Facts
Decision
Comment


The Full Federal Court recently overturned a decision of the Federal Court in relation to whether vacuum cleaner manufacturer and supplier Lux had engaged in unconscionable conduct when selling items door to door.

Facts

The matter related to the sale of Lux vacuum cleaners to five elderly consumers, where salespeople had attended their homes under the premise of a free maintenance check. The Australian Competition and Consumer Commission (ACCC) alleged that unfair tactics had been used by the salespeople to get a sale, to the extent that they had acted unconscionably. However, Justice Jessup of the Federal Court disagreed that Lux had engaged in unconscionable conduct.

The ACCC appealed in relation to three of the five consumers. In particular, the ACCC was concerned that not enough emphasis had been placed on:

  • the consumers' position of relative vulnerability; and
  • the fact that Lux had not complied with relevant door-to-door selling laws.

Decision

The Full Federal Court upheld the ACCC's appeal, overturning the earlier decision and determining that Lux had engaged in unconscionable conduct. The full court interpreted the facts differently to Jessup, observing that:

"[the] norms and standards of today require businesses who wish to gain access to the homes of people for extended selling opportunities to exhibit honesty and openness in what they are doing, not to apply deceptive ruses to gain entry."

The court argued that the initial deception by Lux salespeople had effectively tainted their transactions with consumers, acting as a "launch pad" that allowed the salespeople to carry out their sales strategy. The court seemed particularly concerned with the strategy used by Lux – it argued that the pretext of a free maintenance check, while legitimate, was simply the first stage of a calculated strategy of achieving a sale.

Although the court did not consider the age of the consumers to be a particular disadvantage, the consumers certainly felt pressured and obliged to follow through with the purchase. In those circumstances, and where the salesperson was in the home of the consumer, it was considered that there was an inequality of bargaining power.

The court also agreed with the ACCC's submission that not enough emphasis had been placed by the trial court on the fact that Lux had not complied with relevant door-to-door selling laws. In this context, the consumers were considered vulnerable – non-compliance with the law was central to the question of whether the conduct was conscionable.

Comment

The decision confirms the standards expected of businesses in certain contexts. In determining what constitutes unconscionable conduct, the court made it clear that the conduct as a whole should be considered. The conduct is of primary importance, rather than the consumer's response to the conduct – it is no excuse to suggest that despite any inappropriate behaviour, a consumer nevertheless was able to take advantage of a cooling-off period or an opportunity to terminate the contract.

The court did not appear to disagree with Jessup's observations as to what constitutes unconscionable conduct. Rather, the court took issue with how the principle had been applied to the facts in this case. Jessup had observed that unconscionable conduct included, but was not limited to:

  • serious misconduct;
  • clearly unfair or unreasonable conduct;
  • conduct showing no regard for conscience;
  • conduct irreconcilable with what is right or reasonable;
  • conduct importing a pejorative moral judgment;
  • demonstrating high level of moral obloquy; or
  • highly unethical conduct.

It is clear that the range of unconscionable conduct is wide and can also include bullying and thuggish behaviour, as well as undue pressure and unfair tactics, taking advantage of vulnerability or a lack of understanding and trickery or misleading conduct.

In addition, the appellate court also appears to have understood certain behaviour either as being indicative of or as constituting unconscionable conduct. This includes conduct that does not comply with relevant laws, as well as "conduct against conscience by reference to the norms of society". However, little detail was provided as to how such norms are to be understood, other than with reference to ambiguous notions of 'conscience' and 'community values'. The inherent uncertainty of this principle is therefore an opportunity for flexibility in its application.

For further information on this topic please contact Bill Fragos at Piper Alderman by telephone (+61 2 9253 9999), fax (+61 2 9253 9900) or email ([email protected]).