The Trade Practices Act comes to the rescue of debtors
In previous issues we have discussed the unconscionable conduct provisions of the Trade Practices Act and in particular the decision in Berbatis Holdings (ACCC v CG Berbatis Holdings Pty Ltd (2000) ATPR 410778) (Law Reporter, February 2000) in which the Australian Competition and Consumer Commission (ACCC) ran a successful action for one consumer which was forced to sign a new lease in a shopping centre. Unconscionable conduct is linked to other provisions of the TPA including section 60 which prevents persons from harassing debtors. Just how much pressure can be used by a creditor in trying to collect moneys due to it? This is particularly relevant at a time when things are getting tough and there are increasing pressures for debts to be met. In Australian Competition and Consumer Commission v McCaskey ((2000) ATPR 41-780) the limits of section 60 of the TPA which prohibits such coercion, and its linking to other provisions of the Act was considered by French J who had decided the Berbatis case. The facts are taken from the CCH Law Report of the case.
A debt collection agency (Cash Return Mercantile Pty Ltd) and its former agent (Sharyn McCaskey) admitted engaging in undue harassment and coercion as well as misleading or deceptive conduct in connection with the collection of debts and consented to the making of various orders by way of declaration and injunction against them. Evidence, arising from attempts to collect payment from four debtors, indicated that McCaskey had made an excessive number of telephone calls to debtors, adopted a threatening, aggressive and abusive manner in those telephone calls and misled debtors and others about debt recovery procedures and the consequences of non payment of debt. The ACCC sought various orders by way of declaration and injunction against the respondents based on alleged contraventions of sections 52, 53(g) and 60 of the TPA. Section 52 of the TPA prohibits misleading and deceptive conduct; section 53(g) prohibits a person to claim on a remedy which he does not have. French J held that the debt collection agency and McCaskey had engaged in undue harassment, coercion and misleading conduct while collecting debts from consumers.
In considering the issue of harassment which I would like to deal with in more detail here, French J noted that in considering section 60 of the TPA that the word harassment must serve two broad purposes. First of all it describes a range of conduct in connection with the supply of goods or services and would have to include among other things "repeated pressure on a consumer" which is under no pre-existing obligation to acquire those goods or services. It must also refer to conduct in relation to a consumer who is under no obligation to make payment for goods and services. In all the circumstances a court would have to evaluate the relevant conduct. If a consumer owed money to a supplier he/she could expect repeated unwelcome approaches requiring payment of the debt if they had not been paid. Such demands would not be regarded as harassment. However, if the frequency, nature or content of the approaches and any communications made were such that they were calculated to intimidate or demoralise or exhaust a debtor rather than to convey that payment was due, this would amount to harassment.
French J also noted that most of the incidents in this matter fell within the scope of the criteria of undue coercion and indeed some might have amounted to undue harassment. He also considered that coercion prohibited by the TPA might occur where a demand served on a debtor was not issued with the legitimate purpose of reminding him or her of the obligation to pay and that legal proceedings might be instituted but "was calculated otherwise to intimidate or threaten the debtor". Certainly if the threat included a suggestion that criminal proceedings or seizure of property might occur (which is rarely available unless certain mortgages are held) the coercion is likely to be seen as being unwarranted or undue. His Honour did not find that the other provisions in the TPA (eg sections 52 and 53(g)) were, however, breached. In finding that a breach of the TPA had occurred his Honour suggested that a trade practices compliance program should be put in place. The question that a person in McCaskey's position might ask himself or herself in relation to the demand for payment was put by the judge in these words:
"Are the contents, the timing, the location and other circumstances of my demand for payment reasonably calculated to remind the debtor of his or her obligation, specify a time within which it must be satisfied and indicate that civil proceedings will be instituted if payment is not made?" This is a useful reminder of the level to which one should go in pursuing rights in recovering payment. His Honour also ordered that suitable advertisements should be placed by the company in appropriate newspapers announcing what steps were being taken in relation to the matter. Injunctions were ordered against the company to refrain from similar conduct for three years. The decision is another example of the operation of the TPA in this area of consumer activities and a salutary reminder for moderation in the way in which persons seek to deal with consumers.
The purpose of this database is to provide a full-text record of all articles that have appeared in the CDJ since February 1997. It is aimed to assist in the research and reference process. The database has a full-text index and will enable articles to be easily retrieved.It should be noted that information contained in this database is in pre-publication format only - IT IS NOT THE FINAL PRINTED VERSION OF THE CDJ - therefore there might be slight discrepancies between the contents of this database and the printed CDJ.
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