Consumer law – Australian Consumer Law – statutory guarantees – unconscionable conduct – misleading or deceptive conduct

In Australian Competition and Consumer Law v Jayco Corporation Pty Ltd [2020] FCA 1672 (20 November 2020) the court determined the liability phase of an enforcement action brought by the applicant (the ACCC) against the respondent (Jayco Corp).

Jayco Corp is a manufacturer of caravans, campervans, camper trailers and other recreational vehicles (RVs). The ACCC alleged that Jayco Corp engaged in unconscionable conduct and misleading or deceptive conduct, and made false or misleading representations to four consumers (the consumers) in relation to claimed defects in their RVs. The RVs were sold to the consumers by Jayco dealers, which are companies and businesses independent of Jayco Corp.

The conduct of Jayco Corp was alleged to have arisen in connection with claims by the consumers that the RVs each bought had defects that entitled them to a refund of the purchase price, or replacement goods, pursuant to rights under the Australian Consumer Law (ACL). The issues in the proceeding concerned the interaction between Jayco Corp’s obligations under its warranty (the Jayco warranty), and the consumers’ statutory entitlements under the ACL against the suppliers of the RVs.

The ACCC alleged that Jayco Corp considered the consumers’ claims about defects in their RVs against its obligations under the Jayco warranty rather than with full reference to the consumers’ rights under the ACL, and thereby engaged in conduct that was unconscionable. In summary, the impugned conduct was as follows (at [5]):

“(1)       refusing to exercise its discretion under the Jayco warranty to provide a replacement RV;

(2)         pressing the position that the only remedy available to the Consumers was repair; and

(3)         unfairly obstructing the Consumers from obtaining a refund or replacement RV from the Jayco dealer that sold the RV, to which they were entitled under the ACL.”

The ACCC also alleged that Jayco Corp made false or misleading representations to the consumers as to their entitlement to a remedy, and as to Jayco Corp’s own role in relation to the consumers’ rights or ability to obtain a replacement RV, or a refund of the purchase price.

Accordingly the main issues for determination were as follows (at [10]):

“(1)       Did the RVs have manufacturing defects that led to a failure to comply with a statutory guarantee that was to be characterised as a ‘major failure’ for the purposes of the ACL?

(2)         In consequence, were the Consumers entitled to reject the RVs and obtain a refund or a replacement RV?

(3)         Were the representations alleged by the ACCC made, and if so were they misleading or deceptive, or likely to mislead or deceive, or did they otherwise constitute false or misleading representations made in contravention of the ACL?

(4)         Was Jayco Corp’s conduct, in relation to the claims made by the four Consumers, to be characterised as unconscionable for the purposes of s21(1) of the ACL?”

The statutory guarantees

Issues (1) and (2) involved a consideration of statutory guarantees under Part 3-2, Division 1 of the ACL, in particular the guarantees as to goods being of “acceptable quality” (s54), reasonably fit for a disclosed purpose (s55) and other express warranties (s59(1)).

The court considered the provisions providing for remedies between a consumer against a supplier (at [34]-[52]), a consumer against a manufacturer (at [53]-[55]), and a supplier against a manufacturer (at [56]).

In respect of each of the consumers, the court made detailed findings about the purchases, concerns and defects with, and multiple repairs to their RV. This involved an assessment by the court as to whether each RV would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure.

In the circumstance of this case, this required the court to consider whether many defects, all or most of which were individually repairable, collectively were such that a reasonable consumer’s level of tolerance was stretched to the point that the goods would not have been acquired (at [199], [379] and [500]).

The court held that three of the four RVs in question had manufacturing defects that resulted in a major failure to comply with a statutory guarantee (at [11], [196], [379] and [500]; cf [588]). Further, three of the four consumers were entitled to reject their RV, and to obtain a refund or a replacement RV from the supplier, being the selling dealer. However that was not Jayco Corp, who was the manufacturer. The relevant Jayco dealers were not parties to the proceeding.

Alleged contraventions of ss18(1) and 29(1)(m) of the ACL

The ACCC’s case that Jayco Corp engaged in misleading or deceptive conduct, and made false or misleading representations, towards the consumers relied heavily on alleged oral statements, as well as some written statements. Wheelahan J referred to the well-known authorities about the difficulties of proof of words alleged to have been spoken (at [604]-[606]).

Ultimately, the court held that only one of the various alleged representations made by an employee of Jayco Corp to only one of the consumers was made in contravention of ss18 and 29(1)(m) of the ACL. That was a representation in an email to consumer RH (at [533], [652] and [861]). Wheelahan J held that the email contained a representation that was misleading or deceptive, and was false or misleading, because “it conveyed that the only remedy to which Consumer RH could ever be entitled was repair, because that was the claimed effect of the Jayco warranty. This was not the case because the Jayco warranty did not affect the rights of a consumer under the ACL” (at [649]).

However, the court rejected the other alleged contraventions of ss18(1) and 29(1)(m) of the ACL in relation to this consumer and the other three consumers (at [617]-[620], [627]-[640] and [643]-[644]).

Alleged contraventions of s21 of the ACL

While there were some common components of the ACCC’s case in relation to the four consumers, the ACCC did not allege that Jayco Corp engaged in a system of conduct or a pattern of behaviour (at [3] and [790]).

The court set out a summary of the main appellate authorities on the operation of s21 of the ACL and the analogous provisions in the Australian Securities and Investments Commission Act 2001 (Cth) (at [654]-[683]). Further, Wheelahan J discussed features of the statutory matrix of rights and obligations under the ACL between consumers, suppliers and manufacturers which was relevant to an evaluation of conduct of Jayco Corp alleged by the ACCC (at [712]-[725]).

The court held that Jayco Corp’s conduct in relation to the claims made by the four consumers was not to be characterised as unconscionable for the purposes of s21(1) of the ACL (at [11] and [797]-[857]). The court rejected central elements of the ACCC’s case. In particular, Wheelahan J explained that the ACCC’s case failed for three principal reason:

(1)         The first was the rejection of the ACCC’s claim that Jayco Corp required its dealers to obtain its approval before agreeing to replace an RV, or to refund the purchase price pursuant to an obligation under the ACL to do so (at [794]-[795] and [858])

(2)         The second reason related to the close attention to all the factual circumstances that is required by the judicial technique referred to in Jenyns v Public Curator (Qld) (1953) 90 CLR 113 at 118. The court explained at [859]: “That technique required that regard be had to the information that the relevant employees of Jayco Corp possessed at the material times in relation to each individual Consumer’s RV, and to the evaluation of Jayco Corp’s conduct in the circumstances existing at the material times having regard to that information. When close attention was given to Jayco Corp’s conduct in this way, it was clear that the conduct could not be characterised as unconscionable.”

(3)         The third reason, which was said to probably be the most important reason, concerned the statutory framework of rights and liabilities established by the ACL in relation to the supply of goods and services. Wheelahan J said at [860]: “…But standing back, one of the difficulties that the ACCC’s claim faced was that it was tantamount to alleging that Jayco Corp was required to assume a direct liability to a consumer to replace goods as if it were the de facto supplier of the goods, in circumstances where the legislation made the supplier so liable. The legislation then had the effect of establishing a commercial setting in which the supplier and the manufacturer might then work out between themselves how the consequential burden of that liability to the consumer would ultimately be borne. Good conscience did not require that Jayco Corp accept additional direct liabilities to consumers which were otherwise not supported by the legislative scheme.”

Next steps

There is to be hearing on relief (including any penalty for the single contravention of s29(1)(m) of the ACL) and costs on 3 May 2021. Following final orders at first instance, it will be interesting to see if the ACCC appeals to the Full Court about the dismissal of its case for unconscionable conduct under s21 of the ACL.

Dan Star QC is a Senior Counsel at the Victorian Bar, ph (03) 9225 8757 or email danstar@vicbar.com.au. The full version of these judgments can be found at austlii.edu.au. Numbers in square brackets refer to a paragraph number in the judgment.

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