The Full Federal Court overturned a decision of the Federal Court in relation to whether vacuum cleaner manufacturer and supplier Lux engaged in unconscionable conduct when selling items door-to-door.
In the April edition of the Competition and Consumer News we reported on the original decision. The matter related to the sale of Lux vacuum cleaners to five elderly consumers, where salespeople attended at their homes under the premise of a free maintenance check. The ACCC alleged that unfair tactics had been used by the salespeople to get the sale, to the extent that they had acted unconscionably. However, Justice Jessup disagreed that Lux had engaged in unconscionable conduct.
The ACCC appealed in relation to 3 of the 5 consumers. In particular, the ACCC was concerned that not enough emphasis had been placed on the position of relative vulnerability that the consumers were in and the fact that Lux had not complied with relevant door to door selling laws.
Blow for Lux: Zero point field
The Full Federal Court upheld the ACCCs appeal, overturning the earlier decision, determining that Lux had engaged in unconscionable conduct.
Unconscionable conduct: Vacuum polarisation
The Court interpreted the facts differently to Justice 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 initial deception by Lux salespeople effectively tainted the transactions with the consumers; it acted 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 – the pretext of a free maintenance check, whilst legitimate was simply the first stage of a calculated strategy of achieving a sale
Whilst the Court did not consider the age of the consumers was a special 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 ACCCs submission that not enough emphasis was 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 and non-compliance with laws will be central to the question of whether the conduct was conscionable.
Summary: Uncertainty principles
The decision is important as it confirms 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, and not necessarily the consumer’s response to the conduct - it will be no excuse to suggest that despite any inappropriate behaviour a consumer nevertheless had a cooling off period available or an opportunity to terminate the contract.
The Court did not appear to disturb Justice Jessup’s observations as to what constitutes unconscionable conduct. Rather, the Court took issue with how the principle was applied to the facts in this case. Justice 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
- highly unethical conduct
It is clear that the range of unconscionable conduct is wide and can also include bullying and thuggish behaviour, undue pressure and unfair tactics, taking advantage of a vulnerability or lack of understanding, trickery or misleading conduct.
In addition, the Court on appeal also appears to have understood certain behaviour as either being indicative of or constituting unconscionable conduct. This includes conduct that does not comply with relevant laws, as well as engaging in “conduct against conscience by reference to the norms of society”. Indeed, 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, arising from this vacuum matter, is an opportunity for flexibility in its application.