Problem Question

Auctioneer sold cars to Person A at an auction. Person A was a rogue who have false details and asked to take the cars in return for a cheque. After the auction, Person A signed a certificate that ownerhip of the vehicles would not pass to him until the proceeds of the cheque were credited to the Auctioneer. The cheque failed. Person A sold one of the cars to a third party. Auctioneer brought action to recover the vehicle. When did the property pass? What rights does the third party have

It is a valid contract of sale of goods between parties. Ownership passed when the hammer fell. The contract had formed before the certificate was signed, thus the intention can not be inferred. As property did pass, the innocent third party can obtain ownership (If it hadn’t passed, he would not be able to → unless nemo dat exception). Sellers Lien was lost when he handed it over, Auctioneer has no right to recovery.

Seller sold a heifer to Buyers. Buyers did not obtain possession of the animal as it disappeared from its pen. Seller sued the buyer for the price. The contract stated that the heifer was at the buyer’s risk after fall of the hammer and payment must be settled immediately after sale. If it was not settled, then the heifer would be resold. Did ownership pass to the buyer at hammer fell? Who bears the loss?

Valid contract of sale of goods. The risk clause does not show that the ownership would not pass at hammer fall, risk and property can pass separatelty. Thus, ownership would pass immediately regardless of the risk clause. The ability of the seller to resell does not mean ownership stays with seller, as the right to resell does not equal keeping ownership - it is merely a legal remedy. It is a resolutive condition (ownership passes immediately) - if something goes wrong later, the seller still gets certain rights (such as being able to resell). Rather than a suspensive condition where ownership would only pass upon condition fulfilled. Thus, the buyer bears the loss.

Person A sold their business to Person B. The sale included equipment, which was delivered to the buyer on the date of agreement. The purchase price was to be paid in 10 monthly instalments. Five instalments were paid. The buyer became insolvent and defaulted owing $180,000. The Seller claimed that property in the equipment had not passed and demanded its return. There was no express provision for the passing of property nor RoT. Who has ownership / risk

Ownership passes when a contract is made, unless a different intention. Rule 1 of s 23 applies because the goods are specific, unconditional (even with a payment schedule). Delay in payment or delivery does not impact ownerhsip

Vendors agreed to sell all merchantable timber growing in Latvia. Merchantable means all trunks and branches of trees but not seedlings and young trees of less than 6 inches in diameter. The buyers had 15 years to cut the timber and were to cut at 15,000 per annum. The contract was annulled due to a Latvian land law. Thus, the buyers claimed the contract had been frustrated and therefore dissolved. The vendors argued that the property in the timber had passed and that the buyers owed them the balance of the purchase price. Did ownership pass when the contract was signed?

No, because the goods were not specific. You could not identify which trees were included at the date of contract as they needed to grow and be measured. Even if they were specific, the trunks needed to be identified and measured to ascertain price - thus the contract was not complete

Cth leased premises to Company. The premises contained machinery the property of the Cth and permitted the Company to use the machinery. Negotiations for the tenant Company’s purchase of the machiner were ongoing, and later a contract of sale was entered into. The contract stated “net cash before delivery”. The price was never paid. The Cth obtained possession by resuming possession of the leased premises. The Company proceeded against the Cth for detinue and alternatively conversion of the machinery, claiming that the property had passed upon contract being made. Had property passed

No the term of the contract “Net Cash before delivery” showed intention that the property would not pass until price paid

Vendors agreed to sell the defendants a horizontal tandem condensing engine to be delivered free on rail in London. The engine, which weighed thirty tons, was bolted to and embedded in concrete flooring. Before delivery it had to be detached and dismantled by the seller over a two-​ week period at the seller’s expense. While the engine was being loaded on a railway truck the bedplate was accidentally broken, so that the defendants refused to accept it. The plaintiffs brought an action for the price and the defendants pleaded that the property in the engine had not passed to them at the date of the accident. Had property passed?

Ownership had not passed because it was not deliverable. It was not in the condition that the buyer had agreed to receive it. Even if it had been deliverable. The contract showed the parties intended ownership to pass later because the seller agreed to deliver it, thus seller has responsibility until that point. Thus, seller bears risk.

Person A (merchants) contracted to buy bicycles from Person B (manufacturers). Bicycles were not yet manufactured when the contract was made. Person A paid before shipment, the Person B then manufactured them, labelled them for Person A. However, before shipped, Person B went into receivership and the receivers refused to deliver the goods. The buyers argued that ownership had passed because the goods had been appropriated to their contract. Had ownership passed?

Contract for the sale of future unascertained goods. Thus, ownership could not pass when the contract was made and would only pass when the goods were unconditionally appropriated to the contract and the other party assents to that appropriation. In this scenario, there had been no appropriation. The manufacturing and setting aside goods is not enough. It must reach a point where the seller cannot change their mind to allocate the goods elsewhere. It must make it irrevocable (such as shipment). There was no actual or constructive delivery. Goods were at sellers risk

Person A (buyer) purchased 600 cartons out of a larger bulk of 1,500 cartons of goods. The 600 were separated from the larger bulk and placed on bogies outside the cold storage awaiting collection. The buyer’s carrier arrived with a delivery note authorising release of the goods. The delivery note was accepted and seller started loading the goods into the carriers van. The carrier did not switch on the van’s refrigeration until two hours after loading had commenced. After delivery, the kidneys were found to be unfit for human consumption. The buyers sued the sellers, and the sellers counterclaimed for the purchase price. When did property, and therefore risk, pass from the seller to the buyer?

Property and risk passed when the seller acknowledged that it held the identified goods on behalf of the buyer upon presentation of the delivery note. Goods became ascertained when the buyer's carrier presented the delivery note, the cold store acknowledged that those identified cartons were the buyer's goods and authorised their collection. Delivery by a third party completed the transfer. Thus, buyer bears risk and loss

Wine merchants stored customers’ purchased wine, with some individually allocated and other cases stored in common stacks separate from trading stock or recorded as customer stock in bonded warehouses. Some customers had paid for “en primeur” wine that had not yet arrived from France. The companies became insolvent. Had property passed to customers whose wine was stored in common stacks but not individually identified?

Property passed to customers whose wine was separated from trading stock and placed into reserve storage, even if individual cases were not specifically allocated. The wine was sufficiently ascertained, and the customers owned it as tenants in common. However, customers who had only paid for “en primeur” wine that had not yet arrived obtained no proprietary interest.

Person A sold investors gold coins and bullion under “non-allocated” contracts, promising storage and delivery on request. The bullion was not individually identified or segregated, and the company became insolvent without enough gold to satisfy all investors. Did investors acquire a proprietary interest in the remaining bullion?

No. The contracts concerned unascertained goods, and no specific bullion was appropriated to investors’ purchases. Property cannot pass until the particular goods are identified and appropriated, even where they are to come from an identified bulk. Therefore, investors acquired no proprietary interest in the remaining bullion.

Weiner, a manufacturing jeweller, gave jewellery to Fisher, a retail jeweller, to display and sell. The agreement stated that the jewellery remained Weiner’s property, Fisher could not treat it as his own stock, and he would receive half the profit as commission. Instead, Fisher pledged the jewellery as security for a loan. Was Fisher a buyer under a sale or return agreement or merely Weiner’s selling agent?

Fisher was an agent, not a buyer. Despite the wording of the agreement, its terms showed Fisher’s only role was to sell the jewellery for Weiner in return for commission. The jewellery remained Weiner’s property, so Fisher had no authority to pledge it as security.

Donald, a furniture dealer, delivered furniture to Mrs Ferrier on “sale for cash or return” within one week. Two days later, creditors seized the furniture. Had ownership passed to Mrs Ferrier, allowing creditors to claim the goods?

Ownership had not passed to Mrs Ferrier. Under a sale or return agreement, ownership passes when the buyer accepts the goods, acts inconsistently with the seller’s ownership, or keeps the goods beyond the agreed period. Mrs Ferrier had not kept the furniture beyond the one-week period because it was seized after only two days. Therefore, ownership remained with Donald.

A duty-free retailer sold goods to airport customers in sealed, tamper-proof bags labelled as being under customs control. Customers agreed to export the goods within 30 days or notify the retailer and return them if they were not exported. The retailer claimed a customs drawback (repayment of import duties), which required it to legally own the goods at the time of export. Did ownership pass to customers at purchase or only upon export?

Ownership passed to customers at the point of sale. The transaction was an ordinary sale, and the conditions imposed obligations on customers rather than reserving ownership for the retailer. Restrictions on opening, using or reselling the goods limited customers’ actions but did not determine ownership.

A motor vehicle dealer purchased a car from the defendant, who was unaware it had been stolen. The dealer used the car for several months and then resold it, but the police seized it and returned it to the true owner. Could the dealer recover the purchase price despite having used the car for several months?

Yes. There was a total failure of consideration because the seller had no right to sell the car and could not transfer ownership to the buyer. The buyer’s use of the car did not change this.

Murphy owned a van and provided ownership documents to Coker, a car dealer, who falsely represented to a hire-purchase company that he owned it. The company approved financing for the van but rejected the proposed transaction involving a second car. Coker told Murphy the entire arrangement was cancelled, and Murphy later sold the van to Goldring. Could the hire-purchase company obtain good title despite Coker lacking actual ownership and authority to sell the van separately?

Yes. Murphy was estopped from denying Coker’s authority because he had equipped Coker with documents enabling him to represent himself as the owner. Consequently, the hire-purchase company acquired Murphy’s title, leaving Murphy with no title to pass to Goldring.

Motor Credits owned vehicles financed under a floor plan arrangement, allowing Motordom, a motor dealer, to sell them and account for the proceeds. Motor Credits revoked Motordom’s authority to sell but did not notify third parties. Motordom subsequently sold 16 vehicles to Pacific Motor Auctions, falsely claiming outright ownership. Could Motor Credits be estopped from denying Motordom’s authority, allowing Pacific to obtain good title?

No. Mere possession did not create ostensible ownership, and apparent authority extended only to sales in the ordinary course of business. Motor Credits retained title because Motordom’s authority had been revoked and the transaction fell outside its apparent authority.

Motor Credits owned vehicles held by Motordom under a floor plan arrangement, which authorised Motordom to sell them and account for the proceeds. After Motor Credits revoked this authority without notifying third parties, Motordom sold 16 vehicles to Pacific Motor Auctions, which purchased them in good faith without notice of the revocation. Could Pacific obtain good title under s 28(1) of the Sale of Goods Act despite Motordom’s revoked authority?

Yes. Under s 28(1), Motordom remained in continuous physical possession of the vehicles after ownership passed to Motor Credits. The change in legal status from owner to bailee did not interrupt possession. As Pacific acted in good faith without notice, it obtained good title under the statutory exception.

Barclays Finance owned a Mercedes-Benz leased to ICC. Kerr, who controlled ICC, attached personalised plates, registered the car in another company’s name and used it as his own. Although Kerr had no authority to sell, he sold it to Thomas, which later sold it to Marac Finance. Barclays repossessed the car after ICC defaulted. Could Barclays be estopped under s 26(1) of the Sale of Goods Act from denying Kerr’s authority to sell?

No. Estoppel based on silence requires a duty to speak, which Barclays did not owe Thomas. Barclays had no relationship with Thomas, no knowledge of the sale and no obligation to disclose its ownership. Thomas also proceeded despite warning signs and missing documents. Therefore, Kerr could not pass good title.

Caldwell agreed to sell his Jaguar to Norris, who obtained it through fraud by paying a deposit and providing a worthless cheque for the balance. After discovering the fraud, Caldwell immediately contacted his bank and police, identified Norris, and alerted patrols and the Automobile Association to locate the car. Norris disappeared and subsequently sold the car through several transactions until Car & Universal Finance purchased it in good faith without notice. Could Caldwell effectively rescind the contract without communicating rescission to Norris?

Yes. Although rescission normally requires communication, it is effective where the fraudster cannot reasonably be contacted if the seller takes all reasonable steps to demonstrate an unequivocal decision to rescind. Caldwell’s actions clearly demonstrated his intention to rescind, so he retained ownership and the subsequent purchasers could not obtain good title.

Gamer sold vehicles to a dealer on terms that ownership would not pass until payment. The dealer, who had possession of the vehicles, sold them to Natwest under a floor plan agreement, becoming Natwest’s bailee while retaining physical custody. The dealer never paid Gamer, which repossessed the vehicles. Did s 28(2) apply where the dealer transferred constructive rather than physical possession to Natwest?

Yes. Natwest obtained good title because delivery under s 28(2) includes constructive delivery, not just physical delivery. The dealer’s change in status from owner-in-possession to Natwest’s bailee changed the legal character of possession, satisfying the delivery requirement even though the vehicles never moved.

Wells, a chrysanthemum grower, asked Buckland whether its washed sand was suitable for propagating cuttings. Buckland provided a sample and analysis stating the sand had low iron oxide content. Wells purchased sand directly through a buying agent and later bought further loads through Hall & Co, a separate supplier. The sand was unsuitable due to excessive iron oxide, causing £2,500 in damage. Did Buckland’s statements constitute an express warranty, and could it be enforced for purchases through a third party?

Yes. The statements and analysis amounted to an express warranty because a reasonable person would understand them as a promise about the sand’s composition, and Wells relied on that promise. The warranty also applied to purchases through Hall & Co under a collateral contract, as Wells purchased the sand in reliance on Buckland’s assurance. The direct sale also breached the implied term relating to sale by description because the sand supplied did not match the description “washed sand”.

The defendants sold common English sainfoin seed to the plaintiffs under a contract excluding express and implied warranties. The seed supplied was actually giant sainfoin, which was visually indistinguishable from the contracted seed. The plaintiffs resold some seed, and after it was grown by a sub-purchaser, they settled a damages claim and sought recovery from the defendants. Was supplying the wrong seed a breach of condition, and did the exclusion clause prevent recovery?

Supplying the wrong seed breached a condition, and the exclusion clause did not prevent damages. The obligation to supply the contracted seed was fundamental to the contract. Although reselling the goods prevented the plaintiffs from rejecting them and terminating the contract, they could still claim damages for breach of condition. The clause excluded warranties only, not conditions.

Divall purchased a car from a thief and later sold it to Rowland, a motor dealer, who repainted and resold it to Colonel Railsdon. When police seized the car and returned it to its true owner, Rowland refunded Railsdon and sought to recover the purchase price from Divall. Could Rowland recover the full purchase price despite having used and resold the car?

Yes. There was a total failure of consideration because Rowland never obtained legal title, which was the substance of the contract. Physical possession and use of the car did not amount to receiving what he had paid for. Acceptance did not convert the breach of the implied condition that the seller had the right to sell into a mere warranty. Divall could not rely on his own lack of title to prevent recovery.

Miss Rudolph sold a car under a hire-purchase agreement before exercising her option to purchase. The car passed through several dealers until Butterworth bought it in good faith. Bowmaker, the true owner, later demanded its return but offered Butterworth the opportunity to acquire title by paying the outstanding amount. Rudolph subsequently paid the outstanding instalments. Could Butterworth recover the purchase price despite using the car and Rudolph later acquiring title?

Yes. Butterworth validly rescinded the contract and recovered the full purchase price. Rudolph’s later acquisition of title passed through the chain of sales to Kingsway Motors, which could recover damages from the preceding sellers.

The seller supplied Niblett with condensed milk tins labelled “Nissly”, infringing Nestlé’s registered trade mark. Niblett had to remove the labels before selling the goods. Did the seller breach the implied condition that it had the right to sell the goods?

Yes. The seller breached s 12(1) of the Sale of Goods Act because it had no right to sell the goods in their labelled form due to the trade mark infringement. The agreement permitting alternative brands did not exclude this implied condition.

Vinhurst bought a road-marking machine before a patent over it became enforceable. Two years later, the patentee obtained an injunction preventing Vinhurst from using it. Did this breach the implied terms concerning the right to sell and quiet possession?

No breach of s 12(1), but breach of s 12(2). The seller had the right to sell the machine at the time of sale, but the later injunction disturbed Vinhurst’s quiet possession. Quiet possession is a continuing warranty, and the seller’s lack of knowledge of the patent was irrelevant.

Healing (Sales) purchased electrical goods under a floor-plan arrangement, but the goods were wrongly confiscated based on the mistaken belief that the sale terms had been breached. Did this breach the implied warranty of quiet possession?

Yes. Section 17(2) protects the buyer’s quiet possession and can cover the seller’s own tortious acts. The buyer may therefore seek a remedy under the Sale of Goods Act, as well as in tort for conversion. Unlike the condition that the seller has the right to sell, quiet possession is a warranty.

The McBrides bought a bull at auction as a stud breeding bull, but it was permanently infertile due to a latent defect. The vendors relied on exclusion clauses. Was the sale by description, and did the exclusion clause prevent liability?

Yes, it was a sale by description, and the vendors were liable. The bull did not correspond with the essential description of a breeding bull. The latent defect could not reasonably have been discovered by inspection, and the exclusion clause did not exclude the implied condition that the goods correspond with their description.

An art dealer sold a painting described as being by Gabriele Münter to a specialist German art dealer. Both believed it was genuine, but it was later found to be a forgery. Was the sale by description?

No. The buyer relied on its own expertise and assessment rather than the seller’s description, so the attribution was not an essential contractual term.

Ashington contracted Christopher Hill to manufacture mink feed using Norwegian herring meal contaminated with DMNA, which killed the mink. Did the contaminated ingredient breach the implied condition that the goods correspond with their description?

No. The majority held that the ingredient remained “herring meal”; the contamination affected its quality, not its identity. Description identifies the kind of goods, while defects generally concern quality.

Amcor sold PVC resin to Metal Roofing, which argued that the resin’s lower-than-expected purity meant it did not correspond with the description “PVC resin”. Did the goods breach the implied condition as to description?

No, by majority. The buyer failed to prove that the resin was a different kind of product rather than simply lower quality. McPherson JA dissented, finding that the resin fell below the accepted commercial meaning of “PVC resin”.

A seller advertised a car as a 1961 white Triumph Herald convertible, but it was made by welding together parts of two different models. The buyer inspected and test-drove the car. Was the sale by description?

Yes. The buyer purchased the car on the basis that it corresponded with the advertisement, so the car breached the implied condition that goods correspond with their description despite the buyer’s inspection.

Groundnut meal sold for use in animal feed contained aflatoxin, causing birds to die or become stunted. The meal was resold through traders to feed manufacturers. Was the implied condition of fitness for purpose breached?

Yes. The purpose of using the meal in compound animal feed was sufficiently communicated, and reliance on the sellers’ skill and judgment was established. The contaminated meal was unfit for that purpose, and the latent-defect clause did not exclude liability.

Expo contracted Pateman to manufacture aluminium windows for a coastal home, warning there was “nothing between this job and the South Pole”. The windows failed to keep out wind and rain. Was the particular purpose communicated, and was reliance established?

Yes. The warning communicated that the windows needed to withstand severe weather. Reliance on Pateman’s skill and judgment could be inferred from the circumstances, even though both parties were experienced manufacturers.

Golden West bought hydrochloric acid from Daly for gold refining, but the acid contained fluorine that damaged its glass equipment. Had Golden West communicated a sufficiently particular purpose to trigger the implied condition of fitness for purpose?

No. Daly knew the acid was for gold refining but was not told that it needed to be fluorine-free for use with glass equipment. The purpose was too general, and Golden West did not rely on Daly’s technical judgment.

Slater purchased replacement camshafts for his fishing vessel, Aquarius II, but each failed due to the vessel’s abnormal torsional resonance rather than any defect in the camshafts. Was the implied condition of fitness for purpose breached?

No. Finning knew the camshafts were for the vessel but did not know about its abnormal characteristic. As the camshafts were not defective and the unusual requirement was not communicated, Finning was not liable.

Speedway bought all the stock at a motorcycle distributor’s premises, described in the contract as “stock situated at” a specified address. Some goods were unusable. Was the sale by description?

No. “Stock” merely identified the goods by location and did not describe a category of goods with particular attributes. Speedway inspected and bought the goods “as is”.

Shipbuilders ordered propellers to exact specifications for two ships, but one propeller had vibration problems and had to be replaced twice. Were the defective propellers of merchantable quality?

No. Goods are not of merchantable quality if they are unusable for any purpose for which goods of that description would normally be used and are therefore not saleable under that description.

Joseph agreed to buy chickpeas from Harvest Grain for resale at a profit, but Harvest Grain failed to deliver them, preventing Joseph from fulfilling its resale contract. No readily available market existed for replacement chickpeas. Could Joseph recover its lost resale profits?

Yes. Harvest Grain knew of the intended resale, so the resulting losses were foreseeable and not too remote. Without an available market, damages were assessed by reference to Joseph’s actual loss rather than the usual contract-price and market-price difference.

Tarangau purchased a vessel for both personal recreational use and commercial game-fishing charters. Was Tarangau a consumer?

No. Although the vessel was ordinarily acquired for personal use, its substantial commercial chartering purpose meant the purchase constituted a re-supply, excluding Tarangau from consumer status.

Crago concerned whether an ostrich egg incubator was goods of a kind ordinarily acquired for personal, domestic or household use. Did it qualify?

No. There was no evidence that ostrich egg incubators were acquired for personal or domestic use. The party asserting consumer status bore the onus of proving this. Goods may still qualify even if many are purchased for business use.

Bunnings purchased aluminium reflective foil laminates for roof lining. Were the goods of a kind ordinarily acquired for personal, domestic or household use?

Yes. “Ordinarily” means commonly or regularly, not principally or predominantly. The assessment considers the goods’ essential character alongside evidence of their design, marketing, pricing and potential uses.

Vautin purchased a premium yacht for offshore cruising and recreational game fishing, a purpose known to the supplier. Hidden manufacturing defects in the yacht’s foam core compromised its structural integrity and made it unseaworthy. Was the yacht reasonably fit for its disclosed purpose under ACL s 55?

No. The defects created unacceptable structural risks, and the yacht’s ability to complete voyages did not establish that it was reasonably fit for safe offshore use. Vautin validly rejected the yacht because the defects constituted a major failure and their true extent only became apparent after extensive investigation.

Consumers contracted hepatitis A after eating oysters grown in Wallis Lake that had been contaminated by human faecal matter. The consumers alleged that the oysters were unfit for consumption and of inadequate quality. Did the oysters satisfy the statutory guarantees, and did consumers need to prove reliance on the manufacturer’s skill?

No, the oysters were unfit, and consumers did not need to prove reliance. The court held that reliance was presumed unless the manufacturer established otherwise. Merchantable quality was assessed objectively from the perspective of a reasonable consumer, who would expect oysters sold for consumption to be safe. The scientific knowledge defence could apply because no practical test could detect the virus without destroying the oysters.

The Rasells ordered a custom-made wool carpet designed to complement their home’s exposed brick walls. They relied on the manufacturer’s expertise, but six weeks after installation, widespread shading and colour variations developed. They had not been warned of this risk and said they would not have purchased the carpet had they known. Was the carpet fit for its particular purpose and of merchantable quality?

No. The carpet was not fit for its disclosed aesthetic purpose because it no longer provided the intended consistent appearance. It also failed the objective standard of merchantable quality: carpets serve aesthetic purposes as well as covering floors, and reasonable consumers could expect an acceptable appearance. The manufacturer failed to establish a defence because the buyers had not been warned and had reasonably relied on its expertise.

Seeley contracted with Cintro to design and manufacture remote controls for roof-mounted air conditioners. Three air conditioners caught fire. Was the design agreement a contract for the supply of services under the Trade Practices Act?

Yes. The design agreement involved the supply of services, distinct from the supply of goods. As the services cost less than $40,000 and Seeley’s consumer status was not successfully challenged, Seeley could rely on the statutory warranties under s 74 of the Act.

Moore booked a luxury European river cruise marketed for enjoyment and relaxation, but severe flooding disrupted the itinerary, resulting in bus travel and missed cruise destinations. Could passengers recover damages for disappointment and distress under ACL s 267(4)?

Yes. The High Court held that reasonably foreseeable disappointment and distress may be recoverable where a supplier breaches consumer guarantees for services intended to provide enjoyment, pleasure or relaxation. Section 275 did not prevent recovery by importing the NSW personal-injury damages restriction, because the claim concerned lost holiday enjoyment rather than personal injury.

Consumers contracted hepatitis A after eating oysters harvested from Wallis Lake, where human faecal contamination had contaminated the oysters. Were the oysters defective goods under the Trade Practices Act (TPA), and could the manufacturer rely on the state-of-scientific-knowledge defence?

The oysters were defective, but the defence was available. The oysters were considered “manufactured” goods, and their safety fell below what consumers were generally entitled to expect under s 75AC(1). However, under s 75AK(1)(c), the manufacturer could rely on the defence because the defect could not be discovered using the scientific or technical knowledge available at the time of supply. The only test capable of detecting the contamination would destroy the oysters, making discovery before supply impossible. Accordingly, the claim under s 75AD failed.

The applicant underwent surgery to replace her mitral valve and later experienced complications allegedly caused by a chip in the valve. The manufacturer argued that the defect did not exist when the goods left its control. Testing and visual examinations had been conducted before supply, and later examinations of the explanted valve did not reveal abnormalities apart from a blood clot. A small chip was detected in tests four years later. Could the manufacturer establish the defence?

Yes. The Court found that examinations of the valve’s component parts before assembly established the likelihood that any chip present would have been detected. The evidence therefore supported the conclusion that the defect did not exist when the valve left the manufacturer’s control, and the defence was successful.

JJ Richards, a waste management company, entered into or renewed at least 26,000 standard form contracts after the unfair contract terms provisions came into effect. Its contracts contained terms allowing automatic renewal, unilateral price increases, limited liability for non-performance, charges for services not provided, exclusivity, continued charges during suspension, unlimited indemnities and restrictions on termination where payments remained outstanding. Were these terms unfair under s 23 of the ACL?

Yes. The terms created a significant imbalance between the parties, were not reasonably necessary to protect JJ Richards’ legitimate interests and could cause detriment to customers. JJ Richards did not rebut the presumption under s 24(4). The terms were also insufficiently transparent, although lack of transparency is not an essential element of unfairness. The Court granted injunctions under s 232, preventing JJ Richards from relying on the terms and requiring it to publish the decision to its customers.

Europcar’s rental agreements imposed unlimited customer liability in circumstances including overhead, underbody and water damage, reversing commercial vehicles and breaches of contract. However, its website represented that customer liability was limited to a Damage Liability Fee (DLF), or nil if certain cover products were purchased. The parties agreed that certain contract terms were unfair and the website representations misleading. Were the terms unfair, and did the website conduct contravene the applicable legislation?

Yes. The contract terms created a significant imbalance, were not reasonably necessary to protect legitimate interests and could cause detriment, satisfying the unfair contract terms test under s 12BG of the ASIC Act. The website representations were misleading because they suggested liability was capped when it could be unlimited in specified circumstances, contravening ss 12DA and 12DB of the ASIC Act. The rental arrangement was treated as a financial product involving a credit facility, so the ASIC Act provisions applied rather than the ACL’s unfair contract terms provisions. The Court also emphasised that significant imbalance requires examining the contract as a whole and assessing whether the terms substantially favour the supplier.

Quantum Housing Group (QHG), an approved participant in the National Rental Affordability Scheme, pressured investors to transfer property management to managers approved by Quantum. Investors depended on QHG to receive NRAS incentives and could not simply change to another approved participant. QHG issued misleading correspondence, concealed its commercial connections with recommended managers, imposed an unjustified $10,000 security deposit on non-Quantum managers and threatened investors with default notices. At least 260 properties changed to Quantum-approved managers. Does statutory unconscionability under s 21 of the ACL require proof that a business exploited a consumer’s vulnerability or special disadvantage?

No. The Full Court held that vulnerability or special disadvantage is not an essential requirement of statutory unconscionability, although it may be relevant. QHG’s deliberate and dishonest misuse of its superior bargaining position, misleading representations, pressure on investors and unjustified requirements were sufficient to establish unconscionable conduct. The Court rejected the interpretation that Kobelt required proof of a pre-existing vulnerability. Statutory unconscionability is broader than equitable unconscionability and focuses on whether the conduct is unconscionable in all the circumstances.

Berbatis owned a shopping centre where the Roberts operated a fish shop. The Roberts wanted to sell their business because they had a sick child, but the sale required a renewed lease and Berbatis’ consent. Berbatis agreed to consent only if the Roberts gave up their claims against the shopping centre owner arising from separate litigation. Despite their solicitor advising against signing, the Roberts agreed. Did Berbatis engage in unconscionable conduct under s 51AA of the Trade Practices Act?

No. The High Court held that unequal bargaining power alone does not establish a relevant special disadvantage. The Roberts were experienced businesspeople, had legal representation and could understand their own interests. Their difficulty was that they could not obtain the commercial outcome they wanted, rather than that they were unable to judge or protect their own interests. Unconscientious exploitation of a person’s inability to protect their interests must be distinguished from taking advantage of a superior bargaining position. As the Roberts did not suffer from a relevant special disadvantage, the claim failed.

Harry Kakavas was a high-stakes gambler who played baccarat at Crown Casino between June 2005 and August 2006, turning over $1.479 billion and suffering net losses of $20.5 million. He alleged that Crown and two employees engaged in unconscionable conduct by enticing him to gamble through incentives, including loss rebates and use of Crown’s private jet, while knowing he had a gambling problem. The courts rejected his claim, and he appealed to the High Court. Did Crown engage in unconscionable conduct by exploiting Kakavas’ alleged special disadvantage?

No. The High Court unanimously dismissed the appeal. Kakavas voluntarily participated in a risky activity in the ordinary course of Crown’s business. He was not intoxicated, immature, elderly or incompetent, and he had the ability to self-exclude. His gambling problem did not, on the facts, establish a special disadvantage that Crown had unconscientiously exploited. The Court emphasised that equitable intervention is not intended simply to protect people from the consequences of their own decisions; it aims to prevent victimisation. The whole course of dealings and the precise relationship between the parties must be examined, and the plaintiff must identify conduct beyond the ordinary conduct of business that justifies equitable intervention.

Kobelt operated a remote SA general store serving impoverished Aṉangu customers with limited financial literacy. Under his “book-up” system, customers provided their debit cards and PINs, allowing him to withdraw their funds to repay debts and fund future purchases. He retained cards, controlled spending and kept inadequate records, but the system also provided access to credit and vehicles. Was his conduct unconscionable under s 12CB(1) of the ASIC Act?

No, by majority. Unconscionability required special disadvantage and unconscientious exploitation. Although customers were vulnerable, they understood the basic system, authorised withdrawals and received practical benefits. The majority found Kobelt had not unconscientiously exploited their disadvantage.