FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Apple Pty Ltd (No 2) [2017] FCA 1329

ORDERS

THE COURT ORDERS THAT:

1.    The applicant have leave to file and serve an amended originating application and a further amended concise statement, in the form provided to the Court by email on 1 November 2017, by 4.00 pm on 15 November 2017.

2.    The applicant pay the respondents’ costs thrown away by reason of the amendments for which leave has been granted in paragraph 1 of these orders.

3.    By 4.00 pm on 29 November 2017, the respondents file and serve any amended concise statement in response.

4.    By 4.00 pm on 13 December 2017, the applicant file and serve any reply to the respondents’ amended concise statement in response.

5.    By 4.00 pm on 9 February 2018, the respondents file and serve:

(a)    all affidavit material on which they intend to rely at the hearing on liability; and

(b)    a tender list of documents, not otherwise annexed or exhibited to any affidavit, that they intend to tender at the hearing on liability.

6.    The matter be referred to mediation, before a Registrar of this Court, to be concluded by 2 March 2018.

7.    By 4.00 pm on 9 March 2018, the applicant file and serve any evidence in reply.

8.    There be a further case management hearing at 9.30 am on 16 March 2018.

9.    The matter be listed for trial on liability, on a date to be fixed, on an estimate of six days.

10.    Save in respect of paragraph 2 of these orders, costs be reserved.

11.    There be liberty to apply.

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

REASONS FOR JUDGMENT

MOSHINSKY J:

1    The applicant (the ACCC) seeks leave (by interlocutory application filed on 24 October 2017) to amend its originating application and its amended concise statement.

2    The matter was before the Court on 25 October 2017. Although the respondents (Apple) did not oppose leave being granted, the Court raised concerns about some aspects of the proposed amended documents. An order was made that the ACCC file and serve revised proposed amended documents by 4.00 pm on 1 November 2017, which it did. At this point in time, Apple indicated that it opposed leave being granted to the ACCC to amend the documents. Accordingly, a direction was given for each party to file and serve a short outline of submissions, with a view to the matter being determined on the papers. On 9 November 2017, each party filed a short outline of submissions. Neither party indicated that it sought an oral hearing.

3    Both parties approached the matter by focusing on the proposed amendments to the concise statement, as the amendments to the originating application are largely consequential.

4    In order to provide context for the discussion that follows, I set out paragraphs 8, 13-18 and 27 of the proposed further amended concise statement (without mark-up):

8.    From about September 2014 to at least February 2016, some iPhone and/or iPad users experienced a fault, commonly known as “Error 53”, which rendered their iPhones or iPads inoperable (the Error 53 software fault).

…

13.    The Error 53 software fault occurred when the iPhone or iPad users attempted to update the iOS software on their functioning device to iOS8 or iOS9 or restore the factory settings of their functioning device, by connecting it to Apple iTunes through a personal computer. The iOS software update or restoration process engaged the server software and the device ceased functioning. An error message appeared on Apple iTunes stating that the device could not be restored, and the device had stopped functioning. This occurrence was commonly referred to as “bricking”.

14.    The Error 53 software fault occurred because, during the process described in paragraph 13 above, a difference was detected between data stored on the device and data held on Apple US servers in relation to the hardware components of the device.

15.    Many consumers who experienced the Error 53 software fault sought after-sales support from Apple Australia, through its retail stores and/or the telephone support service, and requested a remedy for their bricked iPhones and iPads.

16.    Between February 2015 and February 2016, Apple Australia represented to at least the consumers listed in Annexure A and Annexure B that, if a component of their iPhone had previously been repaired, serviced or replaced by someone other than Apple Australia or a service provider authorised by Apple Australia or Apple US (Apple-Authorised Service Provider), no Apple entity (including Apple Australia and Apple US) was required to, or would, provide a remedy for the Error 53 software fault at no cost (the Error 53 Software Fault Representations).

17.    From at least 21 December 2015 to about February 2016, Apple US published a webpage with the address https://support.apple.com/en-au/HT205628 and titled “If you see error 53 or can’t update or restore your iPhone or iPad”:

If the screen on your iPhone or iPad was replaced at an Apple Service Centre, Apple Store, or Apple Authorized Service Provider, contact Apple Support. If the screen or any other part on your iPhone or iPad was replaced somewhere else, contact Apple Support about pricing information for out-of-warranty repairs.

18.    By the conduct in paragraph 17 above, Apple US represented to consumers in Australia with iPhones and iPads affected by the Error 53 software fault that, if a component of their device had previously been repaired, serviced or replaced by someone other than Apple Australia or an Apple-Authorised Service Provider, no Apple entity (including Apple Australia and Apple US) was required to, or would, provide a remedy relating to the Error 53 software fault at no cost (the Error 53 Software Fault Website Representation).

…

27.    The Error 53 Software Fault Representations and the Error 53 Software Fault Website Representation were misleading or deceptive, likely to mislead or deceive and/or false because:

(a)    the iOS8 and iOS9 software which Apple US supplied, or agreed to supply, to consumers in Australia (whether by way of a software update or software restoration) were subject to consumer guarantees under Part 3-2 of the ACL, including the guarantees in ss 54 and 55, which required that they be goods of acceptable quality and be reasonably fit for the purposes for which Apple US represented they were reasonably fit;

(b)    when a consumer took the steps referred to in paragraph 13 above in relation to an iPhone device, the iOS8 or iOS9 software caused a difference of the type referred to in paragraph 14 above to be detected, so that the consumer experienced the Error 53 software fault and the device ceased to function; and

(c)    the consumers whose devices ceased functioning in these circumstances were entitled to a remedy from Apple US under Part 5-4 of the ACL.

5    Paragraphs 27A and 27B follow the same structure as paragraph 27. Paragraph 27A relates to the server software and paragraph 27B relates to the iPhone devices. The ACCC alleges that these goods were also subject to the consumer guarantees in Part 3-2 of the Australian Consumer Law (being Sch 2 to the Competition and Consumer Act 2010 (Cth)), in addition to the iOS8 and iOS9 software that is the feature of paragraph 27.

6    In relation to the concise statement, Apple submits that the ACCC’s proposed further amended concise statement fails to plead the material facts that the ACCC alleges result in it being false, misleading or deceptive for Apple to have made the representations alleged in paragraphs 16 and 18 of the proposed further amended concise statement. It is submitted that the proposed further amended concise statement alleges that the said representations were misleading or deceptive by simply: (a) describing the sequence of technical events that are said to have preceded the display of the Error 53 message and led to the devices becoming inoperable (paragraphs 13 and 14); and (b) asserting the rights enjoyed by consumers under the Australian Consumer Law “in these circumstances” (paragraphs 27(a) and (c), 27A(a) and (c), and 27B(a) and (c)).

7    Apple submits that: there is no pleading of any matter that is said to have caused the sequence of technical events to have occurred that resulted in the iOS software, the server software or the iPhone devices being of unacceptable quality; the proposed further amended concise statement does not expose any underlying problem that ultimately made the relevant devices cease working such that s 18 or 29(1)(m) of the Australian Consumer Law would be engaged in relation to the representations pleaded; and if the ACCC’s case is that each of the relevant devices ceased working through no fault of the consumer or no fault of their repairer, and hence that the pleaded implied representations concerning the rights of consumers under the Australian Consumer Law were misleading or false, then the ACCC should say so.

8    In my view, the proposed further amended concise statement ‘pleads’ sufficient material facts to support the ACCC’s claim that Apple contravened ss 18 and 29(1)(m) of the Australian Consumer Law. At the hearing on 25 October 2017, I raised concerns that the proposed further amended concise statement contained a flaw in logic in that it described the circumstances in which the Error 53 software fault occurred but not why it occurred. I was concerned that the proposed allegation, to the effect that the device ceased working “because of the Error 53 software fault”, may have been without foundation. However, the revised version, provided to the Court on 1 November 2017, now addresses this concern. Paragraph 14 has been retained rather than being deleted. That paragraph sets out an explanation, albeit at a high level, as to why the Error 53 software fault occurred. Given the complexity of the technical issues, I consider this high-level explanation to be sufficient in the circumstances.

9    Further, I consider that the proposed further amended concise statement contains sufficient material facts to support the contention that the alleged representations were false, misleading or deceptive, or likely to mislead or deceive. In simple terms, the allegations may be summarised as follows. It is alleged that when iPhone users attempted to update the iOS software on their functioning device, the software update engaged the server software and the device ceased functioning. It is alleged that this occurred because, during the updating process, a difference was detected between data stored on the device and data held on Apple US servers in relation to the hardware components of the device. The alleged representations are then pleaded in paragraphs 16 and 18 to the effect that, if a device had been repaired by a non-Apple authorised repairer, then Apple was not required to provide a remedy at no cost. It is then alleged that these representations were misleading because: the consumer guarantees applied; and the consumers whose devices ceased functioning in the circumstances described were entitled to a remedy from Apple US under the consumer guarantee remedy provisions. This is a logically coherent series of allegations and is sufficient for present purposes. If there is any difficulty in understanding precisely how the ACCC puts its case, this can be addressed by way of particulars. Whether the ACCC is able to establish each step in this series of allegations is, of course, a matter for trial.

10    Accordingly, I will grant leave to the ACCC to amend its originating application and its amended concise statement to the form of the proposed documents provided on 1 November 2017. In relation to costs, the ACCC should pay any costs thrown away by reason of the amendments; otherwise, costs should be reserved. I will also make the other timetabling orders discussed at the case management hearing on 25 October 2017.

Associate:

Dated:    14 November 2017