THE UNIVERSITY OF SYDNEY
FACULTY OF LAW
EXAMINATION FOR THE DEGREE OF MASTER OF LAWS AND
THE GRADUATE DIPLOMAS IN LAW AND IN COMMERCIAL LAW
CONSUMER PROTECTION LAW —
POST-SALE CONSUMER PROTECTION
JUNE 1999 TIME ALLOWED: 2 HOURS
READING TIME: 15 MINUTES
CANDIDATES MUST ATTEMPT TWO (2) QUESTIONS.
ALL QUESTIONS ARE OF EQUAL VALUE. EACH QUESTION MUST BE WRITTEN IN A SEPARATE BOOK.
THIS IS AN OPEN BOOK EXAMINATION.
Question 1 (Attempt both parts; each part is of equal value)
(a) Ben owned a luxury home on the outskirts of Sydney. Because of the large grounds and vast expanse of lawn he felt he needed a special lawn mower and ended up purchasing from a retailer an Acme brand "sit -on" mower at a cost of $10,000. Most such mowers are sold to sporting clubs or town councils, but about 10% are sold to wealthy individuals such as Ben.
Ben bought the mower partly because of advertising saying "service and satisfaction are always guaranteed when you buy Acme".
He was dismayed when he found after 12 months that his machine used a new technology, which very few technicians understood, as a result of which he had to wait for 2 months to have it repaired when it broke down. His dismay turned to anger when after 18 months a vital part broke and Acme said it regretted that this imported component part was no longer made by its overseas manufacturer and no replacement part was available.
When the mower was delivered to Ben he was handed an "Owner's manual" at the back of which was the statement: "Acme attempts to keep a full stock of spare parts at all times but regrets it cannot guarantee their availability longer than 12 months after the date of sale; moreover, repair work by our own technicians is available only at our factories in Melbourne and Brisbane". When he agreed to purchase the mower in the dealer's showroom copies of this manual were available for perusal, but (like most customers) Ben thought there was no need to do so until his mower was delivered. Acme Ltd, the manufacturer of the mower, had asked all dealers to display a sign drawing attention to "important notices in the owner's manual" but the retailer had not done so.
Ben is threatening to sue Acme for breach of its obligations under Division 2A of Part V of the Trade Practices Act. Acme seeks your advice as to any liability it may have to Ben, and also asks how it might better protect itself from liability in future.
[see next page for question 1 (b)]
Question 1 (cont)
(b) Anne has for many years conducted a business cleaning and restoring clothes. Notices at her shop proclaim prominently that she specialises in handling delicate fabrics and leather goods. She operates as a sole trader. When customers leave clothes for cleaning they are handed a document headed "Claim Docket" which sets out the customer's name, the work to be done and the charge, and the time when the clothes will be ready. On the bottom is printed:
Anne is not liable for any loss or damage in excess of $50, whether caused by breach of contract (including fundamental breach) or otherwise.
Bill brought his expensive leather coat to Anne for cleaning. It was ruined because she applied to it a cleaning agent which she should have realized was not suitable for leather. He had not dealt with Anne previously.
Elizabeth had dealt with Anne regularly over the past two years, but had never noticed the words at the bottom of the docket. She brought to Anne for cleaning a valuable fur coat. Anne cleaned it perfectly, but she was so taken with its quality that at lunch time she wore it to lunch at a nearby restaurant. Her lunch companion, who had just lost her job, became rather intoxicated and knocked over a bottle of red wine. Most of the wine landed on the fur coat, which now has a large stain which cannot be removed.
Anne refuses to pay any more than $50 to either Bill or Elizabeth, both of whom seek your advice.
[examination continues next page]
Question 2
John conducted a pizza restaurant in premises which he leased in a large suburban shopping centre. Sandra leased a shop in the same shopping centre in which she conducted a toy shop. Both were very experienced business people and had conducted many successful businesses previously. Each was making much more profit from their current ventures than they had expected when they took their leases. Both leases were about to expire and each started negotiations with the landlord with a view to renewal.
John was inclined to move to a recently opened centre nearby where he thought he could be even more successful than at present. However, the landlord persuaded him to continue negotiations for renewal of his present lease. In the course of these negotiations the landlord induced John to reveal his profit figures for the past 12 months, saying he needed to satisfy himself as to the future prospects of the business. John had never previously shown such figures to the landlord but he did not object because the landlord's policy had always been not to lease shops in the centre to people who would be direct competitors of existing tenants. Shortly thereafter John renewed his lease. Unknown to John, the landlord had revealed John's trading profit to Pizza Barn, a nationwide franchisor of pizza restaurants which was considering leasing a site very close to John's. (That site was currently operated as a Chinese restaurant.) Two weeks after John renewed his lease, a franchisee of Pizza Barn opened in the former Chinese restaurant, and a month later John's takings had fallen to half their previous level.
Sandra, who had previously had a lease for 3 years, was told her lease would be renewed only on the basis that her lease would be for 7 years, with a right on the part of the lessor but not of the lessee to determine the lease earlier on giving 6 month's notice. Sandra was desperate to renew the lease because although the business was very successful she owed a great deal of money because she had guaranteed a loan to her son's company, which had recently been placed in liquidation. She was also in a fragile emotional state because her devoted husband of 20 years had recently dropped dead from a heart attack. She signed the new lease, but was shortly after offered a lease in another shopping centre which she considers will provide a much better environment for her shop.
Advise John and Sandra whether they may obtain relief under sections 51AA, 51AB, or 51AC of the Trade Practices Act.
[examination continues next page]
Question 3
EITHER
"The Australian Law Reform Commission recommended that Australia adopt a system of strict product liability based on recovery for loss caused by the way the goods acted. Unfortunately, the Government adopted a liability regime, based on the EC Directive on product liability, under which it is essential for the plaintiff to prove that the goods were defective. In the result we are left with a regime which in practice is likely to result in a standard of liability little different from that arising under the tort of negligence."
Discuss.
OR
"The development risks defence contained in s 75AK(1)(c) of the Trade Practices Act is essentially inconsistent with a system of strict liability. It should be repealed without delay."
Discuss.
[end of examination]