The issue of unfair business practices came to the fore recently when a Magistrate found a Queensland businessman guilty of wrongly accepting payment for goods and services. Knowingly accepting payment without ever supplying the good or service is an offence under the Australian Consumer Law (ACL). Below, we summarise the facts and the Court’s decision as well as what allowances consumer law makes for those occasions when a business receives payment but fails to supply.

The Case

The defendant, Mr Nathan Todd Kerrins, was the sole director of Fix My Home Australia Pty Ltd, trading as The Trusted Group. The matter itself concerned two contracts that Mr Kerrins had made. In the first agreement, Mr Kerrins agreed to supply a building company in Mackay with a yearlong internet advertising campaign. The company paid Mr Kerrins $2,200 to ensure that it appeared on the first page of Google search results. Similarly, Mr Kerrins contracted with an aftermarket vehicle parts supplier in Victoria. Under that agreement, he promised to provide a Google advertising campaign. The company paid Mr Kerrins $1,980.

Mr Kerrins fulfilled none of his obligations under either agreement. In addition to not delivering the promised services, he also did not give either company a refund. Mr Kerrins’ company ceased operations in January 2016. On 12 September 2016, Mr Kerrin was found guilty in the Southport Magistrates Court of two counts of wrongly accepting payment for goods and services. The Magistrate fined Mr Kerrin $13,000 and ordered him to pay compensation of $4,180 to those businesses for whom he failed to supply his services. The Office of Fair Trading Queensland (OFT), the state consumer protection agency, was instrumental in bringing about Mr Kerrins’ conviction. Executive Director Sharon Simmers said that the conviction served as a ‘clear reminder’ to all businesses of their consumer law responsibilities. She further warned that the OFT would ‘vigorously’ pursue those businesses who ‘rip-off’ customers, irrespective of whether those customers were individuals or businesses.

Wrongly Accepting Payment

Section 36(1) of the ACL prohibits a person in trade or commerce from accepting payment, or other consideration, for goods or services if he or she does not intend to supply those goods or services at the time of receiving payment. If a person wrongly accepts payment to provide a financial service or provides a service that is materially different, he or she can be prosecuted under Section 12DI of the Australian Securities and Investment Commission Act 2001 (Cth).  

Significance of the Case

Mr Kerrin’s prosecution reminds all businesses that engaging in unfair practices which seek to defraud consumers and other businesses are prohibited. It also confirms the fact that regulators will not hesitate to act if they believe that a business has blatantly ignored its obligations under the ACL. As such, the case reminds the business community that one of the goals of consumer law is to protect consumers (and businesses, who are treated as having the same rights as consumers in specific instances) in the marketplace from unsavoury commercial practices. Moreover, it also provides a mechanism whereby businesses that choose to engage in such behaviour and their directors become publicly accountable.

Supply Within a Reasonable Time

The law does, however, recognise and accept that in some situations, despite all best efforts, a business may receive payment for a good or service but nonetheless not supply it. The ACL places obligations on business but in a realistic and practical manner.

The ACL requires that a person engaged in trade or commerce who accepts payment or other consideration to supply a good or service to do so within the nominated time. If the parties did not specify a particular time, the business must supply within a reasonable time. However, the ACL makes two exceptions to this rule. 

First, it provides that the rule does not apply if the failure to supply is beyond the individual’s control, and he or she took reasonable precautions to avoid such failure. Similarly, the rule does not apply if a person offers to supply different goods or services as a replacement to the customer and the consumer agrees. Most importantly, if the individual or business provides a refund promptly in the case of a genuine inability to supply then, in general, there should be no issues with the ACL.

Key Takeaways 

These particular exceptions to the obligation of a person in trade or commerce to supply a good or service upon receipt of payment reflect the capacity of consumer law to allow for the exigencies of doing business. They ensure that businesses will not face negative consequences at law merely because life and doing business is an imperfect process. In turn, this highlights the fact that consumer law does not exist simply to penalise business in a vacuum devoid of reality. Rather, it seeks to protect consumers in the marketplace from unscrupulous commercial practices.  Such protection is necessary because suppliers often have more power than individual consumers. Left on their own, consumers would most often not have the means of making businesses accountable for their actions.

Although a business can unknowingly mislead consumers, civil and criminal penalties are typically reserved for intentional conduct. If you have any questions about your obligations under the ACL or need assistance resolving a dispute with a supplier, get in touch with our consumer lawyers on 1300 544 755. 

Carole Hemingway

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