Legal Issues with Angelwings Airlines

This document discusses the legal issues faced by Fabio and Greta with Angelwings Airlines. It explores the breach of consumer rights, misleading advertising, and unconscionable conduct. The document also suggests possible enforcement actions and remedies for the affected parties.

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Question 1
Facts
Fabio and Greta, an elderly couple and Italian migrants, sold their Australian farm in
order to go and meet their relatives in Italy. This would be their first overseas trip.
After a considerable research, they were impressed with Angelwings Airlines which
was an overseas-owned airline which made television advertisements showing
favourable advertisements for its passengers. The couple booked their flights
through the agency of leisure travels as Greta had a back injury. Fabio made an
assumption that the higher fees charged in the economy class were to carter for the
seating facilities and because the press advertisements by Angelwings stipulated
passenger delivery by limousine to the airport of departure.
Fabio and Greta were disappointed by the fact that there was no limousine to collect
them as they used a taxi to the airport. The seats of the plane they boarded were not
spacious leather ones advertised by the airline and the quality of their meals was
also sub-standard. When she raised these issues, Greta was brushed off by the
cabin crew.
The return was worse when they returned from Italy as Greta described their seating
arrangements were wanting. On their arrival in Brisbane, they took their
disappointments and complaints against Angelwings Airlines to the travel agent, who
showed surprise at such complaints. The travel agent told them that Angelwings
Airlines only advertise the service availed in the first class because if the potential
passengers knew the kind of service offered in the economy class, no one would fly
in it.

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Law
Schedule 2.Australian Competition and Consumer Act (ACCA) (Cth)
Application of the Law to the Facts
S 3(3) Schedule 2 ACL defines a consumer as a person who acquires particular
services at a price not more than $40000 or if the acquired services were meant for
household or domestic or personal use or consumption. Fabio and Greta qualified as
consumers to the flight services offered by Angelwings Airlines.S 3(10) ACCA
provides for the presumption of who is deemed to be a consumer of goods and
services, a presumption which is upheld unless there has been established the
contrary with regards to the person being considered as a consumer to the goods
and services, a presumption satisfied by the Fabio family.
S 4(1) (a) ACCA deems representation to be misleading if someone makes a
representation regarding a future matter without reasonable grounds to make such
representations. Such misleading representation was made by Angelwings Airlines
in their press advertisements where they offered luxurious services including delivery
passengers’ departure airports through limousine. This was false and only aimed at
luring the potential passengers.
S 22 (1) ACCA prohibits unconscionable conduct in the purchase or supply of any
goods or services in any business transaction. It further notes that there may be
imposed a pecuniary or monetary penalty in case of any contravention. The action of
Angelwings Airlines to give false information to its passengers is unreasonable and
lacking in principles hence it is uncalled for.

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S 35 ACCA offers specific protection against bait advertising for the offer of particular
products or services which is just a misrepresentation and not the actual case.
Angelwings breached their contract as their advertisement was merely a bait
advertisement and not the actual facts on the grounds. Fabio and Greta had every
reason to say that the airline company had a duty which they breached.
S 52 (1) ACCA provides guarantee for undisturbed possession of the goods and
services as initially agreed. When they applied for the economy class, it is because
Fabio and Greta required some space of comfort without any disturbance, also
bearing in mind that Greta had back injury. This was never the case and people were
packed together like sardines. This did not offer comfort in any bit.
S 54 ACCA provides guarantee to acceptable quality. Angelswings Airlines was in
contravention of this guarantee as well. In their press advertisements, they offered
quality services such as spacious seats, and quality meals and even a limousine to
deliver the passengers to the departure airports. This was directly opposite to what
Fabio and Greta and other passengers experienced during their travels.
Enforcement actions
Chapter 5 ACCA provides for enforcement and remedies. An enforcement action
would include the application of s 223(1) (a) which provides for the public issuance of
a warning notice by the regulator if the regulator has reasonable grounds of
suspecting a conduct that may have contravened provisions in the ACCA. This
would be to the effect of preventing Angelwings Airlines from engaging in false
advertisements just to lure passengers into booking their flights with the economy
class yet the service provided was way the contrary of what was in the

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advertisements. Such notice should be very strong such that if Angelwings does not
comply with it, then the regulator may proceed with other stricter legal measures.
Remedies
S 224 ACCA provides for pecuniary penalties where the court has the satisfaction
that there existed the contravention of any provisions as provided by the ACCA.
These could be charged on Angelwings Airlines as they provided false and
misleading information to their passengers through the television advertisements in
contravention of the provisions ACCA, and to act as a warning to other businesses
with similar malpractices or intentions. Under s 227, the courts must give preference
to the person who suffered damage or loss for compensation purposes. In this case,
Fabio and his wife Greta should be ones to given preference based on their suffering
while on their trip to and from Italy.
S 228 ACCA also provides for civil actions to recover the lost monies. The general
public may rely on civil actions on the realisation of the misconduct of such
businesses as Airwings Airlines so that the lost amounts may be recovered by the
injured parties and the public at large.
S 229 provides for indemnification which allows the injured individual to shift the loss
suffered to the party responsible for such loss. Greta had a back injury and that was
their core reason for booking a flight with the economy class having been convinced
of its convenience through the television advertisements by Angelwings Airlines. This
however not being the case, the airline company will have to compensate the Fabio
family for their loss and inconvenience caused.

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S 232 provides for injunctions which restrain a person to engage in certain conduct.
The court should issue injunctions to prevent Angelwings Airlines from engaging in
misrepresentation and bait advertising in order to win more customers. This is
unacceptable. Instead, they should concentrate more on looking at ways of
improving their services so that they attract more customers.
S 237 provides for compensation to the injured party. As previously seen, this should
be paid to Fabio and Greta for their disappointment and discomfort during their trips
with Angelwings Airlines.
Conclusion
In conclusion, it is very unreasonable and unfair for businesses to lie to their
customers or feed them with false and misleading information in order to boost their
profits even without having the interests and well-being of the customers at heart or
in mind. The action of Angelwings Airlines to provide its potential with false
information was uncalled for and also unhealthy for the business as well. The
necessary agencies and government institutions must take very stringent and strict
actions against such unscrupulous companies for the protection of the consumers of
the goods and services. Strict action should also be taken against such officers such
officers as the travel agent who knew about the actions of such companies as the
Angelwings Airlines yet they could not do anything about it or file any reports with the
relevant authorities.
Question 2

STUDENT NAME STUDENT NUMBER
Facts
Property Tax Accounting, also known as PTA, is an accounting firm operated by Alex
in Brisbane. Denise who is a business owner wishes for the minimisation of her tax
liability. She searches the PTA website and sees the description of Alex as a
specialist in tax and trusts and a CPA (Certified Practising Accountant), having an
experience of more than 15 years. After booking an appointment with PTA, she gives
her business structure’s overview. Alex’s advice to Denise is that she can set up a
trust in the operation of her business where the trust would split, on an equal basis,
the net income of the business between Denise and Barry who is her husband. Barry
does not perform any duties in the business as he looks after the children on a full
time basis.
Denise has particular concern for the legality of the structure of the trust. On
assuring Denise of his experience in the preparation of trusts and the fact that the
use of trusts in business provides a structure of tax effectiveness, Denise relies on
the advice and gives instruction to Alex for the preparation of the trust. After
completion of the tax return of the trust for the financial year of 2017-18, Alex split
the $180000 net amount between the couple. There is a breach of the rules of tax
avoidance by the trust as stipulated in the Income Tax Evasion Act Assessment Act.
This is in accordance with the ATO, Australian Taxation Office. The Taxation Ruling
IT- 2030 of the ATO particularly provides for the consistency of someone’s income
with his or her work value or business.
Denise is ordered by the ATO for the tax pay back, a 50% penalty included. Her
business also suffers because she is seen as tax cheat. She instructs her lawyer to

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send a letter to Alex to demand to be compensated an amount worth $100,000 as a
result of his negligence.
Law
Caparo Industries PLC v Dickman,
Civil Liability Act
Donoghue v Stevenson
Hedley Bryne v Heller
Application of the Law to the Facts
Duty of care
In Caparo Industries PLC v Dickman,the Court of Appeal came up with three tests
for determining a duty of care for negligence; the harm must have been foreseeable
because of the conduct of the defendant as was seen in Donoghue v Stevenson;
the parties must be in a proximity relationship and the imposition of liability must be
just, fair and reasonable. Alex should have foreseen that his negligent misstatement
may have contravened the regulations of ATO regarding the avoidance of tax
payment. Alex and Denise also were in a proximity business relationship since after
receiving advice from him, Denise instructed Alex to go ahead and prepare the trust.
It would also only be just, fair and reasonable for Alex to compensate Denise
because he had breached his duty as a specialist in tax and trusts.
The Hedley Bryne v Heller case introduced the principle of negligent misstatements
where the decision stated clearly that a person voluntarily assumes responsibility to
the person to whom he or she makes a statement or any other relevant person. It

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went ahead to state that if the statement was made negligently, then it is the person
who made the statement that would be held liable for any losses incurred. This only
means that the losses incurred by Denise should be the burden of Alex together with
his company, Property Tax Accounting. This is because he made negligent
misstatements in his preparation of the trust tax return. The prepared statements of
the trust were negligent to the effect that the ATO found the trust to breach its
regulations against tax avoidance. It is only fair and just that Alex and PTA take
responsibility for their negligent misstatements and compensate Denise for all her
losses and embarrassment.
General standard of care
In S 9 (1) CLA provides that there exists a breach of duty where the person in breach
could foresee the risk and even a reasonable person could have taken precautionary
measures in order to avoid such breach of duty. Alex should have taken the
precautionary measures of ensuring the legality of the trust and its compliance with
the law. It should be noted that the legality of the tax structure was an issue of keen
interest to Denise. However, due to his negligence, Alex did not put all such factors
into consideration and ensure a healthy and thriving working environment for
Denise’s business. S 9(2) CLA provides for the reasonable test for the breach where
any reasonable person ought to have taken precautions to avoid the risk for harm by
looking at the factors such; probability of the occurrence of the harm in case of any
reckless, the e harm likeliness of the harm being serious, any burden that would be
incurred in the avoidance of the harm and the social utility creating the harm risk.
Causation

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S 11 (1) CLA provides that the causation for a breach of duty has the elements of
factual causation where it is the breach which factually made the harm to occur and
scope of liability of the person in breach which extends to the harm. The negligent
misstatement by Alex in the trust document that where Denise and her husband,
Barry would split the net income into two equal incomes was found to be in violation
of the Income and Tax Assessment Act (Federal. This is because the Australian
Taxation Office made a ruling to provide that a person should earn an income which
is in consistence with the value he or she adds to the business. This was not the
case with Denise’s situation as her husband was taking care of their children on a full
time basis. However, Denise only wished to minimise her tax liability and not avoid it
altogether. She was in fact concerned about the legality of the trust tax return that
she was to acquire from Alex and his company, PTA. It is due to the negligence of
Alex that he made the negligent misstatement that Denise and Barry could share
their net income equally which was in violation of the set rules and regulations of
ATO. This therefore means that the causation for non-compliance with the set rules
came as a result of the misguidance of Denise by Alex. She should therefore not be
liable for the offence of tax avoidance. Alex should be charged with negligence and
he should compensate Denise, include compensation for the harm caused to her
business as she is now deemed as a tax cheat.
S 22 CLA provides for the professions’ standard of care where a professional is
considered to have not breached his duty unless his peer professional opinion
deems it otherwise, or if the court considers the opinion contravene a written law or
is irrational. If Denise sought the opinion of peer accountants, she may be glad to
know that Alex’s actions were not in accordance with the standards of his profession.
However a stronger reliance may be put on the written law, which in this case is the

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ATO Taxation Ruling IT-2030 which stipulates clearly that there should be
consistence between an individual income and the work value they partake in the
particular business in question. This was seen to be in direct contravention of the
advice given by Alex and as well as the trust tax return that he had prepared where
he had indicated that Denise and Barry would share the net income equally.
Conclusion
The case of Caparo Industries PLC V Dickman gave a threefold test for the duty of
care in the general cases of negligence. Hedley Bryne v Heller also introduced the
liability of any person who makes negligent misstatements. The CLA provides for the
general standard of care under section s 9 (1) where it states that the risk ought to
be foreseeable. S 9 (2) CLA provides a reasonable test where the reasonable
person should look at factors such as the probability of the occurrence of the harm
because of any recklessness. Alex was the cause for the ATO to impose a penalty
on Denise alongside an order for her to pay the required tax balances. Had he been
diligent and keen enough, he should have known that the equal sharing of the net
income of the business between Denise and Barry, her husband, would have been
inconsistent with the rules and regulations of the Australian Taxation Office.
Moreover, when Denise seemed to worry about the legality of the trust tax return,
Alex assured her that he had drafted many such trusts and it was the trusts which
were convenient for businesses. This was supposed to show his competence,
expertise and experience as a specialist in the business of tax and trusts. This was
however not the case because the trust had contravened the law. Alex had used his
words to convince Denise and it was on this basis that Denise instructed him to
prepare the trust. Therefore Alex is liable for the woes of Denise and Denise should
go ahead with her plans of demanding for compensation from Alex through her local

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lawyer. This compensation should also include for the damages and embarrassment
that she has suffered together with the negative implication to her business.