Question 1 ( 15 marks)
Fabio and Greta, an elderly migrant Italian couple, sold their farm and decided to make a trip to Italy to meet their relatives. Their only airline experience had been a few interstate trips; this would be their first trip overseas. They undertook considerable research about which airline to use by referring to newspaper and television advertisements and airline websites. They were particularly impressed by the advertisements for Angelwings Airlines, an overseas-owned airline, whose television advertisements showed passengers being served what were described as delicious meals with ‘the finest Australian wines and a high standard of service’. Greta, who had issues with her back injury, was especially impressed by the spacious leather seats and the cushioned headrests in which passengers travelled. They booked their flights on Angelwings through the Leasure Travel Agency. The economy class fares charged by Angelwings were slightly higher than other airlines, but Fabio assumed that the extra amount was due to the seating facilities and fact that the Angelwings press advertisements said that passengers would be delivered to the departure airport by limousine.
As the departure date neared Fabio and Greta were excited by the idea of going overseas and travelling in such comfort. They were disappointed that a limousine did not collect them, and they made their way to the airport by taxi. When they boarded the plane, they found to their horror that their seats were nothing like the spacious leather seats they had seen on the advertisements. They said that they were jammed together ‘like sardines’ and they could barely move. The quality of the meals they were served was well below what was stated in the advertisement. Greta raised these matters with cabin staff, who brushed her off.
On the return trip from Italy the experience was even worse. Greta described the seating arrangements as ‘what you would expect in a cattle truck’. When they arrived in Brisbane they visited the travel agent and complained that they had been let down by Angelwings Airlines. The agent expressed surprise at their complaints. She told them that ‘What they advertise is the first class service. If they showed how economy class passengers were treated nobody would fly.’ Fabio and Greta think that this is evidence of a rip-off and seek your advice.
(a) Advise Fabio and Greta as to whether the Angelwings Airlines has breached any of the provisions of the Australian Consumer Law (ACL) (Schedule 2, Competition and Consumer Act 2010 (Cth). What enforcement actions can be taken by the
ACCC and Courts against the Airlines and remedies (if any) are available for Fabio and Greta under the ACL?
(In your answer, DO NOT discuss legal issues under the law of contract and/or the tort of negligence).
Question 2 (15 marks)
Alex operates an accounting firm known as “Property Tax Accounting” (PTA) in Brisbane. Denise, a business owner, wishes to minimise her tax liability. She finds Alex on the PTA
website. Alex is described as a “tax and trusts specialist” and a Certified Practising Accountant (CPA) with over 15 years’ experience. Denise makes an appointment to visit Alex at the PTA premises. Denise provides an overview of the business structure at the meeting. Alex advises Denise that she can minimise her tax by setting up a trust to operate the business, with the trust splitting the business’ net income each financial year 50/50 between Denise and her husband Barry. Barry, who takes care of their children full time, performs no duties for the business.
Denise is particularly concerned about ensuring the trust structure is legal. Alex assures Denise that she has prepared “hundreds of trusts” and she need not worry because many businesses use trusts as a “tax effective structure”. Denise relies on Alex’s advice and instructs him to prepare the trust. Alex completes the trust tax return for the 2017-18 financial year and splits the net income of $180,000 between Barry and Denise. The Australian Taxation Office (ATO) finds that the trust breaches the tax avoidance rules under the Federal Income Tax Assessment Act. In particular ATO Taxation Ruling IT- 2030 provides that a person’s income should be consistent with the value of the work they do for the business.
The ATO orders Denise to pay back the tax she avoided plus a penalty of 50%. Denise’s business also suffers when it is revealed she is a “tax cheat”. Denise instructs her local lawyer to send a letter addressed to Alex demanding compensation of $100,000 for his negligence.
Advise Denise whether she is entitled to claim damages from Alex for her financial losses. (DO NOT discuss ‘defences’ relevant to negligence) Explain your answer fully making reference to appropriate case law on negligent misstatement and the relevant Sections of
the Civil Liability Act 2003 (Qld).