Esanda to pay $20,000 compensation over re-possession fracas

Esanda Finance Corporation Ltd will pay a customer and his wife $20,000 compensation after the Federal Court declared it acted unconscionably and used undue harassment when its debt collectors and tow truck operators entered the customer's home and pinned him to the ground while they re-possessed a car.

The ACCC instituted proceedings against Esanda, Capalaba Pty Ltd trading as Nationwide Mercantile Services (NMS), and six individuals (three debt collectors and three tow truck operators). It was alleged that the customer was subjected to physical force, undue harassment, and unconscionable conduct in breach of the Trade Practices Act 1974*. The ACCC also alleged a number of individuals breached the Western Australian Fair Trading Act 1987.

Esanda consented to Federal Court declarations that:

• Esanda acted unconscionably by serving a demand notice in a way that conveyed or was capable of conveying that Esanda would not, or could not lawfully, re-possess the car without a court order and then had the car re-possessed without an order; and also by failing to stop or suspend orders to its agents to re-possess the car when it had reasonable cause to believe that a physical confrontation may occur if the re-possession was attempted or carried out.
• Esanda acted unconscionably by its agents entering the customer's home by jumping a gate for the purpose of opening the garage from the inside; and by not stopping the re-possession when they had reasonable cause to believe a physical confrontation may occur.
• Esanda used undue harassment by its agents' and/or sub-agents' repeated attendances at the customer's home, including surveillance, and its agent approaching the customer's wife at work, claiming the vehicle had been sold, hidden and/or stolen and demanding its location.

NMS consented to a declaration that it used physical force when its tow truck operators physically restrained the customer while the car was being removed. The debt collectors consented to declarations that they aided and abetted and were knowingly concerned in NMS's use of physical force.

NMS and the three debt collectors consented to declarations that they aided and abetted and were knowingly concerned in Esanda's unconscionable conduct and undue harassment.

After a trial, the tow truck operators were found to have aided and abetted and to have been knowingly concerned in Esanda's unconscionable conduct by not stopping their attempts to re-possess the car when they had reasonable cause to believe a physical confrontation may occur if they continued.

Two tow truck operators were found to have contravened section 23 of the WA Fair Trading Act by physically restraining the customer while the vehicle was being removed.

The court made orders:

• restraining Esanda from engaging in similar conduct in the future;
• requiring Esanda to change some of its procedures and instructions to its agents;
• requiring Esanda to pay $20,000 compensation to the customer and his wife;
• reducing the amount of the loan by $1892.73; and
• pay the ACCC's costs.

The court restrained the collection agents from engaging in similar conduct in the future, ordered them to attend compliance seminars and pay costs.

Justice Malcolm Lee said the conduct was "clearly unfair or unreasonable".

This is the first time that the prohibition on the use of physical force in section 60 has been considered by the courts.

Justice Lee said that section 60 of the Act is "intended to govern relations between trading corporations and consumers by providing that a corporation is not to resort to harassment, or the use of physical force, in support of a demand for the payment by a consumer for goods or services supplied to the consumer".

He considered the Act to set "a norm of corporate conduct in which the use of physical force, or undue harassment, by a corporation in such circumstances is deemed to be unacceptable".

*Section 51AB of the Trade Practices Act prohibits a corporation from engaging in unconscionable conduct in connection with the supply or possible supply of goods or services to a consumer. Section 60 prohibits a corporation (or its servants or agents) from using physical force, undue harassment or coercion in connection with the supply of goods or services to a consumer or the payment for goods and services by a consumer.

BACKGROUND

In July 1998 Esanda loaned $15,092.02 to a consumer to buy a car, secured by a chattel mortgage over the car. The loan was to be repaid by 48 monthly payments of $373.20. From time to time the consumer defaulted. He sought to replace the loan from Esanda with a loan from another financier and also sought to obtain from Esanda a repayment variation. He was unsuccessful. By April 2000, the arrears exceeded $1,800 and, by service of a notice, Esanda demanded that the consumer fix his default under the mortgage.

On 20 June 2000 the car was repossessed with $2,180 outstanding. The allegations made against Esanda and other respondents by arise from the manner in which the re-possession occurred. Esanda instructed agents and sub-agents to recover the car, on terms that no remuneration would be paid unless the agents succeeded re-possessing the vehicle or obtaining payment in full of the arrears due. The agents and sub-agents of Esanda contacted the consumer, or made it known that the consumer's movements were being monitored.

Additionally, an Esanda agent went to the consumer's wife's work in circumstances which caused her embarrassment and humiliation. On 20 June 2000 three debt collectors and three tow truck drivers went to the customer's home to seize the car. One agent jumped a gate and opened the garage door from inside. A tow-truck was reversed into the garage. As the operator's were connecting the customer's car to the tow-truck, the customer ran into the garage in an agitated state. In the scuffle that ensued two operators pinned the customer to the ground and kept him there. After the customer's car was towed away the operators 'got up off' the customer and ran out of the garage.