Case: Australian Competition &amp; Consumer Commission v Michigan Group Pty Ltd (ACN 065 378 029) [2002] FCA 1439
Outcome: applied
Whether Mama's had reasonable grounds for believing the truth of representations about a future matter involves an objective test. The same is not true of the alleged personal accessories: the applicants must "demonstrate that such a person: &#8226; knew that the representation was made, and either: &#8226; knew that it was misleading; or &#8226; knew that the corporation had no reasonable grounds for making it": Australian Competition &amp; Consumer Commission v Michigan Group Pty Ltd (ACN 065 378 029) [2002] FCA 1439 at [303] per Dowsett J. Nor, unlike the corporation involved (cf s 51 TPA) does a natural person bear any onus. 150 I accept the applicants' submissions that: &#8226; The following representations can be characterised as representations as to future matters: (a) if not satisfied and provided a 6 or 12 month period had expired since the oven was supplied, the proprietor had a right to require Mama's to take the oven back whereupon they would be released from all financial obligations in respect of the oven; (b) if not satisfied and provided a 6 or 12 month period had expired since the oven was supplied, the proprietor had a right to require Mama's to cancel the lease with the financier whereupon they would be released from all financial obligations in respect of the oven; (c) the supply of the oven was financially risk free. &#8226; There is no evidence that Mama's had reasonable grounds for believing that any of those representations was true. As to Mr Hilder and Mr Soo respectively, to the extent that each was involved, he knew that the representation was made and either knew that it was misleading or that Mama's had no reasonable grounds for making it. &#8226; There is no doubt that the representations were misleading and deceptive: (i) the oven recipient would not be released from all financial obligations in respect of the oven upon its return after the nominated trial period; (ii) Mama's was legally unable to cancel the lease with the financier upon such return; and (iii) the acceptance of the oven from Mama's was far from financially risk-free: any such freedom depended on Mama's willingness, if need be, to sustain a substantial loss in respect of the oven and, at least, to put itself heavily out of pocket in relation to the oven until a resale of the oven and, in reality, permanently out of pocket to some degree, even assuming the willingness of the financier to finance a resale or to accept termination of its lease arrangement. 151 Quite apart from these in limine ways in which the representations were misleading and deceptive, there are other grounds for so concluding: &#8226; In none of the five cases was the oven taken back as requested or provided. Nor were the oven operators released from their financial obligations to the financiers. They were landed with an overpriced oven which, on the respondents' recommended system, had proven unprofitable, and were subject to substantial credit charges under a long-term contract. That is a long way from supposedly having entered into a financially risk-free arrangement. &#8226; Neither Mama's nor Mr Hilder had any arrangement with the financiers that envisaged a six (or 12) month trial period or a release of the lessee from obligations after 6 (or 12) months for any reason whatsoever. &#8226; Both Mr Hilder and Mr Soo (especially Mr Hilder but, quite firmly in my mind, also Mr Soo) well knew that they were at least gilding the lily. They both knew the propensity of financiers to insist upon the performance of obligations to them by their borrowers and quasi-borrowers. They both knew that what they were telling their prospects who became oven recipients was not in accordance with the realities of loan financing and the ease of resale of a second-hand oven originally sold at greatly over value. &#8226; They both knew all the essential ingredients of the misleading and deceptive aspect of the transactions which I have identified. Mr Soo understood the financing arrangements. He knew that, as between the oven "owners" and the financiers, there was a 60 month deal, not one for a risk free 6 month trial. Mr Hilder negotiated the financing. &#8226; Mr Hilder preferred not to face up to the complainants. Mama's entire system of operations was his invention.