CONSUMER PROTECTION AND THE TRADE PRACTICES ACT … · CONSUMER PROTECTION AND THE TRADE PRACTICES ACT 1974-1975 (CTH) BY JOHN GOLDRING* While State legislatures have responded, to

CONSUMER PROTECTION AND THE TRADE PRACTICES ACT 1974-1975 (CTH)

BY JOHN GOLDRING*

While State legislatures have responded, to some extent, to pressure for greater legal protection of consumers, consumer protection had never been an area of legislative activity on a national level until the passing of the Trade Practices Act 1974-1975 (Cth). Mr Goldring examines the effect of the Trade Practices Act 1974-1975 (Cth) on the area of consumer protection in Australia, and notes that the Act, in addition to introducing regulation of restrictive trade practices on a scale beyond that previously experienced in Australia, includes sweeping legislative innovations aimed to protect consumers. The Act is shown to prohibit certain types of undesirable commerical activity and gives to a wide range of potential plaintiffs the right to take action for damages and injunctive relief. The terms implied by law into contracts of sale of goods and hire-purchase are extended and similar terms are included in other types of contract.

1. INTRODUCTION

There has been considerable comment on those provisions of the Trade Practices Act 1974-1975 (Cth) (hereinafter referred to as the "Trade Practices Act") which are designed to deal with restrictive trade practices and monopolies, and thus to supersede much of the Restrictive Trade Practices Act 19 71-19 72 ( Cth) .1

The announced policy of legislation dealing with monopolies is to reduce the ultimate cost to the consumer of goods and services by ensuring efficiency and avoiding excessive profits by suppliers by enforcing competition among suppliers. This is an essential part of any legislative program designed to ensure that a consumer gets a fair deal from an economic system in which he, unlike some suppliers, is in no position as an individual to influence. Similar considerations, particularly the relative weakness of the individual consumer and the relative economic strength of the supplier, underlie the consumer protection movement. The connection has not escaped the government, which has included in the Trade Practices Act some far-reaching but relatively unpublicised provisions intended to protect consumers.

*B.A., LL.B. (Syd.), LL.M. (Col.); Solicitor of the Supreme Court of New South Wales; Barrister and Solicitor of the Supreme Court of Papua New Guinea and of the Supreme Court of the Australian Capital Territory; Senior Lecturer in Law, Australian National University.

1 Levine, "Aspects of the Trade Practices Bill 1973" (1973) 47 A.L.J. 679; Baxt and Brunt, "The Murphy Trade Practices Bill: Admirable Objectives, Inadequate Means" (1974) 2 Australian Business Law Review 1.

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288 Federal Law Review [VOLUME 6

Part V of the Act, which is in two substantive Divisions, deals with consumer protection. The first deals with "unfair practices" and the second with terms to be implied by law into consumer transactions. These provisions, together with Part VI, which lays down remedies available for contraventions of the provisions of the Act, attempt to provide a code of protection for consumers which appears far wider than anything currently in force in Australia. While parts of the Act are in some ways similar to some provisions of State and Territory legislation, they supersede and extend those provisions. In addition the Act provides for speedy relief, efficient enforcement and meaningful sanctions for breaches of its express provisions.

The Act embodies a code of commercial morality which reputable business people should not find objectionable. Self-regulation is desirable, but is not sufficient to stop undesirable practices by unscrupulous elements.

2. THE PHILOSOPHY OF CONSUMERISM'-

The consumer protection movement, which has already made its mark on the statute books of the Auutralian States and Territories3 has been described as a "band-aid on the malignancy of capitalism"." However, in Australia at least, capitalism in some form or another is likely to be the basis of the economy for the foreseeable future. This would seem to entail that individuals will be required to deal with large organizations (i.e. state and private corporations) which have far greater economic power than themselves. When introducing the Trade Practices Bill 1973 (Cth) into the Senate, the then Attorney-General, Senator Murphy, showed that the Australian Government recognized this, for his statement of policy on consumer protection was:

In consumer transactions unfair practices are widespread. The existing law is still founded on the principle known as caveat emptor-meaning "let the buyer beware". That principle may have been appropriate for transactions conducted in village markets. It has ceased to be appropriate as a general rule. Now the marketing of goods and services is conducted on an organized basis and by

2 Trebilcock, "Consumer Protection in the Affluent Society" ( 1970) 16 McGill Law Journal 263 provides a background to the ideological and philosophical problems underlying the moves for legal protection for consumers. He refers to a number of North American writings on the same subject.

3 N.S.W. Consumer Protection Act 1969-1972; Vic. Consumer Affairs Act 1972; S.A. Consumer Credit Act 1972-1973 and Consumer Transactions Act 1972-1973 and Prices Act 1948-1974; Qld Consumer Affairs Act 1970-1974; W.A. Consumer Affairs Act 1971-1975; Tas. Consumers Protection Act 1970; A.C.T. Consumer Affairs Ordinance 1973.

4 An anonymous student, quoted in Layton and Holmes, "Consumerism-A Passing Malaise or a Continuing Expression of Social Concern?" (1974) 46 Australian Quarterly (No. 2) 6, 15.

1975] Consumer Protection 289

trained business executives. The untrained consumer is no match for the businessman who attempts to persuade the consumer to buy goods or services on terms and conditions suitable to the vendor. The consumer needs protection by the law and this Bill will provide such protection.5

This statement seems particularly apt when it is applied to areas of marketing and promotion of goods and services, which might be described, in many cases, as the peddling to people who cannot afford it, of a product which they do not need. It is apt also to cover other sales and promotion tactics which put undue social or other pressures on a consumer. Once a consumer has decided, rightly or wrongly, that he needs a product, he may find either that it is not suitable for his purpose or that it is defective. If he seeks to recover either the price or compensation as a result of the defect, legal costs which he cannot, but which economically more powerful suppliers can afford, may present an insurmountable barrier; or he may find that he is unable to satisfy an evidentiary burden of proving his claim.

All these factors show a need to question the principle caveat emptor as a foundation for the legal principles of trade between individual consumers and suppliers. There are other factors beyond the wants of the individual which ought to be considered, such as a reappraisal of social priorities in consumption, taking into account the fickle nature of available resources and of the environment. A consideration of all these needs shows that legislative regulation is required to ensure that suppliers of goods and services consider the needs of the community and of the individual consumer, as well as the profit motive. Selfregulation of industry and a greater awareness of the rights and responsibilities of consumers are also necessary; but legislation seems necessary both to educate and to enforce th~:se priorities, as the existing law fails to do so.6

The State laws relating to consumer protection show some acceptance of the above propositions, but the fact that they have not been entirely successful shows that there is a need for further action, and the Trade Practices Act sets out to be the Australian government's answer to this need, or at least a partial answer. By dealing with the problem of bigness at the same time as prohibiting trade and promotional practices considered to be immoral or undesirable, the Act recognizes the links between the economic power of the individual and his ability to protect himself. For constitutional reasons the legislation is confined in most cases to acts of corporations. This need not be a restriction. Consumer frustration and inability to obtain a remedy is virtually confined to the situation where the supplier is a corporation. "Bigness" is often a

5 S.Deb. 1973, Vol. 57, 1013-1014. 6 Layton and Holmes, op. cit. provide a general review of this question.


contributing factor, as bureaucratic procedures in big business make it difficult to achieve a flexibility in approach to the problem and an unwillingness for individuals employed by big business to accept individual responsibility.

It may be that the cost to industry of compliance with the Act may not be justified in economic terms, but it seems that today economic answers are not enough: money cannot be the sole means of justifying a particular practice, and the social benefits and social costs of regulation must be accepted as being equally important as the purely economic costs and benefits.

Nevertheless, it is important that the costs of compliance with the requirements of any laws passed for the protection of consumers be balanced against the social and economic benefits of the legislation. These costs include the cost of liability insurance, which one would expect many manufacturers and retailers to hold. The cost of premiums would be passed on to the consumer. One would hope that insurers would arrange for this type of insurance by offering discounted premium rates to those persons, called "suppliers" in the Act, who have a low record of claims against them, and who present evidence that they take due care in the selection of the goods which they supply to consumers. This would add to the sanctions provided by the Act by the threat to the supplier's commercial reputation in the event of his supplying defective merchandise.

This type of cost is relevant only in the case of the sale of defective goods-goods and services which do not comply with the express terms of contracts or terms implied into contracts for the supply of goods by the operation of the Act. Other costs may impose additional expense on corporations. If corporations indulge in undesirable practices, it may be a good thing that the cost of compliance with the law drives them out of business. But as Cayne and Trebilcock have pointed out/ the cost of regulation of an industry may drive the suppliers from the industry and thus eliminate the source of such goods and services. While similar arguments may be made in respect of the regulation of restrictive trade practices and monopolies, it is most doubtful that they would apply to the type of unfair practices with which Part V Division 1 of the Act seeks to deal.

3. APPLICATION OF THE ACT

Virtually every section in Part V Division 1 of the Act commences with the words "a corporation shall not, in trade or commerce". It is obvious that the Act is to be justified under the corporations power of the Parliament contained in section 51 (xx) of the Constitution, as

7 Cayne and Trebilcock, "Market Considerations in the Formulation of Consumer Protection Policy" ( 1973) 23 University of Toronto Law Journal 396.


discussed by the High Court in Strickland v. Roc/a Concrete Pipes Ltd.8

It is not proposed here to deal with the constitutional power of the Parliament to control the activities of corporations or to enact legislation relating to trade practices, as this is already the subject of comment.9

While the constitutional basis of the Act appears primarily to be the corporations power, section 6 provides for the Act to have an additional operation in reliance on other powers.10 The whole of section 6 is expressed to give the Act additional operation over and above the operation it may have if it is taken as being enacted under the corporations power. In addition to operation under the trade and commerce power, section 6(3) (a) provides that Division 1 of Part V, dealing with misleading or deceptive conduct, has effect as if "confined in its operation to engaging in conduct to the extent to which the conduct involves the use of postal, telegraphic or telephonic services or takes place in a radio or television broadcast". There have long been suggestions that the postal and broadcasting powers conferred by section 51 ( v) of the Constitution could be used for the regulation of economic activity, such as trading in marketable securities. A similar power in the Constitution of the United States has been used to support aspects of the regulation of securities in that country. This is the first express use of the power in Australia.

Furthermore, paragraphs (d) to (g) inclusive of section 6(2) provide that the Act should be read, if possible, without reference to matters appropriate only if the Act applied to corporations. Section 6(2) (h) then provides that, subject to those paragraphs, "a reference in this Act to a corporation, except a reference in [certain specified sections], included a reference to a person not being a corporation" [emphasis supplied].

It is clear that the intent of this provision is that the Act should apply even to the conduct of individuals where the Parliament has the constitutional power to legislate in respect of them; this is certainly intended to apply to all transactions entered into in Territories of the Commonwealth. The precise situations in which the Act will be held applicable will depend on the ingenuity and skill in application of constitutional law shown by counsel involved in particular cases. Section 5 states that Parts IV and V extend to the engaging in conduct outside Australia by bodies corporate, incorporated or carrying on business within Australia, or by Australian citizens or persons ordinarily resident within Australia. Section 6 extends the operation of Part V to all

s (1971) 124 C.L.R. 468. 9 Taylor, "The Corporations Power: Theory and Practice" (1972) 46 A.L.J. 5;

Lane, "Can There be a Commonwealth Companies Act?" (1972) 46 A.L.J. 407; Frankel and Taylor, "A 1973 National Companies Act?-The Challenge to Parochialism" (1973) 47 A.L.J. 119; Lane, The Australian Federal System (1972) 99-118; Lane, "Federal Control of Trading Corporations" (1974) 48 A.L.J. 233.

to Explanatory memorandum circulated with the Trade Practices Bill 1973.


conduct taking place in the course of or in relation to trade or commerce between Australia and places outside Australia; trade or commerce among the States; trade or commerce within a Territory, between a State and a Territory or between two Territories, or the supply of goods or services to Australia or to an authority or instrumentality of Australia. This is obviously intended to apply the provisions of the Act to such trade or commerce as the Commonwealth has power, under the trade and commerce power in section 51 (i) of the Constitution to regulate, or which falls within other powers given to the Parliament of the Commonwealth by the Constitution. It seems at least arguable that in so far as the provisions of the Act seek to regulate trade or commerce between Australia and places outside Australia, between the States, or in a territorial context, it is within the constitutional powers of the Commonwealth. No doubt the question of constitutional validity is one which will be tested.

It is not clear whether corporations will be able to avoid the operation of the Act by so structuring their activities that the actual supplying of goods and services, or the making of contracts for the supply of goods or services, may be done by some individual in such a way that he is not a servant or agent of the corporation. The provisions of section 84 would seem to make such avoidance difficult, if not impossible.

Nevertheless, the operation of most of the provisions of the Act is confined to the activities of "corporations" defined in section 4(1) of the Act as follows:

"corporation" means a body corporate that

( a) is a foreign corporation; (b) is a trading corporation formed within the limits of Australia or

is a financial corporation so formed; (c) is incorporated in a Territory; or (d) is the holding company of a body corporate of a kind referred

to in paragraph (a), (b) or (c).

The same section defines "financial corporation" as:

a financial corporation within the meaning of paragraph 51 (xx) of the Constitution and includes a body corporate that carries on the business of banking or insurance as its sole or principal business;

"foreign corporation" as:

a foreign corporation within the meaning of paragraph 51 (xx) of the Constitution and includes a body corporate that is incorporated in an external Territory;

and "trading corporation" as:

a trading corporation within the meaning of paragraph 51(xx) of the Constitution.


The activities engaged in by other persons, except in so far as those persons are acting as the servants or agents or with the assent of a "corporation", will not be affected by many provisions of the Act unless the conduct sought to be regulated falls within another constitutional head of power. Section 55, for instance, is founded on the external affairs power. Therefore in the case of transactions between individual natural persons the existing laws will apply. These are the laws of the States and Territories. Section 75 provides:

(1 ) Except as provided by sub-section ( 2), this Part is not intended to exclude or limit the concurrent operation of any law of a State or Territory ...

(3) Except as expressly provided by this Part, nothing in this Part shall be taken to limit, restrict or otherwise affect any right or remedy a person would have had if this Part had not been enacted.

Section 109 of the Constitution provides that where State and Commonwealth laws are inconsistent, the law of the Commonwealth shall prevail.U The High Court has interpreted this provision to mean that where the Federal law applies to the same area as the State law, the State law is superseded to the exent of the inconsistency.12 Thus in the case of consumer protection legislation, State statutes dealing with say, the practice of pyramid selling, will be superseded where the person engaging in the practice is a corporation, notwithstanding that the State statute may, in the circumstances, provide a more effective sanction.13

The skilful pleader would, it seems, be well advised, if in doubt, to plead counts under both the Act and any applicable State law: if the Act is found either to be unconstitutional or not to apply then the court may apply the State law. A problem may arise under the provisions of the Act: suppose that the St George County Council supplies goods to a consumer which are in fact unmerchantable. As this body has been held not to be subject to the provisions of the Restrictive Trade Practices Act 1971-1972 (Cth),14 the consumer's only remedy may be under the State Sale of Goods Act and the County Council might exclude any

11 Lumb and Ryan, The Constitution of the Commonwealth of Australia Annotated (1974) 331-336.

12 Clyde Engineering Co. Ltd v. Cow burn (1926) 37 C.L.R. 466; Ex parte McLean ( 1930) 43 C.L.R. 472, especially per Dixon J. at 483.

13 Infra p. 309. 14 R. v. Trade Practices Tribunal; Ex parte St George County Council (1974)

2 A.L.R. 371. However, the majority so held on different grounds: Gibbs J. on the basis that the Commonwealth had no power to legislate in respect of the Council; but His Honour was also in agreement with McTiernan and Menzies JJ. who put their decision on the basis that as a matter of construction the Act did not apply to it. Menzies J.'s reasoning would, it seems, also lead to the conclusion that the Council was not a "trading corporation" for constitutional purposes.


implied term as to merchantability .15 The same would be true if the supplier of the goods were a natural person; yet if the same consumer had obtained the same goods from, say Waltons Ltd, Part V Division 2 of the Trade Practices Act would apply, and a similar term could not be excluded,16 as the provisions of the Act would displace the provisions of the State Acts which covered the same field.

Although Part V deals with consumer protection, there is not any definition of "consumer". However, section 4(3) reads as follows:

For the purposes of this Act, unless the contrary intention appears

( a) a person who acquires goods shall be taken to be a consumer of the goods if the goods are of a kind ordinarily acquired for private use or consumption and the person does not acquire the goods or hold himself out as acquiring the goods for the purpose of re-supply; and

(b) a person who acquires services shall be taken to be a consumer of the services if the services are of a kind ordinarily acquired for private use or consumption and the person does not acquire the services for the purposes of, or in the course of, a profession, business, trade or occupation or for a public purpose.

Sub-section ( 4) of the same section provides:

Where it is alleged in any proceeding under this Act that a person was a consumer in relation to particular goods or services, it shall be presumed, unless the contrary is established, that the person was a consumer in relation to those goods or services.

The approach taken by the Australian Act as to what contracts for the supply of goods and services should be included within the scope of Division 2 of Part V of the Act is not identical to that taken in the United Kingdom. In neither case is the person who is to receive the benefit of the Acts any person who is party to a contract for the resale of goods. In section 55(7) of the United Kingdom Sale of Goods Act 1893, as amended by the Supply of Goods (Implied Terms) Act 1973, "consumer sale" is defined as:

a sale of goods (other than a sale by auction or by competitive tender) by a seller in the course of a business where the goods-

( a) are of a type ordinarily bought for private use or consumption; and

(b) are sold to a person who does not buy or hold himself out as buying them in the course of a business.

15 Following the Commercial Transactions (Miscellaneous Provisions) Act 1974 this is no longer possible, relative to "consumer sales" in N.S.W.

16Ss. 68, 71(1): lnfrapp. 310-313.


Section 55(8) provides that a person who seeks to establish that a particular sale is not a consumer sale as defined bears the onus of proof of that proposition.

It would seem, therefore, that the scope of the Australian Act is slightly wider; there is no general requirement that the sale be in the course of a business, though the fact that the Act only applies to contracts for the supply of goods or services by a corporation will ensure that this is usually the case.

The classification of goods into those of a type ordinarily bought for private use or consumption and those which are not may increase the difficulties; and may adversely affect persons who buy goods having many purposes, most of them industrial, with the intention of using them privately. What, indeed, is a private purpose?

Division 2 of Part V applies to contracts for the supply of goods and for the supply of services by a corporation to a consumer. Therefore in every case where a person seeks to assert a right arising under this Division, the onus will be on the corporation to establish that the sale was not a sale to a "consumer" according to the provisions set out above.

New South Wales has followed the Federal Government into modifying some aspects of the law relating to consumer protection by enacting the Commercial Transactions (Miscellaneous Provisions) Act 1974 which adds a new Part to the Sale of Goods Act 1923. This Part adopts a definition of "consumer sale" based on the provisions of the Trade Practices Act and renders void any exemption clause purporting to exclude liability for breach of the implied terms of compliance with description, fitness for purpose, merchantable quality or those relating to sale by sample. It adds a definition of "merchantable quality" similar to that contained in section 66(2) of the Trade Practices Act and also gives to the court the power to join as a defendant the manufacturer of new goods which are the subject of a contract for sale and which are not of merchantable quality, and to require the manufacturer to remedy the defect. "Manufacturer" is defined as including the first importer into Australia of goods, manufactured outside Australia. New South Wales also made similar changes in its Hire-Purchase Act 1960-1974.

The terms "goods" and "services" are also defined in section 4 of the Trade Practices Act. The definition of goods is as follows:

"goods" includes-

( a) ships, aircraft and other vehicles;

(b) animals, including fish;

(c) minerals, trees and crops, whether on, under or attached to land or not; and

(d) gas and electricity.


This definition appears to go a good deal further than the definition of "goods" contained for example in section 5 of the New South Wales Sale of Goods Act 1923-1974. The definition of "services" includes the rights or benefits to be provided under various types of contracts including specifically contracts of insurance, contracts between bankers and customers, contracts for the performance of work (including work of a professional nature) whether or not goods are also supplied, and contracts for the provision of various facilities. This is apparently a provision to overcome any suggestion of lack of constitutional power which might be founded on the State Banking Case.U The Act apparently intends to include within the definition of services virtually all contracts, to which a corporation is a party, for services including professional services. The implication of this provision is extremely wide and may inhibit the current wish, for example, of the legal and accounting professions to be permitted to incorporate their practices.

The provisions of Part V apply also in general to contracts for the "supply" of goods or services. "Supply" is defined in section 4 as follows:

"supply", when used as a verb, includes-

( a) in relation to goods-supply (including re-supply) by way of sale, exchange, lease, hire or hire-purchase; and

(b) in relation to services-provide, grant or confer,

and, when used as a noun, has a corresponding meaning, and "supplied" and "supplier" have corresponding meanings.

In so far as the provisions of the Act apply, this definition will serve to remove any remaining doubts as to whether certain conditions or warranties as to title and as to the fitness or quality or condition of goods supplied under certain contracts are implied under the common law. It seems, however, that the common law will imply such conditions into contracts of bailment and other contracts in relation to goods and services which fall within the definition of "supply" in the Act.18 The conditions and warranties to be implied under Division 2 of Part V will be implied into all contracts for the supply of goods to consumers (provided that the supplier is a corporation); that is, contracts for sale, contracts for hire and hire-purchase contracts (even if these remain following the enactment of legislation implementing the recommendations of the Molomby Committee relating to consumer credit) .19

17 Bank of N.S.W. v. The Commonwealth (1948) 76 C.L.R. 1 (High Court); ( 1949) 79 C.L.R. 497 (Privy Council).

18 E.g. Young & Marten Ltd v. McManus Childs Ltd [1969] 1 A.C. 454; Helicopter Sales (Australia) Pty Ltd v. Rotor-Work Pty Ltd (1974) 4 A.L.R. 77.

19 The first legislation is already in force: the South Australian Consumer Credit Act 1972-1973 and Consumer Transactions Act 1972-1973 supersede the traditional forms of consumer credit.


In summary, the Act will apply to virtually all contracts between consumers, in the sense of normal usage, and suppliers of goods and services provided that the supplier falls within the definition of "corporation" in the Act, and the contract is one which occurs in "trade and commerce", a term which has been defined by the High Court in a series of judgments.20

4. CONSUMER PROTECTION LAW IN AUSTRALIA BEFORE THE TRADE PRACTICES ACT21

Even before 1974, State statutes and the common law provided some protection for consumers, by taking several approaches-all of which are, to some extent, adopted in the Trade Practices Act. They are:

(a) Prescription of standards for goods and services to be provided to consumers;

(b) Establishment of bodies to receive, investigate, and take action (including, in some cases, court action) as a result of complaints by consumers;

(c) Prohibition or regulation of undesirable practices; (d) Prescription of terms to be implied into contracts with consumers;

and (e) Consumer education.

(a) Prescription of Standards

Standards, both definite and vague, have been laid down both by the common law and by statute. The law of torts imposes a general obligation on every person to take care not to injure those who may be injured as a consequence of his actions.22 The courts have held that this duty extends to a manufacturer of goods, who must take care that his goods will not injure those who he may reasonably foresee will use the goods.23 However, where a person is injured as a result of the manufacturer's negligence, he must discharge a heavy onus of proof before the

20 Commencing with Australian Steamships Limited v. Malcolm (1914) 19 C.L.R. 298, especially at 335.

21 There is no general work on Australian consumer protection law. But see The Consumer and the Law ( 1973, Committee for Post-Graduate Studies, Department of Law, University of Sydney); (1971-1972) 4 Adelaide Law Review 1-129, 423-450; Nielsen, "Consumer Protection" (1971, Committee for Post-Graduate Studies, Department of Law, University of Sydney); Taperell, Vermeesch and Harland, Trade Practices and Consumer Protection ( 1974); Hall, "The Consumer Affairs Act (Qld), 1970 to 1974" (1974) 8 University of Queensland Law Journal 131.

22 Following Donoghue v. Stevenson [1932] A.C. 562, 599. 23 E.g. Grant v. Australian Knitting Mills Ltd [1936] A.C. 85; (1935) 54 C.L.R.

49; Davie v. New Merton Board Mills Ltd [1959] A.C. 604; Morison, Sharwood and Phegan, Cases on Torts, (4th ed. 1973) 203tf; Greig, Sale of Goods ( 1974) 246tf.


courts will allow him to recover damages. He can, however, recover even though he is not in any contractual relationship with the manufacturer. This area of the law has become known as "products liability". The courts, in certain situations, will also allow recovery in tort where the duty of care imposed upon the manufacturer is one imposed not by the common law, but by statute.24 The plaintiff in such cases must establish that the purpose of the statute is to prevent injury or loss, or that the breach of the statute is also a breach of the duty of care imposed by the common law.25

In addition to difficulties of proof, there are special problems which a plaintiff faces where the goods are manufactured outside the State where he is, or where he suffers the injury; particularly if the place of manufacture is outside Australia. 26 In the absence of statutory provisions, such a plaintiff is usually well advised to rely on any contractual rights he may have.

Statutory standards, both State and Federal, for goods and services have been prescribed only in the case of a very limited range of goods and services.27 Supply of goods and services which do not comply with those standards is an offence, and civil recovery will be permitted under section 82 of the Trade Practices Act.

Consumer standards are also prescribed indirectly by legislation restricting the class of persons permitted to supply goods or services to those licensed under the law. This is true of most professional services, such as those provided by medical and dental practitioners, accountants,

24Fleming, The Law of Torts (4th ed. 1971) 121-132; Morison, Sharwood and Phegan, op. cit. 699-734.

25 O'Connor v. S.P. Bray Ltd (1936-1937) 56 C.L.R. 464, per Dixon J. 477-478; Fleming, op. cit. 122.

26 Note the effect of N.S.W. Sale of Goods Act 1923-1974, s. 64(6); George Monro Ltd v. American Cyanamid and Chemical Corporation [1944] K.B. 432; Godley v. Perry [1960] 1 W.L.R. 9; Bennett, "The Liability of the Manufacturers of Thalidomide to the Affected Children" (1965) 39 A.L.J. 256; Thompson v. Distillers Co. (Bio-Chemicals) Ltd [1968] 3 N.S.W.R. 3; affirmed [1971] A.C. 458; Hague Conference on Private International Law, Report of the Special Commission on Product Liability in the Conflict of Laws (1971); UN Commission on International Trade Law, Liability for Damage caused by Products Intended for or Involved in International Trade (1975).

27 E.g. Generally: N.S.W. Consumer Protection Act 1969-1972, ss. 35-41; Vic. Consumer Affairs Act 1972, ss. 58-61A. Food: N.S.W. Pure Food Act 1908-1975; Vic. Health Act 1958; Qld Health Act 1937-1974; S.A. Food and Drugs Act 1908-1972; W.A. Health Act 1911-1973. Drugs: National Health Act 1953-1975 (Cth), s. 85; N.S.W. Poisons Act 1966-1974; Vic. Poisons Act 1962, Health Act 1958; Qld Health Act 1937-1974; S.A. Narcotic and Psychotropic Drugs Act 1934-1974; W.A. Health Act 1911-1973; Tas. Poisons Act 1971. Footwear: Vic. Consumer Affairs Act 1972, ss. 42-49. Furniture: N.S.W. Consumer Protection Act 1969-1972, s. 28; Vic. Consumer Affairs Act 1972, ss. 50-57. Weights and Measures: N.S.W. Weights and Measures Act 1915-1974; A.C.T. Weights and Measures (Packaged Goods) Ordinance 1970-1973 (the two last mentioned statutes contain the "Uniform Packaging Code").


architects and solicitors: only persons who are qualified under the legislation may provide those services for reward. Legislation of this type ensures in principle that the services provided by such persons will be such as may be expected from persons who have had a proper training and, in the case of insurance, estate and travel agents that the persons providing the services are financially sound.

(b) Consumer Protection Agencies

Since 1969, most of the States have enacted legislation establishing agencies designed to receive and act upon the complaints of consumers.28

The agencies may incorporate both a body to advise the Minister responsible for consumer matters and a body to handle complaints, or the two may be separate, with the advisory body being part of the appropriate government department. In some ways, they have been effective; informal contacts with businesses which are the subject of consumer complaint have resulted in the elimination of some undesirable products, or remedial action. Some of them have the power to commence legal proceedings in appropriate cases, 29 but very few such actions have been brought.

The agencies, in general, are required to report annually either to the Minister or to Parliament, and may in some States also issue public statements.30 The reports and statements, which often name persons who have been the subject of those consumer complaints the agencies have found justified, are well covered in the mass media. As adverse publicity is often a most effective sanction against businessmen, the threat of being named in a report may be all that is necessary to obtain redress for an aggrieved consumer.31

Generally, the States' legislation contain provisions based on the United Kingdom Trade Descriptions Act 1968, especially relating to misleading advertising, but the extent of adaptation of this legislation

28 N.S.W. Consumer Protection Act 1969-1972, ss. 7, 15, 16; Vic. Consumer Affairs Act 1972, ss. 5, 8; Qld Consumer Affairs Act 1970-1974, ss. 5, 18; W.A. Consumer Affairs Act 1971-1975, ss. 6, 16; Tas. Consumers Protection Act 1970, s. 3; A.C.T. Consumer Affairs Ordinance 1973, ss. 4, 12. South Australia is the exception: by ss. 18a and 18b of the Prices Act 1948-1974 (which were added in 1970) the Prices Commissioner is vested with powers to protect "consumers'' (a term defined in the Act). There is no separate Consumer Council or Bureau in South Australia. In "The Administration of Consumer Affairs" ( 197 4) 3 3 Public Administration 307, Mr Hewitt, the N.S.W. Minister responsible for consumer affairs, describes the operation of that State's legislation.

29 E.g. Consumer Affairs Act 1971-1975 (W.A.) s. 17(1)(c) and (d). 30See statutes cited n. 28 supra: N.S.W. s. 16(1)(b)(iii); Vic s. 6(d);

Qld ss. 6(1)(c), 19(1)(b) and (h); W.A. ss. 14(1)(c), 17(1)(b) and (h); Tas. s. 6A(3A)(b); A.C.T. ss. 11(5), 14(d) and (e).

31 Fisse, "The Use of Publicity as a Criminal Sanction Against Business Corporations" (1971) 8 Melbourne University Law Review 107 and "Consumer Protection and Corporate Criminal Responsibility" (1971-1972) 4 Adelaide Law Review 113.


varies considerably from State to State.32 It appears that the British legislation has had a considerable impact both on business and on the courts.33 This may be explained by the fact that its enforcement is entrusted to well-staffed and relatively well-funded agencies. In few Australian jurisdictions have the agencies' staff been adequate to cope fully with the complaints. Further, their powers are limited, and the advisory bodies (which in some cases have a considerable say in the policy of the agencies) are appointed in such a way that the voice of organized consumer bodies may not be represented as strongly as commercial and manufacturing interests.34

The Trade Practices Commission, constituted under the Trade Practices Act, is an independent statutory body. It may share with the State agencies a lack of staff. However, in appropriate cases the AttorneyGeneral or any other person may enforce the provisions of the Trade Practices Act by injunction.35

(c) Prohibition of Undesirable Conduct

Some undesirable conduct has long been prohibited by statute. The earliest examples include matters like giving short weight of goods bought.36 However, in general the consumer has been left to his own devices to guard against the effects of undesirable practices and the high ethical standards of most businessmen have, in a large number of cases, resulted in an effective self-regulation of business. A number of

32 N.S.W. Consumer Protection Act 1969-1972, s. 32; Vic. Consumer Affairs Act 1972, s. 13; Qld Consumer Affairs Act 1970-1974, ss. 31-34; S.A. Unfair Advertising Act 1970-1972; W.A. Trade Descriptions and False Advertisements Act 1936-1973. Peden, "Misleading Advertising" (1974) 6 Bulletin of the Commercial Law Association 7. See also Cohen, "Comparative False Advertising Legislation: A Beginning" (1971-1972) 4 Adelaide Law Review 69; Sutton, "The Consumer Protection Act 1969 (N.S.W.) and Comparable Legislation in Other States and Overseas" (1971-1972) 4 Adelaide Law Review 43; Harding, "Advertising and the Consumer" in The Consumer and the Law (1973, Committee for Post-Graduate Studies, Department of Law, University of Sydney); Phillips, "False and Misleading Advertising under the Trade Practices Act, 1974, and Existing Queensland Legislation" (1974) 2 The Queensland Lawyer 73.

33 Dobson, "Trade Descriptions Act 1968-Recent Decisions" (1974) 8 The Law Teacher 12 deals with recent U.K. cases, the most important of which appears to be Tesco Supermarkets Ltd v. Nattrass [1972] A.C. 153, and augments Egan, Trade Descriptions-the New Law (1968), O'Keefe, The Trade Descriptions Act 1968 (1968) and The Law Relating to Trade Descriptions (1971).

34 Consumer representation: N.S.W. Consumer Protection Act 1969-1972, s. 7(2)(b); Vic. Consumer Affairs Act 1972, s. 5(1)(d); W.A. Consumer Affairs Act 1971-1975, s. 6(2)(e); Tas. Consumers Protection Act 1970, s. 3(3)(d); A.C.T. Consumer Affairs Ordinance 1973, s. 5(1). Business representation: N.S.W. s. 7(2)(c); Vic. s. 5(1)(a), (b) and (c); W.A. s. 6(2)(d); Tas. s. 3(3)(a), (b) and (c); A.C.T. s. 5(2). Queensland repealed all statutory qualifications and left such matters to be prescribed: Consumer Affairs Act Amendment Act 1973, s. 4.

35 s. 80(1). 36 E.g. N.S.W. Weights and Measures Act 1915-1974 replacing earlier legislation

to the same effect.


practices have attracted the attention of the various legislatures, presumably because they have outraged the consumers who form the bulk of the community. As early as 1899 New South Wales passed legislation dealing with door-to-door sales of books,37 and since then most of the States and Territories have legislated in respect of practices which they find undesirable. These practices include door-to-door sales,33 inertia selling,39 mock auctions,40 pyramid sales41 and misleading advertising.42

(d) Prescription of Implied Terms

The Sale of Goods Acts43 codified the common law and implied several terms into contracts of sale which could be enforced by the parties to the sale unless they had· expressly or impliedly agreed to exclude them from the contract. Later legislation, particularly in Australia, reflected the view that the unequal bargaining power of the parties made it necessary to provide that the terms implied into contracts relating to goods should not be capable of exclusion by the parties (in practice, the supplier of either the goods or credit) .44

Where the law lays down terms which are to be implied into contracts for the supply of goods or services, even where exclusion clauses are not permitted, it is only the parties to those contracts and their privies who are protected. Others, such as the guest of a purchaser of goods which turn out to be defective, have no right either against the purchaser or against the seller of the goods.411 The only possible remedy is in tort

37 Book Purchasers' Protection Act 1899-1963. 38 N.S.W. Door-to-Door Sales Act 1967-1974; Vic. Consumer Affairs Act 1974,

ss. 14-20; Qld Door to Door (Sales) Act 1966-1973; S.A. Door to !Door Sales Act 1971 and Book Purchasers Protection Act 1963-1972; W.A. Door to Door (Sales) Act 1964-1973; Tas. Door to Door Sales Act 1967; N.T. Door to Door Sales

· Ordinance 1967. 39 N.S.W. Unsolicited Goods and Services Act 1974; Vic. Consumer Affairs Act

1972, ss. 21-32; Qld Unordered Goods and Services Act 1973-1974; S.A. Unordered Goods and Services Act 1972; W.A. Unsolicited Goods and Services Act 1973; Tas. Unordered Goods and Services Act 1973; Peden, "Unsolicited Goods and Services" (1975) 7 Bulletin of the Commercial Law Association 15.

40 N.S.W. Mock Auctions Act 1973; Vic. Consumer Affairs Act 1972, ss. 13B-13F; Qld Mock Auctions Act 1973; S.A. Mock Auctions Act 1972; Tas. Mock Auctions Act 1973; W.A. Auction Sales Act 1973, s. 25.

4t N.S.W. Pyramid Sales Act 1974; Vic. Consumer Affairs Act 1972, ss. 32A-32E, Qld Pyramid Selling Schemes (Elimination) Act 1973; S.A. Pyramid Sales Act 1973; W.A. Pyramid Sales Schemes Act 1973-1975; A.C.T. Pyramid Selling Ordinance 1973-1974; Tas. Pyramid Selling Act 1974.

a Supra n. 32. 43 N.S.W. Sale of Goods Act 1923-1974; Vic. Goods Act 1958; Qld Sale of

Goods Act of 1896; Tas. Sale of Goods Act 1896; W.A. Sale of Goods Act 1895; A.C.T. Sale of Goods Ordinance 1954-1967; S.A. Sale of Goods Act 1895-1971.

44fnfra pp. 310-313. 411 Compare Lockett v. A. & M. Charles Ltd [1938] 4 All E.R. 170 and Buckley

v. La Reserve [1959] Criminal Law Review 451. Cf. The United States Uniform Commercial Code, s. 2-318 which extends the benefit of warranties in a contract for the .sale of goods to members of the buyer's household and guests (who may reasonably be expected to use the goods) regardless of the lack of contractual

302 Federal Law Review (VOLUME 6

and generally presents, in this type of case, an almost insuperable evidentiary barrier.

(e) Education of Consumers

No matter how much statutory protection may be given to consumers, it is unlikely that the law will ever see its way clear to giving a remedy to one who, through his own want of care, is the author of his own harm. No matter how much the emphasis of the law has changed from caveat emptor to caveat venditor, a person who is vigilant in his own interest will have far greater protection than one who is not. For this reason all the consumer protection agencies established by the States,46 and the Trade Practices Commission,47 produce literature which is widely distributed, and co-operate with educational institutions.

5. THE FEDERAL EXERCISE IN CONSUMER PROTECTION

The remainder of this article deals with the effects of the Trade Practices Act on the approaches to consumer protection which have been mentioned above. The question of implied terms warrants full treatment in the next section; and the establishment of the Trade Practices Commission as a body for investigating and remedying the complaints of consumers is dealt with in the section on remedies. This section will mention, far more superficially than is desirable, the remaining types of consumer protection dealt with in the Act.

Some, at least, of the matters covered by Division 1 Part V of the Act are matters dealt with under legislation of the States and Territories.48 For most purposes concerned with the supply of goods, Australia rather than any one of the States or Territories, is the market, and confusion results to both supplier and consumer if the requirements of the law differ between States. This is particularly true of the prescription of product safety standards in respect of goods to be supplied throughout the national market, and also of advertising and other promotional techniques which often apply beyond the limits of any particular State. It does not seem an undue infringement on States' rights that the Commonwealth Parliament has passed legislation affecting interstate commercial transactions which affect suppliers and consumers throughout Australia equally. Practices such as inertia selling and pyramid selling are often carried out by a supplier in one State to a consumer in another,

relationship; N.S.W. Sale of Goods Act 1923-1974, s. 64(5) allows manufacturers to be added to consumer actions where goods are of unmerchantable quality. See also Manufacturers Warranties Act 1975 (S.A.).

46 E.g. N.S.W. Consumer Protection Act 1969-1972, s. 16(1) (b )(iii). 47 Trade Practices Act, s. 28 ( 1) . 48 E.g. inertia selling, pyramid selling, and to some extent, misleading advertis

ing: Part 4 of this article, supra.


involving either the mails or broadcasting or television. In each of these cases a clear, or at least an arguable, case may be made out not only that the Federal Parliament has a legitimate political interest in the subject matter of the legislation, but also the constitutional power to legislate, 49 if, indeed, the two can be separated. Consumer protection cannot be limited, in realistic terms, to any one part of Australia.

(a) Prescription of Standards

Sections 62 and 63 of the Act provide, respectively, for product safety standards and product information standards. The classes of goods in respect of which the standards are to be prescribed, and the standards themselves, being matters of considerable detail, are to be the subject of regulations made under the Act; and in 1975, the Act was amended so as to permit the regulations to exempt goods intended for export from the provisions of sections 62 and 63. Though an Interim Consumer Standards Commission was established in October 1973 and has produced a report,50 the permanent Commission, which is envisaged as the body responsible for producing the standards, has not yet been established, and no action has been taken under these sections. Potentially, they could have a very significant effect on commercial activity if applied, for example, to motor vehicles, electrical appliances, and similar goods. It would seem the provision of the product information standards would be less onerous than the provision of safety standards, as the latter may refer to inter alia the performance, design or construction of goods.61

Supply of sub-standard goods in relation to which standards have been prescribed under either section is an offence.52 Additionally, a person who has acquired sub-standard goods from a supplier and has suffered any loss is given a right to bring an action for damages which, because of questions of remoteness of the damage from the contravention, he might not otherwise have had. 53

(b) Prohibition of Undesirable Practices

The main source of inspiration for Division 1 of Part V of the Act is the Federal Trade Commission Act of the United States which is linked closely to legislation dealing with restrictive trade practices.64

However, that Act and the Commission it establishes have been the

49 Supra pp. 290-293. 50 Report of the Interim Commission on Consumer Standards (1974). ot S. 62(2)(a). 62 Ss, 62(1), 63(1). 53 Ss. 62(3), 63(3), 82(1). M The Federal Trade Commission is charged with the duty of enforcing anti

trust legislation which may also be enforced by actions brought by private parties and by the U.S. Justice Department: Dietrich, "Federal Trade Commission and Consumer Protection" (1973) 1 Australian Business Law Review 204.


subject of substantial criticism. 55 Procedures are slow and quite inept to prevent deceptive or unfair practices which occur only once, or over a short period of time-practices which include radio and television advertising campaigns. The Trade Practices Act attempts to overcome some of these criticisms in that it allows the Trade Practices Commission, the Attorney-General, or any other person56 to obtain immediate injunctive relief; though, where the plaintiff is a private individual, he would be required to give an undertaking as to damages should his claim not succeed after a full hearing.57

Where a person is injured as a result of a contravention of a provision of the "Unfair Practices" Division, either on common law principles or, where the particular provision deems him so to have been injured, he also has a civil action for damages. 58

The provisions of the Division59 fall into two classes. Sections 52 and 55 are general provisions, which may have an extremely wide scope. The remaining sections deal specifically with particular practices.

Section 52 is based on section 5 of the United States Federal Trade Commission Act which makes "unfair or deceptive" acts unlawful. Section 52 (1) on the other hand, prohibits "misleading or deceptive" conduct by a corporation. The difference in wording may be significant, as the element of "unfairness" may have influenced the American courts in their construction of section 5 of the Federal Trade Commission Act, though this is not apparent in the many judgments which construe the section.60 Some of these judgments will, no doubt, be referred to when section 52 comes before the Australian courts, but weight may not be placed upon them because of the difference in wording. The words of section 52 are similar to those which appear in some State legislation,61

55 Cox, Fellmeth and Schultz, 'The Nader Report' on the Federal Trade Commission (1969); American Bar Association, Report of the A.B.A. Commission to Study the Federal Trade Commission (1969).

56S. 80(1). 57 Spry, Equitable Remedies (1971) 435-441 and Hewitt, Kerr on Injunctions

(4th ed. 1903) 23, 567-569. There seems to be no reason why an application for an interim injunction to restrain a contravention of the Act should be treated differently from any other application for an interlocutory injunction. Where the Attorney-General or (probably) the Commission is the plaintiff, they are not required to give undertakings as to damages where they seek an injunction in the fulfilment of their obligation to enforce the law: F. Hoffmann-La Roche & Co. v. Secretary of State for Trade and Industry [1974] 3 W.L.R. 104.

5SS. 82(1). 59 Taperell, Vermeesch and Harland, Trade Practices and Consumer Protection

(1974) Chapters 9 and 10 provide a useful analysis of the law, including some references to United States decisions.

60 Kintner, A Primer on the Law of Deceptive Practices (1971); Maher, "Section 52 of the Trade Practices Act 1974: Some Suggested Guidelines" (1975) 49 Law Institute Journal 80; Taperell, Vermeesch and Harland, op. cit. Ch. 10.

61 E.g. N.S.W. Consumer Protection Act 1969-1972, s. 32.


but judicial consideration of them is rare.62 A further ground for distinguishing the words of the American Act is that while section 5 of that Act imposes a penal sanction, a contravention of section 52 is specifically excluded from the criminal penalties imposed by the Trade Practices Act-the only possible relief being by way of injunction or damages.63

The inference to be drawn from section 52(2) is that the conduct covered by the following provisions of Part V Division 1 of the Act is certainly conduct which is "misleading or deceptive". It would seem to follow that where the provisions of State legislation dealing with consumer protection have not been superseded by the passage of the Trade Practices Act, but the State legislation provides only a small fine or some other petty sanction for its breach, a person may invoke the civil relief available under the Trade Practices Act, even though that relief may not be specifically available under State law, as almost certainly some such conduct is likely to be held to be "misleading or deceptive".

The interpretation given to section 32 of the New South Wales Consumer Protection Act 1969-1972 in C.R.W. Pty Ltd v. Sneddon64 would indicate that in a context such as that of section 52 the term "deceptive" certainly does not involve the proof of facts of the type necessary to establish a right to sue for the tort of deceit. There a plaintiff must establish that the defendant made a statement (or conceivably, a nonverbal representation) which was untrue, and that at the time the defendant knew it to be untrue, or did not believe that it was true, or made it recklessly or indifferently without regard or concern whether it was true or not. 65 It would seem that something less is necessary in order to establish a breach of the obligation imposed by section 52.

Very often, in the case of the supply or promotion of goods or services to consumers, the question is not so much whether a statement is true, as whether it is strictly accurate. The common law does provide a remedy if a statement in respect of goods or services is incorporated into a contract for the supply of those goods or services, and also if it is made so as to induce the representee to enter into such a contract.66 It is where the statement is made in such a way that it cannot be a term of the contract that most cases of consumer complaint arise. Here again, the distinction between a statement intended to be acted upon and one

62 C.R.W. Pty Ltd v. Sneddon (1972) 72 A.R. (N.S.W.) 17; Taperell, Vermeesch and Harland, op. cit. Ch. 1 0; Peden, "Misleading Advertising" (197 4) 6 Bulletin of the Commercial Law Association 7.

63 Ss. 79, 80, 82, 87. 64 (1972) 72 A.R. (N.S.W.) 17. 65 Derry v. Peek (1889) 14 App. Cas. 337; Fleming, The Law of Torts (4th

ed. 1971) Ch. 25. 66 Brown v. Sheen and Richmond Car Sales Ltd [1950] 1 All E.R. 1102; Oscar

Chess Ltd v. Williams [1957] 1 W.L.R. 370.

306 Federal Law Review [VoLUME 6

which amounts to a "mere puff"67 must be made, though a "puffing" statement may be "misleading or deceptive".68

The word "misleading" in section 52 ( 1) would seem to encompass not only statements or conduct that distort the truth, but also statements which give a wrong impression in the context in which they are made.69

In the first action to be brought under Part V Division 1 of the Act,70

some reliance was placed on section 52. In the argument, which related primarily to the granting of interlocutory relief, counsel for both parties argued on the analogy between the right conferred by the Act upon the plaintiff and that which a person has to prevent another from passing off his goods as those of the plaintiff. It appears that passing off is misleading or deceptive conduct, and conduct which constituted passing off would also contravene section 52. Other actions relating to industrial and intellectual property would also seem to fall within section 52 as well as section 55.

The expression "in trade or commerce" (although defined in section 4 ( 1)) may have the effect of restricting the operation of section 52. Why the words appear is unclear. It seems to have no constitutional significance, and if intended to restrict the operation of the provision to the normal commercial business of the corporation, the reasons why this form of words was used, rather than some other, are not apparent.

Apart from these suggestions, it is difficult to say whether conduct of a certain type will or will not come within the provisions of the section.

Section 55, the other general section, is designed to implement the 1967 revision of the Paris Convention for the Protection of Industrial Property. At the time of writing, Australia is not a party to the Convention, and section 55 has not come into force. This Convention, though concerned with patents, trade marks, and other means of protecting rights of inventors and users of industrial property, deals also with unfair competition, and this apparently has led the Parliament to enact this provision as part of legislation dealing specifically with unfair practices in commerce. The Convention is undeniably a bona fide international agreement, and thus it would seem that legislation enacting the obligations of Australia under such a convention is a valid exercise of the external affairs power given by section 51(xxix) of the Constitution.71

67 Carlill v. Carbolic Smoke Ball Company [1893] 1 Q.B. 256. 68 C.R.W. Pty Ltd v. Sneddon (1972) 72 A.R. (N.S.W.) 17. 69 A guide to the meaning of "misleading and deceptive" might be s. 5 (3) of

the N.S.W. Companies Act 1961-1974: " ... a statement included in a prospectus . . . shall be deemed to be untrue if it is misleading in the form and context in which it is included".

7° John Walker & Sons Ltd v. Donlan Liquor Markets Pty Ltd (unreported, Australian Industrial Court, 9.12.74).

71 The King v. Burgess; Ex parte Henry (1936) 55 C.L.R. 608, 687; Airlines of N.S.W. Pty Ltd v. N.S.W. (No. 2) (1964-1965) 113 C.L.R . .54, 152-153.


The wording of section 55 follows closely that of article 1Qbis (3)(3) of the Convention. The section may have wide effects but is not free from ambiguity. It is not clear what conduct is "conduct that is liable to mislead" or whether such conduct is in any way different from "misleading or deceptive" conduct. Nor is it clear what is meant by the term "the public" in the section. Is this term to be confined to the sense in which it is used in other legislation dealing with industrial property which refers to "the public"? The term is one which is a perennial source of difficulty in other contexts. 72

Section 53 is the first of the sections dealing with specific practices which are rendered unlawful by the Act. It also applies to acts or omissions by a corporation "in trade or commerce". The conduct prohibited is the making of false representations in connection with the actual or possible supply, or promotion of the supply or use of any goods or services.73 The prohibition would seem to apply, though not explicitly, to what is characterized as "false or misleading advertising" which is prohibited both by the United Kingdom Trade Descriptions Acts 1968 and 1972 and by the legislation of some of the States.74

However, the provisions of section 53 are specific; it is a penal provision. Other misleading or deceptive conduct in connection with the supply or promotion of goods or services may be the subject of civil action under section 52, in which case it would not be necessary to establish that the corporation or its agents had the mens rea which would seem necessary to establish guilt of an offence under section 53.

The offering by a corporation, in trade or commerce, of gifts, prizes or other free items in connection with the supply or promotion of goods and services, where the corporation does not intend to provide the gifts or benefits, is prohibited by section 54, and the related practice of "bait advertising" by section 56. The effect of this latter section is to penalize the advertising of goods or services at a "special price"74 where the corporation does not intend to offer such goods or services at that price for a period and in a quantity that are reasonable, having regard to the market in which the corporation carries on its business. While the intention of the legislature is clear in these provisions, it would appear extremely difficult to secure a conviction as a result of their contravention. 76

72 E.g. Lee v. Evans (1964) 112 C.L.R. 276 where the High Court was required to determine how many persons constituted "the public".

73 E.g. in the first prosecution for an offence under this Division, Hartnell v. Sharp Corporation of Australia Pty Ltd (1915) 5 A.L.R. 493 the defendant had admittedly advertised its microwave ovens as having been approved by a particular body which had in fact given no such approval. The advertisement was false in one of the specific ways prohibited by the Act.

74 Supra n. 32. 74 Defined ins. 4(1) of the Act. 76 Principally because "market" is difficult to define. It is relevant also to the


"Referral selling", a practice which has been criticized as inimical to the interests of consumers, 77 is a practice whereby the supplier of goods represents to a customer that if he gives the names of other potential customers, or assists the corporation in some other way in the supply of goods or services to other customers, he will receive a rebate. If the rebate is made contingent on the happening of some event after the contract with the first customer is made (typically the sale of goods to some other customer introduced by the first customer) then the practice is rendered illegal by section 57.

Pyramid selling and inertia selling are both practices which have been prohibited by legislation in most of the States and Territories of Australia.78 State legislation in respect of inertia selling is fairly uniform, and the provisions of sections 64 and 65 fit into the general pattern of this legislation. An offence is cqmmitted by a corporation which, in trade or commerce, asserts a right to payment from a person in respect of unsolicited goods or for the making of an entry in a directory,79

unless it has reasonable cause to believe that there is a right to payment; the burden of proving "reasonable cause" rests on the corporation.80

Section 65 deals with the liability of a person who receives unsolicited goods. If that person gives notice as required by the section, the corporation may, at its expense, recover the goods from the recipient at the address stated in the notice. One month after the date of the notice, or if no notice is given, three months from the receipt of the goods, the right of the corporation to recover the goods or payment for them is barred.

A new section (63A) was inserted in 1975 to prohibit a corporation sending to any other person a "credit card" as defined in that section, other than by way of renewal or in response to a request. The section was a reaction to protest at the tactics of Australian banks, which when introducing the "Bankcard", sent credit cards to all their male accountholders without any request. The government took the view that such practices encouraged persons to incur liabilities beyond their capacity to pay.

enforcement of Part IV of the Act: Levine, "Aspects of the Trade Practices Bill 1973" (1973) 47 A.L.J. 679, 685-686.

77 E.g. Consumer Affairs Council, Report for the Year ended 30.6.73, 16-18. See now the Referral Selling Act 1974 (N.S.W.).

78 For inertia selling, see n. 39 supra and the article by Peden cited there. However, Professor Peden may give a misleading impression that it is State, rather than federal legislation, which governs acts done other than by a corporation. The effect of the Trade Practices Act s. 6 is to give that Act a wide operation over the conduct of individuals other than corporations within State boundaries. For pyramid selling see n. 41 supra.

79S. 64(1), (3) and (5); "directory" is defined ins. 64(10). sos. 64(9),


Pyramid selling occurs where one person sells goods or services to another for a money consideration, but induces the buyers by leading them to believe that they will recoup their outlay by recruiting additional members to the scheme who will pay them a sum sufficient to cover not only the goods, which the recruits themselves will resell under the scheme, but also a substantial profit. Profit is not possible without the recruitment of additional members but, of course, there is always a limit to the number of potential recruits. The enactment of legislation relating to pyramid selling has made the practice virtually extinct in Australia,81

but should any unscrupulous promoter be tempted to revive it, section 61 goes some way towards its prohibition.

A corporation contravenes that section if it is a promoter of a scheme to which the section applies, or if a person who is a participant in the scheme (as defined in the section) makes any payment to or for the benefit of the corporation, or if the corporation, being a promoter of, or a participant in such a scheme, holds out to any person the prospect of receiving any payment or benefit in respect of the introduction of other persons who are potential participants in the scheme.

Both inertia selling and pyramid selling are practices which call for legislation on a national basis. The State laws are not entirely uniform, and what is illegal in one State may be permissible in another. Furthermore, there may be constitutional and jurisdictional problems: a pyramid or inertia selling scheme may be, arguably, "trade, commerce or intercourse among the States" and thus within the protection of section 92 of the Constitution (in which case not even a Federal law would be effective to prevent the practice) . Problems arising from the effect of section 109 of the Constitution on the Trade Practices Act are probably the most obvious in this area, and the ingenuity of promoters of such schemes cannot be underestimated. Prior to the enactment of the Act, a scheme might be established under the law of a State where it would be legal and the victims selected in some other State where the laws were harsher upon the scheme. In such a case, an obligation under the scheme might be enforced by a judgment in the State where the scheme was legal, which, under constitutional and statutory provisions, would then have to be given effect in the State where the scheme was illegal.82

81 Pyramid Selling in Victoria: An Investigation by the Victorian Public Interest Research Group Limited (1973) ; Head, "Pyramid Selling Legislation-Effective?'' (1974) 2 Australian Business Law Review 167; Myers, Wedding and Maertin, "Non-Egyptian Pyramids-U.S. Style" (1974) 2 Australian Business Law Review 84; "Pyramid Schemes: Dare to be Regulated" (1973) 61 Georgetown Law Journal 1257; Ella, "Multi-level or Pyramid Sales Systems: Fraud or Free Enterprise" (1973) 18 South Dakota Law Review 358; Simpson, "Pyramid Selling: The Australian Attempts at Control" (A.N.U. Law Library, honours research paper (1974)); cf. U.K. Fair Trading Act 1973, Part XI and New York State General Business Law, s. 349ff (added 1973).

82 Merwin Pastoral Co. Pty Ltd v, Moolpa Pastoral Co. Pty Ltd ( 1933) 48


To the extent that the Trade Practices Act does not cover a scheme, or the statutory provisions may be avoided, even if section 7 5 of the Act can be given the effect which appears to have been ·intended, such a scheme is still, in theory, possible.

The other provisions of Part V Division 1 of the Trade Practices Act prohibit the acceptance of payment by a corporation in trade or commerce of goods which it does not intend to supply, or where the goods or services which the corporation intends to supply are materially different from those represented to the consumer at the time the contract is made (section 58). Such conduct may already be an offence under the criminal law of the various States.83 The Act also prohibits the making of a statement by a corporation in trade or commerce regarding the profitability or risk of business to be carried on wholly or substantially at a person's place of residence (section 59) or the use of "physical force, undue harrassment or coercion" at a person's residence in connection with the supply or possible supply of goods or services to that person, if he is a "consumer" as defined in the Act (section 60). Potentially more important is the prohibition in section 60 of the use of force in connection with the payment for goods and services by a consumer. This provision would seem to outlaw some of the more dubious practices used by debt collectors. It might also apply to the collection of instalments under hire-purchase, as opposed to credit sale, agreements.84

6. IMPLIED TERMS AND CONDITIONS IN CONTRACTS FOR THE SUPPLY OF GOODS AND SERVICES

It has been recognized for some time that the conditions and warranties implied under the provisions of the State Sale of Goods Acts85

are inadequate in affording protection to the buyers of goods. The main reason for this is the stipulation86 that express or implied provisions in

C.L.R. 565; Kay's Leasing Corporation Pty Ltd v. Fletcher (1964) 116 C.L.R. 124; s. 118 of the Commonwealth Constitution; Service and Execution of Process Act 1901-1974 (Cth) and the State and Territorial Laws and Records Recognition Act, 1901-1964 (Cth), s. 18; Pryles and Hanks, Federal Conflict of Laws (1974) Ch. 2.

83 E.g. N.S.W. Crimes Act 1900-1974, s. 179; Qld The Criminal Code ss. 427-428.

84 S. 4(1) defines "supply" to include supply under hire-purchase contracts; a finance company, though not a party to any contract for the sale of goods between the dealer and the consumer, may perform acts in connection with the supply of or payment for those goods under a contract for the supply of goods.

ss N.S.W. Sale of Goods Act 1923-1974, ss. 17-20; Vic. Goods Act 1958, ss. 17-20; Qld Sale of Goods Act of 1896, ss. 15-18; Tas. Sale of Goods Act 1896, ss. 17-20; W.A. Sale of Goods Act 1895, ss. 12-15; A.C.T. Sale of Goods Ordinance 1954-1967, ss. 17-20; S.A. Sale of Goods Act 1895-1971, ss. 12-15.

86 E.g. N.S.W. s. 51 and the opening words of s. 19.


contracts for the sale of goods may displace the conditions and warranties implied by statute.87 Other legislation dealing with transfer of title to goods, such as the so-called "uniform" Hire-Purchase Acts,88

imply similar conditions and warranties; but such Acts prohibit the exclusion of the implied terms except in special circumstances. Suppliers of goods are quick to take advantage of the opportunity to exclude the implied warranties and conditions from contracts of sale. This problem has been considered by the English and Scottish Law Commissions,89

whose recommendations led to the passage in the United Kingdom of the Supply of Goods (Implied Terms) Act 1973.90 In summary, the provisions of that Act prevent the exclusion of the implied conditions and warranties in consumer transactions (which are defined in the Act) and also supply a new definition of "merchantable quality" which is intended not only to be a re-statement of the existing law,91 but to clarify and expand it. Certain other refinements are made to the wording of the implied conditions and warranties including those relating to title and quality.

Sections 66, 69, 70, 71 and 72 of the Trade Practices Act reproduce, with minor variations, the principal substantive provisions of the English Act. Section 74 extends the implication by law of similar terms into contracts for the supply of services. In itself, the application in Australia of the 1973 United Kingdom Act would be a major development in the law relating to the sale of goods.

Like the provisions of the United Kingdom Supply of Goods (Implied Terms) Act 1973 (henceforth referred to as "the United Kingdom

87 The Commercial Transactions (Miscellaneous Provisions) Act 1974 (N.S.W.) inserted s. 64 into the Sale of Goods Act 1923; s. 64 prohibits exclusion clauses in "consumer" sales, "consumer" is defined in virtually the same terms as in the Trade Practices Act.

88 N.S.W. Hire-Purchase Act 1960-1974; Vic. Hire-Purchase Act 1959; Qld Hire-Purchase Act of 1959; Tas. Hire-Purchase Act 1959; W.A. Hire-Purchase Act 1959-1974; A.C.T. Hire-Purchase Ordinance 1961-1969. In South Australia hire-purchase was abolished by the Consumer Transactions Act 1972-1973, ss. 4, 24: supra p. 296.

89 Law Commission, Published Working Paper No. 39 and Scottish Law Commission, Memorandum No. 15: Provisional Proposals relating to the Exclusion of Liability for Negligence in the Sale of Goods and Exemption Clauses in Contracts for the Supply of Services and other Contracts (Joint Document, 1971); Law Commission, Published Working Paper No. 18 and Scottish Law Commission Memorandum No. 7, Provisional Proposals Relating to Amendments to Sections 12-15 of the Sale of Goods Act 1893 and Contracting out of the Conditions and Warranties Implied by those Sections (1968).

90 Comments on the Act: Yates, "The Supply of Goods (Implied Terms) Act 1973" [1973] Journal of Business Law 135; Carr, "The Supply of Goods (Implied Terms) Act 1973" (1973) 36 Modern Law Review 519.

91 The state of the existing law, following some rather inconsistent decisions in Henry Kendall & Sons v. William Lillico & Sons Ltd [1969] 2 A.C. 31, Ashington Piggeries Ltd v. Christopher Hill Ltd [1972] A.C. 441 and B.S. Brown & Son Ltd v. Craiks Ltd [1970] 1 All E.R. 823 is discussed by Bilinsky, "When are Goods of Merchantable Quality?" ( 197 4) 6 Commercial Law Association Bulletin 1.


Act"), many of the provisions of Division 2 of Part V of the Trade Practices Act are restatements and variations of the language of the existing sale of goods legislation. For instance, the definition of "quality of goods" in section 66 (1 )(a) of the Act is similar to the definition of the same phrase in section 5 (1 ) of the New South Wales Sale of Goods Act 1923-1974. It is necessary that the Act should contain definitions of this type, because it is not, like the United Kingdom Act, merely amending existing legislation. ,It enters upon new ground for Commonwealth legislation. In so far as the provisions of the Act do not apply to sales of goods or to sales other than by corporations to consumers and to other contracts for the supply of goods and services, it seems clear that there is no room for section 1 09 of the Constitution to operate, and State legislation relating to sale of goods, hire-purchase, and so on, will continue to govern such transactions.

There has been no indication that any of the States or Territories (other than New South Wales)92 have made any moves to follow the lead set by the English and Scottish Law Commissions in reform of this area of the law, and in particular to the question of implied terms and conditions in contracts of this type, though the Chairman of the recently established Australian Law Reform Commission has expressed interest in the area.

The aim of the United Kingdom Act, and of Part V Division 2 of the Trade Practices Act is to clarify the terms and conditions implied into contracts for the supply of goods (and, so far as the Australian Act is concerned, of services) and to prevent the exclusion of any of those terms from contracts for the supply of goods (or services) to a consumer, as is currently possible.

Section 68 gives effect to the main recommendations of the English and Scottish Law Commissions by prohibiting exclusion of the implied terms. It avoids any term of a contract for the supply by a corporation of goods or services to a consumer which purports to exclude, restrict or modify or has the effect of excluding, restricting or modifying the application of any of the provisions of Division 2; or the exercise of the right conferred by such a provision; or the liability of the corporation for a breach of a condition or warranty implied by such a provision. The justification for this. section can be found in paragraph 9 of the English and Scottish Law Commissions' Joint Working Paper:

It is the view of the Law Commissions that the considerations which justify the ban on contracting out of sections 13-15 of the Sale of Goods Act [sections 18-20 of the New South Wales Sale of Goods Act 1923-1974] in the case of consumer sales are even stronger justification for a similar ban on contracting out of liability for negligence in the case of such sales. In modern conditions the

92 N.S.W. Commercial Transactions (Miscellaneous Provisions) Act 1974.


contracting parties to a consumer sale are rarely of equal bargaining power, and unfair terms may be imposed by an economically dominant seller upon an individual consumer who, by reason of his weakness, may have no means of protecting himself against such terms and who, without any fault on his part, may suffer a potentially heavy and irrecoverable loss.93

Under the existing law, where there is a contract for the supply of goods or services, except possibly a contract for supply by hire-purchase or a "consumer sale" under the New South Wales Sale of Goods Act 1923-1974, the liability of the seller for breach of an implied term may be excluded; so may his liability in negligence or any other cause of action. Even though the evidentiary burden on the consumer is likely to be heavier if he sues in negligence than if he relies on an implied term,94 there seems no reason, in view of the reasons for the Law Commissions' recommendations, why he should not have the right to sue for negligence as well as for breach of an implied term.

Section 67 prevents the use of a "backdoor" exemption clause by providing that the provisions of the Act will apply in every case where the proper law of the contract would be, in the absence of a choice-oflaw provision in the contract, the law of a part of Australia. If the Act did not contain such a provision, the choice by the parties of, say, the law of Papua New Guinea (where the Goods Act 1951 is in substantially the same terms as the Sale of Goods Acts of the States) as the law governing a contract might enable the seller of goods to contract out of the provisions of the Act.95 While it may be doubtful, because of the requirements of public policy, that such a clause in a contract would be effective, the possibility remains; particularly in view of the great respect which the courts have given to the choice of the parties of a legal system to govern their obligations to each other.96

Section 69 ( 1 ) is a re-enactment of the present implied undertaking as to title contained in section 17 of the New South Wales Sale of Goods Act 1923-197 4. While the provisions of the section extend also to hire-purchase agreements and some other secured credit sales, the substantive provisions are the same as those implied at present by the

93 Cited n. 89 supra (the 1971 Joint Document). 94Jbid. 95 Vita Food Products Incorporated v. Unus Shipping Co. Ltd [1939] A.C. 277,

290: the Board stated that the choice of a governing law by the parties would be effective subject to the requirements of public policy. This case remains the governing principle, subject perhaps to the requirements that there must be a reasonable connection between the transaction and the place whose law is chosen and that the purpose of choosing a foreign law is not to avoid the effect of local legislation: Golden Acres Ltd v. Queensland Estates Pty Ltd [1969] Qd.R. 378; Nygh, Conflict of Laws in Australia (2nd ed. 1971) 338-343.

96 E.g. Vita Food Products Incorporated v. Unus Shipping Co. Ltd [1939] A.C. 277.


hire-purchase legislation, namely an implied condition that at the time when property in the goods is to pass, the seller will have the right to sell the goods.97 The position under the Sale of Goods legislation is not so clear. It has been held in England that the seller must be in a position to pass a good title at or before the time of delivery.98 Section 69 ( 1 ) , by providing clearly that the supplier must be in a position to pass title at the time when property is to pass (presumably to be determined in accordance with sections 22 and 23 of the New South Wales Sale of Goods Act 1923-1974 and corresponding legislation) resolves this difficulty and gives welcome certainty.

Presumably the "right to sell" will be construed as at present and the term will be given the extended meaning by the courts similar to that adopted in Niblett Ltd v. Confectioners' Materials Co. Ltd.99 Section 69(1) and (3) are in almost identical terms to section 12(1) and (2) of the United Kingdom Sale of Goods Act 1893 as amended by the 1973 Act. Sub-section ( 3) extends protection to the consumer by implying warranties that all charges or encumbrances known to the supplier have been disclosed before the contract is made, and extends the warranty of quiet possession currently contained in section 1 7 ( 2) of the New South Wales Sale of Goods Act 1923-1974. The position under the Sale of Goods Acts, the provisions of which were interpreted by the English Court of Appeal in Rowland v. Divall,1 is unsatisfactory. It would seem that a purchaser of goods, of which the vendor has no title, may have two courses of action. He may sue for breach of the implied term of the contract, in which case the general rules relating to the measure of damages in actions for breach of contract will apply.2

In this case, it would seem that the purchaser would have his damages reduced by an amount estimated to cover the worth of his possession and use of the goods, a result which would appear to follow from the decision of the Court of Appeal in Mason v. Burningham.3 Alternatively, he may sue to recover the money he has paid for the goods as money paid for a consideration which has totally failed, following Rowland v. Divali" where it was held that the consideration of the sale was the

97N.S.W. Hire-Purchase Act 1960-1974, s. 5(1); Vic. Hire-Purchase Act 1959, s. 5; Qld Hire-Purchase Act of 1959, s. 5; Tas. Hire-Purchase Act 1959, s. 9; W.A. Hire-Purchase Act 1959-1974, s. 5; A.C.T. Hire-Purchase Ordinance 1961-1969, s. 10. The South Australian equivalent is the Consumer Transactions Act 1972-1973, s. 8.

98 Karflex Ltd v. Poole [1933] 2 K.B. 251; Mercantile Union Guarantee Corporation Ltd v. Wheatley [1938] 1 K.B. 490.

99 [1921] 3 K.B. 387. Cf. Microbeads A.G. v. Vinhurst Road Markings Ltd [1975] 1 W.L.R. 218.

t [1923] 2 K.B. 500. 2The principle in Hadley v. Baxendale (1854) 9 Exch. 341, [1843-1860] All

E.R. Rep. 461 is now enacted in all the Sale of Goods Acts: e.g. Vic. ss. 56(2), 57(2), 59(2) and 60. Ct. Trade Practices Act, s. 82(1).

3 [1949] 2 K.B. 545. 4 [1923] 2 K.B. 500.


title to the goods and not the physical possession or use of them. In their Report,5 the English and Scottish Law Commissions suggested that the decision in Rowland v. Dival!G should be modified by statute so that the result would be more in accord with the general rules applying to contracts, and that the apparent anomaly would cease. The consumer "should be able to recover no more than his actual loss, giving credit for any benefit he may have had from the goods while they were in his possession". 7 This recommendation has not been given effect in either the United Kingdom or in Australia.

Section 69(2) is a provision which has no corresponding counterpart in the United Kingdom legislation. As the supplier of the goods under a contract to which this section applies will generally, but not exclusively, be a corporation, it is capable, unlike an individual, of securing loans to it by creating a floating charge over its assets from time to time. Although, contingently, a third party may be or become the equitable owner of the goods, the contingency seldom occurs, and for this reason it is good commercial sense to provide that until the unlikely occurrence of the crystallization of the floating charge, its existence should not constitute a defect in the supplier's title for which he will be liable under the implied condition as to title.

At first sight, section 69 (3) appears to reduce the protection given to a consumer, by providing that there can be contracts under which the supplier will be obliged to transfer to the consumer only such title to the goods as he or a third person may have. Yet such sales often occur, especially in the case of sales by mortgagees following default by the mortgagor where, at least up until the sale, the mortgagor retains an equity of redemption. If the reports of the Rogerson and Molomby Committees are enacted in States other than South Australia,8 mortgagee sales of goods will become as common as the repossession sales which they will replace. There are also other sales of encumbered goods, and where there is such a contract for the supply of goods (it is suggested that they will be the exception), there is adequate protection for the consumer. By section 69 ( 3) (a), all charges and encumbrances on the title must be disclosed where the section is to apply (i.e. where, expressly or by implication the contract is for the transfer of such title as the supplier or the third party may have). While this preservation of caveat emptor may not appear consistent with the policy underlying the remainder of the Act, it is difficult to envisage that a consumer, knowing of the limitations of the supplier's (or the third party's) title, and the

5 Joint Working Paper No. 18 of 1968, para. 11; Law Commission No. 24 and Scottish Law Commission No. 12, Exemption Clauses in Contracts: First Report: Amendments to the Sale of Goods Act 1893 (1969, reprinted 1973) paras. 11-19.

6 [1923] 2 K.B. 500. 7 English and Scottish Law Commissions, Joint Working Paper No. 18 of 1968

cited supra n. 89, para. 11. 8 Supra n. 19.


nature of those limitations, would proceed with the transaction if he were concerned about the title that would pass to him. In any case he would have the warranty of quiet possession contained in section 69 ( 3 )(b) which gives some relief against the supplier. If the supplier does not disclose the charges and encumbrances he will be liable under section 69(3) (a). The section would not and could not apply to situations where the supplier has no title at all, and in this case the consumer may rely on the general provisions of section 69 ( 1 ) . The only possible additional difficulty with the provision is the case where the supplier sells as agent for a third party, in excess of limitations on his authority as agent. However, this seems to be more a question of the law of agency rather than to fall within the scope of this section; it would seem that a limitation of authority is not a "charge or encumbrance" within the meaning of the section.

Section 70 is concerned with contracts for the supply of goods by description, other than sales by auction or by competitive tender. There seems to be a reason for such exclusions; in both cases there is likely to be a right for potential consumers to inspect the goods and, in the case of sales by tender, the invitations will also in general provide detailed specifications of the goods not usually available in consumer sales. Such sales are not subject to the same pressures as may fall on the consumer who might otherwise buy on "impulse". Other than this, the section is similar to the implied condition of compliance with description currently contained in section 18 of the New South Wales Sale of Goods Act 1923-1974. Section 70 is, however, restricted to contracts for the supply of goods by a corporation to a consumer in the course of a business. There is no corresponding provision in the United Kingdom Act (though similar words appear in the United Kingdom Trade Descriptions Act 1968) where the condition of compliance with the description is implied into every contract for the sale of goods, and may not be excluded by the agreement of the parties. There seems to be no constitutional reason why this provision in the Australian Act should be worded as it is. If the draftsman was worried about constitu" tional problems, why did he not use the phrase more commonly found in the Act, "in trade or commerce", which has the benefit of construction by the courts? The condition of compliance with description would seem to be fundamental to any contract providing for the transfer of title to property. The words which restrict the operation of the section of the Australian Act, "in the course of a business", are themselves ambiguous. For example, must the goods be goods which the seller supplies as part of his business? What of goods, say a refrigerator, which a corporation uses in a business of selling fish: it disposes of the refrigerator, and the disponee is presumed to be a consumer. Is this a sale in the course of a business? Or are the fish the only goods sold which fall within that description? Suppose the facts of the leading case


on compliance with description, Varley v. Whipp,9 arose in Australia today, and the seller was not an individual, but a corporation. Then the only condition regarding compliance with description which would be implied into the contract would be any such implied term which might be implied under the common law.10 The consumer, or buyer, might receive no assistance from the Trade Practices Act.

Section 70(2) re-enacts the provision of the United Kingdom legislation to the effect that a supply of goods is not prevented from being a supply by description for the purposes of section 70 ( 1) by reason only that being exposed for sale or hire, they are selected by the consumer. Presumably these words were added by the English draftsmen to put beyond doubt the situation, now increasingly common, of "cash and carry" type sales such as were discussed in the case of Lacis v. Cashmarts.11 However, in view of what was said by the Privy Council in Grant v. Australian Knitting Mills Ltd,12 by the High Court in the same case13 and in David Jones Ltd v. Willis,l4 it seems quite clear that even under the existing Sale of Goods Acts such sales may still be sales by description. These provisions appear to add nothing to the existing law, except that the term implied by them cannot be excluded from the terms of a contract for sale. There was such an exclusion in Marks v. Hunt Bros (Sydney) Pty Ltd15 where the goods, which had been selected from the supplier's display, did not comply with the contract description. The effect of the implied condition of compliance was excluded by written terms in a contract for sale, and this precluded recovery by the consumer.

Section 71 contains the important implied conditions as to merchantable quality and fitness for purpose. The final report of the English and Scottish Law Commissions16 was delivered following the decision of the House of Lords in Ashington Piggeries Ltd v. Christopher Hill Ltd17

s [1900] 1 Q.B. 513. 10 The High Court's decision in Beaton v. Moore Acceptance Corporation Pty

Ltd (1959) 104 C.L.R. 107 suggests that in certain contracts, terms may be implied by the common law, notwithstanding the existence of terms implied by statute into the same contracts; Turner, "Common Law Implied Terms of Fitness in Contracts of Simple Hire and Hire-Purchase: An Analysis" (1972) 46 A.L.J. 560 and 619. It is arguable that the common law will imply certain terms into contracts for the supply of goods, though, because the existence of statutory terms has obviated the necessity of relying on the common law, it is not clear what the terms would be and under what circumstances they would be implied.

11 [1969] 2 Q.B. 400. 12 [1936] A.C. 85. 13 (1933) 50 C.L.R. 387. 14 (1934) 52 C.L.R. 110. u; (1958) 58 S.R. (N.S.W.) 380. 16 English and Scottish Law Commissions, Provisional Proposals Relating to

the Exclusion of Liability for Negligence in the Sale of Goods and Exemption Clauses in Contracts for the Supply of Services and Other Contracts (1971).

17 [1972] A.C. 441.


and the earlier report of the Law Commissions18 had taken account of the decision in Henry Kendall & Sons v. William Lillico & Sons Ltd.19

These decisions, together with the decision of the House of Lords in B.S. Brown & Son Ltd v. Craiks Ltcf0 are of considerable importance to the questions of what constitutes "merchantable quality", 21 and of the meaning of the condition of reasonable fitness for purpose implied by the Sale of Goods Acts. In section 66(2) of the Trade Practices Act there is a new definition of "merchantable quality":

Goods of any kind are of merchantable quality within the meaning of this Division if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all the other relevant circumstances.22

Compare this provision with the basic test which the courts seem finally to have laid down as the test of merchantable quality. It is a statement of Dixon J. in Australian Knitting Mills Ltd v. Grant: 23

[t]he condition that goods are of merchantable quality requires that they should be in such an actual state that a buyer fully acquainted with the facts and, therefore, knowing what hidden defects exist and not being limited to their apparent condition would buy them without abatement of the price obtainable for such goods if in reasonably sound order and condition and without special terms.

In Henry Kendall & Sons v. William Lillico & Sons Ltd24 Lord Reid added to this:

I would only qualify this by substituting "some buyers" for "a buyer". "A buyer" might mean any buyer: but for the purposes for which some buyers wanted the goods the defects might make the goods useless, whereas the purposes for which other buyers wanted them the existence of the defects would make little or no difference.

Lord Reid also modified and applied25 a statement of Lord Wright in Cammell Laird & Co. Ltd v. The Manganese Bronze and Brass Co. Ltd26 as follows :

What [the equivalent of New South Wales Sale of Goods Act 1923-1974 section 19(2)] now means by "merchantable quality"

18 No. 18, 1968; Law Commission No. 24 and Scottish Law Commission No. 12, Exemption Clauses in Contracts: First Report: Amendments to the Sale of Goods Act 1893 (1969, reprinted 1973) paras. 40-55.

19 [1969] 2 A.C. 31. 20 [1970] 1 All E.R. 823. 21 Bilinsky, "When are Goods of Merchantable Quality?" (1974) 6 Commercial

Law Association Bulletin 1. 22 Cf. Supply of Goods (Implied Terms) Act 1973 (U.K.), s. 7(2); N.S.W.

Sale of Goods Act 1923-1974, s. 64(3). 23 (1933) 50 C.L.R. 387, 418. 24 [1969] 2 A.C. 31, 79. 25Jd. 77. 26 [1934] A.C. 402.


is that the goods in the form in which they were tendered were of no use for any purpose for which goods which complied with the description under which these goods were sold would normally be used, and hence were not saleable under the description.

While both these statements do amplify a great deal what is meant by "merchantable quality" it does seem that a reference to the price is necessary. In B.S. Brown & Sons Ltd v. Craiks Ltd21 the House of Lords considered this, and, while it is submitted they did not substantially modify the tests of merchantability which they had laid down in Henry Kendall & Sons v. William Lillico & Sons Ltd, they did state that the abatement of price, which was referred to by Lord Reid when he quoted with approval the statement of Dixon J., should be a substantial one. However, the statement of Lord Reid in Henry Kendall & Sons v. William Lillico & Sons Ltd would seem still to be the basic guide to the meaning of "merchantable quality" as that term is used in the Sale of Goods Acts.

What, then, is the effect of the new definition? It would seem that apparently the intention of the English and Scottish Law Commissions was that this would extend the definition of "merchantable quality" rather than restrict it. The definition seems to be an amalgam of the test originally laid down by Dixon J. and Lord Wright as adopted by Lord Reid. However, it does bring into operation a much closer relationship between the implied condition of merchantability and the other condition implied under the Trade Practices Act section 71, that of fitness for purpose. It will be seen infra that when a consumer makes known expressly or impliedly a purpose for which the goods are required, an onus is cast upon the supplier to exercise skill and judgment to supply goods which are fit for that purpose. Previously, because the condition of reasonable fitness would not be implied into a contract for the sale of goods unless and until the buyer proved certain matters as conditions precedent, it was more difficult for a consumer to establish that this condition of fitness for purpose should be implied. The wording of the Act reduces this burden considerably.28

The extension of the definition of "merchantable quality" contained in section 66(2) also eases the burden on the consumer, because it now seems that, even if this were not the case under the law as laid down by the House of Lords, if the goods are not fit for a purpose for which goods of that type are normally supplied, then the goods will be unmerchantable.

The implied terms that goods should be fit for a particular purpose and of merchantable quality had a common origin in the common law, and were applied virtually interchangeably until the passage of the

27 [1970] 1 All E.R. 823. 28 Cf. Lord Diplock•s speech (dissenting in part) in Ashington Piggeries Ltd v.

Christopher Hill Ltd [1972] A.C. 441, 498-514.


United Kingdom Sale of Goods Act in 1893 imposed the strictures of codification.29 However, there was a distinction prior to the Act, aptly stated by Best C.J. in Jones v. Bright: 30

If a man sells an article, he thereby warrants that it is merchantable, -that it is fit for some purpose . . . If he sells it for a particular purpose, he thereby warrants it fit for that purpose . . .

The question whether the condition to be implied is one of fitness for purpose or one of merchantable quality will depend on whether or not the buyer makes known to the supplier, expressly or by implication, the purpose for which the goods are to be used. This basic distinction is retained under section 71 of the Trade Practices Act, though the conditions precedent which are required under the State Sale of Goods Acts need not now be proved if the buyer is a consumer able to rely on the provisions of the Trade Practices Act. For example, under the Commonwealth Act, it is no longer necessary to show that, in making known the purpose for which the goods are required, the buyer did so in such a way to show reliance on the seller's skill and judgment; i.e. so as to bring home to the mind of a reasonable seller that he was being relied upon.

Nevertheless, under both the Sale of Goods Acts and the Trade Practices Act there are two implied conditions, and the nub of the distinction may be found in the following passage from a speech of Lord Diplock: 31

The key to both subsections is reliance-the reasonable reliance of the buyer upon the seller's ability to make or select goods which are reasonably fit for the buyer's purpose coupled with the seller's acceptance of responsibility to do so. The seller has a choice whether or not to accept that responsibility. To enable him to exercise it he must be supplied by the buyer with sufficient information to acquaint him with what he is being relied upon to do and to enable him to appreciate what exercise of skill or judgment is called for in order to make or select goods which will be fit for the purpose for which the buyer requires them.

This consideration, in my view, throws light upon two matters arising under section 14. The first is the meaning of "particular purpose" in subsection ( 1). The second is the application of the doctrine of "partial reliance" under both subsection ( 1 ) and subsection ( 2).

29James Drummond & Sons v. E.H. Van Ingen & Co. (1887) 12 App. Cas. 284; Ashington Piggeries Ltd v. Christopher Hill Ltd [1972] A.C. 441; Henry Kendall & Sons v. William Lillico & Sons Ltd [1969] 2 A.C. 31.

so (1829) 5 Bing 533, 544; 130 E.R. 1167, 1172. 31 Ashington Piggeries Ltd v. Christopher Hill Ltd [1972] A.C. 441, 506-507.

For the purpose of this quotation, ss. 14(1) and (2) of the U.K. Sale of Goods Act 1893 are respectively similar to ss. 71 (2) and (1) of the Trade Practices Act and to, for example, ss. 19(1) and (2) of N.S.W. Sale of Goods Act 1923-1974.


To attract the condition to be implied by subsection ( 1) the buyer must make known the purpose for which he requires the goods with sufficient particularity to enable a reasonable seller, engaged in the business of supplying goods of the kind ordered, to identify the characteristics which the goods need to possess to fit them for that purpose. If all that the buyer does make known to the seller is a range of purposes which do not all call for goods possessing identical characteristics and he does not identify the particular purpose or purposes within that range for which he in fact requires the goods, he does not give the seller sufficient information to enable him to make or to select goods possessing a characteristic which is needed to make them fit for any one of those purposes in particular, if the same characteristic either is not needed to make them fit, or makes them unfit, for other purposes within the range.

A "range of purposes" case thus poses a stark question of legal policy as to whether the seller's responsibility ought to be to supply goods which are fit for at least one of the purposes within the range or to supply goods which are fit for all of those purposes unless he expressly disclaims responsibility for their fitness for any one or more of them. The answer to this question of policy has, in my view, been pre-empted by subsection (2) of section 14 of the Sale of Goods Act 1893.

The commonest way in which a buyer makes known to the seller a range of purposes for which the goods are required is by the description by which he buys them and by nothing more. This is the case that is contemplated by subsection ( 2). This, as it has been authoritatively construed by the courts, provides that the only condition to be implied as to the responsibility of the seller is that the goods should be reasonably fit for one of the purposes within the range.

This being the state of the law, it would seem that the definition of merchantable quality contained in section 66 ( 2) of the Trade Practices Act merely summarizes the existing case law. Any abatement in price would, as suggested supra, be only one of the circumstances to be taken into consideration on the facts of each case. Section 66 (2) continues to relate the question of merchantable quality to the description under which the goods are supplied. If goods of that description are commonly used for a range of purposes, and the goods supplied are fit for any such purposes, then they are merchantable.

It should also be noted that the restriction on the circumstances in which the condition of merchantable quality contained in section 19 ( 2) of the New South Wales Sale of Goods Act 1923-1974 will be implied, namely that the goods must be bought by description from the seller who deals in goods of that description, no longer applies under the Trade Practices Act. In every case where a corporation supplies goods to the consumer in the course of a business there is an implied condition


that the goods supplied will be of merchantable quality, except where the defects are specifically drawn to the consumer's attention before the contract is made, or where the consumer examines the goods before the contract is made and the examination ought to reveal the defect. Section 71 (1 )(a) broadens the exception in comparison to that permitted under the Sale of Goods Acts. It is obviously desirable that, if the supplier draws the attention of the consumer to a defect in the goods before the contract is made, he should not be liable by reason of that defect, but he is now no longer able to otherwise expressly exclude the operation of the implied condition of merchantable quality, as he could formerly have done under the Sale of Goods Acts. Section 71(1)(b) re-enacts substantially the proviso to section 19(2) of the New South Wales Sale of Goods Act 1923-1974.

Section 71 ( 2) provides:

Where a corporation supplies (otherwise than by way of sale by auction or sale by competitive tender) goods to a consumer in the course of a business and the consumer, expressly or by implication, makes known to the corporation or to the person by whom any antecedent negotiations are conducted any particular purpose for which the goods are being acquired, there is an implied condition that the goods supplied under the contract for the supply of the goods are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied, except where the circumstances show that the consumer does not rely, or that it is unreasonable for him to rely, on the skill or judgment of the corporation or of that person.

This section is in substantially the same form as the provision adopted by the United Kingdom legislation.32 In this provision the Law Commissions seem to have taken account of the decisions of the House of Lords in Henry Kendall & Sons v. William Lillico & Sons Ltd33 and Ashington Piggeries Ltd v. Christopher Hill Ltd34 on the question of what is reasonable fitness for a particular purpose. The implied condition of reasonable fitness for purpose is one which existed in the common law prior to the enactment of the Sale of Goods Acts.35 Under the Sale of Goods Acts (in New South Wales, section 19(1)), before the condition of fitness for a particular purpose of goods will be implied, it is necessary that the buyer expressly or by implication make known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller's skill and judgment, and also that the goods are of a description which it is in the course of the seller's business to supply. Section 71(2) and the corresponding United Kingdom

32U.K. Sale of Goods Act 1893 s. 14(3). 33 [1969] 2 A.C. 31. 34 [1972] A.C. 441. 35 James Drummond & Sons v. E.H. Van lngen & Co. (1887) 12 App. Cas. 284.


provision36 do away with the necessity of the consumer proving anything other than that the sale was in the course of a business and that he has expressly or by implication made known the particular purpose for which the goods are being acquired. In both Henry Kendall & Sons v. William Lillico & Sons Ltaa7 and Ashington Piggeries Ltd v. Christopher Hill Ltd38 there were arguments that the buyers (or one of them, in a "string" contract) had not made the particular purpose known, and in both cases there were arguments regarding the question of whether it was in the course of the seller's business to supply goods of that description.

As the English and Scottish Law Commissions have found, a seller may escape liability by putting a buyer to proof of these matters-even in view of the attitude of the courts laid down in a long line of cases such as David Jones Ltd v. Willis, 39 Grant v. Australian Knitting Mills Ltd4° and Godley v. Perry41 that from the act of the consumer in selecting goods, or in taking goods from a display of goods in the supplier's premises, or some other similar action, an implication may arise that the consumer has made known the purpose for which the goods have been required. Nor have the courts required any particular degree of specificity in the making known of the purpose.42 Similarly, where the goods in question have only one normal use, the implication will readily be made that they are required for that purpose without the need for any overt act on the part of the consumer. Where a hot water bottle,43 coal,44 milk,45 and a ship's propellor,46 were not reasonably fitfor the purpose for which such goods are ordinarily used, the courts found that by the act of purchasing such goods, the buyers had impliedly made known to the respective sellers the purpose for which the goods were required, so that the condition was implied into the contracts.

Under section 71(2), the condition of fitness for purpose will be implied into all contracts for the supply of goods by a corporation to a consumer, and may not be excluded unless the corporation can establish that the consumer did not rely on the seller's skill and judgment (or that

36 S. 14 ( 3) of the Sale of Goods Act 1893 as amended by the Supply of Goods (Implied Terms) Act 1973.

37 [1969] 2 A.C. 31. 33 [1972] A.C. 441. 39 (1934) 52 C.L.R. 110. 40 (1933) 50 C.L.R. 387 (High Court); [1936] A. C. 85 (Privy Council). 41 [1960] 1 All E.R. 36. 42 In David Jones Ltd v. Willis (1934) 52 C.L.R. 110 the plaintiff asked for

"walking shoes". 43 Preist v. Last [1903] 2 K.B. 148. 44 Manchester Liners Ltd v. Rea Ltd [1922] 2 A.C. 75; cf. Wilson v. Rickett

Cockerell & Co. Ltd [1954] 1 Q.B. 598. 45 Frost v. The Aylesbury Dairy Company Ltd [1905] 1 K.B. 608. 46 Cammell Laird & Co. Ltd v. The Manganese Bronze and Brass Co. Ltd

(1934] A.C. 402,


of his servant or agent or of the person by whom antecedent negotiations are conducted), or the circumstances show that it is unreasonable for the consumer to rely on such skill and judgment. The condition will be implied whether or not the use for which the goods are in fact required is one for which such goods are ordinarily or commonly used. It might be possible to interpret the Act in such a way that an express statement in a written contract that the consumer does not rely on the skill and judgment of the supplier would be admissible evidence of that fact.

Such a contract, if it is a standard-form contract, might, on the contrary, be disregarded by the court as being inconsistent with the circumstances in which the contract was entered into, viz that the consumer did in fact rely on the skill and judgment of the supplier in circumstances in which it was entirely reasonable for him to do so. However, this does appear to be a loophole in the drafting of the Act. While it is only fair to the supplier to relieve him from liability in cases where in fact there was no reliance, the wording of the section, and the possibility that the consumer's agreement to sign a statement that he did not rely on the skill and judgment of another person might be evidence of circumstances showing that he did not place such reliance, seem to be contrary to the spirit of the Act as embodied in section 68. Perhaps a provision similar to section 5(3) of the New South Wales Hire-Purchase Act 1960-1974, would give more effective protection to the consumer. At least that section does not provide so many possibilities for escape. On the other hand, a supplier who expressly disclaims any skill with regard to the goods, who has never dealt with them or with similar goods previously, and who, perhaps, has ordered them at the request of the consumer, as he can no longer be permitted contractually to exclude it, ought not to be subjected to liability; and it is certain that this aim is achieved by the wording of section 71 ( 2) of the Trade Practices Act.

The other principal change effected by section 71 (2) relates to the onus of proof of circumstances giving rise to the implication of the condition.

There is no longer any onus on the consumer to prove reliance or that he has made known the purpose in such a way as to show that he has relied on the skill and judgment of the seller or supplier; this is now presumed. It is suggested that this is not such a significant change in the law for, as was pointed out in a series of cases of high authority from Grant's case47 and Cammell Laird's case48 to Henry Kendall & Sons v. William Lillico & Sons Ltd49 and Ashington Piggeries Ltd v. Christopher Hill Ltd,50 the bringing home of the buyer's purpose to the mind of the seller is a matter which will readily be found by the courts.

47 (1933) 50 C.L.R. 387 (High Court); [1936] A. C. 85 (Privy Council). 48 [1934] A.C. 402. 49 [1969] 2 A.C. 31. :;o [1972] A.C. 441.


It is clear that, under the Sale of Goods Acts, even though the buyer supplies designs or specifications to the seller, so that the seller may manufacture or process goods to the requirements of the buyer, the seller may still be under an implied obligation to exercise skill and judgment, for example, in the finishing process of manufacture51 or in the selection of suitable ingredients. 52 The Trade Practices Act does not alter the law on this point.

Section 66(1) paragraphs (c) and (d) define "antecedent negotiations" and "the person by whom antecedent negotiations were conducted". These provisions cover agents, salesmen and other persons who negotiate the contract to be entered into by consumers with corporations. In particular they cover the "dealer" in the context of hire-purchase. In this context it is also important to have regard to section 84, which provides in subsection ( 1 ) that if it is necessary to establish the intention of a corporation it is sufficient to show that the servant or agent of the corporation had the necessary intention, and in subsection ( 2), that if an agent or servant of a corporation or any other person at the direction or with the consent or agreement (whether expressed or implied) of a director, agent or servant of the body corporate, engages in conduct, then the acts of that servant, agent or person will be taken to be the acts of the corporation. Section 71 ( 3) provides that a person who, in the course of a business is acting as agent for a corporation and as such makes a contract on behalf of the corporation in the course of a business, will attract the provisions of section 71 to that contract and impose consequent obligations and liabilities on the corporation, except where the corporation is not supplying goods in the course of a business and either the consumer knows that fact or reasonable steps are taken to bring it to his notice before the contract is made. It is suggested that this provision raises a presumption that where a corporation supplies goods it does so in the course of a business and unless the corporation proves that the consumer knew that the sale was not in the course of a business or that it took reasonable steps to bring that fact to the notice of the consumer then the conditions implied by section 71 will in fact apply to the contract.

The original Sale of Goods Act 1893 (U.K.), section 14(1) 53 contained a proviso that where goods were sold under a patent or trade name, there was no implied condition of fitness for any particular purpose. Apparently the reason for this exclusion was the assumption that if a buyer bought goods under their trade name, he was relying on the reputation of the goods, rather than the skill and judgment of the seller. However, decisions of the courts removed what meaning there

,51 Cammell Laird & Co. Ltd v. The Manganese Bronze and Brass Co. Ltd [1934] A.C. 402.

52 Ashington Piggeries Ltd v. Christopher Hill Ltd [1972] A.C. 441. 53 N.S.W. Sale of Goods Act 1923-1974, s. 19(1).


had been from the proviso. 54 It would be excluded only if the trade name was specified in such a way as to show that the buyer did not rely in any way on the skill and judgment of the seller. The proviso is no longer a part of the United Kingdom Act, and it does not appear in the Trade Practices Act, and this seems reasonable in days of national advertising campaigns when brand names, such as "Xerox", "Biro" and "Hoover" have become generic names for classes of goods. To buy a "Hoover" or a "Frigidaire" need not necessarily exclude reliance on the seller's skill and judgment. Strangely, in New South Wales where the liability for breach of the implied condition of merchantable quality can be imposed in appropriate cases on the manufacturer of goods (under section 64 of the Sale of Goods Act 1923-1974 ), the "trade name proviso" still applies.

Section 72 of the Trade Practices Act re-enacts in substance the provisions of the Sale of Goods Acts (in New South Wales, section 20) dealing with sales by sample. This is in accordance with the recommendations of the English and Scottish Law Commissions. Section 73 deals with contracts for supply other than by way of sale. At present, under the various so-called "uniform" Hire-Purchase Acts, if an owner, as defined by the legislation, is found to be in breach of an implied condition or warranty, though he is the person primarily liable for the breach, in certain circumstances he may be able to pass this liability on to the person who actually supplied the goods, called in the legislation a "dealer" .55 This seems eminently reasonable as in most cases the owner is in fact a finance company entirely unconnected for the purposes of a consumer transaction with the supplier of the goods.

Section 73 imposes liability for a breach of an implied term on the person who conducted the antecedent negotiations56 where that person is a corporation, and exempts the person who would under the hirepurchase legislation be regarded as the "owner". The effect of this provision may well be to lead finance companies to provide finance to consumers only where the "dealer" is a corporation, as only in such cases, under the terms of the Trade Practices Act, will the "owner" be able to escape liability. The scheme of the section seems perfectly reasonable-unless the consumer can also recover against the "owner" under the provisions of the applicable State Act: whether he will be able to do so depends on the interpretation of section 75 of the Trade Practices Act and section 109 of the Constitution. 57 The finance company

54 Baldry v. Marshall [1925] 1 K.B. 260; Criss v. Alexander (1928) 28 S.R. (N.S.W.) 587.

55 N.S.W. Hire-Purchase Act 1960-1974, ss. 2(1 ), 6(3); Vic. Hire-Purchase Act 1959, ss. 2(1), 6(3); W.A. Hire-Purchase Act 1959-1974, ss. 2(1), 6(3); Qld Hire-Purchase Act of 1959, ss. 2(1), 6(3); Tas. Hire Purchase Act 1959, ss. 4(1)(a), 10(3); A.C.T. Hire-Purchase Ordinance 1961-1969, ss. 6(1), 11(3).

56 Defined in s. 66. 57 Supra p. 293.


ought not to be responsible for the condition or quality of the goods or of title to them where in fact the goods are supplied by a third person. There may be a possible disadvantage to the consumer, however, where the "dealer" or "person by whom the antecedent negotiations were conducted" is a man of straw. Under the hire-purchase legislation, as the "owner" is primarily liable, the financial collapse of the "dealer", or his disappearance, will not affect the hirer's right of recovery, provided that the finance contract has in fact been concluded.58

Though this may be unfair to the "owners", they are probably better able to afford the loss and the possibility of such liability may cause them to insist on high standards of commercial conduct by the dealers who are, more often than not, acting also as their agents. Section 73 of the Trade Practices Act does not provide similar protection for consumers against disreputable corporate dealers.

Section 7 4 is an entirely new provision. It does not appear in the English legislation. Its effect is to imply into every contract for the supply (otherwise than by way of competitive tender) by a corporation in the course of a business of services, to the consumer, a warranty that the services will be rendered with due care and skill and that any materials supplied in connection with these services will be reasonably fit for the purpose for which they are supplied.59 Section 74(2) provides that where a corporation contracts to supply services to a consumer in the course of a business and the consumer makes known the particular purpose for which the services are required or the result that he desires the services to achieve, there is an implied warranty that the services supplied and any materials supplied in connection with them will be fit for that purpose or are of such a nature and quality that they might reasonably be expected to achieve that result, except where the circumstances show the consumer does not rely or that it is unreasonable for him to rely on the corporation's skill or judgment. In the past it has been assumed that certain conditions and warranties as to the exercise of care and skill and the condition or quality of goods supplied in connection with the supply of services will be implied into a contract for

58 Newlands v. Argyll General Insurance Co. Ltd (1959) 59 S.R. (N.S.W.) 130. The finance company had not accepted the hirer's offer to enter the agreement at the relevant time.

59 C/. Marcel (Furriers) Ltd v. Tapper [1953] 1 W.L.R. 49; Young & Marten Ltd v. McManus Childs Ltd [1969] 1 A.C. 454; and Dodd v. Wilson and McWilliam [1946] 2 All E.R. 691 which considered whether a particular contract was one of sale of goods or for work done and materials supplied and whether, if the latter, which conditions would be implied by the common law. Certainly the English courts have implied similar t'erms into contracts for services: G.H. Myers and Co. v. Brent Cross Service Co. [1934] 1 K.B. 46; Samuels v. Davis [1943] K.B. 526; Stewart v. Reavell's Garage [1952] 2 Q.B. 545; Ingham v. Emes [1955] 2 Q.B. 366. There are similar Australian cases: Martin v. McNamara [1951] St.R.Qd. 225; and in Helicopter Sales (Australia) Pty Ltd v. Rotor-Work Pty Ltd (1974) 4 A.L.R. 77 the High Court approved the approach of the House of Lords in Young & Marten's case.


services, as, for instance, a supply and fitting of roofing tiles.60 Is a hospital liable if it supplies defective blood during the course of postoperative treatment?61 Section 7 4 puts the position beyond doubt, and although a contract may be characterized as a contract for services rather than a contract for the sale of goods, the conditions of merchantability and reasonable fitness will be implied. Therefore the type of problem that arises in connection with say the installation of a cocktail cabinet62 or an oil heater63 when it is not clear whether such contract is a contract for services or a contract for the sale of goods will no longer arise. Where services, e.g. installations, are supplied as an incident of a contract for the supply of goods, the situation is not so clear, as the contract is for the supply of goods rather than of services. In any case the supplier will be obliged to exercise care and skill and provide goods which are merchantable and reasonably fit.

Section 74(3) defines "services" as meaning "services by way of

( a) the construction, maintenance, repair, treatment, processing, cleaning or alteration of goods or of fixtures on land;

(b) the alteration of the physical state of land;

(c) the distribution of goods; or

(d) the transportation of goods."

It would seem therefore that such contracts would apply to such matters as the removal of minerals from land.64 It would also seem to include certain professional services, particularly hospital and optical services and possibly architectural services and the construction of houses (as these relate to the alteration of the physical state of land) where such services are provided by a corporation. This, it is suggested, would provide extremely wide protection to prospective homeowners and others who at present are bound by complicated written contracts with builders which contain wide exemption clauses and also arbitration clauses!15

Overall, it would seem that the provisions of Part V Division 2 of the Trade Practices Act extend and clarify the existing implied terms in

60 Young & Marten Ltd v. McManus Childs Ltd [1969] 1 A. C. 454. 61 Cf. Dodd v. Wilson and McWilliam [1946] 2 All E.R. 691; Perlmutter v.

Beth David Hospital (1954) 123 N.E. 2d. 792. 62 Brooks Robinson Pty Ltd v. Rothfield [1951] V.L.R. 405. 63 Collins Trading Co. Pty Ltd v. Maher [1969] V.R. 20. 64 Cf. Amco Enterprises Pty Ltd v. Wade [1968] Qd.R. 445; Mills v. Stokman

(1966-1967) 116 C.L.R. 61. 65 The Law Reform Commissions in both N.S.W. (Part 2, Section 2, para. 45)

and the A.C.T. (Part 11(4)) in Working Papers published during 1973 have recently drawn attention to the inequities which can arise where an arbitration clause in a contract with a consumer (e.g. building and insurance contracts) is used to defeat or delay a claim made by that creditor. Ct. Fakes v. Taylor Woodrow Construction Ltd [1973] Q.B. 436.


contracts for the supply of goods, strengthen them by making it impossible for suppliers to exclude these conditions and warranties, and extend the range of contracts in which they will be implied. This in itself is a highly significant reform in consumer protection. Perhaps, as Lord Diplock pointed out in Ashington Piggeries Ltd v. Christopher Hill Ltd,66 the pendulum has swung completely to the side of the consumer and the basic principle of the law is no longer caveat emptor as it was at the time of enactment of the Sale of Goods Act, but is caveat venditor. The Attorney-General's second reading speech67 would indicate that this is the aim of the Act. Whether or not this is economically desirable is not for this article to decide, but certainly consumers have cried long and loud for greater protection and certainly these provisions will assist their cause.

7. ENFORCEMENT AND REMEDIES

The real teeth of the Act are provided in Part VI, the provisions of which do not in terms discriminate between the unfair practices enumerated in Division 1 of Part V or the implied condition and warranty provisions contained in Division 2. Section 79 provides that any person who contravenes a provision of Part V (other than the very general provision prohibiting misleading or deceptive conduct contained in section 52) is guilty of an offence and is liable, if a corporation, to a fine of up to $50,000 or if an individual, to a fine of up to $10,000 or imprisonment for up to six months. In addition, any person who suffers loss or damage as a result of an act done in contravention of Part IV or V of the Act may, under section 82, recover damages, provided that he commences his action within three years of its accrual.

It would seem, because of the differences in the wording of the provisions of Division 2 dealing with implied conditions and warranties, and also because of the rule of construction that penal provisions shall be construed strictly,68 that a corporation which is in breach of a condition implied into a contract for the supply of goods or services by virtue of Part V Division 2 of the Act is not for that reason guilty of an offence: as to commit a breach of a term of a contract which is implied by operation of the Act is not to contravene the Act itself. Even to attempt to exclude such an implied term is not a contravention of the Act, though section 68 renders the attempt void. The penal provisions would, it seems, apply only to breaches of the provisions in Division 1 (other than section 52 which is specifically excluded) dealing with unfair practices.

oo [1972] A.C. 441, 508-509. 67 Set out supra pp. 288-289. 68 Tuck & Sons v. Priester (1887) 19 Q.B.D. 629, 638; Langan (ed.), Maxwell

on the Interpretation of Statutes (1969) 238ff.; Edgar, (ed.), Craies on Statute Law (1971) 529-531.


The same considerations might not apply to some of the other remedies contained in this part of the Act. Section 80 ( 1 ) provides "The Court may, on the application of-(a) the Attorney-General; (b) the [Trade Practices] Commission; or (c) any other person [emphasis supplied] grant an injunction" restraining a person from engaging in conduct that constitutes or would constitute any contravention of Part IV or Part V and all attempts, aiding and abetting, conspiracies to, or being a party to, such a contravention. This provision would seem to apply clearly to any of the unfair practices mentioned in Division 1 of Part V (other than section 52), but it is not so clear that it would enable a person to obtain an injunction preventing a supplier of goods supplying goods which were, for example, unfit for a purpose for which such goods are normally used in contravention of section 71(2). Certainly this is a contravention in the broad sense, but as the effect of Division 2 of Part V is to provide a statutory formula for the terms and conditions of contracts of supply of goods and services, it does not appear that these provisions impose any obligation or prohibition on persons other than obligations of a contractual nature. Even if this were not the case, it may be that the courts, despite the apparently broad wording of the locus standi provisions of this section, would not give standing to a person not himself a consumer to prevent say, General Motors-Holden, from selling vehicles which were not roadworthy. Therefore, to this extent the Act may not make available to consumers in Australia a procedure similar to that followed by consumers in the United States to prevent the sale of unfit or unmerchantable goods.4111

On similar lines it could be argued that section 82 ( 1 ) , conferring a right to bring an action for damages upon a person who suffers loss or damage as a result of a contravention of Parts IV or V, does not apply to Division 2 of Part V: as where there is a breach of a term implied into a contract by the provisions of that Division, the party suffering loss already has a right to bring an action for breach of the implied term in the contract.

Section 86 reads as follows:

Jurisdiction is conferred on the Court to hear and determine actions, prosecutions and other proceedings under this Part and that jurisdi<;tion is exclusive of the jurisdiction of any other court, other than the jurisdiction of the High Court under section 7 5 of the Constitution.

"Court" is defined in section 4 as the "Superior Court of Australia".

4111 In the U.S. the Government has been able to obtain injunctions to prevent the sale of goods which are defective or in breach of some statutory requirement: U.S. v. Vitasafe Corporation (1965) 345 F.2d. 864. It seems that where a product is dangerous the courts will award damages for breach of a duty of care: Baxter v. Ford Motor Co. (1932) 12 P.(2d) 409, affirmed (1932) 15 P.(2d) 1118. This appears to be a possible development of the principle in Donoghue v. Stevenson [1932] A.C. 562 which has not been fully considered in Anglo-Australian law.


In his second reading speech to the Senate on the Bill, the then Attorney-General stated that the Government wished to initially confer exclusive jurisdiction under the Act on a single court, so as to "assist the early development of a cohesive body of case law ... ".70 At the time of writing, no Superior Court of Australia has been established, and there is considerable and organized opposition to the establishment of such a court, mainly on the basis that while there may be a need for a system of federal courts in the United States, where the legal qualifications of some State judges are negligible, there is no such need in Australia.71 Unless such a Court is established, the "transitional" provisions of section 169 conferring exclusive jurisdiction on the Australian Industrial Court will operate. It does seem justifiable, at least in cases dealing with some of the more controversial parts of the Act, that there be uniformity of decision; but as the majority of cases dealing with important questions arising under the Act will be decided ultimately by the High Court, regardless of the jurisdiction in which they are commenced, the reasons given by ·the Attorney-General do not seem to have so much force. The advantage of having proceedings in a single Federal court would seem to be more that there would be a single procedure for all actions brought under the Act, and problems relating to service of process in the various parts of Australia would be avoided.

The jurisdiction thus conferred on the Federal court certainly includes any criminal jurisdiction and jurisdiction to hear actions arising out of contraventions of the provisions of Part V Division 1 (dealing with misleading and deceptive practices). It does not extend to actions for the breach of conditions implied into contracts for the supply of goods or services by Division 2 of Part V. Such actions fall to be determined in ordinary actions for breach of contract, to which the normal rules as to jurisdiction apply. The actions may, therefore, be heard in the ordinary course in the courts of the various States and Territories. No doubt some, but not all, difficult points of construction of the implied terms will come before the High Court on appeal, but in other cases it might well be that different courts, in the United Kingdom and Australia, will interpret the provisions differently.

If a corporation is convicted under a provision of the Act, section 83 provides that a finding of fact in the criminal proceedings is prima facie evidence of that fact in proceedings under section 82. On sight, this provision binds State courts considering c~aims for breaches of conditions implied into contracts for the supply of goods or services as a result of the operation of the Act. In practice, it is difficult to envisage any proceedings where the facts necessary to establish guilt of an offence under the Act would be material in a civil claim for breach of an

70 S.Deb. 1973, Vol. 58, 1878. 71 E.g. Commercial Law Association, Report on the Superior Court of Australia

Bill1974 (1974).

332 Federal Law Review [VoLUME 6

implied warranty; one exception readily apparent, is that a fact proved in a prosecution under section 53 or section 55 may be relevant to a claim for damages for breach of a condition implied under section 71 (or section 7 4) . However, as the Federal court hearing the charge has a wide discretion to make orders for ancillary relief of consumers under section 87, discussed infra, it is more likely that a consumer who has suffered loss would be well advised to seek an order under that section rather than to bear the expense of commencing proceedings himself.

Much of the Act applies only to corporations and there may be a problem in establishing that the corporation has the intent which is necessary to establ~sh mens rea as a necessary ingredient of the offence. It seems that at least in respect of certain offences, a corporation is capable of having the requisite guilty mind.72 However, to put matters beyond doubt, section 84 provides that it is sufficient to prove knowledge of a servant or agent of the corporation in order to prove the knowledge of the corporation itself. Section 84(2) provides:

Any conduct engaged in on behalf of a body corporate by a director, agent or servant . . . or by any other person at the direction or with the consent or agreement (whether express or implied) of a director, agent or servant of the body corporate shall be deemed ... to have been engaged in also by the body corporate [emphasis supplied].

Under the Act there will be no dispute over whether in fact a person is acting on behalf of the corporation; any action of which the corporation (by its directors, servants or agents) knew and which was done on its behalf will be sufficient to make the corporation liable. A possible loophole is the requirement that the conduct be engaged in on behalf of the corporation. In the absence of any deeming provision it appears that the prosecution would have to prove that some authorization was given by or on behalf of, or some benefit flowed to the corporation before the deeming effect of section 84 ( 2) would operate, and there may be a presumption that a corporation would not be taken impliedly to have authorized the doing of acts by its servants or agents which are illegal.

Section 85 provides a number of defences, the onus of proof of which lies upon the defendant. This seems in line with the policy behind the Act that certain practices, both restrictive trade practices and misleading practices, are per se bad and perhaps on this ground the reversal of the general rules as to the onus of proof in criminal cases as laid

72 The King and the Minister for Customs v. Australasian Films Limited (1921) 29 C.L.R. 195; R. v. I.C.R. Haulage Ltd [1944] K.B. 551; Moore v. I. Bresler Ltd [1944] 2 All E.R. 515; Leigh, The Criminal Liability of Corporations in English Law (1969); Welsh, "The Criminal Liability of Corporations" (1946) 62 L.Q.R. 345; Heerey, "Corporate Criminal Liability-A Reappraisal" (1962) 1 Tasmanian University Law Review 677; Fisse, "The Distinction Between Primary and Vicarious Corporate Criminal Liability" (1967) 41 A.L.J. 203.


down in W oolmington v. Director of Public Prosecutions13 should be displaced. In outline, the available defences to a charge of contravention of any part of Part V require the establishment by the defendant that the contravention was "due to a mistake, to reliance on information supplied by another person, to the act or default of another person, to an accident, or to some other cause beyond his control; and . . . that he took reasonable precautions and exercised due diligence to avoid the contravention". The section goes on to provide that if the defence is reliance on information supplied by another person or the act or default of another person, the defendant must, at least seven days before the hearing, give notice to the prosecutor containing information which would identify or assist in the identification of that other person.

Section 85 ( 3) provides a defence to publishers in respect of charges relating to the publication of an advertisement. Such persons must establish that they received the advertisement for publication in the ordinary course of business and did not know and had no reason to suspect that the publication of the advertisement would contravene the provisions of Part V. This is in line with State legislation74 which provides printers and publishers with a defence to a charge of publishing false and misleading advertisements. Quite properly, it is submitted, such a defence is not available to advertising agencies which actually prepare advertisements.

As mentioned above, section 63 of the Act makes it an offence for a corporation to supply goods which do not comply with the prescribed consumer products information standard. In a prosecution for breach of this provision, it is a defence if the defendant establishes that he acquired the goods for the purpose of resale from a person who carried on, in Australia, a business of supplying such goods, otherwise than as the agent of a person outside Australia, and that the defendant did not know, and could not with reasonable diligence have ascertained, that the goods did not comply with the standard or that he (the defendant) had not complied with that standard in relation to the goods; or that he relied, in good faith, on a representation by the person from whom he acquired the goods, that no standard had been prescribed in respect of the goods. In such a case the defendant is required, at least seven days before the hearing, to notify the prosecutor of the person from whom he acquired the goods.

Section 87 ( 1) provides that if in a proceeding instituted, or for an offence under Part VI, the Court finds that there has been a contravention of Part IV or V, the Court may in addition to imposing a penalty

73 [1935] A.C. 462. 74 N.S.W. Consumer Protection Act 1969-1972, s. 32(4); Vic. Consumer Affairs

Act 1972, s. 13(8); Qld Consumer Affairs Act 1970-1974, s. 45A; W.A. Trade Descriptions and False Advertisements Act 1936-1973, s. 8(4). Cf. Harding, "Advertising and the Consumer" in The Consumer and the Law (1973 Committee for Post-Graduate Studies, Department of Law, Sydney University) 64.


or granting an injunction or damages "make such other orders as it thinks fit to redress injury to persons caused by any conduct to which the proceeding relates or any like conduct engaged in by the defendant" [emphasis supplied]. This provision seems, on its face, to give the Court wide jurisdiction to make orders for the benefit of all manner of persons, most of whom are not parties to any proceedings before it. It is perhaps under this provision that consumer champions in the tradition of Ralph Nader would be able to seek to persuade the Court that relief should be granted. For the reasons previously stated it would seem that the Court has no jurisdiction in a case concerning the breach of a term of a contract implied by reason of the provisions of Division 2 of Part V. It seems that orders may be made only in cases of restrictive trade practices under Part IV and unfair practices under Division 1 of Part V. These provisions are fairly wide and no doubt it is envisaged that in cases of, for instance, misleading advertising or of the supply of goods which do not comply with consumer standards, a prosecutor could seek a declaration under the provisions of section 87. Section 87(2) specifies certain types of orders that may be made, but does so without limiting other orders which may be made. Such orders include declarations that contracts, or parts thereof, or collateral arrangements relating to contracts are void; orders varying contracts; orders directing the refund of money or return of property and orders directing payments to persons who have suffered loss or damage. Section 87 ( 5) makes it clear that the powers of the Court under this provision, in relation to a contract, do not in any way affect any other power that any other court may have in relation to the contract in proceedings instituted in that other court.

Many of the provisions of Part VI of the Act are designed to cope not so much with problems of consumer protection, but with the problems of restrictive trade practices. However, the broadest of remedies provided by the Act are not confined to cases of contravention of any provision of the legislation dealing with trade practices. The basic factor behind the whole of the legislation is consumer protection. The remedies which are provided, such as injunctions and orders for restitution, are suited equally to cases where it is proved that a corporation has engaged in unfair or misleading practices as to where the corporation has been a party to a restrictive trade practice. The division of Part V of the Act into two parts, one dealing with unfair practices and one dealing with consumer protection by means of implied terms in contracts for the supply of goods or services, is implicitly recognized in the availability of remedies. Where the Act has proscribed an unfair practice it also provides a remedy. Where, however, a contract which, because of the provisions of the Act, contains a term which is breached by the supplier, the consumer has his normal contractual remedy in the

. courts. It may be a vestige of the age of laisser-faire that a party to a


contract should be left to pursue his own remedies by a statute which in significant ways is the legislative epitaph of laisser-faire.

It would, perhaps, be unduly onerous to place on the supplier of goods the responsibility not only of complying with contractual obligations which he cannot exclude, but also to subject him to the inconvenience of the supervision of another government instrumentality. The Act may give to the consumer an effective means of enforcing a justified complaint. If so, the vigilance of individual consumers could be a more effective weapon than a new bureaucracy, but only if-and this is not made clear by the Act-the consumer is not exposed to the risk of legal costs in all actions which are prima facie justified, and if the businessman is not exposed to vexatious litigation.

The consumer may not be left in so bad a position as might at first be supposed. Legal aid schemes are expanding rapidly; the establishment of the Australian Legal Aid Office is a significant step, and various voluntary and other forms of legal aid are becoming available. It is likely that the Family Law Act 1975 (Cth) and proposed legislation relating to compensation for injury will free a great many legal resources. Whatever the extent of temporary setbacks, Australian society is becoming more affluent, and the trend is to consume more. As has been pointed out:

. . . most consumers will find action to be not worthwhile, even if there is a cause of action, simply because the value of the goods or services does not warrant the risk of incurring the costs involved.75

Professor Harding documents his own findings as to the position in New South Wales by referring to the United Kingdom Consumer Council Report, Justice out of Reach.76 The statement quoted here is just as apt if one takes the Trade Practices Act at face value. Some undesirable activities will be prosecuted by the Trade Practices Commission and by the Attorney-General; but other action under the Act will depend on the initiative of individual consumers, and therefore on their resources.

The existence of legal aid on a scale which is far greater than known before in Australia will undoubtedly provide resources for the legal sanctions on breaches of the code of commercial behaviour given statutory form by the Act. In those jurisdictions where the consumer protection agencies have the power to bring actions on behalf of the consumer, there seems no reason why those actions should not include the enforcement of rights given directly by the Act, or indirectly through the enforcement of remedies for terms which are implied into contracts as a result of the operation of the Act.

75 Harding, op. cit. 48. 76 H.M.S.O. London, 1970.


The introduction of small claims courts, 77 initially as a result of antilawyer bias in Queensland, but subsequently in other jurisdictions, may also be another forum in which a wronged consumer may enforce the rights which he has received as a result of the Act.

The philosophy underlying this move is a feeling among politicians that the costs, apparent formality and delay of litigation deter consumers, particularly the poorer consumers, from pressing claims for defective products. Some of these tribunals exclude legal practitioners from appearing before them, 78 thus giving a possible advantage to persons or corporations who have considerable business before such tribunals, as those persons can employ a skilled, though not legally qualified, person as a member of their staff to defend claims against them. If adequate legal aid were available, there would be no need for such tribunals. Many claims arising from breaches of terms in contracts for the supply of goods and services will come before these tribunals and, as there is usually no appeal and judicial review of decisions of such tribunals is limited,79 decisions of such tribunals may not be uniform. However, much of the law which the tribunals will be required to consider is relatively well settled, and they will have no jurisdiction in matters arising under the Trade Practices Act except where the Act implies terms and conditions into contracts for the supply of goods or services.

Section 1 70 provides that a person who has instituted, or who proposes institution of proceedings under Part VI of the Act, or against whom such a proceeding has been instituted may apply to the AttorneyGeneral for assistance; and if it is reasonable to do so, and to refuse would cause unreasonable hardship to the applicant, the AttorneyGeneral may grant legal or financial assistance. Both the granting of the assistance and the nature of the assistance which may be granted appear to be entirely within the discretion of the Attorney-General. This provision operates quite independently from any other legal or financial aid that may be available, though no doubt the officials of a legal aid scheme will readily approach the Attorney-General for assistance wherever they consider that there is a chance that it will be granted. To some extent, this provision appears designed to overcome the position that arises where an individual or impecunious corporation complains that it has been injured by a restrictive or undesirable practice. In the United States, the payment of lawyers under the "contingent fee" system, whereby a lawyer undertakes the conduct of a case on the basis that

77 Qld Small Claims Tribunals Act 1973-1974 (see also the Magistrates Courts Act Amendment Act 1975); N.S.W. Consumer Claims Tribunals Act 1974; W.A. Small Claims Tribunals Act 1974-1975; Vic. Small Claims Tribunals Act 1973; A.C.T. Small Claims Ordinance 1974; N.T. Small Claims Ordinance 1974.

78 Qld s. 32; N.S.W. s. 30; W.A. s. 32; Vic. s. 30. 79 Qld ss. 18-19; N.S.W. ss. 20-21; W.A. ss. 18-19; Vic. ss. 16-17. The A.C.T.

and N.T. Ordinances allow appeals to the Supreme Court.


he will receive a percentage of the verdict if the action is successful, allows impecunious persons with an arguable case to obtain legal services. In the absence of such a system in Australia, the provision of such aid as is granted under this section is desirable, though the fact that it depends on the discretion of a Minister whose political or business sympathies may not lie with the applicant does give some cause for concern.

The result may well be that the combination of the extension of legal rights, the existence of legal aid and consumer protection agencies, and increasing awareness of their rights by an increasing number of consumers will afford to the consumer a remedy without undue expense or inconvenience. Incidentally, the legal profession which is apprehensive that it may lose revenue as a result of changes in the areas of family and accident compensation law, may find that, to some extent, acting for suppliers in defence of claims by consumers will be a compensating factor. The overall cost of such litigation to the economy may be offset by the fact that goods and services are available which are not defective -a price which many, if not most, consumers would be pleased to bear.

8. CONCLUSIONS

It is too early to assess the total effect of the Trade Practices Act on consumers, on the manufacturing and distributing sectors of the Australian community, or on the Australian economy. It is certain that in many areas it is regarded with hostility; and it is also true that some consumer organizations, hardened by their experience with some State legislation which they find to be toothless, are cynical of the effectiveness of the Act. The overall reaction from consumers and those who purport to speak on their behalf is one of slightly sceptical favour.

The major problem is the constitutional one. No doubt the Act will be challenged very soon, most probably in a case dealing with restrictive trade practices, as this is the area in which most apprehension and disfavour is currently being voiced by business interests. If the Act survives this test-and it is possible that the constitutional validity of the provisions of the consumer protection parts of the Act may stand or fall on grounds different from those which apply to the restrictive trade practices and monopolies provisions-then there are the additional difficulties flowing from section 109 of the Constitution which are alluded to in several parts of this article. To what extent will the private and public lawyers who represent those interested in the enforcement of the Act rely on both State law and the Act? To what extent will they be able to do so?

Assuming that the High Court will find a constitutional basis for the Act, then it must have a significant impact on the business community. Business organizations and the Attorney-General's Department have


both given wide publicity to the operation of the Act and the types of trade practices to which it relates. It is difficult to believe that any businessman is ignorant of its operations. Many of its provisions, such as those in Part VIII relating to resale price maintenance and Part X dealing with overseas cargo shipping, are transplanted without change from the previous legislation. It is the consumer protection provisions which are the great unknown.

There will be criticisms of individual provisions of the Act, some of which will be apparent from the text of this article. These may be weaknesses which restrict or destroy the usefulness of the Act in dealing with particular practices which are commonly held to be undesirable, particularly if problems associated with section 109 of the Constitution and section 75 of the Act result in the striking down of what State legislation there currently may be in the area.

Despite this, it is suggested that the Act be looked at as a whole. If it can be supported on constitutional grounds, then individual weaknesses may be remediable by amending legislation (which is not such a remote possibility). Even given that the political colour of the government may change, consumer issues are "trendy" issues which have considerable political punch in the days of increasing urban middle classes.

The Act is an attempt to provide, in a single piece of legislation, a collection or code of provisions which prevent or regulate commercial practices thought to be undesirable because they adversely affect the consumer. In most cases the overall adverse affect on the consumer may be due in varying degree to a combination of undesirable practices; for instance (up to 1970), a combination of monopoly, resale price maintenance, deceptive advertising, pressure selling and faulty goods in respect of which recovery was prevented by an exclusion clause, might have affected a consumer adversely. In any given case the immediate complaint of the consumer will generally be directed at one only of the undesirable factors, and this will usually relate to the quality of the goods, the price, or the methods used by the supplier. All the practices dealt with by the Act are accepted by all politicians as in some degree undesirable; if one places any value on parliamentary speeches, political opposition is based on ideological questions and "States' Rights" rather than of support for the business practices attacked by the Act.

Yet it would also seem to be generally accepted that in trade or commerce in the mid-1970s it is seldom useful to talk of trade practices within a particular State; most goods (and some services) are manufactured and marketed with a national market in mind. Even if the legislation currently existing in the various States was effective to eliminate an undesirable practice within a particular State, those who profit from it might be able so to structure their activities so that they were unreachable by the laws of that State. To some extent, such avoidance appears to have followed the major changes in South Australian


law effected by the Consumer Credit Act 1972-1973 and the Consumer Transactions Act 1972-1973 of that State, with major non-bank sources of finance being still able to use more traditional (and unregulated) forms of consumer credit by having the law of some other State govern the transaction. National laws can prevent this, though the ingenuity of lawyers will no doubt devise means of circumventing the Trade Practices Act as they have done in the case of the South Australian consumer credit laws.80

For these reasons, it is submitted that though the Trade Practices Act is not perfect, it is a national law, and it does attempt to attack a multitude of causes which adversely affect the consumer. Certainly it might have been more bold in some of the measures which would greatly benefit consumers, such as providing for strict liability of manufacturers to classes of persons injured by defective products, but these matters do raise extremely complex problems both of law, and in economic terms, of cost-benefit analysis, which deserve a great deal of study. Criticisms, therefore, may be made of the technical provisions of the consumer protection provisions of the Act, but not of its aims. Once the minor ambiguities in the Act and the major constitutional difficulties are sorted out, it seems that Australia will be a place where the commercial morality to which businessmen have so long paid lip service (and for the most part observed) will be law, and breaches of it will attract sanctions. Consumers who are injured will, by a combination of the legal changes, the extension of legal aid, and the establishment of small claims tribunals, have available a channel of redress. Given that Australia is, and will remain, based on a capitalist economy, surely legislative steps in this direction are welcome.

80 Current reports say that in South Australia, to avoid the operation of the legislation, one device used is a sale by the dealer to the consumer and the credit provider as tenants-in-common. The credit provider then agrees to release his interest in the goods on payment of a sum referable to principal and interest, maintenance of the goods, right to repossession, etc. However, as credit providers become more familiar with the operation of the new legislation, they are apparently happier with its operation-to the extent that the Finance Conference of Australia is now seeking the approval of the Standing Committee of AttorneysGeneral to similar legislation throughout Australia.

Documents

CONSUMER PROTECTION AND THE TRADE PRACTICES ACT … · CONSUMER PROTECTION AND THE TRADE PRACTICES ACT 1974-1975 (CTH) BY JOHN GOLDRING* While State legislatures have responded, to