THE Federal Court has found a law firm principal guilty of deceptive conduct.
The Court has declared that a number of representations made by Pippa Sampson of Goddard Elliot Lawyers, in the period April 2002 to October 2010, to collect small debts on behalf of video rental stores were misleading and deceptive.
The ACCC alleges that from at least July 2010, Sampson made misleading or deceptive representations in four debt collection letters and notices posted to addressees.
According to the ACCC, Sampson falsely told debtors that if a debt was not paid and a video store issued a legal proceeding against the addresses, that would result in the addressee having to pay “significant legal costs”.
It claims she said in a debt collection letter that her law firm could enforce judgment by way of a warrant, garnishee order and/or an order against the addressee’s wages, which would be served upon their employer, “when such remedies can only be ordered by the court”.
Sampson, the principal and registered owner of Goddard Elliott Lawyers has admitted sending approximately 20,000 debt collection notices per month in the 12 months prior to the Australian Competition and Consumer Commission instituting
proceedings. The notices were sent Australia-wide.
“The scale and flagrant nature of this conduct, and the fact that it was engaged in by a lawyer is of great concern to the ACCC,” ACCC chairman Rod Sims said.
The ACCC took legal action after concerns were raised by the Central Australian Aboriginal Legal Aid Service on behalf of clients who had received debt collection notices making the misleading representations.
“This decision sends a clear message to the debt collection industry that they must take care not to misrepresent or overstate the consequences of non-payment of a debt when communicating with alleged debtors” Sims said.
The Federal Court has ordered Sampson to stop making the misleading representations, publish corrective notices in a number of national newspapers and industry publications, ensure herself, and Goddard Elliott staff, undertake trade practices compliance training, and contribute $30,000 towards the ACCC’s court costs.
The representations found to be misleading and deceptive were that the video store was entitled to recover a specified amount in solicitor's costs in addition to the claimed debt despite having no necessary entitlement to recover such a cost.
It found the customer would incur additional costs associated with any legal action, when in reality if unsuccessful the video store could not recover legal costs. If successful, a Court would not order that legal costs relating to the recovery of a small debt be paid unless there were special circumstances. It also noted that there are state laws that could limit the amount of legal costs that could be awarded by the court in actions for small debts.
The Court also noted that it was misleading that Goddard Elliott could enforce any judgment by itself, including by way of a warrant, or a garnishee order, or an attachment of earnings order. In reality, the video store would need to win the case, apply for an order for payment and then the court must grant an order to enforce judgment.