Litigation and Dispute Resolution

Not so super funds: The curious case of Baltins

8 February, 2018

In November 2017 the Australian Competition and Consumer Commission (ACCC) commenced proceedings against Apple Pty Ltd in the Federal Court of Australia, alleging that it engaged in misleading or deceptive conduct and made or false or misleading statements to consumers about the availability of remedies under the Australian Consumer Law (ACL) in respect of defective iPhone and iPad devices.

The ACCC’s entire case rested on telephone calls which officers of the ACCC made to retail stores operated by Apple Australia. The relevant calls were “based on a series of fictions” and, in particular, a ruse was employed by the officers pretending to be a fictional consumer with a fictional defective iPhone.

There were two outcomes to the initial calls made by ACCC officers in April 2016: either a communication from an Apple employee that the fictional consumer had no rights under the ACL to a free repair or, alternatively, a request was made that the fictional iPhone be brought into an Apple store so that it could be looked at by Apple technicians.

After making the initial calls, the ACCC officers thought about how they could hone their technique. They decided to add a further element, namely, that the fictional consumer lived an inconvenient distance away so that it was impracticable for the fictional consumer to come into the Apple store. This was adopted so as to make it more likely that there would be an answer given (or admission made)  by the Apple employee about whether the fictional consumer had a right to free repair under the ACL.

Ultimately, the case brought by the ACCC relied upon 13 telephone calls made in June 2016 during which an Apple employee made a statement to the effect that the fictional consumer did not have a right to free repair under the provisions of the ACL.

After proceedings had been commenced by the ACCC, Apple indicated that it objected to the evidence of the telephone calls in its entirety, including on the basis that the evidence was obtained improperly or in consequence of an impropriety within the meaning of s 138(1) of the Evidence Act 1995 (Cth). Section 138(1) provides that: 

(1) Evidence that was obtained:

(a) improperly or in contravention of an Australian law, or

(b) in consequence of an impropriety or of a contravention of an Australian law,

is not to be admitted unless the desirability of admitting the evidence outweighs the undesirability of admitting evidence that has been obtained in the way in which the evidence was obtained.

First stage – obtained improperly?

The first stage of the Court’s task under s 138(1) is to determine whether the evidence was obtained (a) improperly or in contravention of an Australian law, or (b) in consequence of an impropriety or of a contravention of an Australian law.

The Federal Court (Lee J) observed (at [34]) that to amount to impropriety the conduct in question “must be quite or clearly inconsistent with (the minimum standards expected and required in the relevant context) … mere doubts about the desirability of appropriateness of particular conduct will not be sufficient”.

The evidence adduced by the ACCC included that officers making enquiries of traders without disclosing that they are from the ACCC (described as “Jo Consumer enquiries”) are an important investigative tool for the ACCC to carry out its enforcement activities. Furthermore, the ACCC has internal guidelines or a framework as to how to conduct “Jo Consumer” operations, setting out the circumstances in which covert calls to are to be made. No evidence was adduced of the guidelines or framework, however, so the court did not know if the conduct in this case was consistent with same.

Importantly, the Court was not satisfied that the covert activity was embarked upon by reference to any perceived difficulty in the ACCC obtaining evidence relevant to the topic of the investigation, i.e. after exhausting (or dismissing as impracticable) non-deceptive investigative techniques to obtain similar evidence.

The Court also formed the impression on the evidence that the ACCC, or at least the head of the Enforcement Division of the ACCC (who gave evidence) “treated the use of deceptive investigative techniques with apparent insouciance”.

In light of the above, the Court concluded that the minimum standards expected of a regulator such as the ACCC and required in the relevant context were breached and the breaches were not minor, with the result that the evidence was obtained improperly for the purposes of s 138(1).

Second stage – the exercise of discretion

The second stage of the Court’s task under s 138(1) is to determine, by the principled exercise of discretion, taking into account the list of matters set out in s 138(3), whether the desirability of admitting the evidence outweighs the undesirability of admitting evidence that has been obtained in the way in which the evidence was obtained.

The Court observed that in its view, the particular conduct was very much at the lower end of the spectrum of impropriety. Furthermore, the ACCC officers involved subjectively believed that they were behaving appropriately (albeit in the Court’s view overzealously), with the apparent approval of their superiors, and consistent with the general approach taken by the ACCC to Jo Consumer enquiries. The evidence also had a high probative value and importance in the case that the ACCC wished to advance against Apple.

The Court thus concluded in all the circumstances that the evidence should not be excluded under s 138. Lee J stated (at [90]):

Although I have disquiet about what has occurred and some surprise that a tighter rein is not kept within the ACCC to ensure that covert activity is not engaged in unless it is strictly necessary, in the particular circumstances, I do not believe that this conduct is of sufficient seriousness such that the rejection of the evidence should be used as some way of vindicating the contravention of what I regard to be the appropriate standards of conduct. 

Take home points:

  1. It is possible for evidence obtained improperly or in contravention of an Australian law to be admitted into evidence. The Court will undertake a balancing exercise in determining whether such evidence is to be admitted or not. The relevant considerations will include the gravity of the impropriety (or where on the spectrum of impropriety, in the Court’s view, the particular conduct falls).
  2. Investigative bodies such as the ACCC need to be careful to ensure that they do not jump straight to using ‘deceptive’ methods of investigation, without first exhausting (or dismissing as impracticable) non-deceptive techniques to obtain similar evidence. The Court will scrutinise whether any ‘deceptive’ investigative techniques employed were truly necessary to obtain the evidence in question. If the answer is no, then this will increase the risk of the evidence being excluded on the basis that it was obtained improperly.

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Canadian Court elevates thumbs-up emoji to signature status

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After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed.   Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph [18], Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)."   Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and   The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and   The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter.   Judgment At paragraph [36], Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship.   Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph [63]: "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest.   What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.

Published by Foez Dewan
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Venues NSW ats Kerri Kane: Venues NSW successful in overturning a District Court decision

The McCabes Government team are pleased to have assisted Venues NSW in successfully overturning a District Court decision holding it liable in negligence for injuries sustained by a patron who slipped and fell down a set of steps at a sports stadium; Venues NSW v Kane [2023] NSWCA 192 Principles The NSW Court of Appeal has reaffirmed the principles regarding the interpretation of the matters to be considered under sections5B of the Civil Liability Act 2002 (NSW). There is no obligation in negligence for an occupier to ensure that handrails are applied to all sets of steps in its premises. An occupier will not automatically be liable in negligence if its premises are not compliant with the Building Code of Australia (BCA). Background The plaintiff commenced proceedings in the District Court of NSW against Venues NSW (VNSW) alleging she suffered injuries when she fell down a set of steps at McDonald Jones Stadium in Newcastle on 6 July 2019. The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. In addition, VNSW challenged the findings that the steps met the definition of a 'stairwell' under the BCA as well as the trial judge's assessment of damages. Decision on Appeal The Court of Appeal found that primary judge's finding of breach of duty on the part of VNSW could not stand for multiple reasons, including that it proceeded on an erroneous construction of s5B of the Civil Liability Act 2002 and the obvious nature of the danger presented by the steps. As to the determination of breach of duty, the Court stressed that the trial judge was wrong to proceed on the basis that the Court simply has regard to each of the seven matters raised in ss 5B and 5C of the CLA and then express a conclusion as to breach. Instead, the Court emphasised that s 5B(1)(c) is a gateway, such that a plaintiff who fails to satisfy that provision cannot succeed, with the matters raised in s 5B(2) being mandatory considerations to be borne in mind when determining s 5B(1)(c). 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Published by Leighton Hawkes
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