Reference no: EM133200323
CONSUMER PROTECTION
Problem 1
In April 2016, the Federal Court of Australia found that the maker of Nurofen, Reckitt Benckiser, breached section 18 of the Australian Consumer Law "and another section of the ACL". The Federal Court found that Nurofen's "specific pain" range misled consumers because they all contained the same active ingredient - ibuprofen lysine 342mg - and did the same thing. Nevertheless the "specific pain" range cost twice as much as the "non- specific" general Nurofen product. The products promised to relieve back pain, period pain, and tension headache or migraine, even though it is not possible to specifically target pain relief in such a manner.
It was admitted by the ACCC that if a consumer looked carefully he or she would have noticed small print on the packets that said that the active ingredient in each of the products was the same.
The ACCC was responsible for bringing legal proceedings against the manufacturer in the Federal Court. What arguments do you believe the ACCC would have presented to the Court in relation to the breach of s 18? Would the ACCC also be able to argue a breach of s 29?
Refer to relevant cases to support your analysis of the legislation.
Problem 2
Olga migrated to Australia with her husband and two children from Russia one year ago. Her command of English is poor, and she has little understanding of everyday business matters. While home alone, a sales representative of "Feel Good Gymnasium" knocked on her door, with an offer for a two-year family deal at the gymnasium for $5,000. The salesman explained that it was necessary in Australia for her children to be fit and in good shape at school, or else they were likely to be bullied. Olga, hearing this from the salesman, signed the gymnasium membership contract immediately. She also made an initial advance payment of $1,000.
Olga's husband Peter returned home that evening, and learned about the gymnasium expenditure. He was very upset and angry. As the couple have recently migrated, they have little money, and Peter believes that the salesman made up the story about bullying at school.
Olga now wishes to get her money back and get out of the contract. Advise Olga of any statutory rights she has under the Australian Consumer Law against "Feel Good Gymnasium". Use appropriate sections and cases to support your argument.
Problem 3
Mitchell is an avid soccer player. He purchases a new pair of soccer boots from SportsPlus. The boots are very expensive and are at the top of the range, costing $299. The boots are made by Spike, a company using a distinctive arrow to brand and market all of its products. There is a large arrow on the side of each of the soccer boots that Mitchell has purchased.
After using the boots at two soccer training sessions, the arrow on one of the boots has started to lift and has almost peeled off altogether. Mitchell would like a refund. The store says that a refund is not possible, and insists that the boots must be sent for repair. It will take 7 days for the boots to be fixed. The store also points to the sign at the check-out counter which states that: "SportsPlus will only be liable for whichever is the lowest of the cost of repair or replacement of faulty items."
Advise Mitchell of his rights, and any relevant remedies, under the consumer
guarantee provisions of the Australian Consumer Law. Do not discuss any potential claims that may be made under s 18 or s 29 of the Australian Consumer Law. Please ensure that you use relevant authority in support of your answer (ie: cases and/or legislation).
Problem 4
Monarch Mattresses sells a range of mattresses. The mattresses are on display in its showroom, which is open to the public. Monarch Mattresses' business practices include the following:
• Advertising its mattresses with the statement "Sleeping on our mattresses feels like floating on a cloud".
• Advertising its most popular mattress, the "Cloud 9" as "Was $1,800, Now Only $1,200".
• Advertising its mattresses as being "ideal for asthma sufferers, as endorsed by the Asthma Council".
• Displaying a sign in its showroom that states: "Mattresses can only be returned if covered by Monarch Mattresses' 30 day warranty period".
Monarch Mattresses has never sold the "Cloud 9" mattress for $1,800. It has also never had the materials that its mattresses are made out of tested for allergies or had any direct dealings with the Asthma Council.
Advise Monarch Mattresses whether they have breached section 18 and any of the sub- sections in section 29 of the Australian Consumer Law, including references to any relevant legal cases to support your arguments. Ensure you specifically consider each business practice under both section 18 and section 29, and identify any specific contraventions.
THE LAW OF TORTS
Problem 5
Ashraf Ghani completed a diploma in Cooking and Baking at William Anguish College. Immediately after graduating he set up his own bakery in Dandenong that he called "Kabul Breads". A few months later, as things were going well, Ashraf decided to expand his business. Around that time, he met an old Afghani friend, Shah Masood, who was an accountant and a financial adviser. They discussed Ashraf's expansion plans, and Shah quickly offered to review his financial situation and to prepare a business plan. As Ashraf was financially ignorant and needed expert guidance, he accepted Shah's offer and gave him his financial records.
Shah prepared a financial report and advised Ashraf that he was in a sound financial position, and that he could expand his business. He recommended that Ashraf borrow money in order to set up a new bakery on fashionable Lygon Street, in Carlton (a suburb of Melbourne).
Ashraf trusted his friend and decided to act on the advice. He borrowed $500,000 from "For You Only", a small credit union located in Springvale that provides loan and overdraft facilities. "For You Only" used the financial report prepared by Shah to offer a loan to Ashraf. Ashraf signed a five-year lease.
Soon after opening his new shop, Ashraf realised that people who visit the Lygon Street area generally only buy traditional Italian food and bread - there was no market for Afghani bread. Ashraf came under financial stress, and blamed Shah for his situation. Shah admitted that he had not adequately factored in Ashraf's pre-existing debts, and had underestimated the significant costs associated with setting up the new business. Shah advised Ashraf to terminate the lease and inform "For You Only" that he would be unable to repay the loan. "For You Only" is faced with significant losses.
(a) Advise Ashraf about his prospects of success in an action against Shah in the tort of negligence. Refer to relevant cases and statutes.
(b) Does Shah owe "For You Only" a duty of care? Refer to relevant cases.
Problem 6
The Big Cheese Pty Ltd makes cheese. During the manufacture of a particular batch of cheese marked ‘use by 31 March 2019', The Big Cheese omitted to put the batch through the bacteria treatment process which usually kills any bacteria which has affected the cheese. The cheese was then packaged in airtight plastic packaging and was sold to Monash Supermarkets Pty Ltd for sale in their supermarkets.
On 15 March, Louisa purchased a block of cheese which was marked ‘use by 31 March 2019' from Monash Supermarkets Pty Ltd in Caulfield. Louisa stored the cheese in the refrigerator but did not look at the ‘use by' date. On 7 April, during her lunchbreak at work she ate part of the cheese which was contaminated by bacteria and became very ill. She
fainted in the office, and in the process of fainting she slipped on the power cord of her laptop computer, which was dragged over the side of her desk and dropped to the floor, causing the screen to crack. The laptop was valued at $5,000. Louisa was admitted to hospital, incurred ambulance and medical expenses, and was unable to work for 6 weeks.
Advise Louisa of her prospects of success in an action against The Big Cheese Pty Ltd in the tort of negligence. Please discuss all elements of a negligence action and any defences that might apply. Please ensure that you use relevant legal principles and authority in support of your answer (ie. cases and/or legislation).
THE LAW OF BUSINESS ORGANISATIONS
Problem 7
Vance and Cadel are good friends and enthusiastic cyclists. Vance has won several events and is well-known in the cycling community. Now in their sixties, they decide to start a small business selling bicycles and establish a partnership. It is agreed that Cadel will play a more active role in the day-to-day running of the shop whilst Vance will do promotions and continue racing on the veterans' circuit, wearing the partnership's colours. It is also agreed that Cadel may purchase stock for the business, up to the value of $5,000 per month.
Several months after the partnership was established, Cadel purchases six high performance Italian racing bikes from Avanti's agent in Melbourne. Each racing bike costs $15,000. When the invoice arrives, Vance is angry and refuses to agree to pay. These were clearly the most expensive bikes that Cadel had ever ordered. Avanti threatens legal action against the partnership.
Advise Vance whether he can be held liable for the purchase made by Cadel, under the Partnership Act.
Problem 8
Jacob Farook's company, JF Solar Panels Pty Ltd, has been running a solar panel business for many years. Jacob is the sole director and the sole shareholder. In July 2016, Jacob ordered glass panels to the value of $1 million from Glass Makers Pty Ltd, a glass wholesaler, as he had done on many occasions. At around the time that the order was placed, the company was experiencing serious cash-flow problems, and was unable to pay its debts. Jacob, who was immersed in the research and development side of the business, did not pay sufficient attention to the company's accounts, and only realised that it was in serious trouble a month later.
When the glass was delivered in September, the company could not pay the account and it has remained unpaid. The manufacturer is now suing both the company and Jacob. Advise Jacob of the extent (if any) of his personal liability.
Problem 9
Ace Cleaning Ltd (AC) was established in 2010. It specialises in providing office cleaning services in the central business districts of several states. It has two directors (Ellie and Abdul), and Ang Lee is the CEO. The company secretary is Renae. The company was very profitable for the first few years of operations, and in February 2015 it entered into a contract with Cleaning Systems Ltd (CS) to purchase a new vacuum and washing equipment system for $5 million, payable over three years.
In April 2016, AC was facing financial difficulties. Indeed, it had the appearance of insolvency: it couldn't pay its cleaning suppliers and the bank was dishonoring its cheques due to insufficient funds in AC's bank account. Nevertheless, Ellie and Ang Lee committed to a $300,000 advertising campaign, genuinely believing that it would help boost sales. Abdul was not involved in making this decision, as he had decided to visit his dying father back in Malaysia.
Unfortunately, the campaign did not produce the required results, and AC has been put into liquidation. Advise Ellie, Abdul and Ang Lee whether they can be made personally liable for the money owed for the advertising campaign. Refer to relevant cases and statutes.
Problem 10
Emilio and Fernando are directors of the company Planet Express Pty Ltd. Emilio's friend Amy promises Emilio a free trip to Europe for 3 weeks if Planet Express Pty Ltd buys shares to the value of $1 million in Amy's company, Moonlight Pty Ltd. Emilio does not do any research before deciding that Planet Express Pty Ltd should invest in Moonlight Pty Ltd, because Amy is his friend, and he is enticed by the free trip. He does not disclose these matters to Fernando. Moonlight Pty Ltd is very poorly run and goes out of business six weeks later. Planet Express Pty Ltd loses its $1 million investment.
Advise Emilio whether he has breached any of his obligations under the Corporations Act 2001 (Cth) in connection with Planet Express Pty Ltd investing in shares in Moonlight Pty Ltd. Please ensure that you refer to relevant sections of the legislation and any relevant cases to support your answer.