FEDERAL COURT OF AUSTRALIA

Director, Consumer Affairs Victoria v Vic Solar Pty Ltd (No 3) [2021] FCA 171

ORDERS

THE COURT DECLARES THAT:

Misleading and deceptive conduct

1.    Between June 2014 and December 2018, the First Respondent engaged in conduct, in trade or commerce, in contravention of ss 18, 29(1)(h) and 29(1)(i) of the Australian Consumer Law applying as a law of the Commonwealth by s 131 of the Competition and Consumer Act 2010 (Cth) and as a law of the State of Victoria by s 8 of the Australian Consumer Law and Fair Trading Act 2012 (Vic) (referred to collectively herein as the Australian Consumer Law) by reason that its agents represented to consumers that:

(a)    Community Bulk Buy was an independent social enterprise for the purpose of reducing the price of residential solar photovoltaic (PV) systems (through bulk buying cost savings);

(b)    the more people who signed up to the Community Bulk Buy program, the greater the cost saving; and

(c)    the opportunity to acquire a solar PV system promoted as part of the Community Bulk Buy offer was only available for up to a few days,

when those representations were false as the Community Bulk Buy program was a marketing fiction, there was no organisation (whether corporate or otherwise) which constituted Community Bulk Buy and consumers’ purchases of solar PV systems were not aggregated in any way that generated cost savings for them.

2.    Between June 2014 and December 2018, the First Respondent engaged in conduct, in trade or commerce, in contravention of ss 18 and 29(1)(e) of the Australian Consumer Law by reason that its agents distributed to consumers a Community Bulk Buy brochure that contained representations that purported to be testimonials in relation to the First Respondent’s solar PV systems and no evidence was adduced to prove that the representations were not false or misleading.

3.    Between June 2014 and December 2018, the First Respondent engaged in conduct, in trade or commerce, in contravention of ss 18 and 29(1)(k) of the Australian Consumer Law by reason that its agents distributed to consumers a brochure relating to the “One Solar” branded solar PV systems supplied by the First Respondent that contained a representation that One Solar International’s solar panels utilised German and US engineering when that representation was false as the solar panels supplied by the First Respondent under the One Solar brand were manufactured in China.

4.    Between June 2014 and December 2018, the First Respondent engaged in conduct, in trade or commerce, in contravention of ss 18 and 29(1)(a) of the Australian Consumer Law by reason that its agents distributed to consumers a brochure relating to the “One Solar” branded solar PV systems supplied by the First Respondent that contained a representation that One Solar International is a leading global manufacturer of Solar PV system solutions for the residential and commercial market and that One Solar International is the world’s first fully integrated “one-stop-shop” solar company that controls the whole process of manufacturing, installation and servicing of entire solar PV system applications, which representations were false as One Solar International did not manufacture solar panels but merely owned the brand name “One Solar”.

5.    On an indeterminate number of occasions between September 2016 and May 2017, the First Respondent engaged in conduct, in trade or commerce, in contravention of s 18 of the Australian Consumer Law by reason that its agents distributed to consumers a brochure relating to the “One Solar” branded solar PV systems supplied by the First Respondent that contained the Clean Energy Council logo and thereby represented that One Solar International was affiliated with, or approved by, the Clean Energy Council when that was false.

6.    On 23 September 2015, the First Respondent engaged in conduct, in trade or commerce, in contravention of ss 18 and 29(1)(g) of the Australian Consumer Law by reason that its agent represented to Ms Maria Capodicasa that after installing the solar PV system she would not receive another energy bill, which was misleading because there was not a reasonable basis for making the representation and she continued to receive electricity bills after the solar panels were installed.

7.    On 30 September 2015, the First Respondent engaged in conduct, in trade or commerce, in contravention of ss 18, 29(1)(g) and 29(1)(k) of the Australian Consumer Law by reason that its agent represented to Mr Davide Altobelli:

(a)    that after installing the solar PV system he would not receive another energy bill, which was misleading because there was not a reasonable basis for making the representation and he continued to receive electricity bills after the solar panels were installed; and

(b)    that the solar panels supplied by the First Respondent were German made, when that was false as the panels were made in China.

8.    On 24 April 2017, the First Respondent engaged in conduct, in trade or commerce, in contravention of ss 18 and 29(1)(g) of the Australian Consumer Law by reason that its agent represented to Mr Rodney Davis that the payments to First Respondent for the solar panels would take the place of his power bills, which was misleading because there was not a reasonable basis for making the representation and the solar power credits received by Mr Davis did not cover even half of his power bill.

9.    On 23 May 2017, the First Respondent engaged in conduct, in trade or commerce, in contravention of ss 18, 29(1)(g) and 29(1)(k) of the Australian Consumer Law by reason that its agent represented to Mr Mark Boast:

(a)    that once the solar PV system was installed, it would heavily reduce his electricity bill, which was misleading because there was not a reasonable basis for making the representation and his power bills were only reduced slightly; and

(b)    by giving him a One Solar brochure indicating that the inverters were manufactured in Germany or the USA, that the “One Solar” branded inverters supplied by Vic Solar were manufactured in Germany or the USA when that was false as the inverters were made in China.

10.    On 5 December 2018, the First Respondent engaged in conduct, in trade or commerce, in contravention of ss 18 and 29(1)(g) of the Australian Consumer Law by reason that its agent represented to Mr Maxwell Johansen that the cost for the solar panels would only be $14 more than his then current power bill, so that he would only be paying $78 a fortnight, and that he might receive a small electricity bill of about $10, which was misleading because there was not a reasonable basis for making the representation and Mr Johansen did not receive any material (cost saving) benefit from the solar panels.

Unsolicited consumer agreements

11.    The First Respondent contravened s 74(a) of the Australian Consumer Law on each occasion between June 2014 and December 2018 that its dealers called on home-owners to solicit “leads” for the sale of solar PV systems by reason that the dealers failed to clearly advise the home-owners, before beginning to negotiate, that the dealer’s purpose was to seek agreement to the supply of a solar PV system by the First Respondent.

12.    The First Respondent contravened ss 76 and 79 of the Australian Consumer Law on each occasion between June 2014 and December 2018 that Vic Solar entered into agreements for the sale of its solar PV systems to consumers, including when entering into agreements with Ms Capodicasa on 23 September 2015, Mr Altobelli on 30 September 2015, Ms Wright on 18 November 2016, Mr Davis on 24 April 2017, Mr Boast on 23 May 2017 and Mr Johansen on 5 December 2018, by reason that:

(a)    before the agreements were made, the consumer was not given information in writing as to the consumer’s right to terminate the agreement during the termination period or the way in which the consumer may exercise that right; and

(b)    the agreements did not contain on the front page a notice that conspicuously and prominently informed the consumer of the consumer’s right to terminate the agreement in accordance with s 79(a)(b)(i) and were not accompanied by a notice that could be used by the consumer to terminate the agreement in accordance with s 79(c)(i).

13.    On or about 22 April 2015, the First Respondent contravened s 86 of the Australian Consumer Law by its sales representative accepting a deposit of $400 from Ms Hizon at the time of signing an unsolicited consumer agreement.

14.    On or about 27 April 2015, the First Respondent contravened s 84 of the Australian Consumer Law by not returning or refunding to Ms Hizon the deposit paid by her after Ms Hizon terminated the unsolicited consumer agreement entered into by her in accordance with s 82 of the Australian Consumer Law.

15.    On 23 September 2015, the First Respondent contravened s 86 of the Australian Consumer Law by its sales representative accepting a deposit of $1,000 from Ms Capodicasa at the time of signing an unsolicited consumer agreement.

16.    The First Respondent contravened s 86 of the Australian Consumer Law by commencing the installation of a solar PV system at Ms Capodicasa’s premises within 10 days of her signing the unsolicited consumer agreement on 23 September 2015.

17.    On 30 September 2015, the First Respondent contravened s 78 of the Australian Consumer Law by reason that its agent made an unsolicited consumer agreement with Mr Altobelli in his home and did not provide a copy of the agreement to Mr Altobelli after it was signed.

18.    On 24 April 2017, the First Respondent contravened s 73 of the Australian Consumer Law by reason that its dealer called on Mr Rodney Davis after 6pm for the purpose of negotiating an unsolicited consumer agreement.

19.    On 23 May 2017, the First Respondent contravened s 73 of the Australian Consumer Law by reason that its dealer called on Mr Boast at about 6pm for the purpose of negotiating an unsolicited consumer agreement.

Unconscionable conduct

20.    The First Respondent, in trade or commerce in connection with the supply of solar PV systems, engaged in unconscionable conduct in contravention of s 21 of the Australian Consumer Law in the course of each of its sales of solar PV systems between June 2014 and December 2018, including in the course of its sales to Ms Capodicasa on 23 September 2015, Mr Altobelli on 30 September 2015, Ms Wright on 18 November 2016, Mr Davis on 24 April 2017, Mr Boast on 23 May 2017 and Mr Johansen on 5 December 2018, by reason that:

(a)    its business model was an intentional system of trading to call on consumers at their homes using “lead generators”, an environment in which consumers are more vulnerable to predatory and unfair sales tactics;

(b)    an important element of its business model was the “Community Bulk Buy” marketing concept which was false and misleading;

(c)    many other aspects of its marketing were false or misleading, including particularly that the First Respondent was offering a “leading brand” of solar PV systems manufactured in Germany and the US;

(d)    it failed to comply with many of the requirements of Division 2 of Part 3-2 of the Australian Consumer Law; and

(e)    the prices charged for its solar PV systems were above average market prices for systems of similar quality.

Accessorial liability

21.    The Second Respondent was knowingly concerned in the First Respondent’s contraventions of the Australian Consumer Law which are the subject of the declarations in paragraphs 1, 2, 3, 4, 7(b), 9(b) and 12 by reason that:

(a)    the Second Respondent was the director of, and a shareholder in, the First Respondent from October 2012 until it went into administration in November 2019, oversaw the direction of the First Respondent’s business and worked within the business on a day-to-day basis;

(b)    the Second Respondent was responsible for the First Respondent’s marketing and sales system involving the lead generators knocking on household doors to seek an invitation for a sales representative to visit to discuss the sale of a solar PV system;

(c)    the Second Respondent reviewed and approved the marketing scripts used by the First Respondent’s lead generators in the course of their marketing activities;

(d)    the Second Respondent knew that the representations made by the First Respondent which are the subject of the declarations in paragraphs 1, 2, 3, 4, 7(b) and 9(b) were false; and

(e)    the Second Respondent knew that the agreements used by the First Respondent did not contain notifications required by ss 76 and 79 of the Australian Consumer Law.

AND THE COURT ORDERS THAT:

22.    The Respondents pay the Applicant’s costs of the proceeding to date.

23.    The matter be listed for a hearing regarding penalties and other relief at 10.15am on 23 April 2021.

24.    The Applicant file and serve any submissions or evidence in support of the application for penalties and other relief by 19 March 2021.

25.    The Respondents file and serve any submissions or evidence in response by 9 April 2021.

26.    The Applicant file any material in reply by 16 April 2021.

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

REASONS FOR JUDGMENT

O’BRYAN J:

1    On 29 January 2021, I delivered judgment in this proceeding on the issue of liability: Director, Consumer Affairs Victoria v Vic Solar Pty Ltd (No 2) [2021] FCA 26 (Liability Judgment). I found that the first respondent (Vic Solar) had contravened ss 18, 21, 29, 73, 74, 76, 78, 79, 84 and 86 of the Australian Consumer Law applying as a law of the Commonwealth by s 131 of the Competition and Consumer Act 2010 (Cth) and as a law of the State of Victoria by s 8 of the Australian Consumer Law and Fair Trading Act 2012 (Vic), and that the second respondent, Mr Srinivasan, was knowingly concerned in certain of the contraventions of ss 18(1), 29, 76 and 79 of the Australian Consumer Law.

2    At that time, I made an order that the parties file, within 28 days, draft short minutes containing an agreed form of declarations reflecting the reasons for decision of the Court and orders proposed by the parties for timetabling a hearing as to pecuniary penalties and other relief or, in the absence of agreement, the plaintiff and respondents file competing draft short minutes containing the declarations and timetabling orders proposed by each party and accompanying submissions in support of no more than 3 pages in length.

3    Since 17 February 2020 (when their solicitors filed a notice of ceasing to act), the respondents have not participated in this proceeding. On 10 February 2021, the applicant served the Liability Judgment, and proposed orders for timetabling a hearing as to pecuniary penalties and other relief, on the respondents by the methods of substituted service ordered by the Court on 25 June 2020. The respondents have not corresponded with the applicant in relation to the proposed timetable. In accordance with the orders made on 29 January 2021, the applicant filed its proposed timetabling orders and declarations together with a short written submission. Nothing has been filed by the respondents.

4    I have not accepted the form of declarations proposed by the applicant and it has been necessary to make substantial revisions to the form proposed. There were three problems with the declarations proposed by the applicant.

5    First, the declarations proposed by the applicant stated contraventions of the law without any explanation as to the reason for the contravention. The purpose of declaratory relief is to declare the Court’s determination of a right, duty or liability that was the subject of controversy between the parties: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 (Ainsworth) at 582. As observed by the High Court in Rural Press Ltd v ACCC (2003) 216 CLR 53 (at [89]) in a similar context, a declaration that a person has contravened a statutory prohibition should indicate the gist of the findings that identify the contravention. Similarly, in ACCC v EnergyAustralia Pty Ltd [2015] FCA 274, Gordon J said (at [83]) that declarations must be “informative as to the basis on which the Court declares that a contravention has occurred” and “should contain appropriate and adequate particulars of how and why the impugned conduct is a contravention of the Act”. Declarations need not be lengthy, nor seek to reproduce the reasons for judgment, but to have any utility they must explain the declared contravention of the law. As observed by Dowsett J in ACCC v Danoz Direct Pty Ltd [2003] FCA 881; 60 IPR 296 (at [260]):

…It is important that any declaration be framed so as to convey a limited and accurate message to those who have an interest in its subject matter. It is unlikely that any good purpose will be served by numerous declarations which merely repeat the various misrepresentations and the various occasions on which they were made. The most effective form of declaration will accurately reflect the impugned conduct in a concise way.

6    Second, in this proceeding, the applicant seeks relief in respect of contraventions of the Australian Consumer Law applying as a law of Victoria as well as a law of the Commonwealth. In particular, the applicant has applied for injunctive relief under s 232 of the Australian Consumer Law applying as a law of the Commonwealth (see Liability Judgment at [17]-[26]). On the basis of that application, I found that the respondents had contravened the Australian Consumer Law applying as a law of Victoria as well as a law of the Commonwealth. Despite that, the applicant framed the proposed declarations by reference only to the Australian Consumer Law applying as a law of Victoria. That did not reflect the reasons for judgment, nor provide a basis for the injunctive relief sought by the applicant.

7    Third, the applicant noted in its written submissions that, in the Liability Judgment at [115], the Court found that the Clean Energy Council representation was a contravention of s 29(1)(h) of the Australian Consumer Law. However, the applicant submitted that it had pleaded a contravention of s 29(1)(g) and it sought a declaration to that effect (notwithstanding the finding of the Court). The basis on which the applicant invited the Court to alter its finding as recorded in the Liability Judgment was not made clear. Regardless, I reject it. The applicant appears to misunderstand the difference between paragraphs (g) and (h) of s 29(1). The two paragraphs are as follows:

29     False or misleading representations about goods or services

(1)     A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:

…

(g)     make a false or misleading representation that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits; or

(h)     make a false or misleading representation that the person making the representation has a sponsorship, approval or affiliation; or

…

(emphasis added).

8    It can be seen that paragraph (g) applies to a representation that goods or services have sponsorship or approval, whereas paragraph (h) applies to a representation that the person making the representation has a sponsorship, approval or affiliation. In its pleading with respect to the Clean Energy Council representation, the applicant alleged that Vic Solar made a false or misleading representation that Vic Solar or One Solar International Pty Ltd had a sponsorship, approval or affiliation with the Clean Energy Council. Although the applicant alleged that by making the representation Vic Solar breached s 29(1)(g), it is apparent that paragraph (g) has no application to a representation that particular persons have sponsorship, approval or affiliation. However, s 29(1)(h) is applicable. For that reason, in the Liability Judgment I concluded that the pleading contained an unintended error and should have alleged a contravention of s 29(1)(h) (at [114]).

9    Although not expressly raised by the applicant in its written submissions, I have come to the view that the findings in the Liability Judgment in respect of the Clean Energy Council representation support a declaration of contravention of s 18 of the Australian Consumer Law, but not a declaration of contravention of s 29(1)(h). The reason for that conclusion is that I found that the use of the Clean Energy Council logo in the One Solar brochure distributed by Vic Solar conveyed a representation that One Solar International was affiliated with, or approved by, the Clean Energy Council. However, s 29(1)(h) only applies to a false or misleading representation that the person making the representation has a sponsorship, approval or affiliation. In the present case, the person making the representation was Vic Solar, not One Solar International, but I did not find that the brochure conveyed a representation that Vic Solar was affiliated with, or approved by, the Clean Energy Council. That was because Vic Solar was not referred to in the brochure. I will therefore make a declaration with respect to s 18, but not s 29(1)(h).

10    Without any clear explanation in its written submission, the form of declaration proposed by the applicant in relation to the Clean Energy Council representation was to the effect that Vic Solar made a false and misleading representation that the “One Solar solar PV panels were endorsed, affiliated with, or approved by the Clean Energy Council, in contravention of sections 18 and 29(1)(h) of the ACL”. Such a declaration cannot be made. A representation to that effect, focussed on the products that were supplied under the One Solar brand, was not pleaded by the applicant and was not found by the Court. Further, even if such a representation had been pleaded and found, it would have involved a contravention of s 29(1)(g), not 29(1)(h).

11    Having regard to the above matters, it has been necessary to re-frame substantially the declarations proposed by the applicant into an appropriate form, which I now make. I also make orders timetabling a hearing on the issue of penalty and other relief largely as proposed by the applicant.

Associate:

Dated:    3 March 2021