FEDERAL COURT OF AUSTRALIA

Australian Consumer and Competition Commission v Launceston Superstore Pty Ltd [2013] FCA 1315

THE COURT ORDERS THAT:

1.    The Court declares, pursuant to section 21 of the Federal Court of Australia Act 1976 (Cth), that in making the oral and written statements listed at paragraph 1(a) to (c) of the Originating Application filed on 12 June 2013 in the Proceeding, the Respondent:

(a)    made representations in connection with the supply or possible supply of goods or services that were false or misleading and concerned the existence, exclusion or effect of a guarantee, right or remedy available under the consumer guarantee provisions in Division 1 of Part 3-2 to the Australian Consumer Law (‘the ACL’) being Schedule 2 to the Competition and Consumer Act 2010 (Cth), and the remedies relating to those guarantees in Part 5-4 of the ACL in contravention of section 29(1)(m) of the ACL; and

(b)    in doing so, engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 18 of the ACL.

2.    Pursuant to section 232 of the ACL, the Respondent is restrained (whether by itself, its servants, agents or otherwise howsoever) for a period of three years from the date of these Orders from making representations (whether oral or written) to any customer to the effect that the Respondent:

(a)    does not have any obligation to provide any remedies in relation to damaged goods it supplies unless notified of any damage within 24 hours of delivery or pick up, or a similarly restricted period of time unrelated to the nature of the goods;

(b)    does not have any obligation to provide a refund or replacement in relation to any goods it supplies regardless of the circumstances and the provisions of Division 1 of Part 3-2 of the ACL and the remedies relating to those guarantees in Part 5-4 of the ACL; and

(c)    does not have any obligation to provide an exchange or refund in relation to goods it supplies if the goods are supplied for $300.00 or more, or some other amount less than or equal to $40,000.00.

3.    Pursuant to sections 224(1)(a)(ii) and 228 of the ACL, the Respondent is to, within 28 days of the date of these Orders, pay to the Commonwealth a pecuniary penalty in respect of the contravention of section 29(1)(m) of the ACL in the amount of $32,000.

4.    Each party is to bear their costs of the proceeding and all previous costs orders in the proceeding are to be vacated.

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

REASONS FOR JUDGMENT

INTRODUCTION

1    The Applicant (‘ACCC’) seeks pecuniary penalties, declaratory and other relief against the Respondent (‘Launceston Superstore’).

2    Launceston Superstore was a franchise of Harvey Norman operating out of a store in Launceston, Tasmania.

3    Launceston Superstore admits that in the period between July and December 2011 it engaged in conduct that contravened ss 18 and 29(1)(m) of the Australian Consumer Law (ACL) (being Sch 2 to the Competition and Consumer Act 2010 (Cth) (‘CCA’)). This proceeding raises similar issues and legal principles as those described in my reasons in Australian Consumer and Competition Commission v HP Superstore Pty Ltd [2013] FCA 1317 which I will not repeat.

4    Launceston Superstore made a total of three representations on a total of two occasions to one consumer “concerning the existence, exclusion or effect of any warranty, guarantee, right or remedy” within the meaning of those words in s 29(1)(m) of the ACL. The representations, the circumstances in which they were made and the respects in which they were false or misleading are set out in the Statement of Agreed Facts filed by the parties (‘Agreed Facts’) which I attach to this judgment marked “Annexure A”. Launceston Superstore admits that, in making each representation, it thereby contravened s 18 and s 29(1)(m) of the ACL.

5    The parties have agreed that the appropriate orders are as follows:

(a)    make declarations pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth);

(b)    grant injunctive relief pursuant to s 232 of the ACL; and

(c)    order payment by Launceston Superstore of a penalty in the amount of $32,000.00 pursuant to s 224 of the ACL.

APPLICATION OF LEGAL PRINCIPLES TO THE FACTS

6    The facts and admissions establishing the particular conduct that Launceston Superstore admits gave rise to contraventions of the ACL, together with other matters relevant to penalties, are set out in the Agreed Facts. In support of the proposed penalty, the parties rely on those facts and admissions by Launceston Superstore.

7    I now turn to consider the salient matters to be considered.

Nature, extent and duration of conduct - circumstances in which conduct took place

Whether conduct deliberate

8    The conduct comprised three statements made to one consumer by means of, or in the form of, one written statement on a receipt given to him on one occasion in July 2011 and two oral statements made to him by one sales representative of Launceston Superstore on one occasion in November 2011.

9    There is no indication that the oral statements were made with an intention to mislead or deceive the consumer or to misrepresent the existence, exclusion or effect of any warranty, guarantee, right or remedy.

10    A great number of electrical appliances are bought by consumers from retailers such as the Launceston Superstore in Australia every day. It is not unusual for consumers to return new electrical appliances to retailers on the basis of a fault in the goods or out of a concern that the goods are not of acceptable quality when they purchased them.

11    Processes to ensure that consumers can obtain a remedy, if goods were not of acceptable quality when sold to consumers, represent a cost on the retailer’s business. Retailers may need to incur costs to maintain a culture of compliance with the ACL, including by supervision of staff. An appropriate penalty would take into account the need to deter other retailers from encouraging, permitting or risking similar contraventions of the ACL.

Amount of loss caused

12    There is no evidence of loss or to damage to consumer in this proceeding, arising from the contravening conduct of Launceston Superstore.

Whether similar prior conduct

13    Launceston Superstore has not been previously found by a court to have contravened any provision of the ACL or to have engaged in conduct similar to that described in the Agreed Facts.

Involvement of senior employees or management

14    There is no evidence of involvement by senior employees or senior management.

15    An appropriate penalty would take into account the need to encourage senior employees and management, both of Launceston Superstore and other retailers, to prevent contraventions of the ACL.

Size and financial position

16    The Agreed Facts shows the size and financial position of Launceston Superstore. The penalty of $32,000 takes proper account of Launceston Superstore’s size and financial position.

Culture of compliance and corrective measures in response to contravention

17    The Agreed Facts sets out ACL compliance training engaged in by Launceston Superstore both before and after the relevant conduct.

18    Launceston Superstore ceased trading on about November 2012 and does not intend to re-commence a business of any kind. The ACCC does not seek an order for compulsory compliance training in this proceeding.

Co-operation and contrition/discount

19    The Agreed Facts sets out Launceston Superstore’s co-operation with ACCC. It is a mitigating factor that Launceston Superstore is admitting liability for the contraventions set out in this document without a contested hearing. As a result of this cooperation by Launceston Superstore, a more complex trial has been avoided. A fully contested trial would have required more days in hearing and, with the potential for appeals, consume large amounts of the Court’s and the ACCC’s time and resources. It is also of significance that affected consumers have not had to attend court to give evidence and submit to cross examination.

20    The parties have not sought to state a specified percentage discount for Launceston Superstore’s co-operation and acknowledgement of liability. However, Launceston Superstore is entitled to a discount for voluntary acknowledgement of liability and co-operation.

Deterrence

21    A factor relevant to penalty is whether the penalty is of a sufficient magnitude for general deterrence among corporations making representations to consumers about their rights under the consumer guarantee legislation generally, and corporations supplying computer products to consumers specifically.

22    The proposed penalty, together with the other proposed orders, sufficiently deter repetition of the conduct by Launceston Superstore (to the extent that deterrence is necessary having regard to the fact that it has ceased trading and does not intend to re-commence) and by retailers generally.

Maximum penalties and one transaction / one course of conduct principle/totality

23    The maximum penalty for a body corporate for each act or omission that relates to a provision of Div 1 of Pt 3-1 of the ACL, which Division includes s 29, is $1.1 million.

24    Courts are required to pay careful attention to maximum penalties when imposing penalties. This is because, first, the legislature has legislated for them; secondly, because they invite comparison between the worst possible case and the case before the court at the time; and thirdly, because in that regard they do provide a yardstick, taken and balanced with all of the other relevant factors.

25    The conduct comprised three statements made to one consumer by means of, or in the form of, one written statement on a receipt in July 2011 and two oral statements by one sales representative of Launceston Superstore on one occasion in November 2011. The receipt was given to the consumer when he purchased a mobile phone from Launceston Superstore. The two oral statements were made to him in response to his enquiries about problems he was having with the phone. The three contraventions occurred in one course of conduct.

26    It is appropriate to fix and impose a single penalty for all the contraventions because they arose out a single course of conduct.

Conclusion on appropriate penalty

27    I consider that a pecuniary penalty pursuant to s 224 of the ACL in the sum of $32,000 is appropriate (and within the permissible range) for the contraventions admitted by Launceston Superstore.

IN STORE NOTICE

28    The ACCC does not seek an order against Launceston Superstore for the display on an in-store notice of consumers’ rights under the consumer guarantee provisions of the ACL in this proceeding.

COMPLIANCE TRAINING

29    The ACCC does not seek an order against Launceston Superstore for the implementation of a compliance program.

CONCLUSION

30    For the above reasons, I will make the following orders:

1.    The Court declares, pursuant to section 21 of the Federal Court of Australia Act 1976 (Cth), that in making the oral and written statements listed at paragraph 1(a) to (c) of the Originating Application filed on 12 June 2013 in the Proceeding, the Respondent:

(a)    made representations in connection with the supply or possible supply of goods or services that were false or misleading and concerned the existence, exclusion or effect of a guarantee, right or remedy available under the consumer guarantee provisions in Division 1 of Part 3-2 to the Australian Consumer Law (‘the ACL’) being Schedule 2 to the Competition and Consumer Act 2010 (Cth), and the remedies relating to those guarantees in Part 5-4 of the ACL in contravention of section 29(1)(m) of the ACL; and

(b)    in doing so, engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 18 of the ACL.

2.    Pursuant to section 232 of the ACL, the Respondent is restrained (whether by itself, its servants, agents or otherwise howsoever) for a period of three years from the date of these Orders from making representations (whether oral or written) to any customer to the effect that the Respondent:

(a)    does not have any obligation to provide any remedies in relation to damaged goods it supplies unless notified of any damage within 24 hours of delivery or pick up, or a similarly restricted period of time unrelated to the nature of the goods;

(b)    does not have any obligation to provide a refund or replacement in relation to any goods it supplies regardless of the circumstances and the provisions of Division 1 of Part 3-2 of the ACL and the remedies relating to those guarantees in Part 5-4 of the ACL; and

(c)    does not have any obligation to provide an exchange or refund in relation to goods it supplies if the goods are supplied for $300.00 or more, or some other amount less than or equal to $40,000.00.

3.    Pursuant to sections 224(1)(a)(ii) and 228 of the ACL, the Respondent is to, within 28 days of the date of these Orders, pay to the Commonwealth a pecuniary penalty in respect of the contravention of section 29(1)(m) of the ACL in the amount of $32,000.

4.    Each party is to bear their costs of the proceeding and all previous costs orders in the proceeding are to be vacated.

Associate:

Dated:    6 December 2013

“ANNEXURE A”