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A test for the Australian Consumer Law

Consumer Law News | October 2013

The Australian Consumer Law was recently tested in the decision of the Federal Court in the case ACCC v. Lux Distributors Pty  Ltd [2013] FCA FC 90. In this case the Australian Competition & Consumer Commission commenced proceedings in a situation where 5 door to door sales personnel from Lux obtained entry into the homes of 5 elderly women customers. After testing the customers own vacuum cleaners and comparing these cleaners with the Lux model, persuaded the customers to purchase the new Lux cleaner. At first instance Justice Jessup ruled that the case did not amount to unconscionable conduct by the Lux sales people. The ACCC successfully appealed this decision in 3 of the 5 sales transactions. 

The significance of this case is the examination by the courts of the meaning of what is “unconscionable conduct” in the context of the Australian Consumer Law (ACL) and is it any different to the previous provisions under the former Trade Practices Act which the ACL has replaced? Previously in cases brought under the unconscionable conduct provisions of the Trade Practices Act (whether in the context of individual consumer vs. a corporation, or a small business vs. a big corporation) the courts examined the extent of “moral turpitude” in the behaviour of the offending party, and whether there was a healthy dose of that moral turpitude present to form the requisite unconscionable conduct. In the appeal case of Lux, the court extended its examination of the facts to search for “a normative standard of conscience” by looking at “accepted and acceptable community standards” by looking at “honesty and fairness in … dealing with consumers”… ”without deception or unfair pressure”. The court referred to other legislation (namely State laws) and community standards of “justice”, “fairness”, ”vulnerability, advantage and honesty”  to assess the appropriate level of conduct and to determine what would constitute unconscionable conduct in the case of the 3 sales people from Lux towards their elderly customers. Lux Distributors has sought special leave to appeal the decision in the High Court.

Another decision of the Federal Court in the same week as the Lux decision was made by Justice Pagone in the case of a business vs. business transaction in which the plaintiff claimed unconscionable conduct: isr One Pty. Ltd v Telstra [2013] FCA 23. This case was brought by a smaller business seeking an interim injunction against Telstra where Telstra sought to enforce a large commercial contract against the smaller business in circumstances which the court found to be unconscionable under clause 21 of the ACL.

Unconscionable conduct in the context of consumer and business transactions is also dealt with in the Corporations Act. These cases can be a timely reminder for small and large business to regularly review their practices to ensure their transaction processes do not lend a business to engage in behaviour that could be construed as “unconscionable” in relation to the other party to the transaction and run the risk of having a transaction being set aside, or amended, or incur a penalty under the ACL or the Corporations Act.

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