Australian Consumer Law

Key cases:

Nelson v Nelson (1995) 184 CLR 538

Lindsay Petroleum Co v Heard (1874) LR 5 PC 221

Bester v Perpetual Trustee Co Ltd [1970] 3 NSWR 30

Beckford v Wade (1805) 17 Ves 87

Re Howlett [1949] Ch 767

Haas Timber and Trading Co Pty Ltd v Wade (1955) 94 CLR 593

Allcard v Skinner (1887) 36 Ch D 145; [1886-90] All ER Rep 90

1. AUSTRALIAN CONSUMER LAW

1. Introduction

1.1 From 1 January 2011 the new Australian Consumer Law (“ACL”) will come into effect.  The new regime introduces a single, national consumer and competition law which replaces both the Trade Practices Act 1974 (Cth) (“TPA”) and State and Territory consumer protection laws and creates a national, unified system. The new system will be enforced by the ACCC, ASIC and State and Territory fair trading agencies.

The ACL has been implemented in two stages, through two statutes: the Trade Practices Amendment (Australian Consumer Law) Act (No 1) (Unfair Contracts) 2010 (“TPA1”) (passed in March 2010) and the Trade Practices Amendment (Australian Consumer Law) Act (No 2)  2010 (passed in June 2010) (“TPA2”).

1.2 Stage 1

TPA1 came into effect on 1 July 2010 and creates a national unfair contracts regime which addresses standard form contracts and expands the powers of both the ACCC and ASIC.

1.3 Stage 2

TPA2 will come into effect on 1 January 2010, completing the new system of consumer protection. The Act not only changes the name of the TPA to the Competition and Consumer Act 2010 (Cth), but also effects amendments to the TPA,  the ASIC Act 2001 and the Corporations Act 200.

2. Major provisions of the Unfair Contracts Act

2.1 Apart from introducing the ACL, the UCA provides for substantial, national laws relating to unfair contractual terms in consumer contracts and provisions for new penalties and enforcement measures.

Primarily, the UCA applies to “consumer contracts” which are in “standard form.”

2.2 A ”consumer contract” is a contract which has at least one party who is acquiring a product or service for predominantly personal or domestic consumption or use. Consumer contracts include contracts for the sale of land for “personal use” and may also apply not only to residential property but also land purchased for the purposes of private investment.

2.3 The phrase “standard form contract” is not defined in the UCA, but in deciding whether a contract is in standard form, the court may take into consideration:

• The relative bargaining positions of the parties
• The preparation of the contract
• The negotiation (if any) of the terms
• Whether any special characteristics of either party are taken into consideration by the contract

2.4 One of the objectives of the UCA is to provide a means of addressing the use of “unfair terms” in contracts. An unfair term is one which (inter alia):

• Creates an imbalance in the rights and obligations of the parties
• Is not reasonably necessary to protect the rights or interests of a party
• Would cause a detriment or disadvantage for one of the parties if relied upon.

2.5 The onus is upon the party alleging the unfairness. Examples of unfair terms given in the UCA include terms pursuant to which:

• One party has the unilateral right of termination
• The right of one party to sue the other is limited
• One party may assign their rights under the contract without the assent of the other
• The right to vary the terms is limited to one party and the terms may be varied by that party without the consent of the other.

2.6 If a term of the contract is held to be unfair, the term will be void. If it is possible to sever the term without affecting the operation of the contract, the contract will remain in effect. If it is not possible to sever the term, the contract will be void.

3. The new Australian Consumer Law

3.1 The Competition and Consumer Act 2010 will implement a new scheme for consumer protection based upon both the TPA and the various consumer protection statutes of the States and Territories. In particular, it introduces:

• A national product safety system
• Reforms developed from the best practice of State and Territory sale of goods and fair trading laws
• A new national law which guarantees consumer rights when purchasing goods and services
• Amendments to the TPA which applies the principles of unconscionable conduct to the formation and terms of a consumer contract and to the subsequent behaviour of the parties
• A new national scheme which applies to unsolicited goods, including door-to-door and other forms of direct sales.

3.2 Product safety

The provisions of the ACL in regard to product safety apply to both the provision of consumer goods and services. These services include the supply, installation, maintenance, cleaning, assembly, or delivery of goods.  The ACL also allows for the recall and banning of goods which present a risk of injury both for the intended use of goods and also their reasonably foreseeable misuse.

3.3 Consumer guarantees

Statutory guarantees for consumer goods will apply uniformly across Australia. These replace the warranties and conditions implied in consumer contracts pursuant to the TPA and State and Territory sale of goods laws. The guarantees are substantially the same as those existing under current law, but may now have a broader application.

For example, the guarantee that goods shall be of “acceptable quality.”  Unlike the current requirement that goods be of “merchantable quality,” the provision that goods be of an acceptable quality will take into consideration (inter alia):

• the price of the goods
• any statements made about the goods on the packaging or labels
• any representations made by the supplier of the goods, or
• any other relevant circumstances relating to the supply of the goods.

3.4 Enforcement and remedies

The ACL has strengthened enforcement measures and remedies for breaches of the consumer protection provisions.  A breach of the consumer protection provisions will attract a civil penalty of up to $1.1 million for a corporation or $220,000 for an individual. Corresponding criminal penalties also apply. These are similar to the current penalties existing under the TPA.  Moreover, the ACCC also has a greater role in the surveillance and enforcement of the new national product safety regime. Not only has it been given increased powers to detect and pursue breaches of the ACL, but also breaches of industry codes of conduct. 

1. Equitable Defences

1. Introduction

Injunctions are not granted, specific performance orders are not made, and normally other equitable relief will not be granted if an equitable defence is made out. Such a defence may be established if the defendant argues and supports it with evidence or because the court identifies a defence from the material before it, sometimes from the plaintiff’s own evidence.

 Further, it must be remembered that at all times, the Court has a wide discretion to allow relief or accept a defence.

2. Defences based upon maxims

2.1 Many of the defences find their expression in maxims of equity.  These are often expressed with great generality and universality.  Because of the discretionary and flexible nature of the jurisdiction, the maxims and general defences should be regarded more as guidelines than fixed rules (compare the distinction between guidelines and fundamental principles suggested in Films Rover International v Cannon Film Sales [1987] 1 WLR 670 at 680-682, by Hoffman J.).

2.2 He who comes to equity must come with clean hands

Whilst “unclean hands” will disqualify a plaintiff from receiving equitable relief, under certain circumstances that Court will allow the plaintiff to ”wash their hands”: Nelson v Nelson (1995) 184 CLR 538.

2.3 He who seeks equity must do equity

Are there any other maxims which could be used as defences?

3. Laches

3.1 The defence of laches is enshrined in the maxim: Equity assists the diligent (sometimes – “vigilant”), not the tardy.  In other words, if the plaintiff has delayed for a time in requesting relief from the Court for an infringement of rights, the defendant may raise the defence of laches.  The basis for the defence is as follows:

• the plaintiffs delay in seeking relief was such that
• the defendant believed that the plaintiff had accepted the state of affairs (infringement of rights)
• the defendant may (or may not) have altered his position in reliance up this belief and,
• in any case, it would therefore be an injustice to the defendant if the Court were to alter the status quo by granting the relief requested: Lindsay Petroleum Co v Heard (1874) LR 5 PC 221.

3.2 Factors considered by the Court

3.2.1 Length of the delay

Whether the plaintiff’s conduct constitutes delay sufficient to found the defence of laches depends upon the circumstances of the case. Mere lapse of time does not necessarily constitute laches.  For example, a delay of many years (eg 20 years) would not constitute laches if there were mitigating factors, such as unconscionable conduct on the part of the defendant:  Bester v Perpetual Trustee Co Ltd [1970] 3 NSWR 30.

3.2.2 Plaintiff’s knowledge

In order to successfully raise the defence of laches the defendant must be able to show that at all relevant times the plaintiff was aware of his rights to pursue a claim in equity. Further, knowing of this right, the plaintiff failed to act: Beckford v Wade (1805) 17 Ves 87; Re Howlett [1949] Ch 767.  Time does not begin to run for the defence until the plaintiff becomes aware of these rights:  Bester v Perpetual Trustee Co.

 3.2.3     Change of position of the defendant

The defendant must also be able to prove that:

• the plaintiff’s delay caused him to change his position and
• that the grant of relief would in all the circumstances therefore be unjust and inequitable: Lindsay Petroleum Co v Heard.

3.2.4      Prejudice to the rights of others

Laches will succeed as a defence if it can be shown that the plaintiff’s delay has led third parties to alter their position or acquire rights which would be infringed if the Court granted the remedy sought by the plaintiff.

Haas Timber and Trading Co Pty Ltd v Wade (1955) 94 CLR 593

Orr v Ford (1989) 167 CLR 316

3.2.5      Other factors which affect success of the defence

• Statutes of Limitation – Laches does not apply as a defence until the statutory limitation period has expired. Archbold v Scully (1861) 9HLC 360
• A defence of laches will rarely succeed if the plaintiff is seeking equitable relief in regard to a legal right. Re White [1917] SASR 193

4. Acquiescence

4.1 Acquiescence may be raised as a defence when the behaviour of the plaintiff suggests/indicates that they have accepted a set of circumstances or state of affairs and that, further,  they will not pursue a claim which may be available to them in relation to any rights which may have arisen: Bester v Perpetual Trustee.

4.2 Acquiescence is very closely related to laches, but they are not mutually dependant: Allcard v Skinner (1887) 36 Ch D 145; [1886-90] All ER Rep 90.

Facts: Ms A, pursuant to the advice of her religious advisor, entered an Anglican convent. During her time there she made substantial donations to the order. However, some years later she left the convent, left the Anglican church and became a Roman Catholic. Six years later, Ms A decided that she wanted her property returned and applied to the court to have the assignments set aside on the grounds of undue influence. Ms A’s brother was a solicitor and she also had an independent solicitor. Therefore, she had access to legal advice whenever she required it.  Ms S, for the convent, raised the defence of laches and acquiescence.

Held: The majority of the Court rejected the defence of laches, but noted that the case did not simply rest upon the issue of lapse of time and that ‘there is far more than inactivity and delay on the part of the plaintiff. There is conduct amounting to the confirmation of the gift’ (per Lindley CJ at 816; 101).  Thus, if A realises that his rights are being infringed by B but does nothing about it, then he may be said to have acquiesced to the infringement. If A waits for 10 years before pursuing a remedy, then B could also raise the defence of laches:  Glasson v Fuller [1922] SASR 148.  Therefore, the defences of laches and acquiescence may be used either separately or together.

4.3 In considering a defence of acquiescence, the Court will consider similar factors to those which are applied re the defence of laches, viz:

• the conduct of the plaintiff
• whether the defendant changed his position
• the rights of third parties
• any other circumstances relevant to doing justice between the parties.

5. Hardship

If compliance with a decree of specific performance or injunction would cause hardship to a defendant, this hardship may – but not necessarily -serve as a defence.  Each case will be judged by the court on its merits.  In regard to specific performance,  only “in extraordinary circumstances can hardship supply an excuse for resisting performance of a contract for the sale of immovable property,” Patel v Ali [1984]Ch 283 at 288. Thus, difficulty of the defendant in finding money or even imminent insolvency (AMEC Properties Ltd v Planning & Research Systems Plc [1992] 1 EGLR 70) have been held to be insufficient to constitute hardship. However, risk to the defendant of prosecution (Norton v Angus (1926) 38 CLR 523 at 534), or forfeiture of property have been deemed sufficient.  Further, the court will also consider a defence of hardship to a third party in regard to a decree of specific performance (Colyton Investments Pty Ltd v Mc Sorely (1962) 107 CLR 177 at 185).

6              HYPOTHETICAL PROBLEM

Write your own hypothetical problem to present to the class using:

1. A claim by Abby Normal for one or more of the following:

• Specific performance
• Quantum meruit
• Rescission
• Rectification

2. A defence to that claim by Roy Rogers of one or more of the following:

• Laches
• Acquiescence
• Hardship
• Estoppel

The hypothetical does not need to be long (or rambling) – merely a statement of those facts which give rise to Abby’s claim and a description of the circumstances which may enable Roy to raise the defence. Approx 200 words should be sufficient.