FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v LG Electronics Australia Pty Ltd [2018] FCAFC 96

ORDERS

THE COURT ORDERS THAT:

1.    The parties confer and, within seven days, file agreed or competing orders for determination of the appeal reflecting these reasons for judgment.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

Overview

1    For the reasons which follow we agree with the primary judge’s conclusion that, in its dealing with consumers, retailers and repairers about faulty televisions, LG Electronics Australia Pty Ltd did not engage in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18(1) of the Australian Consumer Law in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (the ACL) or make to consumers a false representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy in contravention of s 29(1)(m) of the ACL other than on two occasions. To the extent of these two occasions, the appeal must be allowed and appropriate consequential orders made (noting that s 29(1)(m) is a pecuniary penalty provision carrying a maximum penalty for contravention by a body corporate of $1.1 million and that the ACCC also sought declarations, injunctions and a range of other orders).

2    A key fact on which the case of the Australian Competition and Consumer Commission (the ACCC) founders is that the ACCC did not prove that any of the televisions were not of acceptable quality in breach of the consumer guarantee of acceptable quality in s 54 of the ACL. The ACCC tried to prove this but failed for the reasons the primary judge gave: Australian Competition and Consumer Commission v LG Electronics Australia Pty Ltd [2017] FCA 1047 at [167]-[168]. The ACCC does not challenge the primary judge’s conclusion that whether or not LG might have been liable under the ACL consumer guarantee remained unknown.

3    This conclusion had (and has) important consequences. It necessarily followed that the ACCC did not prove that the consumers would have had a cause of action against the person who supplied the television to them or that LG would have been bound to indemnify the supplier as provided for in ss 259, 271 and 274 of the ACL. It also necessarily followed that the ACCC did not prove that either LG or the persons with whom it dealt knew or believed that the consumers would have any such cause of action or LG any such liability. It is these matters which, in part, explain why the primary judge characterised the dealings between consumers, repairers and retailers (on the one hand) and LG (on the other hand) as a form of negotiation in which, by not mentioning the possible application of the ACL consumer guarantee, LG did not engage in conduct likely to mislead or deceive in contravention of s 18(1) or make a false representation as provided for in s 29(1)(m).

4    The ACCC would have it that the primary judge’s characterisation of the context is wrong, but we disagree for the reasons given below. The ACCC would also have it that, if the context was a negotiation about what LG might do for a consumer, then the negotiation itself was likely to mislead and deceive because LG knew the ACL consumer guarantee might apply, but the consumer did not. Again, we disagree. As explained below, the context of the dealings simply did not call up for consideration the possibility that consumers might have rights under the ACL consumer guarantee. The consumers (or those communicating on their behalf) wanted to know what LG would do for them. LG told the consumers what it was willing to do. Some consumers pressed harder than others and got more out of LG as a result. However, as also will be explained, on two occasions LG did falsely represent that the ACL consumer guarantee did not exist, was excluded or had no effect in contravention of s 29(1)(m) and s 18(1), albeit that the persons to whom the false representations were made knew they were false and were not in fact misled.

5    The other key matter is this. During the hearing of the appeal the ACCC sought leave to add the following additional ground of appeal:

The learned primary judge should have found that, by LG’s admitted practice in respect of faulty LG TVs of consciously and deliberately communicating in all communications with consumers, retailers and repairers … as if the rights under and potential application of the ACL consumer guarantee regime did not exist unless raised with LG, it contravened ss 18 and 29(1)(m) of the ACL.

6    Leave to amend the notice of appeal in this way should be refused. To the extent relevant the ACCC’s case, as pleaded and as run below, was that LG had contravened ss 18(1) and 29(1)(m) of the ACL in respect of its dealings with seven particular consumers who had purchased LG televisions from different suppliers. The ACCC did not plead or run its case on the basis that LG’s policy, practice or system for dealing with consumers who complained about faulty televisions contravened ss 18(1) and 29(1)(m) of the ACL. During the hearing a witness, Ms Warwood, who was the team leader of LG’s Direct Dealer Support team, gave evidence in which she agreed that “unless the ACL was specifically invoked by the consumer, your training was that you should not treat it as an ACL claim”. Ms Warwood did not agree that this was a “way of heading off the invocation of the ACL”. The ACCC did not seek to amend its case before the primary judge as a result of this evidence. It did not raise with the primary judge any suggestion to the effect that LG’s policy, practice or system for dealing with consumers who complained about faulty televisions contravened ss 18(1) and 29(1)(m) of the ACL. For the ACCC now to be given leave to run such a case would offend the principle that in an appeal of this kind a party is bound by the way in which it conducted its case below; had such a case been put below, LG might well have called other evidence about its training, policies, practices and systems.

7    Apart from this, proving the existence of a policy, practice or system of dealing with consumers does not itself prove a contravention of ss 18(1) or 29(1)(m) of the ACL. Contraventions, if they exist, arise from the actual dealings with consumers (that is, conduct). The existence of a particular policy, practice or system, if proven, may support the drawing of various inferences including that a particular dealing or dealings occurred or did not occur in a particular way or that dealings were likely to mislead or deceive. Theoretically it may be that having an indiscriminate system in place of never mentioning the ACL consumer guarantee regime unless raised could, depending upon the circumstances, be conduct likely to mislead (if communications informed by such a policy were made to a class of persons likely to include persons ignorant of such rights). But no such case was run here.

8    In the present case, as noted, whether or not an “ACL claim” could be sustained was unknown to LG and the consumers, retailers and repairers. They were not trying to work out if an “ACL claim” could be sustained; they were working out what LG might do for them when their LG television developed a fault. As the discussion below exposes, the actual dealings do not align with the ACCC’s case theory.

9    The parties tendered a statement of agreed facts about the seven courses of dealing. Some courses of dealing are more complicated than others. In some cases, the supplier and/or repairer acted as a conduit between the customer and LG. In others, the customer, supplier and repairer were all dealing directly with LG. The primary judge found at [39(8)] that:

Where LG communicated with repairers and retailers, it was the intent of LG that the information contained in that communication would be passed on to the relevant customers.

10    On this basis, the primary judge treated the communications from LG to repairers and retailers as communications by LG to customers. It is not suggested that in so doing the primary judge erred.

11    The primary judge also noted at [39(2)], as is the fact, that:

In respect of a good failing to be of acceptable quality, the ACL does not prevent a requirement being imposed by LG that the consumer pay costs associated with the assessment or repair of the goods (at the first instance).

12    There is no suggestion that the primary judge’s summary of the relevant principles at [15]-[23] involved any error. In particular, the primary judge accepted, and LG does not dispute, that silence about a matter may convey a misleading, deceptive or false representation depending on the circumstances.

13    The primary judge’s conclusions were based on the statement of agreed facts and findings about a small number of contested factual issues, none of which are challenged in this appeal. This appeal also turns on issues of fact and raises no matter of principle.

The dealings

SS and CS

14    The course of dealing between LG and customers SS and CS is the most straightforward. As such, it exposes the problems with the ACCC’s case theory.

15    SS and CS purchased an LG television from a supplier for $670. About 18 months later the television developed a fault in that the screen had solarised so that the picture on one side of the screen appeared a different colour from the other side. The repairer estimated a repair cost of $220 for labour and $924 for parts. The repairer emailed the quote for the repairs to LG under an email saying “[c]ustomer have asked me to forward this to you and if you would cover this under warranty”. LG, via Ms Warwood, replied by email saying “LG are happy to assist with the cost of Parts Only, labour would be covered by your own cost. Please let me know if you wish to proceed”. CS replied saying “[w]e would be very happy to proceed. Thank you for your assistance in this matter”.

16    The television was then repaired with LG paying for parts and the customers for labour.

17    In the context of this course of dealing, it does not matter if the “warranty” in the email from the repairer meant LG’s contractual warranty (which had expired), the ACL consumer guarantee or both. LG was asked a question (would it cover the repair cost under warranty) and answered by advising what it would be “happy” to do so. In so answering, it is apparent that LG was indicating what it would be prepared to do irrespective of whatever the legal position might ultimately be under any warranty. CS’s reply indicates that this is how these customers understood LG’s answer. The ACCC pointed to the repair warranty authorisation LG sent to the repairer referring to “[a]pproval for OOW [out of warranty] parts only”, but this was sent after the customers had accepted LG’s offer.

18    The ACCC would have it that LG’s communication (“LG are happy to assist…”) conveyed representations as to legal rights and liabilities, specifically that consumers were only entitled to have the good repaired regardless of the nature of the defect (the so-called Repair Only Representation) and that when the good had any defect after the expiry of LG’s manufacturer’s warranty, consumers were liable for the labour costs of the repair (the so-called Labour Cost Representation). We are unable to accept that the actual course of dealing between LG and SS and CS involved any such representations. While the repairer’s email asked if LG would cover the repairs “under warranty”, LG’s answer is not reasonably capable of being understood as carrying with it any representation about legal rights and liabilities.

19    This is the conclusion which the primary judge reached at [68]. The conclusion does not depend on what the ACCC characterises as the primary judge’s “key error” at [8] of his reasons. At [8] the primary judge said this:

There is no direct evidence that any of the consumers asked to be advised of their rights generally. Communications were made with a call centre (not an information centre) of LG for the purpose of asking LG for assistance. The responses by LG should be viewed in light of that purpose to the extent known by LG and the actual enquiry made by the consumer and communicated to LG. It is not alleged that LG had a responsibility to volunteer information to consumers and advise generally about the ACL, unless to not do so would amount to a half-truth in the various ways alleged in this proceeding. If, for instance, a specific enquiry was made to LG by a consumer as to his or her legal rights in relation to a faulty LG television, then if LG decided to respond, it would be a half-truth to only refer to the LG warranty. On the other hand, if a very specific enquiry was made by a consumer only concerning the LG warranty or asking for a TV to be replaced or repaired, I would not consider a confined response to that specific enquiry to be misleading even if no mention was made of the ACL. It thus seems to me that in relation to each consumer the issue is to determine the correct characterisation of the relevant communications, taking into account the context of these communications.

20    It is apparent that the ACCC reads this paragraph as indicating that unless a consumer, in terms, asks a supplier or manufacturer about the consumer’s rights under the ACL the supplier or manufacturer will not have engaged in conduct likely to mislead or deceive the consumer by deliberately not mentioning the ACL. The ACCC submitted that the reasoning to this effect is “unsupportable”. The short answer to this submission is that we do not accept the primary judge reasoned to this effect. Read on its own terms and in the context of [7] and [9] of the primary judge’s reasons it is apparent that the primary judge was making a different point. His Honour’s point was that everything depended on the actual communications between LG and the consumer. As his Honour said at [9]:

The pleadings of the ACCC refer to various individual statements made by various representatives of LG, each one alleged in essence to be a half-truth, and to that extent misleading. There can be a danger in this approach. It is important to look at each statement in the context of the other statements made by the LG representatives, in addition to the queries raised by each consumer. Therefore, whilst the Court has considered each pleaded representation as presented by the ACCC, it has not considered each representation in isolation.

21    The primary judge was not saying that conduct would be likely to mislead or deceive only if a consumer asked about their legal rights. Nor was he saying that it would not be likely to mislead or deceive for a manufacturer to answer a question about a manufacturer’s warranty without mentioning the ACL consumer guarantee. His Honour was not proposing any principle or guideline against which conduct could be tested. He was explaining why it was necessary to consider each statement in context. Accordingly, and contrary to the ACCC’s submissions, the primary judge did not assume that “a consumer’s enquiry can be neatly segregated either into an enquiry about the LG warranty or an enquiry about their legal rights more generally”. The primary judge was in fact rejecting any form of presumptive segregation, either of statements from other statements or of statements from their context.

22    The primary judge did not assume that CS and SS were making claims only under LG’s manufacturer’s warranty as the ACCC proposes. That is a construct of the ACCC’s making which does not accord with the primary judge’s reasoning process. Nor did the primary judge fail to have regard to the fact that LG knew that remedies might be available under the ACL. To the contrary, and as noted, the fact that neither LG nor anyone else knew whether such remedies would be available or not was a necessary aspect of the primary judge’s reasoning.

23    It is also apparent that the primary judge did not assume that SS and CS were aware of the ACL. His Honour’s statement at [39(10)] that retailers would be aware of the ACL is not challenged. It is the statement also in [39(10)] that to the extent explained later in his reasons consumers would be aware of the ACL with which the ACCC takes issue. As the ACCC noted, however, his Honour concluded at [57] that despite receiving the LG warranty card which referred to the ACL as required, “on the evidence most (if not all) of the consumers would have had, at the time of communicating about the faulty TVs, only a very general knowledge about the ACL and its existence”. Contrary to the ACCC’s submissions, the primary judge did not assume that consumers would be “sophisticated enough to formulate their requests for assistance by reference to the ACL or the LG warranty”. This submission appears to reflect the ACCC’s misplaced concern about [8] of the primary judge’s reasons.

24    Nor is the ACCC’s concern about the balance of [57] of his Honour’s reasons sustainable. After concluding that most if not all consumers would have only a very general knowledge about the ACL, the primary judge said:

Nevertheless in viewing LG’s conduct, it is relevant that all consumers had been informed (as the law required) of the ACL, and LG would have been aware this occurred at least at the time of purchase. Further, LG had no reason to assume that a consumer was not aware of the ACL.

25    According to the ACCC, the primary judge was saying that “LG assumed each consumer was aware of the ACL”. We disagree. The submission converts a negative proposition (LG had no reason to assume) into a positive proposition (LG assumed). The two propositions are different. The primary judge was saying only that, from the whole of the communications considered in context, there was no reason for LG to hold any particular state of mind about a consumer’s knowledge of the ACL. As a result, the ACCC’s submission, that “many communications were too brief to enable LG to make any such assessment”, is in fact consistent with the primary judge’s reasoning.

26    As the course of the dealing between SS and CS and LG discloses, it is not a “leap”, as the ACCC would have it, from characterising a consumer as seeking assistance from LG to characterising LG’s response as part of a negotiation. The ACCC’s submissions, that the effect of LG’s conduct was for consumers to bargain away rights under the ACL which they never knew they had, does not grapple with the course of dealings in the context in which they occurred. Neither LG nor any consumer (or repairer or retailer) knew if LG would be liable to indemnify a supplier for contravention of the ACL consumer guarantee. LG was under no obligation to deal with consumers directly. As the ACCC acknowledged, LG could have re-directed all inquiries to the suppliers without risking any contravention of the ACL. And as the primary judge also noted at [38], the person claiming a contravention of the ACL consumer guarantee is the one who must prove the contravention and, unless and until a contravention is proved, it is that person who must pay the costs of establishing the existence of the contravention. These are all part of the context in which the communications occurred. They support the primary judge’s characterisation of the communications as a form of negotiation the purpose of which was to work out what LG would do irrespective of legal rights and obligations.

27    The same considerations answer the ACCC’s submission that it is not possible to separate “a practical solution to a practical problem” (LG’s characterisation of the purpose of the dealings in which it engaged) and “the legal framework in which that ‘practical problem’ (a faulty LGTV) arose”. The ACCC submitted that any request for a solution to a problem “encompasses all possible bases of entitlement, not just the one LG wishes to focus on” (that is, LG’s manufacturer’s warranty). We do not accept this hypothesis. It is expressed at too high a level of generality, divorced from the actual course of dealings in which LG was involved.

28    The ACCC referred to the primary judge’s observation at [59] that:

The conscious approach of LG to its communications with the retailer or consumer was to respond to the enquiry in the context of that specific enquiry. By this I mean that unless the ACL was raised, LG would not mention it or bring it to a consumer’s attention.

29    This observation reflects Ms Warwood’s evidence. The ACCC submitted that LG’s approach was “somewhat more calculated” than the primary judge would have it, in that LG chose to refer in many of the communications to the expired LG warranty. This was said to support the ACCC’s case that the effect of LG’s conduct was to require consumers “with an imperfect knowledge of the law, or no knowledge of the law, to find their way to the truth pasts stratagems which were evidently likely to mislead them”. As we have said, the ACCC’s case was based on the actual communications, not any policy, practice or system of LG. The submission also assumes that the purpose of the dealing was for customers to ascertain “the truth” which, on the ACCC’s case, is the truth about whether they might have some claim under the ACL consumer guarantee. As the dealing between SS and CS and LG discloses, however, this assumption does not reflect the context or substance of the dealing as it in fact occurred.

CW

30    About 22 months after CW purchased an LG television for $800, the screen would no longer display pictures. Both the supplier and the customer had communications with LG. The primary judge identified the relevant circumstances and communications at [70]-[77] of his reasons for judgement. The ACCC contends in this appeal that only the Fourth CW Statement was misleading and deceptive in that it involved LG in making the Repair Only Representation, the Labour Cost Representation, as well as the so-called Limited Warranty Representation (that remedies available in respect of the failure of LG goods which had any defect were limited to the LG manufacturer’s warranty) and the Goodwill Representation (that when an LG good had any defect after the expiry of the LG manufacturer’s warranty LG had no further obligations with respect to the LG good and any step it took in respect of the LG good was an act of goodwill).

31    The Fourth CW Statement, made to the supplier, was in these terms:

At this point in time, LG have made the decision to cover PARTS only for the customers out of warranty unit as a goodwill gesture due to the below facts;

- Unit is 11 months outside of the manufacturer’s express warranty

- No previous repair/history on customers unit

- This would be the first confirmed fault

- Part is readily available

However the cost of labour will be at the customer’s expense.

32    As the primary judge said at [79] none of the communications can be considered in isolation from each other or the overall context. The evidence disclosed that LG had been informed by the supplier that CW had already approached the supplier and Fair Trading (NSW) about the television (at [71]). The television had already been repaired once, presumably when it was within the period of the LG manufacturer’s warranty (at [72]-[73]). CW had been told by an LG representative that LG’s warranty had expired and that there was “a lot to be considered to what happened to the product…after the last repair” and that CW “might” be liable for the repair cost and should have the television evaluated by the same repairer. CW had insisted to LG that the television be replaced (at [72]). He had been told again that the LG manufacturer’s warranty had expired and that the television would “need to be assessed first to confirm if a manufacturing fault which would be at the customer’s expense then we could possibly look at assisting…but no guarantee”. The record of this conversation states that CW “did not want to do that” and said he “would look into it” (at [73]). Advice to the same effect, that CW would need to have the television assessed at his own expense before LG could proceed, was also communicated to the supplier, as well as the fact that CW would not pay for the assessment. Further, it was known that the quote for the cost of parts for the repair was $960 and for labour was $165.00. After all of these communications, LG made the Fourth CW Statement to the supplier.

33    The ACCC contends that it was misleading or deceptive for LG to respond to the supplier’s inquiry leading to the Fourth CW Statement in terms which failed to acknowledge the existence of the ACL consumer guarantee. The ACCC submitted that where a request for practical assistance, not specifying a legal basis, is answered with a response which focuses on a legal right which does not apply, and is silent as to an equally relevant legal right which might well apply, that response is misleading or deceptive.

34    Again, the ACCC’s submissions are pitched at too high a level of generality. The course of dealing between CW and LG cannot be reduced to the kind of general proposition the ACCC has made. It may be accepted that LG stated, more than once, that its warranty had expired. It is also the case, however, that LG did not suggest to CW that he had no other potential legal rights either expressly or by implication from silence about the ACL consumer guarantee in the circumstances. LG’s insistence that the television had to be assessed at CW’s cost before it could decide what assistance it would provide did not carry with it any of the implications the ACCC proposes.

35    The ACCC would have it that the words “at this point in time” (which are used in different contexts in a number of LG communications) means “when the LG warranty has expired” and not, as the primary judge said about another customer’s interaction with LG at [95]-[97], simply “at that time”. We do not think this issue can be determinative. Even if, in the context of the Fourth CW Statement, the words relate to the fact that LG’s warranty had expired, the statement was made in the course of a dealing the result of which was nothing more than LG explaining what it was willing to do in circumstances where CW would not pay for an assessment of the cause of the defect. The context, as the primary judge said at [82]-[83], was one akin to a negotiation, the focus of which was not what legal rights might exist, but what CW could get LG to do irrespective of any such rights as might or might not exist. The alleged misleading representations were not conveyed by the Fourth CW Statement in the circumstances.

JF

36    About 22 months after JF purchased his LG television for $1,750 the screen stopped displaying pictures. The supplier and LG had a number of communications about the television. The ACCC in the appeal contends that the Second, Third and Fourth JF Statements (the fourth being made to the repairer not the supplier) conveyed the Repair Only Representation, the Labour Cost Representation, the Limited Warranty Representation, and the Goodwill Representation. The primary judge identified the relevant circumstances at [84]-[91] including the Second, Third and Fourth JF Statements which were in these terms:

Second JF Statement

However LG have reviewed the customer’s request for out of warranty assistance and at this point in time the cost of the repair will be at the customers expense due to the below factors;

- Unit is 10 months oow

- no prev repair/history on the unit

- both parts are readily available to complete repair

- Minor repair

Sorry Gavin but due to the above reasons the repair will not be covered by LG.

Third JF Statement

Dealer Support have come back and agreed to pay for the repair but not the labour charge. Since the unit is 10 months out of warranty I think this is a good outcome. What do you think?

LG have reviewed customers request and at this point in time as the unit is 10 months outside the manufacturer’s express warranty with no prev repair, we can offer to cover parts only – however labour is still at the customer’s expense.

Fourth JF Statement

Hi All,

Just an FYI.

At this point in time LG have agreed to cover parts under warranty – however the cost of the labour will be at the customers expense.

You will be receiving and email from our warranty department with details in regards to the authority.

37    As noted, the television cost $1,750.00. The cost of parts was $149.51 for one part and $190.03 for the other part, and $154 for labour.

38    The ACCC submitted that, in context, JF was making a claim under the ACL. We disagree. The supplier and LG were concerned that JF not make a complaint to “consumer affairs” about the issue with his television but, again, the communications, in the circumstances, accord with the primary judge’s characterisation as a form of negotiation about what JF could get LG to do irrespective of potential legal rights and obligations. The ACCC’s approach involves analysing individual words and phrases to support the submission that LG, by silence about the ACL, misrepresented the consumer’s potential legal rights. The primary judge repeatedly rejected such an approach, and was right to do so.

39    In context, the Second JF Statement conveyed nothing more than LG’s then position in the circumstances as they existed at the time (that is, LG would not pay for the repair). The circumstances include not only those mentioned in the statement but also that, as the primary judge noted at [99], JF had not established that the defect involved any liability for LG under the ACL.

40    The Third and Fourth JF Statements are expressly framed in terms of a negotiated outcome, implicitly, irrespective of potential legal rights and duties, but the ACCC would have it that they carry representations about legal entitlements. We are unable to accept this approach to the communications. Describing LG as having “agreed” to pay and that being a “good outcome”, in context, does not represent that LG had no potential liability under the ACL. The ACCC submitted that LG’s “apparently ex gratia assistance was far less favourable than the position under the ACL” but this overlooks the fact that it did not prove that LG had any liability under the ACL. In this context, LG’s communications are not reasonably open to the interpretation which the ACCC’s submissions involve.

41    Nor, for the reasons the primary judge gave at [102], can it be inferred that JF was actually misled because he accepted LG’s offer. It is not unlikely that JF would have agreed to pay $154 for labour when LG had agreed to pay more than twice that amount for parts. It is not the case that JF “was not required to do so” (that is, make any payment), as this proposition depends on LG being liable under the ACL, when the ACCC attempted to but did not prove this fact.

MM

42    About 26 months after MM bought an LG television for $889, the screen stopped displaying any picture. The supplier communicated with LG on MM’s behalf after MM sent the supplier an email from a repairer attaching a repair quote and saying that “[w]e feel that having to replace the entire display panel in just over a 2 year period, falls well below what you expect as a reasonable lifetime for the product. Our expectation would be to discuss either repair or full refund” (at [105]). The quote was for $960 for parts and $220 for labour.

43    The ACCC contends that the First and Second MM Statements convey the Limited Warranty, Repair Only and Labour Cost Representations. The statements were:

First MM Statement

At this point in time LG can offer to cover the cost of parts however labour will be at the customers expense due to the unit being 14 month outside of the manufacturer’s warranty with no previous repair and this would be the first confirmed fault with the unit.

Hope this helps

Second MM Statement

LG management have re-reviewed & declined customers request, at this point in time LG are happy to assist with covering parts only however labour will be at the customers expense due to the below factors;

- The unit is 14 months outside of the manufacturers express warranty

- No previous repair/history with the customers unit

- This would be the first fault

- Part is readily available to complete the repair.

44    Again, we are unable to accept that LG’s communications represented that MM was not entitled to any remedy under the ACL. It was not known one way or another whether MM might have any such entitlement, but it was known that LG’s manufacturer’s warranty had expired. Accordingly, LG did not represent anything about potential rights under the ACL, nor that MM’s only potential entitlement was to the cost of parts only. The primary judge was right to refuse to treat the statements in isolation from the context (at [110]). In context, the primary judge’s characterisation at [111] of the course of dealing as one in which “LG considered a specific request, made an offer and it was accepted” is accurate.

PG and MG

45    PG and MG bought their LG television for $2,663.05 in March 2011. Three years later it developed a vertical line of failed pixels. PG contacted LG and asked for the television to be repaired. The ACCC contends that the PG Third and Fourth Statements conveyed the Limited Warranty, Repair Only and Labour Cost Representations.

46    The Third PG Statement was part of a conversation between PG and an LG representative in these terms (at [115]):

The customer service representative said: “Your television is out of warranty. You will have to pay to have it fixed.”

I said: “The television is faulty. It is not relevant that it is out of warranty. If you purchase a television, it should be repaired or replaced if it fails within a reasonable period after it is purchased.”

The customer service representative said: “We cannot repair the television for you, because it is out of warranty. Here are the details of the technician we would recommend. However, you will have to pay for the repairs.

47    The Fourth PG Statement was from LG to the supplier at a later time as follows (at [117]):

Response with regards to this –

have made the decision to offer to cover parts only on the repair however the labour will still be at the customers expense as the unit is 6 months outside of the manufacturer’s express warranty & this would be the first confirmed fault with the unit

Therefore LG will cover the parts however labour will be at the customers expense as it is outside of manufacturers warranty.

48    We accept from PG’s responses to the LG representative that PG was sufficiently aware of the ACL to know that what the LG representative was saying was wrong. As such, it should be inferred that PG was not misled by what was said. We consider, however, that the statements by the LG representative involved a false representation concerning “the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy” as provided for in s 29(1)(m) of the ACL and that the relevant grounds of LG’s notice of contention do not exculpate LG. We also consider that, in context, this necessarily means that LG contravened s 18(1).

49    First, and in contrast to the communications with other customers described above, the statements by the LG representative in the Third PG Statement were not confined to the mere fact that LG’s manufacturer’s warranty had expired and were not framed in terms of what LG might be willing to do irrespective of legal rights and duties. They were unequivocal statements about what the customers “have to do” (pay for the repairs) and what LG cannot do because LG’s manufacturer’s warranty had expired (not pay for the repairs). Further, no earlier dealings between PG and LG (or on PG’s behalf) tend to put a different complexion on the Third PG Statement. To the contrary, PG had been told that “we can repair the television and refund the call out fee if it is within warranty” (a statement not alleged to be contravening in the appeal), which does nothing to qualify the effect of the Third PG Statement.

50    Second, the statements are not framed to convey merely the LG representative’s state of mind. They are framed as statements of fact which, by necessary implication from what was said and the context in which it was said, also conveyed the representation that no rights other than those under LG’s manufacturer’s warranty existed, operated or had potential effect. This representation was false because there were other potential rights under the ACL by reason of which it was not necessarily the case that, because LG’s warranty had expired, PG would have to pay to have the television repaired.

51    Third, the statements do not admit of the possibility that they represent nothing more than the LG representative’s state of mind and may be incorrect.

52    Fourth, it was not necessary for the ACCC to prove the LG representative did not honestly believe the statements for LG to have contravened ss 29(1)(m) or 18(1). A representation can be false (and misleading or deceptive) even if the representor honestly believes the representation to be true.

53    Fifth, we are unable to characterise the statements as reflecting only that which LG, at that time, was prepared to offer. Nor, in our view, does characterising the statements as part of a negotiation, avoid the false character of the representations in contravention of s 29(1)(m). This is for two reasons. One, as a matter of principle, the context of negotiation does not exclude the potential for conduct to be misleading, deceptive or false. Two, even if the statements can be taken as a mere statement of LG’s position, their terms carry the false representation of non-existence, exclusion or non-effect of the ACL consumer guarantee of acceptable quality.

54    Further, to the extent that a false representation was made, in the circumstances, that conduct must also be characterised as misleading or deceptive or likely to mislead or deceive, despite the fact that PG was not misled. There may well be circumstances where the context including the nature and knowledge of a recipient of a statement may make an otherwise inaccurate statement not misleading. Here, however, even though the false representation did not mislead, as conduct it was to be characterised as false and so as misleading or deceptive in that sense. In the context of a serious inquiry about a faulty consumer good the mere fact that PG had sufficient knowledge not to be misled does not alter the misleading character of what was said. Nor is the misleading character of the statement altered by the fact, if it be the fact, that the LG representative is to be inferred to have known that PG held such knowledge (although it is not apparent why such an inference would be drawn in respect of the particular LG representative making the Third PG Statement).

55    In ground 3 of its notice of contention LG asserted that LG’s statements were opinions only not proved to be other than honestly held, but this does not exculpate LG. In ground 5 of its notice of contention LG said the primary judge failed to consider or give sufficient weight to the conversation between PG and LG on 19 August 2014 where PG said he would pursue the complaint under the ACL and LG said that was PG’s right and the statement made by the legal department of the supplier (for whom PG worked) about PG’s rights. The propositions do not affect the falsity of LG’s representation or alter the context of the dealing between PG and the LG representative who made the Third PG Statement.

56    The Fourth PG Statement was made after other communications in which the supplier had been informed that PG had been told that PG needed to get the television assessed “to confirm fault and confirm if it is a manufacturing fault” and that “any genuine faults will be at LG’s expense”. It was also made in circumstances where, as with all of the customers, it was not known one way or another whether LG would be liable under the ACL consumer guarantee. In these circumstances, we agree with the primary judge (at [119]-[120]) that the Fourth PG Statement is of the same non-contravening character as those made to other customers discussed above.

57    The fact that one statement in this course of dealing involved a false representation in contravention of s 29(1)(m) and, given the context also s 18(1), but the others did not discloses two important matters. One, as the primary judge consistently appreciated, in this area of the law it is necessary to consider what is actually said in context without pre-conceived categories of conduct in mind. Two, if (as may well be the fact), the responses from the LG representative in the Third PG Statement reflected LG’s training not to mention the ACL unless raised specifically by a consumer, the risk which such training carries has placed LG in contravention of ss 18(1) and  29(1)(m). It is a small distance from only mentioning the ACL consumer guarantees if it is expressly raised by a customer to effectively denying the existence of the ACL consumer guarantees altogether. In the case of the Third PG Statement the LG representative travelled that distance.

RH

58    RH purchased an LG television for $2,126 in December 2012 and 18 months later the screen displayed a grid pattern and black lines. RH took the television to an LG authorised repairer who emailed LG saying that RH claimed LG would be “covering this unit under warranty”. LG responded that (at [122]):

LG have no mention to this customer that we are assisting OOW.

The TV is currently 7months out of the manufactures warranty with no prior repairs claimed with, the customer needs to get the TV assessed [at their cost] at this point in time to confirm if the fault is in fact a manufacturing defect or not & send report back to LG for review.

Please also have the customer forward a copy of their proof of purchase.

59    The repairer responded “[w]e have assessed the unit and found panel to be faulty. Job card attached”. LG responded with the Second RH Statement, alleged by the ACCC in the appeal to contravene ss 18(1) and 29(1)(m) of the ACL, in these terms (at [123]):

Happy to assist with the cost of Parts, you have not mentioned the cost of labour but that will be chargeable to the customer.

60    In common with our views above, we agree with the primary judge at [125] that the Second RH Statement, in context, does not convey the various misrepresentations as alleged by the ACCC. It may be accepted that the repairer referred to RH claiming that LG would cover the costs of repair “under warranty” and that LG responded noting the television was “OOW” (out of warranty, explained in the same email to be out of LG’s manufacturer’s warranty). The Second RH Statement does not, however, convey anything about legal rights and obligations. As the primary judge concluded at [126] and [128] the Second RH Statement merely conveyed what LG was willing to do irrespective of potential legal rights and duties.

DW and SW

61    DW and SW bought their LG television for $776 in May 2012 and just over two years later the screen stopped displaying any pictures. SW communicated with LG about the television. The primary judge found at [131] that SW “had a good working knowledge of the remedies available under the ACL and communicated this to LG”. The primary judge accepted that SW had an initial conversation with LG representatives the full terms of which are at [131], and the relevant parts of which included the following:

On about 23 July 2014, I called LG’s customer service line and asked for LG to repair the television. I spoke to LG representatives named lllet, Kim and Alex. I was given a call reference for the call, being RNA 140723081909.

I asked each of lllet, Kim and Alex if LG would repair or replace the television. Each told me words to the effect that because my television was outside of the manufacturer’s warranty, there was nothing they could do in respect of the television.

In response, I said words to each of lllet, Kim and Alex to the effect that we have consumer laws in Australia that apply to the purchase of an item where the item is not of an acceptable quality and is not free from defects.

On 23 July 2014, I was called by Alex of LG. He told me words to the effect that he had taken my case to his superiors but that given my television set was so far out of warranty, there was no way that they could accommodate my claim under their manufacturer’s warranty.

I said words to the effect that LG was required under Australian Consumer Law where there was a major failure of a product to either repair, replace or refund the purchase price of my product as it was not of an acceptable quality and that I was not satisfied with his response.

During my call with Alex, I asked that my claim be escalated to the next level and he responded that he would forward my complaint to another area.

…

62    The First DW Statement is that first in bold in the quote above. The Second DW Statement is that second in bold in the quote above. The ACCC alleged contraventions based on both of these statements but the primary judge rightly found that the Second DW Statement was expressly confined to the manufacturer’s warranty so that the ACCC’s proposition, that the Second DW Statement was that “given that the DW television was so far out of warranty, there was ‘no way’ that LG could accommodate that claim”, could not be accepted (at [130] and [133]). The ACCC does not challenge that factual finding but nevertheless maintains that both statements make the Limited Warranty Representation.

63    In common with our conclusions about LG’s dealings with PG, SW was aware the ACL consumer guarantees gave consumers rights even if the precise operation of the statutory scheme was not known to SW. We also do not consider the Second DW Statement involved any false representation in contravention of s 29(1)(m). The Second DW Statement was accurate.

64    It is the First DW Statement which, in our view, contravenes s 29(1)(m) (and, as with the Third PG Statement, s 18(1)) because it falsely represents the non-existence, exclusion or non-effect of the ACL consumer guarantee as to acceptable quality and the character of the statement, as false, means that the conduct was also misleading or deceptive given the context. The substance of the representation is the same as that conveyed by the Third PG Statement. The discussion above about the Third PG Statement applies also to the First DW Statement, including our rejection of LG’s proposition that as the statement is nothing more than an honest held opinion it cannot contravene the ACL. As such, while we agree with the primary judge that the First DW Statement did not lead SW into error (indeed, it is apparent it did not), we conclude that, in context, the First DW Statement falsely represented that the ACL consumer guarantee did not exist, or was excluded or did not have effect merely because LG’s manufacturer’s warranty had expired and, in context, was misleading and deceptive conduct.

65    The use of the word “could” (there was nothing LG could do in respect of the television), in the context in which it was made, does not transform the statement into a mere representation of LG’s position irrespective of such legal rights as may exist. The statement means that LG could do nothing because its own warranty had expired and thereby conveyed that there were no other potential rights or duties of the ACL under which LG could or might have to do something. The fact that SW sought repair of the television, when LG had no obligation to repair but only to indemnify the supplier if LG had contravened the ACL consumer guarantee, also does not alter the quality of the statement as one conveying the false representation in contravention of s 29(1)(m) and, in context, contravening s 18(1).

66    The Fourth DW Statement was made toward the end of the course of dealing between LG and the repairer and was as follows:

I have spoken to management and at this point in time we will be raising an out of warranty authority for both parts & labour as a goodwill gesture. I’ll raise the authority from my end and have it emailed through to the ASC: Adelaide Telefix within 24-48 hrs.

67    This statement was made after other communications in which LG made what it described as a “pretty good offer” to pay for parts but not labour, when the quote for repair was $725 for parts and $185 for labour. DW had rejected this offer and said that in accordance with “Australian Consumer Law” LG should be “paying for the parts, the labour and also reimbursing me the $56.10 for deposit/assessment fee charged by….LG’s authorised repairer”.

68    In this context, we agree with the primary judge that none of the alleged representation was conveyed by the Fourth DW Statement.

Conclusions

69    For the reasons given the primary judge did not err in rejecting the ACCC’s claims other than in relation to the two instances identified above. We consider that by the Third PG Statement and the First DW Statement LG falsely represented that the ACL consumer guarantee as to acceptable quality did not exist, was excluded or did not operate with respect to the LG televisions in issue merely because LG’s manufacturer’s warranty had expired and thereby, given the context of the dealings, engaged in misleading and deceptive conduct, albeit that neither PG nor DW was in fact misled. The persons to whom those statements were made were not misled by the false representations because they knew they were false. But that does not alter the fact that LG contravened ss 18(1) and 29(1)(m) of the ACL by making those false representations.

70    Accordingly, to the extent noted in respect of the Third PG Statement and the First DW Statement the appeal must be allowed. Otherwise, the grounds of appeal have been considered and rejected in the course of these reasons. It is also unnecessary to consider the notice of contention further, having rejected grounds 3 and 5.

71    We propose orders to the following general effect:

(1)    The appeal be allowed in part.

(2)    The orders of 1 September 2017 be set aside.

(3)    In lieu of the orders of 1 September 2017, declare that the respondent contravened ss 18(1) and  29(1)(m) of The Australian Consumer Law by making a false representation concerning the existence, exclusion or effect of the guarantee of acceptable quality that applied to the respondent’s televisions:

(a)    in or about July or August 2014 to a purchaser of an LG 55 inch FHD LED television; and

(b)    on or about 23 July 2014 to a purchaser of an LG 50 inch 123cm full HD plasma television.

(4)    The matter be remitted to the primary judge for determination of the balance of relief, including any pecuniary penalties and costs of the hearing before the primary judge, as necessary.

(5)    The parties confer and, within 14 days, submit agreed or competing orders as to the costs of the appeal and, failing agreement:

(a)    also within 14 days, are to file a written submission of not more than two pages explaining their position as to costs of the appeal; and

(b)    may file within a further seven days thereafter, a written submission of not more than two pages in reply as to costs.

72    We will direct the parties to confer and, within seven days, to file agreed or competing orders for determination of the appeal reflecting these reasons for judgment.

Associate:

Dated:    27 June 2018