10 December 2007
Key Points:
Courts are applying the unconscionable conduct provisions of the Trade Practices Act. The relevant target audience may include the gullible, the not so intelligent and the poorly-educated.
The Federal Magistrates Court recently echoed New York City Police Department Detective Lieutenant Theo Kojak: "Who loves ya, baby?"
In Wood v Dancertext Pty Limited [2007] FMCA 1410 the conduct which formed the basis of the litigation was the offering of an SMS messaging service, purporting to come from a "secret admirer". The applicant, Ms Wood, was the recipient of the following SMS message upon her mobile phone:
"Free MSG you have a secret admirer! Reply CHAT to this message to be connected. For help 1300 659 707. Average message cost 2.70 MSG pair."
Ms Wood telephoned the help number provided and spoke with an employee at IMP Mobile. She was assured that the message was not a scam, and that her "secret admirer" was genuine.
In fact, there was no secret admirer. In answer to the question "who loves ya baby", the answer should have been "no-one".
While the astute, intelligent and well educated person may have been wary of the offering of such a service, Ms Wood was not. She was depressed and vulnerable to succumb to the conduct based on the content of her SMS messages, including "I want 2 escape disappear " and "I haven't been happy for so long".
In the result, the operator of the service was held to be guilty not only of misleading and deceptive but also unconscionable conduct.
Misleading and deceptive conduct
On one level, it is perhaps not surprising that Federal Magistrate Raphael held that the representations made by the service constituted misleading and deceptive conduct in circumstances where there was no "secret admirer". He was also satisfied that the conduct was "in trade or commerce" because the service was a commercial activity for which Ms Wood had paid.
Unconscionable conduct
In addition to finding that the conduct was misleading and deceptive, Federal Magistrate Raphael also held that it was unconscionable and was in breach of section 51AB of the Trade Practices Act 1974 (Cth).
Such findings have been seldom in the past. In order for conduct to be unconscionable, Federal Magistrate Raphael noted that it must constitute "serious misconduct", be "clearly unfair or unreasonable" and show "no regard for conscience" or is "irreconcilable with what is right or reasonable".
He found that the conduct in this case amounted to unconscionable conduct because he held that the respondent knew that Ms Woods was susceptible to claims that she had a secret admirer, based upon the content of her SMS messages indicating that she was suffering from depression.
Damages and injunctive relief
In the result, Ms Wood was awarded compensation equivalent to the monetary sum she expended on SMS messages or telephone calls to the respondent's number. $4,394.20 plus interest of $395.00 (at court rate of 9 percent).
Orders were also made preventing the respondents from providing the SMS service in the future. In making those injunctions, Federal Magistrate Raphael took into account public interest in circumstances where the conduct was not merely confined to the applicant, noting that it was the respondent's business "to ensure that these messages went out to as many persons as possible". He also noted that the granting of an injunction may deter other persons from acting in a similarly unconscionable manner.
Conclusion
This case is significant as it provides an example of what constitutes unconscionable conduct and because it raises the question of how foolish people should be dealt with in terms of allegations of misleading and deceptive conduct.
In this case, however, the target audience of the SMS service was not the "ordinary" or "reasonable" but rather the foolish or the gullible. The courts in a number of cases have previously expressed the view that an "extraordinarily stupid person" and persons who are extremely stupid or gullible will not be protected by section 52.
Similarly in Capomar Sociedad, Limitada v Nike International Ltd [2000] HCA 12 the High Court stated that "in an assessment of the reactions or likely reactions of the "ordinary" or "reasonable" members of the class of prospective purchasers … the court may well decline to regard as controlling the application of section 52 those assumptions by persons whose reactions are extreme or fanciful".
In this case, the Federal Magistrate found that there was both misleading and deceptive and unconscionable conduct. Common sense dictates that this was the correct result. However, reconciling the decision with the reasonable person test of what is misleading and deceptive involves some legal gymnastics -- unless the vulnerable and gullible audience can nevertheless be reasonable.
For further information, please contact Colin Loveday.
