Australian Competition & Consumer Commission v Ozdirect Online Brands Pty Ltd [2009] FCA 1604

FEDERAL COURT OF AUSTRALIA

Australian Competition & Consumer Commission v Ozdirect Online Brands Pty Ltd [2009] FCA 1604

AUSTRALIAN COMPETITION & CONSUMER COMMISSIONER v OZDIRECT ONLINE BRANDS PTY LTD and ALBRIGHT

NSD 704 of 2009

RARES J

11 DECEMBER 2009

SYDNEY IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION NSD 704 of 2009

BETWEEN: AUSTRALIAN COMPETITION & CONSUMER COMMISSIONER

Applicant

AND: OZDIRECT ONLINE BRANDS PTY LTD

First Respondent

PAUL ALBRIGHT

Second Respondent

JUDGE: RARES J

DATE OF ORDER: 23 FEBRUARY 2010

WHERE MADE: SYDNEY

THE COURT DECLARES THAT:

1 The First Respondent, in the period from about 1 September 2008 until about 21 July 2009, accepted payment for certain goods when, at the time of the acceptance, there were reasonable grounds, of which the First Respondent was aware or ought reasonably to have been aware, for believing that it would not be able to supply the goods within a reasonable time and thereby engaged in conduct in contravention of s 58 of the Trade Practices Act 1974 (the Act). 2 The First Respondent, from time to time in the period from about 1 September 2008 until about 25 July 2009, by means of statements published on the websites www.ozdirect.com, www.ozdirect.com.au, www.ausbuys.com and www.ausbuys.com.au (the Ozdirect websites) and in correspondence with certain consumers, made representations to the effect that certain goods advertised for sale on the Ozdirect websites: 2.1 were currently available for dispatch by the First Respondent's suppliers to consumers within a reasonable period; 2.2 would be dispatched to certain consumers within a reasonable period and / or within a minimum of 6 days; which representations were misleading or deceptive by reason of the fact that: 2.3 the First Respondent had been placed on credit hold by the relevant supplier (that is, the First Respondent had exceeded the terms of its credit arrangements, either by reason of owing outstanding invoices or because the volume of its orders exceeded its credit limit) at the time the representation was made; 2.4 goods were not available for dispatch by the relevant supplier until the First Respondent had paid sufficient outstanding invoices to fall beneath the credit limit allowed by the relevant supplier and, as a result, was taken off credit hold; 2.5 goods were not available for dispatch by the relevant supplier until the First Respondent was no longer on credit hold; and thereby, in trade and commerce: 2.6 engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s52 of the Act. 3 The First Respondent, in the period from about 1 September 2008 until at least 3 July 2009, in correspondence with certain consumers, made representations to the effect that: 3.1 delays in supply of goods purchased by the consumer were due to a large influx of orders recently causing a significant backlog in order processing by its suppliers; which representations were misleading or deceptive by reason of the fact that: 3.2 the delays were not due to a large influx of orders recently causing a significant backlog in order processing by the First Respondent's suppliers; 3.3 the delays were in fact due to the First Respondent being placed on credit hold by one or more of its suppliers; and thereby, in trade and commerce: 3.4 engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s 52 of the Act. 4 The First Respondent, in the period from about December 2008 until about April 2009, by means of statements published on the Ozdirect websites and in correspondence with customers, as follows: "You agree that where Ozdirect is obliged to provide you with a refund either pursuant to these Terms and Conditions of Sale or operation of law, such obligation is restricted to issuing of a credit note for such refund, which you may spend on further purchases with Ozdirect." made representations to the effect that: 4.1 it was only obliged to provide a refund by way of credit note; 4.2 it was permissible to exclude, restrict or modify by agreement the exercise of a right conferred by Div 2 of Pt V of the Act; in circumstances where: 4.3 having regard to s 68 of the Act, it is not permissible to exclude, restrict or modify by agreement the exercise of a right conferred by Div 2 of Pt V or s 75A of the Act; and thereby, in trade and commerce: 4.4 engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s 52 of the Act; and 4.5 made false or misleading representations concerning the existence, exclusion or effect of a condition, right or remedy, in contravention of s 53(g) of the Act. 5 The First Respondent, in the period from about 1 September 2008 until at least 21 July 2009 made representations, in correspondence with customers and orally, to the effect that: 5.1 refunds would be provided in due course; 5.2 refunds could take up to 30 days to process from the date of cancellation with the First Respondent's suppliers; or 5.3 refunds could take up to two to three weeks to process because of a backlog in the First Respondent's refunds department, due to daily refund limits through its merchant gateway; in circumstances where: 5.4 any daily refund limits on the First Respondent's merchant gateway did not apply to customers from whom it had accepted payment by direct deposit or transfer into its bank accounts; 5.5 the First Respondent had a policy that cash refunds would not be provided until the customer had made a second request; 5.6 the First Respondent had a policy that it would not provide a refund to any customer until such time as it had obtained a refund from the relevant supplier for the goods ordered by that customer; and 5.7 the First Respondent had a policy of instructing employees not to refund customers who had requested a credit card charge back through their bank, but to let the bank process the charge back, even though it was aware that this would take at least 14 days to occur; and thereby, in trade and commerce: 5.8 engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s 52 of the Act; and 5.9 made false or misleading representations concerning the existence, exclusion or effect of a right or remedy, in contravention of s 53(g) of the Act. 6 The First Respondent, on or about 19 March 2009, made a representation to a customer, Arik Nguyen, to the effect that: 6.1 the Applicant has a policy whereby it allows all businesses 30 days to provide a refund; in circumstances where: 6.2 the Applicant did not at the relevant time (and does not currently) have a policy whereby it allows all businesses 30 days, or any other specified timeframe, for the provision of refunds to consumers; and thereby, in trade and commerce: 6.3 engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s 52 of the Act; and 6.4 made a false or misleading representation concerning the existence, exclusion or effect of a right or remedy, in contravention of s 53(g) of the Act. 7 The First Respondent, in the period from about December 2008 until about April 2009, by statements published on the Ozdirect websites and / or in correspondence to customers, made representations to the effect that: 7.1 the First Respondent could refuse to provide a refund in respect of faulty or defective goods if a customer failed: 7.1.1. to give written notice of an intention to obtain a refund within 3 days of receiving the goods; or 7.1.2. to comply with the First Respondent's instructions on the repackaging and sending of the goods; which representations were false, misleading or deceptive by reason of the fact that: 7.2 having regard to s 68 of the Act, it is not permissible to exclude, restrict or modify by agreement the exercise of a right conferred by Div 2 of Pt V of the Act; and thereby, in trade and commerce: 7.3 engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s 52 of the Act; and 7.4 made false or misleading representations concerning the existence, exclusion or effect of a condition, right or remedy, in contravention of s 53(g) of the Act. 8 The Second Respondent was directly or indirectly knowingly concerned in or party to the conduct of the First Respondent constituting each of the contraventions specified in Orders 1 to 5 and 7 above by reason of being sole director, secretary and managing director of the First Respondent. THE COURT ORDERS THAT: 9 The First Respondent be restrained, for a period of five years, by itself, its agents or otherwise, from accepting payment for goods from any customer when: 9.1 there are reasonable grounds, of which the First Respondent is aware or ought reasonably to be aware, for believing that it would not be able to supply the goods within a reasonable time; or 9.2 the First Respondent has been placed on credit hold by the supplier of the goods in relation to which the First Respondent seeks or proposes to accept payment, and the First Respondent has not been informed by the supplier that the supplier is prepared to supply those goods notwithstanding that the First Respondent is on credit hold; or 9.3 there are reasonable grounds to anticipate that the First Respondent will be placed on credit hold by the supplier of the goods in relation to which the First Respondent seeks or proposes to accept payment: 9.3.1 by the time of placing the order with the relevant supplier; or 9.3.2 by the time the order is due to be dispatched by the relevant supplier and the First Respondent has not been informed by the supplier that the supplier is prepared to supply those goods notwithstanding that the First Respondent is on credit hold. 10 The First Respondent be restrained, for a period of five years, by itself, its agents or otherwise, from representing to consumers, on any website or by other means, that: 10.1 goods advertised for sale by the First Respondent are available for dispatch by the First Respondent's suppliers to consumers within a specified period; at any time after 24 hours: 10.2 of the goods becoming unavailable for dispatch by the First Respondent's relevant suppliers within the specified period; or 10.3 where the First Respondent has breached, or if it were to accept any order for the goods advertised it will cause the First Respondent to breach, its arrangements for credit with the supplier of the relevant goods, and the First Respondent has not been informed by the supplier that the supplier is prepared to supply those goods notwithstanding that breach. 11 The First Respondent be restrained, for a period of five years, by itself, its agents or otherwise, from representing to consumers, on any website or by other means, that: 11.1 delays in supply are due to a large influx of orders recently causing a significant backlog in order processing by its suppliers; unless 11.2 such delays are in fact due to a large influx of orders recently causing a significant backlog in order processing by the First Respondent's suppliers. 12 The First Respondent be restrained, for a period of five years, by itself, its agents or otherwise, from representing to consumers, on any website or by other means, that: 12.1 it is only obliged to provide consumers with a refund by way of credit note; 12.2 the First Respondent can refuse to provide a refund in respect of faulty or defective goods if a customer fails: 12.2.1 to give written notice of an intention to obtain a refund within 3 days of receiving the goods; or 12.2.2 to comply with the First Respondent's instructions on the repackaging and sending of the goods; or 12.3 it is permissible to exclude, restrict or modify by agreement the exercise of a right conferred by Div 2 of Pt V of the Act. 13 The First Respondent be restrained, for a period of five years, by itself, its agents or otherwise, from representing to consumers, on any website or by other means, that: 13.1 refunds will be provided; 13.2 refunds will be provided within a specified timeframe; or 13.3 there is a backlog in the First Respondent's refunds department, due to daily refund limits through its merchant gateway; unless (as the case requires) 13.4 the First Respondent in fact intends to provide refunds; 13.5 the First Respondent in fact intends to provide the refunds within the specified timeframe; 13.6 any such: 13.6.1 backlog in the First Respondent's refunds department is in fact due to a daily refund limit on the First Respondent's merchant gateway; and 13.6.2 daily refund limit applies to the method by which the First Respondent has accepted payment from the consumers. 14 The First Respondent be restrained, for a period of five years, by itself, its agents or otherwise, from representing to consumers, on any website or by other means, that: 14.1 the Applicant has a policy whereby it allows all businesses 30 days, or another specified period, to provide a refund; unless 14.2 the Applicant in fact has stated, whether in a publication or in correspondence with the First Respondent, that it is acceptable for businesses to provide refunds to consumers within 30 days or the specified period. 15 The Second Respondent be restrained, for a period of five years, by himself, his agents or otherwise, from being directly or indirectly knowingly concerned in or party to the First Respondent or any other corporation accepting payment for goods from any customer when: 15.1 there are reasonable grounds, of which the Second Respondent is aware or ought reasonably to be aware, for believing that the First Respondent or the other corporation would not be able to supply the goods within the specified period, or if no period is specified, within a reasonable time; or 15.2 the Second Respondent is aware or ought reasonably to be aware that the corporation is in breach of its arrangements for credit with the supplier of the relevant goods, or if it accepts payment from any such customer in circumstances in which it will become in breach of such arrangements, and that such corporation has not been informed by the supplier that the supplier is prepared to supply those goods notwithstanding that breach. 16 The Second Respondent be restrained, for a period of five years, by himself, his agents or otherwise, from being directly or indirectly knowingly concerned in or party to the First Respondent, or any other corporation, representing to consumers, on any website or by other means, that: 16.1 goods advertised for sale by the First Respondent or that other corporation are available for dispatch by the First Respondent's suppliers to consumers within a specified period; at any time after 24 hours 16.2 of the goods becoming unavailable for dispatch by that corporation's relevant suppliers within the specified period; or 16.3 where such corporation has breached, or if it were to accept any order for the goods advertised it will cause that corporation to breach, its arrangements for credit with the supplier of the relevant goods, and that corporation has not been informed by the supplier that the supplier is prepared to supply those goods notwithstanding that breach. 17 The Second Respondent be restrained, for a period of five years, by himself, his agents or otherwise, from being directly or indirectly knowingly concerned in or party to the First Respondent, or any other corporation, representing to consumers, on any website or by other means, that: 17.1 delays in supply are due to a large influx of orders recently causing a significant backlog in order processing by suppliers of the First Respondent or the other corporation; unless 17.2 such delays are in fact due to a large influx of orders recently causing a significant backlog in order processing by suppliers of the First Respondent or the other corporation. 18 The Second Respondent be restrained, for a period of five years, by himself, his agents or otherwise, from being directly or indirectly knowingly concerned in or party to the First Respondent, or any other corporation, representing to consumers, on any website or by other means, that: 18.1 the First Respondent or the other corporation is only obliged to provide consumers with a refund by way of credit note; 18.2 the First Respondent or the other corporation can refuse to provide a refund in respect of faulty or defective goods if a customer fails: 18.2.1 to give written notice of an intention to obtain a refund within 3 days of receiving the goods; or 18.2.2 to comply with the First Respondent's or the other corporation's instructions on the repackaging and sending of the goods; or 18.3 it is permissible to exclude, restrict or modify by agreement the exercise of a right conferred by Div 2 of Pt V of the Act. 19 The Second Respondent be restrained, for a period of five years, by himself, his agents or otherwise, from being directly or indirectly knowingly concerned in or party to the First Respondent, or any other corporation, representing to consumers, on any website or by other means, that: 19.1 refunds will be provided; 19.2 refunds will be provided within a specified timeframe; or 19.3 there is a backlog in the refunds department of the First Respondent or the other corporation, due to daily refund limits through its merchant gateway; unless (as the case requires) 19.4 the First Respondent or the other corporation in fact intends to provide refunds; 19.5 the First Respondent or the other corporation in fact intends to provide the refunds within the specified timeframe; 19.6 any such: 19.6.1 backlog in the First Respondent's or the other corporation's refunds department is in fact due to a daily refund limit on the First Respondent's or the other corporation's merchant gateway; and 19.6.2 daily refund limit applies to the method by which the First Respondent or the other corporation has accepted payment from the consumers. 20 A copy of the final order of the court and the reasons for judgment, with the seal of the Court applied, be placed on the Court file for the purposes of s 83 of the Act. 21 The Respondents pay the Applicant's costs of this proceeding. 22 Leave be granted to the Applicant to file an Amended Application. Note pursuant to Order 37 Subrule 2(3) of the Federal Court Rules 1 The Second Respondent (Paul Albright) may be liable to imprisonment or sequestration of property unless he abstains from the conduct referred to in the above orders; and 2 The First Respondent (Ozdirect Online Brands Pty Limited) may be liable to sequestration of property unless it abstains from the conduct referred to in the above orders. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA