Ltd [2004] FCA 363; (2004) 138 FCR 314
Australian Competition and Consumer Commission v Chrisco Hampers Australia Limited [2015] FCA 1204; (2015) 239 FCR 33
Australian Competition and Consumer Commission v CLA Trading Pty Ltd [2016] FCA 377
Australian Competition and Consumer Commission v Clinica Internationale Pty Ltd (No 2) [2016] FCA 62
Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 634; (2014) 317 ALR 73
Australian Competition and Consumer Commission v Cornerstone Investment Aust Pty Ltd (in liq) (No 5) [2019] FCA 1544
Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2007] FCAFC 146; (2007) 161 FCR 513
Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682
Australian Competition and Consumer Commission v Excite Mobile Pty Ltd (No 2) [2013] FCA 1267
Australian Competition and Consumer Commission v Geowash Pty Ltd (Subject to a Deed of Company Arrangement) (No 4) [2020] FCA 23; (2020) 376 ALR 701
Australian Competition and Consumer Commission v Get Qualified Australia Pty Ltd (in liq) (No 3) [2017] FCA 1018
Australian Competition and Consumer Commission v Hillside (Australia New Media) Pty Ltd trading as Bet365 (No 2) [2016] FCA 698
Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90
Australian Competition and Consumer Commission v Morild Pty Ltd [2017] FCA 1308
Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd [2021] FCAFC 40
Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; (2016) 340 ALR 25
Australian Competition and Consumer Commission v Renegade Gas Pty Ltd (trading as Supagas NSW) [2014] FCA 1135
Australian Competition and Consumer Commission v Service Seeking Pty Ltd [2020] FCA 1040
Australian Competition and Consumer Commission v Smart Corporation Pty Ltd [2019] FCA 1603
Australian Competition and Consumer Commission v Sony Interactive Entertainment Network Europe Limited [2020] FCA 787; (2020) 381 ALR 531
Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2020] FCAFC 130; (2020) 381 ALR 507
Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640
Australian Securities and Investments Commission v Adler [2002] NSWSC 483; (2002) 42 ACSR 80
Australian Securities and Investments Commission v Citrofresh International Ltd (No 3) [2010] FCA 292; (2010) 268 ALR 303
Australian Securities and Investments Commission v Kobelt [2019] HCA 18; (2019) 267 CLR 1
Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226; (2005) 148 FCR 132
Commonwealth Bank of Australia v Finance Sector Union of Australia [2002] FCAFC 193; (2002) 125 FCR 9
Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; (2010) 269 ALR 1
Director General of Fair Trading v First National Bank plc [2002] UKHL 52; [2002] 1 AC 481
Elan, Re Guild Enterprises Australia Pty Ltd v Cohen [2020] FCA 79; (2020) 142 ACSR 554
Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53; (2018) 260 FCR 68
Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52
Gaffney v Federal Commissioner of Taxation (1998) 81 FCR 574
IMF (Australia) Ltd v Sons Of Gwalia Ltd (Administrator Appointed) ACN 008 994 287 [2004] FCA 1390; (2004) 211 ALR 231
Ipstar Australia Pty Ltd v APS Satellite Pty Ltd [2018] NSWCA 15; (2018) 356 ALR 440
Jenyns v Public Curator (Qld) (1953) 90 CLR 113
Keller v LED Technologies Pty Ltd [2010] FCAFC 55; (2010) 185 FCR 449
Kerkhoffs v Registrar of Aboriginal and Torres Strait Islander Corporations [2014] FCAFC 66
Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357
Mathers v Commonwealth of Australia [2004] FCA 217; (2004) 134 FCR 135
Medical Benefits Fund of Australia Ltd v Cassidy [2003] FCAFC 289; (2003) 135 FCR 1
Mill v The Queen (1988) 166 CLR 59
NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285
P (a minor) v National Association of School Masters/Union of Women Teachers [2003] UKHL 8; [2003] 2 AC 663
Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50; (2015) 236 FCR 199
Re Altim Pty Ltd [1968] 2 NSWR 762
Re Sharpe; Ex parte Tietyens Investments Pty Ltd (in liq) v Official Trustee (Unreported, Federal Court of Australia, 26 October 1998)
Royer v State of Western Australia [2009] WASCA 139; (2009) 197 A Crim R 319
Swishette Pty Ltd v Australian Competition and Consumer Commission [2017] FCAFC 45; (2017) 249 FCR 483
Trade Practices Commission v CSR Ltd [1991] ATPR 41-076
Trivago N.V. v Australian Competition and Consumer Commission [2020] FCAFC 185; (2020) 384 ALR 496
Unique International College Pty Ltd v Australian Competition and Consumer Commission [2018] FCAFC 155; (2018) 266 FCR 631
Violet Home Loans Pty Ltd v Schmidt [2013] VSCA 56; (2013) 44 VR 202
Yorke v Lucas (1985) 158 CLR 661
Division: General Division Registry: Western Australia National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Number of paragraphs: 316 Date of hearing: 29 September 2020 Date of Last Submissions: 22 February 2021 (Applicant) Counsel for the Applicant: Mr MD Howard SC with Ms JA Thornton Solicitor for the Applicant: Norton Rose Fulbright Counsel for the Respondents: The respondents did not appear ORDERS
WAD 215 of 2019 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant
AND: SMART CORPORATION PTY LTD (ACN 134 192 297)
First Respondent
VITALI ROESCH
Second Respondent
MARYNA KOSUKHINA
Third Respondent
ORDER MADE BY:
JACKSON J
DATE OF ORDER:
15 APRIL 2021
PENAL NOTICE
IF YOU (BEING THE PERSON BOUND BY THIS ORDER):
(A)REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME SPECIFIED IN THIS ORDER FOR THE DOING OF THE ACT; OR
(B)DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER REQUIRES YOU NOT TO DO,
YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY OR OTHER PUNISHMENT. ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS YOU TO BREACH THE TERMS OF THIS ORDER MAY BE SIMILARLY PUNISHED.
THE COURT DECLARES THAT:
1.The first respondent:
(a)during the period January 2014 to August 2019, made a representation to consumers, via the publication of statements made on its website, australian4wdhire.com.au that:
(i)all A4WD's rental vehicles had the benefit of being insured for off‑road use; and
(ii)if any damage occurred to the vehicle while being hired, including while being used on unsealed roads, it would be insured under A4WD's insurance policies,
(together, the Insurance Coverage Representation),
when in fact in not all instances would consumers have the benefit of the rental vehicle being insured for damage to it, and in cases of a single vehicle incident where the vehicle was insured, the consumer would at the first respondent's sole discretion be liable under the first respondent's standard form contract for either the costs of rectifying the damage to the vehicle, the vehicle's replacement value or the payout figure under the first respondent's finance contract for the vehicle; and
the first respondent, thereby, in trade or commerce, in connection with the supply or possible supply of rental vehicles:
(b)engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law, contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (ACL); and
(c)made a false or misleading representation that the rental vehicles had characteristics or benefits which they did not have, in contravention of s 29(1)(g) of the ACL.
2.The terms in the various standard form contracts between the first respondent and consumers, as set out in Annexure A, are declared pursuant to s 250 of the ACL to be unfair terms within the meaning of s 24 of the ACL, and are also declared to be void pursuant to s 23 of the ACL, because they included terms to the following effect:
(a)GPS Provisions under which, taken together:
(i)the first respondent was permitted to use global positioning system (GPS) tracking data on the hired vehicle to monitor where the vehicle was driven, the times when the vehicle was being driven and how fast it was being driven;
(ii)the first respondent could use this GPS data to conclude that a consumer had operated the vehicle in a manner which was a Prohibited Operation (defined in the contract to include, among other things, driving in contravention of any traffic laws, driving outside of built-up areas between sunset and dawn and driving during periods of low visibility including but not limited to fog and heavy rain);
(iii)the consumer acknowledged that engaging in a Prohibited Operation will or may cause excessive wear and tear and would likely cause other damage to the vehicle (defined as Driver Behaviour Damage); and
(iv)in the event that the GPS data evidenced that a Prohibited Operation had occurred, the consumer would be liable to compensate the first respondent for the deemed Driver Behaviour Damage in amounts which could authorise the first respondent to deduct part or all of the consumer's security bond;
(b)an Insurance Discretion Clause which provided that in the event of a single vehicle accident, the first respondent had the sole discretion to elect not to submit an insurance claim to its insurers for damage caused to the vehicle, the consequence of which was that the consumer was then liable to pay for the costs of rectifying the damage, the vehicle's replacement value or the payout figure under the first respondent's finance contract, even in circumstances where the vehicle was in fact insured for the damage; and
(c)a Non-Disparagement Clause which required consumers to act at all times in the first respondent's best interests,
in circumstances where each of the GPS Clause, the Insurance Discretion Clause and the Non-Disparagement Clause:
(d)caused a significant imbalance between the rights and obligations of consumers and the first respondent;
(e)were not reasonably necessary to protect the legitimate interests of the first respondent as the party advantaged by the terms; and
(f)caused financial and non-financial detriment to consumers.
3.Between April 2017 and August 2019, the first respondent engaged in conduct in trade or commerce that was, in all the circumstances unconscionable in breach of s 21 of the ACL, by:
(a)in respect of each of the 31 identified consumers (listed at Annexure B), sending each consumer an email that contained language that was intimidating and threatening:
(i)claiming misleadingly and in bad faith that information contained in a document produced by its GPS data provider (Driver Behaviour Report), was evidence that the consumer had incurred large numbers of 'speeding violations' or had otherwise engaged in a Prohibited Operation when using the vehicle, which was a serious breach of contract; and
(ii)saying that the first respondent would be retaining part or all of the security bond because the consumer engaged in a Prohibited Operation;
(b)in respect of 25 of the 31 identified consumers (listed at Annexure C), also relying on a consumer's alleged Prohibited Operation of the vehicle, as purportedly evidenced by the Driver Behaviour Report, to deduct an amount of the consumer's security bond for what it described as 'excessive wear and tear' or 'night driving' irrespective of whether there had been any damage done to the vehicle;
(c)in respect of 18 of the 31 identified consumers (listed at Annexure D), also sending other intimidatory correspondence containing intemperate language that was intimidating and threatening, and which was sent in order to deter and discourage the consumer from:
(i)raising legitimate concerns about the accuracy of the Driver Behaviour Report; and
(ii)disputing the first respondent's allegations that they had engaged in a Prohibited Operation when using the hire vehicle; and
(d)in respect of three of the 31 identified consumers (listed at Annexure E), falsely alleging that the police had issued speeding fines in respect of the consumer's driving of the hired vehicle.
4.The second and third respondents, each of whom caused the first respondent to engage in the conduct described at paragraphs 1 and 3 above, were each knowingly concerned in and a party to, the contraventions of the first respondent declared in those paragraphs within the meaning of s 224(1)(e) of the ACL.
THE COURT ORDERS THAT:
Non-party consumer redress
5.Pursuant to s 239 of the ACL, and within 21 days of the date that this order is served by email on the second and third respondents (at the addresses set out in Annexure F), the second and third respondents must jointly and severally pay to the applicant, on behalf of each of the consumers named in Annexure G, the amount identified in Annexure G for that consumer.
Disqualification orders
6.Pursuant to s 248 of the ACL, the second respondent is disqualified from managing a corporation for a period of three years from the date that this order is served on the second respondent by email (at the address set out in Annexure F).
7.Pursuant to s 248 of the ACL, the third respondent is disqualified from managing a corporation for a period of three years from the date that this order is served on the third respondent by email (at the address set out in Annexure F).
Pecuniary penalties
8.Pursuant to s 224 of the ACL, the first respondent must pay to the Commonwealth of Australia, within 21 days of the date that this order is served by email on the first respondent (at the address set out in Annexure F), $870,000 by way of pecuniary penalty, in respect of the contraventions of s 21 and 29(1)(g) of the ACL referred to in paragraphs 1 and 3 above.
9.Pursuant to s 224 of the ACL, the second respondent must pay to the Commonwealth of Australia, within 21 days of the date that this order is served by email on the second respondent (at the address set out in Annexure F), $179,000 by way of pecuniary penalty in respect of the second respondent's involvement in the first respondent's contraventions of s 21 and 29(1)(g) of the ACL as declared in paragraph 4 above.
10.Pursuant to s 224 of the ACL, the third respondent must pay to the Commonwealth of Australia, within 21 days of the date that this order is served by email on the third respondent (at the address set out in Annexure F), $174,000 by way of pecuniary penalty in respect of the third respondent's involvement in the first respondent's contraventions of s 21 and 29(1)(g) of the ACL as declared in paragraph 4 above, such penalty to become payable only after payment of the non-party consumer redress set out in paragraph 5 above and only on the last day of the month following the month in which the third respondent is discharged from bankruptcy.
Other orders
11.The reasons for judgment with a seal of the court affixed thereon be retained on the court file for the purposes of s 137H(3) of the Competition and Consumer Act 2010 (Cth).
12.The second and third respondents must pay the applicant's costs of the proceeding to be taxed, if not agreed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Annexure A
The terms in the various standard form contracts between the first respondent and consumers that are unfair terms, and are therefore void:
Dates standard contract terms in force Void terms From January 2014 to some time before 31 March 2016 Clause 4(d)
Clause 19(d)From at least 31 March 2016 to at least 24 May 2017 Clause 4(d)
Clause 20(d)From at least 24 May 2017 to some time before 3 April 2018 Clause 4(d)
Clause 17 (second and third paragraphs only)Clause 20(d)
From at least 3 April 2018 to some time before July 2018 Clause 4(d)
Clause 13(f)
Clause 17 (second and third paragraphs only)
Clause 20(d)At some time between April 2018 and July 2018 until at least September 2018 Clause 5(c), (j)
Clause 8 (d)-(i)
Clause 17(g), (h)From at least 24 September 2018 until May 2019 Clause 5(c), (j)
Clause 8(d)-(j)
Clause 17(g), (h)From at least May 2019 Clause 5(c), (j)
Clause 8(h), (j)
Clause 17(g), (h)Annexure B
The 31 identified consumers who received emails from the first respondent as described in paragraph 3(a) of these orders:
No.
Customer name(s)
1.
Benjimen Bomford
2.
Kenneth Hitchcock
3.
John Moriarty
4.
Matthew Roach
5.
Ian Davison and Jane-Marie Forrest
6.
AK
7.
BP
8.
CL
9.
DB
10.
GS
11.
HY
12.
JL
13.
JH
14.
JK
15.
LM
16.
MV
17.
MM
18.
NC
19.
PF
20.
PH
21.
RW
22.
SL
23.
SM
24.
VV
25.
WR
26.
CM
27.
DM
28.
MK
29.
NJ
30.
TM
31.
TMcC
Annexure C
List of 25 consumers who were charged for 'excessive wear and tear' and/or 'night driving' as described in paragraph 3(b) of these orders:
No.
Customer name(s)
Amounts deducted for 'excessive wear and tear' and/or 'night driving'
1.
Benjimen Bomford
$4,710
2.
Kenneth Hitchcock
$3,002.15
3.
John Moriarty
$500
4.
Matthew Roach
$500 and $500 for 'night driving'
5.
Ian Davison and Jane-Marie Forrest
$1,000
6.
AK
$1,000
7.
BP
$500
8.
CL
$500
9.
DB
$1,000 for 'night driving'
10.
GS
$500
11.
HY
$1,164.66
12.
JL
$500
13.
JH
$500
14.
JK
$500
15.
LM
$500
16.
MV
$500
17.
MM
$193.81
18.
NC
$500
19.
PF
$500
20.
PH
$500
21.
RW
$500
22.
SL
$500
23.
SM
$70
24.
VV
$4,390
25.
WR
$500
Annexure D
List of 18 consumers who received other intimidatory correspondence from A4WD as described in paragraph 3(c) of these orders:
No.
Customer name(s)
1.
Benjimen Bomford
2.
Kenneth Hitchcock
3.
John Moriarty
4.
Matthew Roach
5.
Ian Davison and Jane-Marie Forrest
6.
CL
7.
DB
8.
GS
9.
HY
10.
JH
11.
LM
12.
MV
13.
MK
14.
PF
15.
PH
16.
SM
17.
WR
18.
CM
Annexure E
List of three customers who were falsely told that the police had issued speeding fines in respect of the consumer's driving of the hired vehicle as described in paragraph 3(d) of these orders.
1.
Benjimen Bomford
2.
Kenneth Hitchcock
3.
Matthew Roach
Annexure F
A copy of these orders must be served on the first, second and third respondents at the following email addresses:
Respondent Contact Name Email Address First respondent Matthew Bookless (SV Partners) [email protected] Second respondent Vitali Roesch [email protected] Third respondent Maryna Kosukhina [email protected] Annexure G
The second and third respondents pay to the ACCC the following amounts for the benefit of the following consumers:
Hirer name(s)
Amount (deducted by the respondents for 'excessive wear and tear' and processing/administration fees)
Ian Davison and Jane-Marie Forrest
$1,200
John Moriarty
$550
Benjimen Bomford
$4,760
Kenneth Hitchcock
$3,052.15
Table of Contents
Introduction [1] The alleged bases of the remedies sought under the ACL [6] Misleading or deceptive conduct and false or misleading representations [8] Unfair contract terms [11] Unconscionable conduct [14] Involvement of Mr Roesch and Ms Kosukhina [15] Preliminary issue - proceeding against Ms Kosukhina [16] Misleading or deceptive conduct or false or misleading representations [23] Principles [23] The statements made [26] The representations thereby made [35] Were the Insurance Representations misleading or deceptive and false or misleading? [46] Conclusion on contraventions [59] Unfair contract terms [63] Principles [63] Standard form consumer contracts [74] GPS Provisions [75] Whether the GPS Provisions are unfair contract terms [88] Insurance Discretion Clause [113] Non-Disparagement Clause [120] Unconscionable conduct [127] Principles [127] The conduct complained of - one customer's experience [141] Initial emails to other customers making allegations [167] Further emails to some customers [174] Deduction of money from security bonds [181] Evaluation of the conduct [182] Involvement of Mr Roesch and Ms Kosukhina [193] Principles [193] Extent of Mr Roesch's and Ms Kosukhina's knowing involvement [198] Remedies - declarations of contravention [203] Remedies - declarations of unfair contract terms [209] Remedies - injunctions [215] Remedies - non-party consumer redress [220] Remedies - disqualification [234] Principles [235] Application of principles [239] Remedies - pecuniary penalties [247] General approach [248] Maximum penalties [250] Number of contraventions, course of conduct and totality [253] Matters to which the court will have regard in fixing penalty [269] Common factors relevant to penalty [271] The size of A4WD and its financial position and those of Mr Roesch and Ms Kosukhina [271] Senior management engaged in contravening conduct [280] No corporate culture conducive to compliance [281] Disposition to cooperate with the ACCC [282] Whether the respondent has engaged in similar conduct in the past [286] False or misleading representations - specific penalty factors [287] Nature and extent of the contravening conduct, circumstances in which it took place, and the amount of loss or damage caused [287] Market share and reach [293] The deliberateness of the contraventions, and whether they were systematic and/or covert [295] Unconscionable conduct - specific penalty factors [298] Nature and extent of the contravening conduct, circumstances in which it took place, and the amount of loss or damage caused [298] The deliberateness of the contraventions, and whether they were systematic and/or covert [302] Penalties to be ordered [304] Other orders [315] APPENDIX A APPENDIX B REASONS FOR JUDGMENT
JACKSON J:
Introduction
In this proceeding, the applicant (ACCC) seeks declarations as to breaches of Schedule 2 of the Competition and Consumer Act 2010 (Cth), known as the Australian Consumer Law (ACL), by the first respondent, Smart Corporation Pty Ltd, which formerly traded as Australian 4WD Hire (A4WD). The ACCC also seeks a pecuniary penalty against A4WD. The second respondent, Vitali Roesch, and the third respondent, Maryna Kosukhina, are former directors and employees of the company. The ACCC seeks declarations, non‑party redress orders, injunctions, disqualification from managing corporations and pecuniary penalties against Mr Roesch and Ms Kosukhina based on what is said to be their knowing involvement in A4WD's breaches of the ACL. The ACCC also seeks declarations that certain terms in what were A4WD's standard conditions for the hire of vehicles are unfair contract terms for the purposes of s 23 of the ACL.
This proceeding was commenced in April 2019. The respondents were initially represented by a solicitor, filed a concise statement in response to the ACCC's concise statement, and opposed the remedies sought. Then A4WD went into liquidation on 23 December 2019. Ms Kosukhina became bankrupt on 26 February 2020. The court gave the ACCC leave to proceed against the company, subject to an undertaking by the ACCC that it will not enforce any pecuniary penalties or costs orders against the company without the leave of the court. The liquidators indicated that they did not want A4WD to take any further part in the proceeding. The lawyer who had been on the record for all three respondents ceased to act after the company went into liquidation, and no notice of acting or notice of address for service has since been filed for any of the respondents. The ACCC has not communicated with Ms Kosukhina's trustee in bankruptcy.
In those circumstances, orders were made to ensure that the respondents had notice of the hearing of the matter and the possible consequences for them if they did not take part. But none of the respondents appeared at the hearing, which proceeded in their absence on 29 September 2020. The ACCC adduced evidence, largely by affidavit, and made submissions in favour of the relief sought.
The court received supplementary written submissions from the ACCC on 30 September 2020 and 22 February 2021. During the preparation of these reasons it became apparent that the decision of the Full Court in an appeal which the ACCC brought in relation to Quantum Housing Group Ltd was likely to be relevant to questions of unconscionable conduct in this proceeding. My Chambers raised with the ACCC whether I should await the Full Court's decision in that case before delivering these reasons, the ACCC submitted that I should, and so I have done so. That decision came down on 19 March 2021: Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd [2021] FCAFC 40.
For the reasons that follow, I have decided substantially to grant the relief the ACCC seeks.
The alleged bases of the remedies sought under the ACL
A4WD was in the business of hiring out four wheel drive vehicles. It appears that its customers were typically tourists who wanted to drive the vehicles in remote places, including off sealed roads.
There are three sets of allegations made against A4WD. They concern misleading or deceptive conduct and false or misleading representations, unfair contract terms, and unconscionable conduct.
Misleading or deceptive conduct and false or misleading representations
The ACCC makes allegations of breach of the ACL concerning statements about insurance coverage for hired vehicles which A4WD made on its website (australian4wdhire.com.au) and in emails to potential customers between January 2014 and August 2019. According to the ACCC, these were representations to consumers that all of A4WD's vehicles had the benefit of being insured for off‑road use, and that if any damage to the vehicle occurred when it was being hired, including when it was being used on unsealed roads, it would be covered by insurance policies taken out by A4WD.
The ACCC alleges that those representations were false, because not all of A4WD's vehicles were insured for damage caused by single vehicle accidents. A4WD's standard terms and conditions required the hirer to reimburse the company for the cost of repairs in that situation. Also, those terms also gave A4WD the sole discretion not to make a claim on its insurers for single vehicle accidents even if the vehicle was insured, but to instead recover repair costs from the hirer.
Accordingly, the ACCC says that the statements made by A4WD on its website and in its emails involved misleading or deceptive conduct in breach of s 18 of the ACL. The ACCC also claims that the statements were false or misleading representations that goods, namely the hired vehicles, had benefits which they did not have, in breach of s 29(1)(g) of the ACL.
Unfair contract terms
The ACCC alleges that certain provisions which appeared in A4WD's standard terms and conditions are unfair contract terms within the meaning of Part 2‑3 of the ACL.
The standard terms varied from time to time, but the alleged effect of the relevant provisions can be summarised as follows:
(1)Through Global Positioning System (GPS) tracking data on the hired vehicle, A4WD could prepare a Driver Behaviour Report (DBR) which could show that the hirer had engaged in a 'Prohibited Operation' as defined in the contract, for example by driving over the speed limit. That would make the hirer liable to compensate A4WD for deemed 'Driver Behaviour Damage', and A4WD could deduct the compensation from the hirer's security bond. The ACCC submits that these provisions are unfair contract terms because they imposed financial penalties on the hirer without a causal connection between the hirer's behaviour and any loss to A4WD.
(2)If the hired vehicle was damaged in a single vehicle incident, A4WD had the sole discretion to elect not to submit an insurance claim to its insurers for damage, loss or replacement of the hire vehicle. The consumer would then be liable to pay for the costs of rectifying the damage, the vehicle's replacement value, or the pay‑out figure under A4WD's finance contract, even in circumstances where the vehicle was in fact insured for the damage. This is the same provision which is said to falsify the representations about insurance.
(3)Hirers were obligated to act at all times in the best interests of A4WD's business and interests and not defame or denigrate A4WD following the return of the vehicle, including by placing misleading, deceptive or defamatory negative reviews on any website or other form of online forum. The ACCC says that this created a significant imbalance because there were no corresponding obligations that A4WD owed to the customer. This clause prevented the customer from denigrating A4WD even when the customer's views were honestly and genuinely held, and it exposed the customer to liability to A4WD for allegedly failing to act in the company's best interests.
The ACCC alleges that the above terms are unfair contract terms within the meaning of s 23 of the ACL and so should be declared to be unfair under s 250.
Unconscionable conduct
The allegations of unconscionable conduct arise out of A4WD's behaviour in relation to some 31 customers, after they had returned their hired vehicles. The conduct took place in a period from about April 2017 to about August 2019. It typically started with an email the customers would receive after the vehicle had been returned which alleged on the basis of the DBR that the customers had engaged in numerous speeding violations, in the order of hundreds. That was in circumstances where the hirers had paid substantial security bonds (of between $1,500 and $5,000) and the contracts they had signed purportedly entitled A4WD to deduct money from the bond for each violation. The language of the emails is said to have been intemperate, intimidating and threatening, and some customers who tried to dispute the matters received further emails which the ACCC characterises in the same way. After these emails, A4WD deducted money from the security bonds of 25 of the customers for 'excessive wear and tear' or as a 'night driving fee'. Six customers did not receive any part of their bonds back. This is all said to be in breach of the prohibition in s 21 of the ACL on engaging in conduct that is, in all the circumstances, unconscionable.
Involvement of Mr Roesch and Ms Kosukhina
Mr Roesch was a director of A4WD from November 2008 until October 2015 and its sole director for nearly all of that time. He became bankrupt in 2016. Ms Kosukhina was a director of the company from September 2015 until January 2020, and sole registered director for nearly all of that time. The ACCC alleges that Mr Roesch continued as a shadow director from October 2015. It says that Mr Roesch and Ms Kosukhina were jointly and severally responsible for the actions of A4WD and so should be liable in respect of its alleged breaches of the ACL and subject to pecuniary penalties, injunctions and disqualification orders.
Preliminary issue - proceeding against Ms Kosukhina
While the ACCC has obtained leave to proceed against A4WD as a company in liquidation, it has not sought any comparable leave to proceed against Ms Kosukhina, a bankrupt. It submits that it is not required to do so because it is not seeking to proceed against her in respect of a provable debt.
Section 58(3)(b) of the Bankruptcy Act 1966 (Cth) relevantly provides that after a debtor has become bankrupt, it is not competent for a creditor to take any fresh step in a legal proceeding in respect of a provable debt, except with the leave of the court. As to what is a provable debt, s 82(1) provides that subject to Part VI Division 1 of the Bankruptcy Act:
all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.
Section 82(3) provides that penalties or fines imposed by a court in respect of an 'offence against a law' are not provable in bankruptcy.
The monetary remedies the ACCC seeks against Ms Kosukhina are pecuniary penalties, non-party consumer redress orders and the costs of the proceedings. As to the penalties, there is a question about whether s 82(3) applies, because it is arguable that the reference to an 'offence' is only to a criminal offence, and here the ACCC seeks civil penalty orders. In Mathers v Commonwealth of Australia [2004] FCA 217; (2004) 134 FCR 135 at [29]‑[30], Heerey J held that civil penalties which the ACCC was pursuing under s 76 of the Trade Practices Act 1974 (Cth) came within the meaning of 'penalties or fines imposed by a court in respect of an offence against a law' and so were not admissible to proof against an insolvent company under s 553B of the Corporations Act 2001 (Cth). But a similar result does not necessarily follow in relation to s 82 of the Bankruptcy Act. That is because s 82(3AA) expressly provides that civil penalties under the Corporations Act are not provable debts, which might suggest that civil penalties under other legislation such as the ACL may be provable. There was no provision in the Corporations Act comparable to s 82(3AA) of the Bankruptcy Act which was drawn to Heerey J's attention; in fact, s 553B(1), in providing that pecuniary penalty orders under the Proceeds of Crime Act 1987 (Cth) were admissible to proof, points in the opposite direction to s 82(3AA).
But it is not necessary to decide the issue on that basis, because I consider that the monetary remedies, if ordered, are neither debts or liabilities to which Ms Kosukhina was subject at the time of her bankruptcy, nor debts or liabilities to which she may become subject before her discharge by reason of an obligation incurred before the date of the bankruptcy. For Ms Kosukhina to become liable to pay a pecuniary penalty, it will be necessary for this court to determine that she has breached relevant civil penalty provisions and to exercise a discretion that she should be liable for a penalty. For her to be liable for non-party redress orders, the court will have to determine that she was involved in contraventions of relevant provisions of the ACL and to exercise a discretion to make the redress orders: see ACL s 239. A costs order will similarly require the exercise of the court's discretion. None of those matters constitute debts or liabilities to which Ms Kosukhina was subject at the time of the bankruptcy or liabilities to which she will become subject by reason of an obligation incurred before that time. At most, there was a vulnerability to a determination that A4WD had breached the ACL, that Ms Kosukhina had been involved in those breaches, and that the court's discretion should be exercised in a way giving rise to monetary obligations on her part: see Gaffney v Federal Commissioner of Taxation (1998) 81 FCR 574 at 581; Australian Competition and Consumer Commission v Black on White Pty Ltd [2004] FCA 363; (2004) 138 FCR 314 at [34]‑[35]; Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52 at [35]‑[36].
Another possible reason why any liability would not be provable in the bankruptcy is that the ACCC, the party proceeding in this court, is not a 'creditor' so that s 58(3) of the Bankruptcy Act does not apply to it in respect of that liability. Pecuniary penalties are payable to the Commonwealth (or a State or Territory), not to the ACCC (ACL s 224(1)), and prima facie, if liability had been imposed by non‑party consumer redress orders at the commencement of the bankruptcy, it would have been liability to the consumers, not to the ACCC. But basing the result on that ground might be anomalous, as it may be inconsistent with the policy of s 58(3) to ensure that relevant monetary claims are realised and discharged through the bankruptcy process rather than through the courts: see Re Sharpe; Ex parte Tietyens Investments Pty Ltd (in liq) v Official Trustee (Unreported, Federal Court of Australia, 26 October 1998) at 6‑7 (Weinberg J). In the absence of full argument on the point it is preferable not to resolve it on that ground.
I conclude that the potential monetary liabilities which will be imposed on Ms Kosukhina if the ACCC is successful in this proceeding will not be debts provable in the bankruptcy, so that s 58(3) does not require the ACCC to obtain the leave of the court before continuing to prosecute its claims against her.
Misleading or deceptive conduct or false or misleading representations
Principles
In Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2020] FCAFC 130; (2020) 381 ALR 507 at [22] the Full Court summarised the principles to be applied to the prohibition on misleading or deceptive conduct and closely related prohibitions as follows (citations removed):
The central question is whether the impugned conduct, viewed as a whole, has a sufficient tendency to lead a person exposed to the conduct into error (that is, to form an erroneous assumption or conclusion about some fact or matter). A number of subsidiary principles, directed to the central question, have been developed:
(a)First, conduct is likely to mislead or deceive if there is a real or not remote chance or possibility of it doing so.
(b)Second, it is not necessary to prove an intention to mislead or deceive.
(c)Third, it is unnecessary to prove that the conduct in question actually deceived or misled anyone. Evidence that a person has in fact formed an erroneous conclusion is admissible and may be persuasive but is not essential. Such evidence does not itself establish that conduct is misleading or deceptive within the meaning of the statute. The question whether conduct is misleading or deceptive is objective and the Court must determine the question for itself.
(d)Fourth, it is not sufficient if the conduct merely causes confusion.
(e)Fifth, where the impugned conduct is directed to the public generally or a section of the public, the question whether the conduct is likely to mislead or deceive has to be approached at a level of abstraction where the Court must consider the likely characteristics of the persons who comprise the relevant class to whom the conduct is directed and consider the likely effect of the conduct on ordinary or reasonable members of the class, disregarding reactions that might be regarded as extreme or fanciful.
The Full Court also indicated (at [23]) that a requirement that a significant number of persons to whom the conduct is directed would be led into error is no part of the test under s 18 of the ACL: see also Trivago N.V. v Australian Competition and Consumer Commission [2020] FCAFC 185; (2020) 384 ALR 496 at [192].
As far as the prohibition on false or misleading representations in s 29 of the ACL goes, a representation is a statement, which may be conveyed by words or conduct, explicitly or by implication: Aqua-Marine Marketing Pty Ltd v Pacific Reef Fisheries (Australia) Pty Ltd (No 5) [2012] FCA 908 at [78]. It is doubtful whether there is any material difference between the requirement in s 29 that the representation be 'false or misleading' and the phrase used in s 18, 'misleading or deceptive': see Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682 at [14]; Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 634; (2014) 317 ALR 73 at [40].
The statements made
The ACCC has adduced evidence of captures of A4WD's website, australian4wdhire.com.au at various times.
As at 3 August 2017 the home page of the website made the following statement (all errors in original):
Our 4WD's And Bush Campers
For the recreational 4WD and Camper Hire we provide wide range of Small 4WD, Medium 4WD, Large 4WD, Extra Large 4WD, Dual Cabs with Canopy, Troop Carriers, Luxury 4WD as well as various types of Bush Campers. Our 4WD and Bush Camper range was designed predominantly for the self-drive 4WD Tourism & Travel where travelers can experience top quality 4WD and equipment to go for a cruise around the Country Side or to explore the Australian Outback and to have the access and flexibility for their destinations and enjoy their holidays at their own pace. Vehicles of this category are properly insured and equipped and are suitable for this type of travel.
Area of Use, Insurance & Roadside Assistance
Australian 4WD Hire has Off-Road Insurance for all vehicles and we allow you to travel on unsealed roads as long as they are on HEMA MAPS, (aka gazetted road) and are open and safe for passage and you have disclosed your remote Area of Use if applicable. All our vehicles are covered by Manufacturers Warranties and Roadside Assistance. In the unlikely event of vehicle failure, a replacement vehicle will be provided to you subject to availability.
HEMA Maps is a company that produces maps, atlases, guides and digital navigation products.
The above text was displayed prominently near the top of the home page. Further down under the heading 'We Offer' there were a number of bullet points, one of which said 'All Vehicles Off-Road Insured'. The statement 'Australian 4WD Hire has Off-Road Insurance and we allow you to travel on unsealed roads as long as they are on HEMA MAPS, (aka gazetted road) and are open and safe for passage' was repeated towards the bottom of the page. Similar statements appeared in web captures taken regularly up to September 2018.
From July 2018, the home page, after photographs of vehicles available for hire and a booking form, contained another section headed 'Why Australian 4WD Hire?'. One of the answers to that question under a graphic of a 4WD vehicle was 'All Vehicles Off-Road Insured'. Another, under a graphic indicating an online map was 'Off-Road OK as long as on HEMA MAPS'.
Further down the home page as it appeared from July 2018 under a heading '4 x 4 Rental For Any Purpose' or 'Off-Road 4 x 4 Rental For Any Purpose' and a sub-heading 'Freedom and Peace of Mind', the following statement was made: 'Choosing your own adventure while enjoying peace of mind is the ultimate in off-road travel. All Australian 4WD Hire Vehicles are insured for Off-Road use, allowing you to travel worry free on any unsealed roads found on Hema Maps (aka gazetted, open to the public and safe for passage)'.
The ACCC has provided page captures for subsequent dates from which it can be inferred that the home page made these representations throughout the period (at least) to 21 August 2019. At some time between then and the next web capture, which was taken on 9 September 2019, references to vehicles being insured for off-road use were removed.
While the respondents did not appear at trial, their position on these and other matters can be found in their responses to compulsory notices for the production of information which the ACCC served under s 155 of the Competition and Consumer Act 2010 (Cth) (CACA). The ACCC's first s 155 notice was dated 8 November 2018 and contained requirements for information that were divided into a Schedule 1 and a Schedule 2. On 29 November 2018, A4WD gave separate responses to each schedule (Sch 1 Response and Sch 2 Response). On 21 December 2018, the ACCC sought clarification of some of the company's previous answers. A4WD responded to this on 1 February 2019 (February Response). In the Sch 1 Response, A4WD said (emphasis and errors in original):
A4WD WEBSITE
7. The Australian 4Wd Hire website, under the current Entity was published in January 2014.
8. a,b,c, - All of the statements you have highlighted have appeared on the website pretty much since the business' inception. It appears that you may be forgot or deliberately choose not to mention that all these statements are also subject to our T&Cs which are published on our website 24/7.
The only alteration in that regard has been made to any of these statements is the removal of 2 words, 'Fully Comprehensively', which appeared before 'Insured' on the website and was removed from all text on the website and terms and conditions sometime between September and November 2017.
The decision to remove these 2 specific words came following meetings with the Office of Fair Trading, also correspondence with ACCC on and before 6th of October of 2017 and our Legal Representatives, who advised that, even though Legal Liability Cover as Fully Comprehensively Insured does extend to our customers, subject to our T&C's, the web advertising may give the customer a false sense of security or perception in believing that, no matter the cause, or nature of the incident that they would have no liability in event of damage, and of course this is not the case with any insurer in Australia.
We concluded that by using these 2 specific words, we were not only risking the genuine interests of our business, but also our customers. Given this advice we made the decision to remove these 2 specific words and simply advertise vehicles as 'Off-Road Insured', however the Legal Liability Cover as Fully Comprehensively Insured subject to our T&C's on all our vehicle has not changed.
In the February Response, A4WD clarified the timing of the representations to make it clear that they had appeared on its website since January 2014. From this, it is clear that statements to the effect of those set out above were made on the website from that time until August 2019. Until at least September 2017 they were made with particular emphasis by saying that the vehicles were 'Fully Comprehensively' insured.
In addition, emails which A4WD sent to potential customers who had requested quotes on the website said:
WE OFFER - ANY TIME - ANY WHERE
THE RIGHT VEHICLE FOR THE RIGHT PURPOSE WITH RIGHT EQUIPMENT
…
ŸAll Vehicles Off-Road Insured
ŸOff-Road OK as long as on HEMA MAPS
…
There are examples of these emails in evidence that are dated 2 April 2017, 22 December 2017 and 7 February 2018. It can be inferred from the standardised wording and formatting of the emails that many more such emails were sent to potential customers between at least April 2017 and February 2018.
The representations thereby made
There was no specific evidence about the characteristics of the class of people who were exposed to these statements by way of the website. But from the affidavit evidence provided by specific customers, and the nature and evident intended audience of the website itself, it may be inferred that the class was comprised of a potentially wide range of individuals who were considering or planning holidays in remote and regional areas of Australia. It is likely that they had some familiarity with using the internet to acquire and reserve goods and services but they may not have ever done so for the purpose of hiring a vehicle. There were members of the class who were not Australian citizens and lived overseas.
There is no reason to limit that class to people with any particular background, or level of education or experience, so it may be inferred that the class would be made up of people with varying levels of experience in hiring vehicles, varying familiarity with 4WD vehicles and varying levels of knowledge about the insurance arrangements common in the vehicle hire industry, ranging from detailed knowledge to no knowledge at all. Some members of the class may never have hired a vehicle at all before, and many would never have done so in Australia.
The ACCC alleges that the statements set out above represented that all of A4WD's vehicles had the benefit of being insured for off-road use. The respondents have admitted this in their concise statement filed on 21 May 2019. That allegation is made out for the period January 2014 to August 2019.
The ACCC also contends that the statements represented to consumers that should any damage occur to the vehicle while being hired, including while being used on unsealed roads, it would be insured under A4WD's insurance policies. The respondents' concise statement denies this.
Obviously the statements I have set out above did represent that all vehicles that could be hired from A4WD were insured for off-road use. The issue appears to be whether they represented that they were insured for any damage.
It seems that from January 2014 up until at least September 2017, they did make that representation. By the Sch 1 Response as quoted above, A4WD has admitted that the website said that the vehicles were 'fully comprehensively' insured. Mr Roesch and Ms Kosukhina have admitted that too, as they each were named on both Sch 1 and Sch 2 Responses as having signed it.
I am also satisfied that in the form the website appears to have taken from September 2017 to September 2018, a representation that any damage would be insured was made. The statement that the vehicles are 'properly insured' and are 'suitable for this type of travel' together with unqualified statements that A4WD has off-road insurance for all vehicles, and allows travel on unsealed roads, conveyed that the vehicles were insured for any damage. The statements were made on a website with the evident purpose of persuading potential customers to hire the vehicles. In the absence of any express qualification, they are likely to have led at least some ordinary, reasonable members of the class of users of the website to believe that any damage to the vehicle, including any damage sustained off-road, would be covered by insurance.
The representation that any damage was insured was also made on another part of the web site in the form it appears to have taken from July 2018 to at least August 2019. The heading 'Freedom and Peace of Mind', and the statement that, due to A4WD being insured, the customer could 'travel worry free on any unsealed roads found on Hema Maps' conveyed that any damage on those roads would be covered by the company's insurance. If there had been gaps in that insurance, the hirer would not necessarily be 'worry free'.
Finally, from April 2017 to February 2018, the emails received, in the context of the website (which it appears all recipients of the emails had used before receiving the emails), also conveyed that any damage which occurred to the vehicle while it was being hired would be insured under A4WD's policies.
I therefore find that both alleged representations were made, that is, that all of A4WD's vehicles had the benefit of being insured for off-road use, and that if any damage occurred to the vehicle while being hired it would be insured under A4WD's insurance policies (Insurance Representations). They were made on the website as it stood from least January 2014 to August 2019, and by emails from April 2017 to February 2018. Many ordinary and reasonable users of the website would understand the insurance mentioned in both of these representations to refer to insurance provided by an insurance company. And the insurance in question would not just mean the existence of an indemnity under an insurance policy which may or may not be called upon. In common experience and in ordinary parlance, to say that a vehicle is 'insured' implies that if damage to the vehicle occurs, or the vehicle is stolen or lost, an insurance company will pay for the cost of repairing or replacing the vehicle. That was reinforced by the context of the statements on the website, which were viewed by people considering whether to hire a vehicle from A4WD and so would be understood as advancing a reason why they should do so, namely because if any damage to the vehicle occurs, they will not be liable for it. That would be especially important to potential customers who may be considering taking the vehicle off sealed roads, where the risk of single vehicle accidents may be perceived to be greater.
In the respondents' concise statement they seem to try to minimise the extent to which it is likely that anyone was misled by noting, in effect, that the hirer always took the risk of such matters as excesses and exclusions, as well as mechanical damage. But while it can be accepted that most people are familiar with such common limitations to vehicle insurance, that does not detract from the main thrust of what the statements conveyed, as described above.
Were the Insurance Representations misleading or deceptive and false or misleading?
The ACCC relies on four matters said to falsify the Insurance Representations. The first matter is that not all of A4WD's rental vehicles were insured for damage caused in single vehicle accidents. The respondents admitted in their concise statement an allegation that approximately 46% of the vehicles hired by A4WD were not insured for accidents causing damage to the rental vehicle (i.e. they were not comprehensively insured). But that admission followed a statement that, 'Originally, A4WD advertised that all vehicles were comprehensively insured. When they cease [sic] to be comprehensively insured, A4WD changed the wording of the representation to reflect that fact.' From this and from the Sch 1 Response as set out above, it appears that any admission made by the respondents only relates to the period after September to November 2017. It is implicit in the concise statement that at that time, or perhaps some time before it, all vehicles were insured for all damage.
The ACCC also relies on a schedule of insurances dated 26 November 2018 which shows that approximately half of A4WB's vehicles were insured for third party property damage only. This tends to confirm the admission but it does not contain any dates on which insurance ceased and so does not shed any light on whether the vehicles were comprehensively insured before November 2018. There are individual certificates of comprehensive insurance but these all date from the end of 2018.
The Sch 2 Response dated 29 November 2018 explains A4WD's policy on insuring vehicles as follows (errors in original):
Once a vehicle reaches a certain age (2-3 years) or travels over 100,000 km, it is no longer commercially viable to insure them comprehensively through a 3rd party insurer, at which time they are transferred to a The 3rd Party Property Damages cover and the Comprehensive Cover is then extended through us as I hire company, subject to, our customers adhering to our Terms and Conditions.
The response asserts that 'we do extend Full Comprehensive Cover on all our vehicles subject to, our customers adhering to our Terms and Conditions'. But it is clear that to the extent that the 'Comprehensive Cover' relates to damage to the hired vehicle, it refers to a 'self‑insurance policy'. In my view these passages in the Sch 2 Response also confirm the admission in the concise statement, but they do not indicate whether it relates to the period before September to November 2017.
Since over half of the vehicles had only third party damage insurance as at November 2018, and since the Sch 2 Response seems to indicate this was the result of a policy that depended on the age of the vehicle, and so was applied progressively over the fleet, it may be inferred that there were a number of vehicles that were uninsured before November 2018. But it is not clear from the admission when that policy began to be applied, it is not possible to say how many vehicles were insured at any given time, and, in particular, it is not possible to conclude on the balance of probabilities that any vehicles were uninsured before September to November 2017, that being the subject of the admission.
The second matter on which the ACCC relies to falsify the Insurance Representations is that if there was a single vehicle accident, there was a possibility that a vehicle hired from A4WD would not be insured for accidental damage. This also relies on the statements about self‑insurance in both of the Sch 1 and Sch 2 Responses that are described above and does not add to the first matter on which the ACCC relies.
The third matter relied on by the ACCC is that if an A4WD rental vehicle was damaged in a single vehicle accident while being used by the hirer, the costs of repairing the damage to the vehicle might not necessarily have been insured and in that circumstance the hirer would be required to reimburse A4WD for the cost of repairing the damage to the vehicle. The fourth matter relied on is that there was a possibility that even if A4WD's rental vehicle was insured for the damage to it, the hirer would still be required to pay for the cost of repairing the damage, because A4WD's hire contract gave it the sole discretion to elect not to submit an insurance claim to its insurers for damage caused in single vehicle accidents and, instead, A4WD could claim the costs of the repairs from the hirer.
Those two matters are each said to follow from A4WD 's standard hiring terms and conditions, as they varied from time to time. The periods in which each different version of the standard terms was in use is difficult to establish from the evidence. The only sure evidence of the relevant periods comes from examples of signed and dated contracts with customers. The earliest of these in evidence is dated 24 May 2017. Before then, it is necessary to rely on dates given for three versions of the standard terms in the s 155 responses. It is clear from comparing those versions to actual signed contracts that the version history given by A4WD in the s 155 responses is unreliable. Nevertheless, I accept the ACCC's submission that what it says is the first version was in use from January 2014. That is because A4WD admits as much in the Sch 1 Response and confirms the same in the February Response, no actual signed contract or other evidence contradicts that admission, and from observing the history of ongoing elaboration of the standard terms - a history of terms being added or being amended so as to become more detailed - it can be inferred that the version which the ACCC says is the first version was indeed the earliest one in use. For example, that version does not contain a provision about GPS tracking, which appears to have first appeared in the standard terms in around March 2016.
The significance of the above for present purposes is that this first version of the standard terms contained the clause concerning insurance and single vehicle incidents which, the ACCC says, falsifies the Insurance Representations. Hence I find that this clause appeared in all versions of A4WD's standard terms, dating from January 2014. Clause 4(d) of the terms as they stood as at January 2014 was:
In the event of a single vehicle incident the Company may at its sole discretion, depending on the extent of the damage to the Vehicle, elect not to submit a claim to its insurer for damage, loss or replacement of the Vehicle. Should the Company elect not to lodge a claim with in [sic] its insurer in a single vehicle incident, the Company may instead hold the Hirer/Joint-Hirer and/or Authorised Driver/s of the vehicle jointly and severally liable for:
i.the total amount necessary to rectify all Vehicle damage in order to repair the Vehicle to a standard to be determined by the Company; or
ii.the Vehicle's replacement value as assessed by the Company's insurer; or
iii.the sum required to fully satisfy any vehicle pay-out figure under a contract of finance between the Company and a financier whichever is the greater of these three figures and at the sole discretion of the Company. In the event the Company elects not to submit a claim to its insurer for any such rectification of Vehicle damage or Vehicle replacement, the Hirer / Joint Hirer and/or Authorised Driver/s hereby acknowledge and agree that the quantum associated with the repair or replacement of the Vehicle, or the Vehicle's payout figure with the Company's financier, will be payable to the Company as liquidated damages immediately upon written demand by the Company or its legal representatives.
That term was substantially unchanged in various iterations of the standard conditions running through to 2019. I will refer to the terms to that effect collectively as the Insurance Discretion Clause.
To summarise, then, my findings about the matters said to falsify the Insurance Representations: the evidence set out above satisfies me that from at least November 2017 until August 2019, some of the vehicles hired out by A4WD were not subject to policies of insurance taken out with third party insurers which provided coverage for any damage to the vehicle. From November 2018, the date of the schedule of insurance to which I have referred, the proportion of such vehicles was a little over half. For those vehicles, single vehicle accidents where there was no damage to third party property would not be insured by any third party insurer at all. In view of what was conveyed by the statements on the website and in the emails, as I have found above, those statements were misleading or deceptive and false or misleading from November 2017.
Given the lack of evidence regarding the true position as to the insurance of the vehicles before September to November 2017, the ACCC has not established that some of A4WD's vehicles were not comprehensively insured before that time. I do not find that the statements were misleading, deceptive or false for that reason before November 2017.
As for the Insurance Discretion Clause, under it the benefit of any insurance policy could be denied to the customer at A4WD's absolute discretion. That is a significant qualification to the unqualified statements that all vehicles were insured, including for off-road use. The respondents' concise statement asserts that all vehicles were the subject of insurance policies for at least third party damage, so that the statements to the effect that the vehicles were insured were correct. But whether or not those statements were literally true when understood in that light, I have found that they would be understood by reasonable users of the website and recipients of the emails to be saying that if damage to the vehicle occurred, or the vehicle was stolen or lost, an insurance company would pay for the cost of repairing or replacing the vehicle. In failing to refer to the fact that this would depend on whether A4WD exercised its contractual discretion against lodging a claim, and that if it did then the customer would be liable to indemnify the company for any loss, the statements were misleading. The presence of the Insurance Discretion Clause from January 2014 means that they were misleading from that date on.
The respondents' concise statement argues that since the contract contained a security bond clause, and the hirers had to pay the bond, it must have been apparent to them that the insurance did not cover all damage or other losses. There are three answers to this. First, it is likely that many users of the website viewed the statements on the website before deciding to hire a vehicle, before turning their minds to matters such as a security bond, before being informed of the requirement for the bond, and before paying it. It has long been recognised that a contravention of s 18 of the ACL may occur at the point where members of the target audience have been enticed into 'the marketing web' by an erroneous belief caused by the respondent, even if the consumer may come to appreciate the true position before a transaction is concluded: Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640 at [50]. The second answer is that not all consumers were likely to make the connection between the existence of a security bond and insurance coverage which supports the inference on which the respondents relied. Failing to make that connection and inference does not, in my view, take a user of the website outside the class of ordinary and reasonable users. The third answer is that even if an ordinary reasonable user did make that connection, they could nevertheless understand the security bond to cover matters which one would not ordinarily expect to be covered by comprehensive insurance, such as deliberate damage or an excess.
The Sch 1 Response also refers to the availability of the terms and conditions on the website. Whether or not qualifying material of that nature is effective to neutralise an otherwise misleading or deceptive statement is a matter for determination in the specific circumstances of any particular case, and the qualifying material must be sufficiently prominent to prevent the primary statement from being misleading and deceptive: Medical Benefits Fund of Australia Ltd v Cassidy [2003] FCAFC 289; (2003) 135 FCR 1 at [37] (Stone J, Moore and Mansfield JJ agreeing). In the present case, there was little to indicate to users of the website that the statements were qualified by terms and conditions. There was no statement to that effect made immediately after the misleading statements, or any other device designed to draw the user's attention to the fact that those statements were qualified by the company's standard terms and conditions. A link to the terms and conditions is found near the bottom of the home page, behind an asterisk referable to the hire fees, not to the misleading statements. The link is in the same size print as the rest of the normal block text, three paragraphs below the statement about driving 'worry free'. It just says 'Terms and conditions apply' - it is not specifically connected with the statements about insurance coverage. And the terms themselves are the usual finely and densely printed mass of detailed provisions, in which the Insurance Discretion Clause can be found as an unlabelled sub‑clause, or at least it can if one is looking for it. It is unlikely that an ordinary, reasonable user of the website, devoting a reasonable but not excessive amount of time to his or her review of it for the purposes of possibly hiring a vehicle, would find the Insurance Discretion Clause, read it, and understand it to qualify the prominent statements made on the website home page. Despite the fact that it was possible to find the standard terms and conditions, the website was still misleading.
Conclusion on contraventions
There can be no issue that the publication of the website and the sending of the quotation emails to potential customers was conduct in trade or commerce.
For the reasons given, in making the statements on its website that I have described above between January 2014 and August 2019 (both inclusive), A4WD engaged in conduct that was misleading and deceptive. The company therefore contravened s 18 of the ACL during that period. The ACCC has established that from January 2014, the website and emails were misleading because of statements they made which obscured the existence and effect of the Insurance Discretion Clause. From November 2017, they were also misleading because not all of the company's hire vehicles were insured for damage to the vehicle.
As for s 29(1)(g) of the ACL, the respondents' concise statement admits that A4WD has represented to consumers, via the publication of statements made on its website, that all A4WD's rental vehicles have the benefit of being 'insured for off-road use'. In the circumstances, and as I have explained, that statement conveyed that all the vehicles also had the benefit that if damage occurred or the vehicle was stolen or lost, an insurance company would pay for the cost of repairing or replacing it. Given that this was not true for some of the vehicles from at least November 2017 (as at November 2018, over half of them), that statement was false. And given that it omitted to refer to the potentially significant qualification to the statement which arose from the Insurance Discretion Clause, it was also misleading from January 2014.
The Insurance Representations were false or misleading representations that the goods supplied had benefits. They were made in connection with the supply of goods and the promotion of the supply of goods; when used as a verb, 'supply' includes supply by way of hire and when used as a noun it has a corresponding meaning: ACL s 2(1). So from January 2014until August 2019, in making the Insurance Representations, A4WD contravened s 29(1)(g) of the ACL.
Unfair contract terms
Principles
Section 23(1) of the ACL relevantly provides that a term of a consumer contract is void if it is unfair, and the contract is a standard form contract. A consumer contract includes a contract for the supply of goods to an individual whose acquisition of the goods is wholly or predominantly for personal, domestic or household use or consumption: s 23(3).
Section 24 of the ACL provides:
(1) A term of a consumer contract or small business contract is unfair if:
(a)it would cause a significant imbalance in the parties' rights and obligations arising under the contract; and
(b)it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
(c)it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.
(2)In determining whether a term of a contract is unfair under subsection (1), a court may take into account such matters as it thinks relevant, but must take into account the following:
(a)the extent to which the term is transparent;
(b)the contract as a whole.
(3)A term is transparent if the term is:
(a) expressed in reasonably plain language; and
(b) legible; and
(c) presented clearly; and
(d) readily available to any party affected by the term.
(4)For the purposes of subsection (1)(b), a term of a contract is presumed not to be reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term, unless that party proves otherwise.
In Australian Competition and Consumer Commission v CLA Trading Pty Ltd [2016] FCA 377 at [54], Gilmour J set out the following principles (citations removed) about the application of Part 2, Division 2, Subdivision BA of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). For present purposes that Part is not materially different to Part 2‑3 of the ACL, which contains s 23 and s 24:
(a)the underlying policy of unfair contract terms legislation respects true freedom of contract and seeks to prevent the abuse of standard form consumer contracts which, by definition, will not have been individually negotiated;
(b)the requirement of a 'significant imbalance' directs attention to the substantive unfairness of the contract;
(c)it is useful to assess the impact of an impugned term on the parties' rights and obligations by comparing the effect of the contract with the term and the effect it would have without it;
(d)the 'significant imbalance' requirement is met if a term is so weighted in favour of the supplier as to tilt the parties' rights and obligations under the contract significantly in its favour - this may be by the granting to the supplier of a beneficial option or discretion or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty;
(e)significant in this context means 'significant in magnitude', or 'sufficiently large to be important', 'being a meaning not too distant from substantial';
(f)the legislation proceeds on the assumption that some terms in consumer contracts, especially in standard form consumer contracts, may be inherently unfair, regardless of how comprehensively they might be drawn to the consumer's attention; and
(g)in considering 'the contract as a whole', not each and every term of the contract is equally relevant, or necessarily relevant at all. The main requirement is to consider terms that might reasonably be seen as tending to counterbalance the term in question.
It can be relevant in assessing whether a term would cause a significant imbalance to consider whether any burden that the contract imposes on the consumer is matched by a corresponding right or (as a correlative) a corresponding duty on the supplier: see Australian Competition and Consumer Commission v Chrisco Hampers Australia Limited [2015] FCA 1204; (2015) 239 FCR 33 at [53]‑[58] (Edelman J).
As for what is reasonably necessary to protect the legitimate interests of the supplier, it is not appropriate to attempt to define 'legitimate interest' as it will depend on the nature of the particular business of the relevant supplier, the particular circumstances of the business, and the context of the contract as a whole. A legitimate interest may not be purely monetary and may not be confined to reimbursement of expenses directly occasioned by the customer's default. It may be intangible and unquantifiable. The court may take into account options that might be available to the supplier in terms of protecting its business interests, other than the impugned contract terms: see Australian Competition and Consumer Commission v Ashley & Martin Pty Ltd [2019] FCA 1436 at [48]‑[49], [51], [53] (Banks-Smith J). Here, the ACCC relies on the presumption under s 24(4), which requires A4WD to prove that the impugned terms are reasonably necessary in order to protect its legitimate interests.
The third element in s 24(1) is detriment to the consumer. Lord Steyn said of a similar provision applicable in the United Kingdom that this element 'may not add much': Director General of Fair Trading v First National Bank plc [2002] UKHL 52; [2002] 1 AC 481 at [36]. In my view that element simply requires that the application of or reliance on the unfair contract term will be disadvantageous to the consumer in some way. Under s 23(1)(c), the detriment may be financial or otherwise. It can include the imposition of liability in circumstances where the consumer would otherwise not be liable, or allowing the company to charge the consumer for damage for breach of contract where that breach did not cause or contribute to the damage: Ashley & Martin at [63]. Both of those are instances where the contract causes detriment because it imposes a disadvantage which would not be imposed in its absence.
As to transparency, s 24(2)(a) only requires the Court to consider transparency in relation to the particular term that is said to be unfair and only in relation to the matters concerning that term in s 24(1)(a) to (c): Chrisco at [43]. The meaning of 'transparency' in this context is explicit in s 24(3) (see [64] above). But it is not immediately apparent how the transparency of a term, or lack of it, can affect the question of whether the term is unfair.
The difficulty arises because of the nature of the evaluation required by Part 2‑3. It does not involve the exercise of a discretion. Section 23 provides that a term of a relevant consumer contract is void if it is unfair. The term will be unfair if the three elements in s 24(1) are satisfied. Whether that is so is an objective question requiring the application of the specified criteria to the facts. Section 24(2) describes it as a determination. No order of the court is required for s 24(2) to have effect. The court may make a declaration under s 250 which can have further remedial consequences (see below), and that involves a discretion. But that is a different thing to the determination contemplated by s 24(2).
That being so, it is hard to see how the transparency of the provision can affect the objective question of whether the three criteria in s 24(1) are satisfied. With one qualification, whether a term would cause a significant imbalance, is reasonably necessary to protect legitimate interests of a party, or would cause detriment to another party depends on what the impugned term means, that is, on its proper construction. Those matters depend on the effect of the term, on other relevant characteristics of the contract as a whole, and on the factual question of whether the term is reasonably necessary to protect legitimate interests. They do not depend on how the impugned term is presented. If, for example, it is buried in fine print, that may affect its legibility, but it will make no difference to the effect it will have on the parties if it is relied on. So, as Edelman J pointed out in Chrisco at [43], the Explanatory Memorandum to the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth) on the introduction of what is now Part 2‑3 of the ACL says that if a term is not transparent it does not mean that it is unfair and if a term is transparent it does not mean that it is not unfair: see also Gilmour J's observation in CLA Trading at [54(f)] (quoted above).
Mr Roesch became a bankrupt in 2016 but, according to searches conducted by the ACCC, he is not currently a bankrupt. His financial resources and ability to pay any penalty ordered against him are unknown.
Another matter I take into account in this regard is that the business which, evidently, Mr Roesch and Ms Kosukhina were conducting through A4WD has been sold, for minimal consideration, and the company is in liquidation. It is impossible to say the extent to which the ACCC's investigation and this proceeding have contributed to that state of affairs, but senior counsel for the ACCC, properly, accepted that they did make some contribution, and submitted that those matters and the associated stress they have caused for Mr Roesch and Ms Kosukhina, are matters I should take into account in setting penalty, and I will do so.
Senior management engaged in contravening conduct
As I have said, Mr Roesch and Ms Kosukhina have taken responsibility for the content of the website and knew the true position regarding insurance coverage of the vehicles. Ms Kosukhina was the sole director at all material times from October 2015 and Mr Roesch was a senior manager (at least). There is no suggestion in the evidence that anyone else was knowingly responsible for the making of the representations. The contravening conduct arose out of the conduct of senior management.
No corporate culture conducive to compliance
While the February Response mentions that the company took legal advice on its obligations from time to time, there is no evidence of any real compliance programs or other measures taken to ensure compliance with the ACL. That is hardly surprising for a small company like A4WD. It is not a factor on which I place any weight one way or another.
Disposition to cooperate with the ACCC
On balance the respondents' lack of cooperation with the ACCC is not in their favour. I say on balance because it should be acknowledged that they did give ostensibly fulsome responses to the compulsory s 155 notices, including annexing documents such as the insurance schedules which established the falsity of the Insurance Representations from November 2017. And they did admit some allegations in their concise statement which reduced, to a modest extent, the time and resources that the ACCC had to devote to investigating and establishing their contravening conduct. Also, as the ACCC has acknowledged, A4WD did amend its terms and conditions in May 2019 to introduce a causal connection between wear and tear and the amounts deducted from bonds (see [87] and [109]‑[110] above).
Nevertheless, the relief sought by the ACCC was actively opposed until the winding up of A4WD and Ms Kosukhina's bankruptcy caused that opposition to evaporate. That opposition was coupled with a failure to comply with discovery obligations as ordered by the court, which I detailed in Smart Corporation (No 1). The respondents sought to justify that failure by presenting an implausible explanation about email destruction practices, requiring the court to order that specific inquiries be made into their systems. It appears that the further orders made failed to result in the production of obviously discoverable material, such as emails to customers justifying retention of money from their security bonds. But A4WD did produce affidavits capable of explaining that failure if the evidence in them is accepted. It is not possible or necessary to make a firm finding as to whether the respondents complied with their discovery obligations after Smart Corporation (No 1).
In any event, the ACCC has been unable to ascertain the true extent of the contravening conduct and, in the case of the unconscionable conduct, has had to confine its case to the 31 customers where emails were available for one reason or another. I cannot, of course, assume that the conduct was significantly more extensive than that, but I do conclude that A4WD's refusal or inability to produce further customer emails in discovery means that the ACCC (and the court) has no way of knowing.
More broadly, the basis on which the respondents contested the proceeding and their responses to the s 155 notice indicate that they feel no remorse about their conduct, have no insight into it and display no contrition. They continued with the impugned conduct even after they were aware that the ACCC had begun investigating it.
Whether the respondent has engaged in similar conduct in the past
The ACCC had not commenced any other proceedings against the respondents before this proceeding, and there is no evidence of any adverse findings being made against them in other courts in relation to misleading conduct or unconscionable conduct in the past.
False or misleading representations - specific penalty factors
Nature and extent of the contravening conduct, circumstances in which it took place, and the amount of loss or damage caused
The conduct involved placing misleading promotional representations at various points on A4WD's website. It was misleading between at least January 2014 and August 2019. For the whole of that period, it was misleading because the presence of the Insurance Discretion Clause in A4WD's standard hiring terms and conditions meant that the customer in fact had no guarantee of indemnity in cases of single vehicle accidents because A4WD had a discretion not to claim. That was compounded by the company's undisclosed ability under that clause to pursue the customer for the full pay‑out value of the vehicle under any finance contract A4WD had for its purchase.
From at least November 2017 until August 2019, the Insurance Representations made on the website were misleading for the further reason that some of the vehicles that A4WD hired to customers had no insurance for damage to the vehicle. From November 2018 the number of uninsured vehicles was over half, and while there are no figures available for the period before then, it can be inferred that it was still a substantial part of the company's fleet.
The circumstances in which the misleading Insurance Representations took place were typically ones in which potential customers of the company were assessing the merits of hiring a vehicle from A4WD or, potentially, competing businesses. This was done either at the stage of researching the possible hire of vehicles or at the stage of deciding whether to accept a quote and book a hire. It can be inferred that the extent of insurance coverage was important to these customers and likely to influence their decision as to whether to hire a vehicle from A4WD. Many of these customers are likely to have been influenced by the Insurance Representation not to purchase their own insurance and so would have been left exposed to potential loss if there was an accident. From the point of view of A4WD, the relevant circumstances were its desire to increase its business by persuading potential customers to commit to a hire and so potentially deprive competitors of business.
It is not possible to say how many users of the website were exposed to the Insurance Representations during the approximately 5½ years or so in which they have been established to have been made and to have been misleading. In the Sch 1 Response A4WD gave approximate figures for the number of hire contracts it entered into in the financial year ending 30 June 2017 (2,000), the financial year ending 30 June 2018 (3,000) and the period 1 July 2018 to 29 November 2018 (848). Since there must have been many more people visiting the website who did not end up hiring vehicles from A4WD, it can be inferred that several thousand people were exposed to the misleading representations that were broadcast on the website. It can be inferred from those numbers too that several thousands of persons requested quotes on the website and so received the standard emails containing a misleading Insurance Representation. But nothing more precise than that can be said with any confidence.
As for the representations that were made by way of email, while they may also have been widespread, they were likely to have been seen by significantly less people than those who viewed the representations on the website. It appears that the emails were only sent to website users who requested a quote, which not all users would have done, and the evidence as to those emails being sent only covers the period April 2017 to February 2018.
Nor is it possible to estimate how many users of the website were influenced by the representations to hire a vehicle from A4WD, or how many of those users suffered loss when they found out after the vehicle they were hiring was damaged that they were not in fact insured. Only one customer (Jane-Marie Forrest) gave affidavit evidence that she had been misled by the Insurance Representations. Nor is it possible to quantify any such losses. According to the Sch 1 Response, between 10 and 80 customers per year did not receive their full bond back, but this is claimed to only include customers charged for 'excessive wear and tear' so it is not possible to say how many of those were affected by a lack of insurance. Some ten examples of customers who had to pay for damage to vehicles were given in the Sch 1 Response, but it is not possible to know how many of them relied on the Insurance Representations. All this means that the court must take a conservative approach to evaluating the extent of the conduct and its consequences. It is impossible to make any meaningful estimate of the amount of loss or damage caused.
Market share and reach
In TPC v CSR French J identified as relevant (at 52,152) 'the degree of power it [the contravening company] has, as evidenced by its market share and ease of entry into the market'. This was said in the context of breaches of the competition law provisions then found in Part IV of the Trade Practices Act 1974 (Cth) and is not applicable in the same way to a case of consumer law breaches. Nevertheless, in the context of misleading representations in the course of marketing, the market share and market reach of the contravening company can be relevant. The greater market share or greater visibility in the market it has, the more likely it is that contravening conduct will have caused harm to customers and competitors. This can be conceived of as a factor relevant to determining the extent of loss or damage caused by the contravening conduct.
There is no evidence about the size of either the vehicle hire market in Australia or that of the smaller niche of hire of four wheel drive vehicles for recreational off-road use. The customer and turnover numbers I have given above, however, lead to the conclusion that A4WD was a reasonably small player which did not have extensive market reach.
The deliberateness of the contraventions, and whether they were systematic and/or covert
The making of the Insurance Representations was obviously deliberate, as distinct from inadvertent, and in both of the Sch 1 and Sch 2 Responses Mr Roesch and Ms Kosukhina took responsibility for all content on the site. From at least October 2017, they were aware that the representations were potentially misleading: see [32] above. They knew the true position about both the actual extent of insurance coverage and the existence of the Insurance Discretion Clause. Their calculation, in 2017, that the problem could be solved by removing the words 'fully comprehensively' from before the words 'insured' on the website was mistaken. To that extent, the conduct was deliberate.
As the representations appeared at various places on the website and extended from 2014 to 2019, and were repeated in standard form emails, the conduct can also be characterised as systematic. Since the true position was known only to A4WD and could not be discovered easily or at all by others, it can be called covert.
The representation that all vehicles were insured was (at least from November 2017) obviously wrong and the respondents knew it to be so. The representation that all damage was insured was falsified by the Insurance Discretion Clause, but it was less obviously false than the representation that all vehicles were insured. The Insurance Discretion Clause functioned more as a significant qualification to the representations, which made them misleading in the circumstances. I will take that into account in setting the penalties.
Unconscionable conduct - specific penalty factors
Nature and extent of the contravening conduct, circumstances in which it took place, and the amount of loss or damage caused
The unconscionable conduct described above occurred in relation to 31 different customers over a period of time from April 2017 to August 2019. In the context of the size of A4WD's business, that is a significant number of customers over a significant period of time. The conduct was serious in nature. That is perhaps inevitable when there has been a finding of unconscionable conduct, given how far outside societal norms of acceptable commercial behaviour it must be so as to warrant condemnation as conduct that is offensive to conscience. I need not repeat all the matters I set out at [182]‑[192] above which have led me to conclude that the conduct here was unconscionable.
I have already discussed the seriousness of the unconscionable conduct in a general way above, in connection with the question of disqualification. It is appropriate to make some more specific observations here. Looked at from the point of view of the customer, it is conduct that is likely to have caused some distress. These were people who were on holiday. After their holiday, or in some cases during it, they were subject to written attack in a strident form impugning their behaviour and, in some cases, their honesty. This was at a time when they were in a position of vulnerability, because they had paid large security bonds which they had little practical ability to get back. That would have been compounded in the case of overseas tourists who had returned to their own countries.
The aim of subjecting the customers to all this was to ensure that they did not challenge A4WD's refusal to return their bonds. A4WD achieved this by conduct which oscillated across the borders between dishonesty ('Christine Burgess', the speeding fines), bad faith (the claims of hundreds of speeding violations), simple aggression, threats of legal proceedings and threats to report alleged infringements to the authorities. I have already alluded to the fact that the context was holidaymaking, not a matter of life and death. The seriousness of the conduct should not be exaggerated. But in that context, the conduct of A4WD, Mr Roesch and Ms Kosukhina was reprehensible and likely to significantly dampen, if not destroy, the customer's enjoyment of their vacations and lead to stress and unhappiness afterwards, as well as financial loss.
The amount of financial loss or damage can be quantified, albeit not exactly. The relevant amounts of money deducted from customer bonds add up to $28,140.62, but it is not possible to state the precise figure because it appears that up to five customers may have received full or partial refunds, and the evidence does not reveal the amount of the refund to be quantified. The relevant amounts deducted ranged from $120 to $4,760 per customer. Those amounts are not large compared to the damages that can be experienced in commercial cases, but as an unexpected and unwelcome expense added to the cost of the holidays taken, it was significant.
The deliberateness of the contraventions, and whether they were systematic and/or covert
Clearly, the emails were deliberate. They were in extreme terms which were calculated to intimidate the customers into taking the matter no further. The similarities in the emails sent to different customers may merit the description of a 'system'. But I do not consider the evidence goes so far as to establish that the conduct was part of a preconceived plan to put contractual arrangements and vehicle GPS tracking in place so as to permit A4WD to extract money from customers' security bonds after the hire. It may have been more opportunistic conduct, in which Mr Roesch and/or Ms Kosukhina decided to engage in relation to certain specific customers in order to extract extra profit from those customers when the circumstances arose. The similarities between the emails may be explained simply because each one provided a convenient template for the next. Either way, the conduct is reprehensible, but I am not prepared to find that it was the execution of a preconceived plan.
While as I have said there are elements of deception involved, for the most part what the company was doing was in plain sight, so I would not describe the conduct as covert.
Penalties to be ordered
The ACCC has submitted that penalties in the following ranges are appropriate:
(1)As against A4WD:
(a)in respect of the Insurance Representations - $250,000-$350,000; and
(b)in respect of the unconscionable conduct -$500,000-$700,000,
being a total pecuniary penalty of $750,000-$1.1 million.
(2)As against each of Mr Roesch and Ms Kosukhina:
(a)in respect of the Insurance Representations - $50,000-$70,000; and
(b)in respect of the unconscionable conduct - $100,000-$130,000,
being a total pecuniary penalty of $150,000-$200,000 each.
I have considered those submissions, the matters I have set out above, and the overriding need to set a level of penalty which will both deter others from contravening conduct of this kind and (in the case of Mr Roesch and Ms Kosukhina) deter the contraveners from any repetition of it.
In the case of Mr Roesch and Ms Kosukhina, I need to set the penalties at a level which will not be ruinous, although it is hard to calibrate this precisely in the absence of any information about their financial positions, beyond the mere fact of Mr Roesch's past bankruptcy and Ms Kosukhina's present one.
In relation to A4WD, I consider that the penalty for the false or misleading representations in breach of s 29(1)(g) should be $300,000. It is to be approached as two courses of conduct, and in terms of scope, seriousness and likely effect I would apportion $250,000 to the website representations, which was in effect 'broadcast', and $50,000 to the email representations.
The maximum penalties are meaningless as a yardstick in relation to these contraventions. Nor can any assessment of the likely loss to customers or gain to A4WD serve as a measure in these circumstances. But if A4WD had in the order of 5,000 customers in the relevant period and, say, another 5,000 people who did not end up as customers, all of whom were misled by the website representations, that would equate to $25 per website contravention. That is not excessive: see the similar assessment Mansfield J made in Australian Competition and Consumer Commission v Excite Mobile Pty Ltd (No 2) [2013] FCA 1267 at [102]. In truth, it is likely that the number of people who were misled was higher than this, so it is a conservative number. As for the seriousness of the misrepresentations, they were deliberate and, at least in the case of the representation that all vehicles in the fleet were insured, there was no room for argument - A4WD knew it was simply false. The representations related to a matter which was likely to have been particularly important for customers planning to take vehicles off-road. There are few if any mitigating factors.
In relation to each of Mr Roesch and Ms Kosukhina, I would order penalties in relation to the breaches of s 29(1)(g) of $60,000 each, apportioned as to $50,000 for the website and $10,000 for the emails. They each have full responsibility for the contravening conduct and there is no basis to distinguish between their respective contributions to and knowledge of it. But there is little to go on in terms of their ability to pay, a factor which is relevant to specific deterrence and, in the example of financial 'pain' it sets, to general deterrence. Their recent and current bankruptcies suggests that they have little ability to pay, but given the not infrequent ability of persons to draw on financial resources which are out of the reach of the creditors of their bankrupt estate, it is only a suggestion. On the other hand, there is no basis to conclude that they do in fact have access to extensive resources. Since the conduct, while serious, was not egregious, I consider that the court should if anything err on the side of caution to ensure that the penalties are not crushing and do not, for example, prevent Ms Kosukhina from re‑establishing herself financially when she emerges out of bankruptcy.
For the unconscionable conduct, it is necessary to take a different approach, because a penalty needs to be set for each contravention, that is, in relation to each customer. And while there are similarities which permitted me to express my evaluative findings above compendiously, I must have regard to the respondents' specific conduct in relation to each. For that reason, Appendix B to this judgment sets out a brief summary of the relevant conduct towards each customer and the penalty I have assessed in relation to each, having regard to the ACCC's submissions and the matters I have set out above. In relation to the penalties against Mr Roesch and Ms Kosukhina, I have again had regard to their nearly identical levels of responsibility for the unconscionable conduct (item 25 of Appendix B sets a higher penalty for Mr Roesch because of his greater involvement with one customer) and the need to avoid imposing a penalty on them as individuals which is crushing. I have also had regard to the penal effect of the disqualification orders to be imposed, which are at the lower end of the range of durations commonly ordered by the court.
I have taken the maximum penalties into account in setting the penalties for unconscionable conduct. The penalties I have specified in Appendix B are a small fraction of the statutory maxima, which at 31 contraventions total $34,100,000 for A4WD and $6,820,000 for each of Mr Roesch and Ms Kosukhina.
Each penalty set out in Appendix B is adapted to the particular circumstances of the customer as described in that appendix. Many of the customers received the initial email, had an amount of $550 deducted, and there is no evidence of any follow up. These could be described as the base cases. A few (NJ, MK, CM, TMcC, DM and TM) did not have money deducted for 'excessive wear and tear', so that has reduced the amount that I would otherwise have ordered the respondents to pay by way of penalty in respect of those customers. Others experienced increasingly threatening follow up correspondence. Some had significantly more money deducted from their bonds. A few received false claims of speeding fines. At least five (VV, DB, Mr Bomford, Mr Roach and TMcC) felt it necessary to engage lawyers or commence legal action. The presence of these matters are aggravating factors which have been taken into account according to their magnitude and extent.
I have also had regard to the sum of the penalties to be ordered from the point of view of the totality principle and in my view they represent amounts of money which are appropriate to provide special deterrence to the respondents, and general deterrence to other businesses who might be tempted to engage in similar conduct in relation to their customers.
In the result, the penalties I order in relation to the unconscionable conduct total $570,000 for A4WD, $119,000 for Mr Roesch and $114,000 for Ms Kosukhina. The ACCC proposes that the penalty against Ms Kosukhina become payable only on the discharge of her bankruptcy and I accept that is appropriate.
Other orders
The ACCC seeks an order that the reasons for judgment be retained on the court file for the purposes of s 83 and s 137H(3) of the CACA to facilitate proof of the contravening conduct in subsequent proceedings. That is appropriate, although only s 137H is applicable to proceedings under the ACL such as the present proceeding.
The ACCC also seeks an order requiring Mr Roesch and Ms Kosukhina to pay its costs of the proceeding, to be taxed if not agreed. No costs are sought against A4WD, presumably because its winding up would make that futile. Since Mr Roesch and Ms Kosukhina would ordinarily be jointly and severally liable with A4WD to pay the ACCC's costs, leaving the company out of the costs order does not prejudice them. The order sought as to costs will be made.
I certify that the preceding three hundred and sixteen (316) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackson. Associate:
Dated: 15 April 2021
APPENDIX A
(All errors are in the originals.)
After Benjimen Bomford received the version of A4WD's initial email to relevant customers referred to at [173] above, he sent an email disagreeing that the vehicle would need to be cleaned, supported by photographs showing that on drop-off the vehicle was in a generally clean condition. 'Christine Burgess' replied to him on 29 March 2018:
Our terms and conditions have been drafted by top legal specialists in Australia, in accordance with ALL Australian Consumer Protection Agencies and regulations as well as all state and federal laws, we have full confidence in their ability to be enforced.
The DBR is provided to us by a publicly listed, 3rd party company, who receive their data directly from the transport departments in each state an territory, all information contained in the report is received via live fed data monitoring.
It was purely your choice to operate the vehicle in such a dangerous and reckless manner, at this stage we couldn't care less if the vehicle was returned clean or not, your bond would be forfeited in full.
Of course, you are more than welcome to dispute this in any way you see fit, however you must understand that you will face the consequences of doing so.
If you wish to dispute this matter further, we will happily involve top specialist in our industry, and gather all necessary statements to confirm your gross, negligent misuse of our vehicle.
…
As per our previous email, our Business Owner has reserved and will exercise his right to sue you on a full indemnity basis for any subsequent damage that may be found to this vehicle following your hire.
Email sent to Customer GS on 14 July 2018:
We have forwarded your email to our legal representatives, who have thoroughly reviewed your offer [a demand by GS that his money be returned in 10 days or else he would commence proceedings] and they have advised us that your offer is nothing but an attempt to extort and or blackmail our business.
….
If you are willing to provide us with a legal undertaking that you agree to no longer use our name in any public forum or anyone and this matter is settled once and for all on full confidential bases, we will refund $500.00 to you.
If you are not prepared to agree to this, we are welcome to any of your action and will gladly submit all evidence available regarding your deliberate, negligent misuse of our vehicle over the course of your hire.
Email sent to Customer MK on 11 December 2017:
Your lack of understanding the basics of your contract show just how arrogant you really are.
…
You are absolutely idiotic if you think that all of the damage mentioned was not of your doing, in fact, there was even further damage found that we have elected not to pursue you for, however we reserve the right to do so.
Your statement regarding the servicing of the vehicle also shows your stupidity as we do not service vehicles according to the manufacturers recommendations, if you were actually paying attention you would see this was placed there by Toyota when the vehicle was manufactured.
…
We take note of your claim that we have purposefully provided you with a vehicle that we knew would break and will keep record of it as we will not tolerate customers blackmailing or commercially extorting us with defamation, and we highly suggest you seek legal advice and have them explain to you your position In this matter as we take these claims very seriously.
Email to Customer CM on 6 July 2019:
It appears as though your ego and arrogance are so great that they overshadow your ability to understand the matter at hand and the seriousness of the situation.
You have absolutely no legal or professional capacity to make any claims to the admissibility of the GPS data.
You have signed a legally binding contract, which we have clear unmistakable evidence showing you have blatantly disregarded the terms to which you have agreed.
There is no refunds on early returns.
We suggest that you seek the professional advice of quality legal representatives and have them advise you on your legal standing in this matter.
Your actions and behavior whilst operating our vehicle are absolutely unacceptable, however delaying return of your bond is based entirely on the clear, tangible damage you have caused to the vehicle during your hire and you failing to replay to our emails.
Customer JH, who also defended himself in forthright terms in an email to A4WD, received a response which said the following:
We suggest that you stop embarrassing yourself, get the facts right and that you seek legal advice and get their professional opinion before you do or say anything that you might regret and will be held accountable for later.
Your verbal diarrhoea is completely ignorant and lacking of any sense or meaning whatsoever.
With respect to the DBR, we will happily provide this as evidence to any authority necessary and we are certain this evidence is more than sufficient as all data is supplied by a publicly listed 3rd party which obtains all data directly through the Transport Department in each state and territory.
You can be certain that it would not be us who would need to explain ourselves should this be handed over.
Many of your claims are highly defamatory and lacking of any evidence and substance whatsoever, we suggest you have a legal professional explain to you the seriousness of these statements before saying anything further.
This type of blatant stupidity is not something we take lightly and we will happily progress to legal action if necessary.
With respect to your threats with bad reviews - not only we will sue personally for defamation (which would be significant amount as we have now your own emails as evidence) but we also guaranty that we will publish same way all your rental agreements, all relevant information and all your threatening emails and report you to any relevant agencies.
Your claim that we have been aggressive is absolutely false as we have, at all times, been highly professional and have backed all of our statements with physical evidence.
With respect to the surcharge on the security bond, you obviously lack the basic skills to figure out the sum we have charged, as it is only including the 3% taken when the bond was processed.
…
Your email is complete nonsense, and we are very confident that our fact based stance will hold up over your whinging in any court.
As suggested before we suggest you seek legal advice before commenting any further and let your lawyers explain to your legal position.
Should you wish you wish to push this matter any further we will only accept communication through your legal adviser as your obviously are too stupid to know any better.
John Moriarty sent an email to A4WD in response to the initial 'Christine Burgess' email which challenged the validity of the GPS readings as well as the company's entitlement to take them. Customer JM described the alleged 414 speeding violations in his case as 'a bunch of crap'. The response he received from 'Christine Burgess' (on 1 January 2018) was (emphasis in original):
We have had a good laugh reading through your verbal diarrhea, as your stupidity amazes us.
We suggest that you stop embarrassing yourself, get the facts right and that you seek legal advice and get their professional opinion about your legal position and obligation with us before you do or say anything that you might regret and will be held accountable for later.
As with every hire, your hire is governed by the contract that you have signed, It is your obligation to read and understand the terms and conditions fully, which obviously you have not done.
It is clear you have had some trouble reading the driver behaviour report as we have clear evidence of each time you exceeded the speed limit, and the only thing that is 'a bunch of crap' is your behaviour and arrogance.
…
We have absolutely no interest in your lies, and to say that the camping equipment provided was unusable is complete rubbish, had there actually been an issue any wise individual would have informed us straight away and we would gladly have resolved the issue for you.
We even have your signature on the checkout paperwork stating that the vehicle and all equipment was received in clean and good working order, claiming that it was unusable well after you have returned the vehicle is just a sad, pathetic attempt to avoid your responsibility.
With regard to the fuel, you seriously must need new glasses as we have not charged you for fuel, we have a same level fuel policy and require customers to bring back the vehicle with the same amount it went out, which is just another thing you did manage to get right.
To state that we did not tell you that the vehicle needs to be cleaned is another outright lie, your signature on the cleaning agreement form proves this and it is also clearly listed in our terms and conditions.
…
To state you were unaware of this, and that it is illegal, is absolutely idiotic and defamatory and you just confirmed in writing your multiple breach of contract.
We have never come across someone so utterly stupid and unaware of their obligations under the contract and you are delusional if you think that we are going to make any exceptions for a customer like you.
You are welcome to go to your card provider, you are obviously too stupid to realise that the bond was paid via bank transfer and that you have no legal basis to recover the funds for the rental paid by credit card, as we have provided the services to you.
You have no idea of how many friendly highly professional and respected lawyers and QC's we have and herewith confirm receiving of your threats of commercial defamation and extorsion in writing below, and have forwarded on to them.
Your threats of negative reviews on public forum, with no basis for your claims, are something we take very seriously and it should be noted that we have recently obtained a Federal Court Order against Google and another 2 individuals making similar threats and accusations.
We will not hesitate to apply for your inclusion under these order, which will come with a high financial disaster to yourself.
If you wish to take this any further, as per the terms of your hire, the contract falls under the jurisdiction of the QLD Magistrates Court and we invite you to file your suit and we will immediately file a counter claim and also serve application for costs.
We look forward to you continuing to make a fool of yourself in court.
Please Note - If we have not received a written apology from you within 24 hours, we reserve the right without further notice to you to sue you for commercial extortion and defamation.
Again, we strongly suggest you seek quality and not (friendly) legal advice and get their professional opinion about your legal position and obligations under the contract, because it is quite apparent you have absolutely no idea what you are on about.
This prompted a reply from Mr Moriarty apologising for the tone of his previous email and saying that, while he considered that the GPS reading was just separate data points rather than separate incidents, he did not intend to take the matter further ($550 in total had been deducted from the security bond of this customer). 'Christine Burgess' replied to this acknowledging receipt and saying that no further action was required.
Matthew Roach, who challenged the initial email he received, said that if he did not hear back from A4WD he would, among other things, alert other customers through reviews. He received a response (on 6 April 2018) which said, among other things:
With respect to your threats of spreading misleading information about our company on a public forum, this is a clear threat of commercial defamation and extortion, which we will not tolerate.
Please Note: That we have recently successfully obtained 2 Federal Court Orders against Google LLC and another 2 individuals making similar threats and accusations, without any further notice to you we will apply for you to be included under this existing Federal Court Orders which will be a financial disaster for you. We have attached copy of this order for your information.
Everything that has been done is in strict accordance with our terms and conditions, therefore, herewith, we now put you on notice, you have 24 hours to provide us with a written apology, if you do not, we will not hesitate to apply for your inclusion in this court order without further notice to you.
We strongly suggest you seek legal advice and have them explain your legal position before you find yourself in very expensive court proceedings and ask them to search and read the abovementioned Federal Court Orders.
If you wish to take this matter further, we will happily provide all evidence of your breaches of contract as well as your blatant disregard of the law by consistently speeding, we can assure you that no court will look favourably on your reckless dangerous driving.
Should this be the case, not only will Matthew risk losing his license but [HL] will be heavily fined, and may affect future trips to Australia.
It is not clear whether any 'Federal Court Order' was attached to the email; if so it was not in evidence.
APPENDIX B
Instances of unconscionable conduct and penalties
1. VV: 30 April 2017
Customer VV received an initial email from A4WD deducting $4,390 from the security bond for excessive and/or severe wear and tear, $50 as an 'admin fee', and a $150 'processing fee' calculated as 3% of the total bond value of $5,000. The initial email also threatened VV with litigation and claimed that A4WD had forwarded VV's DBR to the 'authorities'. This email also stated that A4WD would be happy to 'publish your driving data to all agencies in Australia and Overseas to ensure you never hire another vehicle again'. There was also intemperate language used in this email, which described VV's behaviour as 'despicable', 'barbaric' and 'stupid'. VV made a complaint to the ACCC and instructed a solicitor to respond to the initial email, but there is no evidence that A4WD replied to this correspondence.
Penalties: A4WD $22,500, Roesch $4,500, Kosukhina $4,500
2. Ian Davison and Jane-Marie Forrest: 29 May 2017 - 6 June 2017
Both of these customers gave affidavit evidence in this proceeding. Jane-Marie Forrest received an initial email from A4WD deducting $1,000 from the security bond for excessive and/or severe wear and tear, $50 as an 'admin fee', and a $150 'processing fee' calculated as 3% of the total bond value of $5,000. No other charges were made against the bond. The initial email also threatened to forward the DBR to the authorities. This email was forwarded to Ian Davison, who responded. Mr Davison received a follow-up email containing intemperate language, in addition to a further threat to 'hand over all evidence we have to law enforcement authorities', and another threat of litigation.
Penalties: A4WD $20,000, Roesch $4,000, Kosukhina $4,000
3. JH: 1 June 2017 - 19 June 2017
Customer JH received an initial email from A4WD deducting $500 from the security bond for excessive and/or severe wear and tear, $50 as an 'admin fee', and a $150 'processing fee' calculated as 3% of the total bond value of $5,000. The initial email also threatened JH with litigation, and threatened to forward JH's DBR to the 'authorities'. JH disputed the deduction, and A4WD replied using intemperate language (describing JH's complaint as 'verbal diarrhoea') and again threatening JH with litigation.
Penalties: A4WD $17,500, Roesch $3,500, Kosukhina $3,500
4. GS: 5 June 2017 - 13 August 2018
Customer GS received an initial email from A4WD deducting $500 from the security bond for excessive and/or severe wear and tear, $50 as an 'admin fee', and a $150 'processing fee' calculated as 3% of the total bond value of $5,000. The initial email also threatened GS with litigation and threatened to forward his DBR to 'the authorities'. It appears that GS did not respond to this email or dispute the deduction until about a year afterwards when GS learned of similar experiences suffered by other customers of A4WD. Jake Kuykendall replied to GS offering GS $500 in exchange for GS's confidentiality, and failing that, another threat of litigation. GS did not accept this offer, and reiterated his demand to be repaid. Jake Kuykendall replied once again in an email which contained intemperate language.
Penalties: A4WD $17,500, Roesch $3,500, Kosukhina $3,500
5. LM: 21 June 2017 - 23 June 2017
Customer LM received an initial email from A4WD deducting $500 from the security bond for excessive and/or severe wear and tear, $50 as an 'admin fee', and a $45 'processing fee' calculated as 3% of the total bond value of $1,500. No other charges were made against the bond. The initial email also threatened LM with litigation, and threatened to forward LM's DBR to 'the authorities'. LM disputed the charges and received a follow-up email containing intemperate language, further threats of litigation, and a threat to escalate the matter to 'law enforcement'.
Penalties: A4WD $17,500, Roesch $3,500, Kosukhina $3,500
6. PF: 12 July 2017 - 17 July 2017
Customer PF received an initial email from A4WD deducting $500 from the security bond for excessive and/or severe wear and tear, $50 as an 'admin fee', and a $150 'processing fee' calculated as 3% of the total bond value of $5,000. The initial email also threatened PF with litigation, and threatened to refer PF's DBR to 'the authorities'. PF apparently disputed the deductions (this email is not in evidence), and the 'Business owner' replied an email comprised of two words: 'fuck off'. PF sought a more detailed response, to which A4WD replied in an email containing intemperate language.
Penalties: A4WD $20,000, Roesch $4,000, Kosukhina $4,000
7. JL: 19 July 2017
Customer JL received an initial email from A4WD deducting $500 from the security bond for excessive and/or severe wear and tear, $50 as an 'admin fee', and a $150 'processing fee' calculated as 3% of the total bond value of $5,000. The initial email also threatened JL with litigation, and threatened to forward LM's DBR to 'the authorities'. There was no other evidence of intemperate language.
Penalties: A4WD $12,500, Roesch $2,500, Kosukhina $2,500
8. RW: 24 July 2017
Customer RW received an initial email from A4WD deducting $500 from the security bond for excessive and/or severe wear and tear, and $50 as an 'admin fee'. No other charges were made against the bond. There was no other evidence of intemperate language, threats of referral to the 'authorities' or threats of litigation.
Penalties: A4WD $12,500, Roesch $2,500, Kosukhina $2,500
9. PH: 3 August 2017 - 14 August 2017
Customer PH received an initial email from A4WD deducting $500 from the security bond for excessive and/or severe wear and tear, $50 as an 'admin fee', and a $150 'processing fee' calculated as 3% of the total bond value of $5,000. PH disputed the deduction, to which A4WD replied with an intemperately worded email (using terms such as 'extreme arrogance' and 'stupidity'), which threatened PH with litigation and threatened to refer PH's DBR to the 'authorities'.
Penalties: A4WD $17,500, Roesch $3,500, Kosukhina $3,500
10. WR: 12 September 2017 - 25 September 2017
Customer WR received an initial email from A4WD deducting $500 from the security bond for excessive and/or severe wear and tear, $50 as an 'admin fee', and a $45 'processing fee' calculated as 3% of the total bond value of $1,500. WR disputed the deduction, and A4WD sent a follow-up email containing intemperate language, threats of litigation and threats to refer the matter to 'law enforcement' and 'the authorities'. This email also claimed that A4WD had 'had this exact conversation with a NSW Magistrate Judge (as a customer), who also wished to dispute these charges and quickly retracted his dispute when he took the time to actually read and understand his legal position and obligations with us'.
Penalties: A4WD $20,000, Roesch $4,000, Kosukhina $4,000
11. BP: 20 September 2017
Customer BP received an initial email from A4WD deducting $500 from the security bond for excessive and/or severe wear and tear, $50 as an 'admin fee', and a $150 'processing fee' calculated as 3% of the total bond value of $5,000. There is no evidence that BP responded to this email, or that A4WD engaged in any other unconscionable conduct in respect of this customer.
Penalties: A4WD $12,500, Roesch $2,500, Kosukhina $2,500
12. NC: 27 September 2017 - 5 October 2017
Customer NC received an initial email from A4WD deducting $500 from the security bond for excessive and/or severe wear and tear, $50 as an 'admin fee', and a $150 'processing fee' calculated as 3% of the total bond value of $5,000. A friend of NC's responded to the initial email on her behalf, and offered to promote A4WD on his media platform in exchange for A4WD waiving the excessive and/or severe wear and tear and administrative fees. A4WD expressed interest in this deal, but the evidence is inconclusive as to whether it actually went through and the withheld bond money was returned. There is no evidence that A4WD engaged in any other unconscionable conduct in respect of this customer.
Penalties: A4WD $12,500, Roesch $2,500, Kosukhina $2,500
13. MV: 3 October 2017 - 4 October 2017
Customer MV received an initial email from A4WD deducting $500 from the security bond for excessive and/or severe wear and tear, $50 as an 'admin fee', and a $45 'processing fee' calculated as 3% of the total bond value of $1,500. No other charges were made against the bond. MV's husband replied to the email and disputed the deduction. A4WD responded to MV's husband with intemperate language, threats of litigation and referrals to 'law enforcement' and 'the authorities'.
Penalties: A4WD $17,500, Roesch $3,500, Kosukhina $3,500
14. AK: 19 October 2017
Customer AK received an initial email from A4WD deducting $1,000 from the security bond for excessive and/or severe wear and tear, $50 as an 'admin fee', and a $150 'processing fee' calculated as 3% of the total bond value of $5,000. No other charges were made against the bond. There is no evidence that AK responded to this email, or that A4WD engaged in any other unconscionable conduct in respect of this customer.
Penalties: A4WD $17,500, Roesch $3,500, Kosukhina $3,500
15. NJ: 3 November 2017
Customer NJ received an initial email from A4WD deducting $2,589.17 in total from the security bond. However, nothing was deducted for excessive and/or severe wear and tear or a night driving fee. The amount was claimed to have been deducted in respect of damage allegedly caused to the vehicle's air conditioner while NJ was hiring it. NJ apparently did not reply to this email, although he did submit a complaint to the ACCC, who followed the complaint up with A4WD. In its response to the ACCC, A4WD claimed that NJ's credit card provider had granted him a full chargeback in respect of the amounts claimed in the initial email.
Penalties: A4WD $10,000, Roesch $2,000, Kosukhina $2,000
16. SL: 9 November 2017 - 10 November 2017
Customer SL received an initial email from A4WD deducting $500 from the security bond for excessive and/or severe wear and tear, $50 as an 'admin fee', and a $150 'processing fee' calculated as 3% of the total bond value of $5,000. A4WD stated that two of the car's doors had been replaced while it was hired out to SL, for which they charged a separate fee, and stated that they had referred the incident to the local police. The allegation about the car doors proved to be incorrect, but A4WD insisted that the excessive and/or severe wear and tear deduction was still valid. There was no other evidence of intemperate language, threats of referral to the 'authorities' or threats of litigation.
Penalties: A4WD $17,500, Roesch $3,500, Kosukhina $3,500
17. MK: 30 November 2017 - 11 December 2017
Customer MK received an initial email from A4WD deducting $7,537.11 in total from the security bond. However, nothing was deducted for excessive and/or severe wear and tear or a night driving fee. MK disputed the initial email, to which A4WD replied using intemperate language (describing MK as 'arrogant' and 'idiotic'), threatening MK with litigation and referral to 'law enforcement'.
Penalties: A4WD $17,500, Roesch $3,500, Kosukhina $3,500
18. CL: 5 December 2017 - 7 December 2017
Customer CL received an initial email from A4WD deducting $500 from the security bond for excessive and/or severe wear and tear and $50 as an 'admin fee'. No other charges were made against the bond. CL disputed the deduction, to which A4WD sent a follow-up email containing intemperate language, threats of litigation and of referring CL to 'law enforcement'.
Penalties: A4WD $17,500, Roesch $3,500, Kosukhina $3,500
19. John Moriarty: 11 January 2018 - 12 January 2018
John Moriarty was sent an initial email from A4WD deducting $500 from the security bond for excessive and/or severe wear and tear, and $50 as an 'admin fee'. No other charges were made against the bond. Mr Moriarty disputed the deduction, to which A4WD sent a follow-up email containing vituperative and threatening language (at one point referring to Mr Moriarty's complaint of being charged for excessive and/or severe wear and tear as 'verbal diarrhea'), and threatened Mr Moriarty with a counterclaim should he file suit in the Magistrates Court of Queensland. That correspondence deterred Mr Moriarty from pursuing the matter. It left him feeling intimidated, embarrassed and frustrated.
Penalties: A4WD $22,500, Roesch $4,500, Kosukhina $4,500
20. TMcC: 16 January 2018
Customer TMcC received an initial email from A4WD deducting $11,690 from the security bond. However, nothing was deducted for excessive and/or severe wear and tear or a night driving fee. The amount was instead apparently deducted because TMcC filled the vehicle with the wrong fuel which damaged the engine and because TMcC had abandoned the vehicle at a place described as 'TCM' in Miriam Vale, Queensland. It appears that TMcC disputed liability for this deduction, but that correspondence was not in evidence. As such there is no evidence that A4WD used intemperate language with TMcC, or threatened to refer TMcC to the authorities. TMcC made a complaint to the ACCC, which followed the matter up with A4WD. In its response to the ACCC, A4WD stated TMcC had received a chargeback from his bank, and that A4WD was accordingly pursuing legal proceedings against TMcC.
Penalties: A4WD $10,000, Roesch $2,000, Kosukhina $2,000
21. JK: 6 February 2018 - 12 February 2018
Customer JK received an initial email from A4WD deducting $500 from the security bond for excessive and/or severe wear and tear, and $50 as an 'admin fee'. No other charges were made against the bond. The initial email also claimed that A4WD had received two speeding fines issued during the course of JK's hire which were sent back to the appropriate 'authorities'. JK sent an email back in which he asked A4WD to rethink its decision to keep the deducted amount. A4WD responded and proposed that they would return the money that had been deducted from the security bond on the condition that JK post a 'couple of 5 star review [sic] on our Google page, as well as post a review on TripAdvisor'. JK accepted this offer, and after he uploaded the review on TripAdvisor, A4WD sent him an email stating that his refund had been approved by upper management and would be processed after his Google reviews were uploaded. However, the evidence is inconclusive as to whether the refund was in fact processed. There was no evidence of intemperate language or threats of litigation.
Penalties: A4WD $12,500, Roesch $2,500, Kosukhina $2,500
22. HY: 27 February 2018 - 13 March 2018
Customer HY received an initial email from A4WD deducting $1,164.66 from the security bond for excessive and/or severe wear and tear, $50 as an 'admin fee', and a $75 'processing fee' calculated as 3% of the total bond value of $2,500. HY disputed the email, and received a follow-up email containing intemperate language and a threat of litigation. HY again disputed the claims, to which A4WD again replied with intemperate language and further threats of litigation. A4WD apparently discovered a negative review about them on Google, which they attributed to HY. Of their own motion, A4WD emailed HY again demanding that HY take down the review, or else they would sue HY, and if HY did not appear, that would 'result in your arrest under the Hague Convention'. HY replied again in dispute, to which A4WD replied with even more intemperate language (describing HY as an 'idiot' and a 'monkey'). A4WD claimed that HY's 'personal documents' had been supplied to the police. There was one more round of emails to similar effect from both parties.
Penalties: A4WD $30,000, Roesch $6,000, Kosukhina $6,000
23. Benjimen Bomford: 28 March 2018 - 29 March 2018
Benjimen Bomford was sent an initial email from A4WD deducting $4,710 from the security bond for excessive and/or severe wear and tear and $50 as an 'admin fee'. The initial email also claimed that two speeding fines had been received (of which subpoenas have shown that the police departments of Western Australia and the Northern Territory have no record). Mr Bomford disputed the deduction and received an intemperate follow-up email which claimed that Mr Bomford's details had been forwarded to the police, and threatened Mr Bomford with litigation.
Penalties: A4WD $35,000, Roesch $7,000, Kosukhina $7,00024. SM: 28 March 2018 - 12 August 2018
Customer SM received an initial email from A4WD deducting $70 from the security bond for excessive and/or severe wear and tear and $50 as an 'admin fee'. The initial email also stated that A4WD had received two speeding fines during SM's hire and that they had been sent back the appropriate 'authorities'. SM queried some of the charges and the speeding fines (but not the excessive and/or severe wear and tear charge), to which A4WD replied stating that the fine would be sent to SM in SM's name, and that they could not give SM a copy of the fine in A4WD's name. SM requested an itemised bill pursuant to the ACL, which A4WD had claimed it had already sent to SM. A4WD emailed SM again intemperately demanding that SM take down a review on the internet which A4WD attributed to SM, or else it would refer the matter to its legal representative and forward the details to the appropriate 'authorities'.
Penalties: A4WD $15,000, Roesch $3,000, Kosukhina $3,000
25. Matthew Roach: 5 April 2018 - 3 October 2018
Matthew Roach was not sent the initial email himself. It was sent to a friend of his, 'HL', who had signed the hire contract. Mr Roach is a solicitor and acted on HL's behalf. HL was sent an initial email from A4WD deducting $500 from the security bond for excessive and/or severe wear and tear and $500 for a night driving fee, and $50 as an 'admin fee'. No other charges were made against the bond. The initial email also stated that they would forward HL's details to the 'appropriate authorities' on the basis of a purported speeding fine, of which the Queensland police have no record and so was never issued. Mr Roach responded to this email on behalf of HL and was sent a follow-up email containing intemperate language and threats of litigation. The bond money was eventually refunded by way of settlement after Mr Roach launched proceedings in the Queensland Civil and Administrative Tribunal (which generated a number of other intemperately worded emails from A4WD and Mr Roesch personally).
Penalties: A4WD $35,000, Roesch $12,000, Kosukhina $7,000. This is the one instance in which Mr Roesch's greater involvement in an instance of unconscionable conduct justifies a greater penalty than Ms Kosukhina.
26. Kenneth Hitchcock: 11 April 2018 - 16 April 2018
Mr Hitchcock was sent an initial email from A4WD deducting $3,002.15 from the security bond for excessive and/or severe wear and tear and $50 as an 'admin fee'. Mr Hitchcock also received a follow-up email which contained intemperate language, claimed that Mr Hitchcock's details had been forwarded to the police, and threatened Mr Hitchcock with litigation. A4WD falsely claimed that speeding fines had been received for Mr Hitchcock's driving of the vehicle.
Penalties: A4WD $35,000, Roesch $7,000, Kosukhina $7,000
27. DB: 29 April 2018 - 1 May 2018
A4WD sent some emails to Customer DB before he returned the hired vehicle, because its GPS tracker had indicated that DB had been speeding and that the vehicle was being driven at night outside of a built up area. DB disputed A4WD's intention to deduct money for night time driving. DB received an 'initial' email from A4WD deducting $1,000 as a night driving fee and $50 as an 'admin fee'. This email also threatened DB with litigation. DB apparently disputed this charge (although this is not in evidence), because he received a follow-up email which contained intemperate language (describing DB as 'lazy') and another threat of litigation. DB wrote a negative online review about his experience with A4WD. In response, A4WD instructed its solicitors to issue a letter of demand to DB, claiming that his review was defamatory, and demanding that DB undertake to apologise to A4WD, retract the 'defamatory' statements contained in the review, take the review down and also not disclose 'any information' about A4WD. This caused DB to instruct lawyers of his own to reply to the letter of demand, in which he relied primarily on the defence of truth as a ground for refusing the demands.
Penalties: A4WD $30,000, Roesch $6,000, Kosukhina $6,000
28. MM: 13 November 2018
Customer MM received an initial email from A4WD deducting $193.81 from the security bond for excessive and/or severe wear and tear and $50 as an 'admin fee'. This email stated that A4WD was contacted by WA Traffic Police regarding an alleged incident of Reckless Driving and High Range Speeding at the time MM was hiring the vehicle. In this instance, A4WD was being truthful, and attached correspondence with WA police to its initial email to MM. However, the initial email also claimed that MM had managed to accumulate 2,318 'speeding violations' according to the DBR, which it used to justify the retention of a portion of the bond. There was no other evidence of intemperate language or threats of litigation.
Penalties: A4WD $12,500, Roesch $2,500, Kosukhina $2,500
29. DM: 10 January 2019
Customer DM received an initial email from A4WD deducting $1,525.74 in total from the security bond. However, nothing was deducted for excessive and/or severe wear and tear or a night driving fee. It appears the amount was deducted in respect of damage claimed to have been sustained to the paint and panel of the vehicle over the term of the hire. However, no invoice or other evidence was attached to the initial email which supported this allegation. The initial email did, however, attach the DBR, and said that the 'excessive speeding violations' shown therein 'are clear negligence and serious breaches of our contract, showing continuous disregard for our property and the law'. However, the email also said that, despite the alleged speeding violations, A4WD had 'made the commercial decision not to charge additional costs for the excessive wear and tear caused by your reckless driving'.
Penalties: A4WD $10,000, Roesch $2,000, Kosukhina $2,000
30. CM: 5 July 2019 - 6 July 2019
A4WD sent some emails to Customer CM before he returned the vehicle, because its GPS tracker had shown that CM had been speeding and was being driven at night outside of a built up area. In these emails, A4WD both threatened to refer CM to the local police, and then stated that it had in fact contacted Northern Territory police about the matter. Upon discovering that his bond had not been returned, CM sent an email to A4WD requesting that it be returned in full. A4WD replied intemperately, and said that in order to proceed, 'you will need to contact the Tennant Creek Police Station regarding your driver behaviour'. This email described the deduction of $1,940.59 (but nothing was deducted for excessive and/or severe wear and tear or a night driving fee). CM reiterated his request, and threatened A4WD with legal action if they did not comply. A4WD sent another intemperate email, threatening litigation of their own and stating that 'we still will be obtaining advise [sic] of this matter from Police of your state and supply them with any evidence if required'.
Penalties: A4WD $12,500, Roesch $2,500, Kosukhina $2,500
31. TM: 22 August 2019
Customer TM received an initial email from A4WD deducting $1,194.01 from the security bond. However, nothing was deducted for excessive and/or severe wear and tear or a night driving fee. Although there was subsequent correspondence regarding TM missing a flight due to the alleged lateness of some of A4WD's representatives in conducting a post-hire inspection, A4WD did not use intemperate language, threaten TM with litigation, or threaten to involve the 'authorities'.
Penalties: A4WD $10,000, Roesch $2,000, Kosukhina $2,000
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