The Federal Court (Court) has ordered four-wheel-drive (4WD) vehicle hire business Smart Corporation Pty Ltd (Smart), previously trading as Australian 4WD Hire, to pay an $870,000 penalty for breaching the Australian Consumer Law.
The Australian Competition and Consumer Commission (ACCC) took Australian 4WD Hire to court for allegedly engaging in unconscionable conduct.
Now, the Court has ruled that the company made false or misleading representations regarding insurance cover and included unfair contract terms in its vehicle rental contracts.
Australian 4WD Hire’s standard form contracts included terms allowing it to charge customers up to $500 each time a customer drove in a way prohibited by the contract, such as driving at night outside of built up areas, driving above the speed limit, or when visibility was poor such as in fog or heavy rain.
The Court found these terms unfair and void because they authorised Australian 4WD Hire to deduct the entire amount of a consumer’s security bond for trivial breaches, which could not have caused any loss or damage to the hired vehicle.
The Court also ruled that the company acted unconscionably by sending intimidating and threatening emails to some consumers to withhold at least $500 of their security deposits for what they claimed to be excessive vehicle wear and tear irrespective of whether there had been any damage done to the vehicle. When some customers disputed the claims, the company sent further intimidatory correspondence to prevent customers from disputing the claim or raising other legitimate issues.
ACCC Chair Rod Sims commented: “Australian 4WD Hire acted unconscionably in its dealing with customers who hired 4WD vehicles around Australia.
“We took this action because Australian 4WD Hire’s treatment of some of its customers was particularly egregious. The misrepresentations made about insurance cover gave customers a false sense of security that they would have the benefit of being covered by insurance, in particular for the off-road use of the vehicles, when this was not the case.”
The Court also found that the company’s former director and fleet manager Vitali Roesch and director Maryna Kosukhin were knowingly concerned in this conduct. As a result, it ordered the disqualification of Roesch and Kosukhin from managing a company for three years, and ordered them to pay $179,000 and $174,000 in penalties, respectively.
