Abraham v Gogetta Equipment Funding Pty Ltd

Proceedings

1. The matter first came before the Tribunal on 31 August 2016, when the Tribunal adjourned the hearing with directions for each party to file and serve any documents upon which they intended to rely within a certain timeframe. Both parties submitted their documents within the allowed times.
2. The matter was listed for final hearing before me on 17 November 2016. On that day, the Applicant appeared in person. He gave evidence on oath. The Respondent was represented by Mr Martin Walker who appeared by phone, and gave his evidence on affirmation.
3. Prior to commencing the hearing, I provided the parties with a further opportunity to discuss the matter with a view to resolving the matter by consent. Neither party sought any further time to resolve the matter.
4. I reserved my decision at the end of the hearing. I then identified some legal issues relating to the liability of the Respondent and potential liability of another party, which had not been raised at the hearing, but arose out of the evidence given. I arranged for the matter to be listed for a Directions hearing to allow the parties to discuss the following issues: Whether the Respondent is a linked credit provider for the purpose of Part 5.5 of the Australian Consumer Law (ACL) If so, whether any orders relating to the breach of consumer warranty can be made against the Respondent alone, or whether the dealer must be joined as a Respondent (sections 278 and 279 of the ACL) Whether the unfair contract provisions in Sections 23 to 28 of the ACL apply to these proceedings If these proceedings (sic) do apply, whether any terms of the rental agreement between the parties were unfair within the meaning of these provisions.
5. The Directions hearing was listed for 15 December 2016. On that day, the Applicant appeared in person. I attempted unsuccessfully to make contact with the Respondent or their representative by phone. I adjourned the matter for a hearing on the papers, with directions that each party file and serve submissions on the following matters within a fixed timeframe: a. Whether the Respondent is a "linked credit provider" to which Part 5.5 of the Australian Consumer Law (ACL) (Schedule 2 to the Competition and Consumer Act 2010 (Cwth)) applies? b. If so, whether the Applicant is entitled to enforce the consumer warranties (including S.54 of the ACL) against the linked credit provider c. Whether these provisions do not apply because the Applicant did not also make application against the supplier (motor vehicle dealer) (s 279 ACL) d. Whether the unfair contract terms provisions in 23 to 28 of the ACL apply to the contract entered into by the parties? In particular, whether the circumstances of this matter amounted to a consumer contract or a small business contract? e. If the provisions apply, whether any of the terms of the contract are unfair (as defined in the ACL), and if so, what remedy the Applicant is entitled to.
6. The Applicant provided his submissions on these issues to the Tribunal within these timeframes. The Respondent claimed he had not received the Applicant's submissions. The Respondent subsequently provided its own submissions and attached documents dated 15 March 2017. This was well outside the time allowed for filing. Neither party has requested that any action be taken in relation to the non-compliance (or alleged non-compliance) with the Tribunal's Directions. In these circumstances, I am prepared to consider these submissions in making my decision.

Jurisdiction

1. The Tribunal's Consumer and Commercial division has jurisdiction in relation to matters arising under various legislation including the Fair Trading Act 1987 (NSW)(FTA) which in turn may raise issues and rights under the Australian Consumer Law (ACL). The ACL was incorporated into the law of New South Wales by section 28(1) of the Fair Trading Act 1987 (NSW) ('FTA').
2. The ACL (NSW) consists of Schedule 2 of the Competition and Consumer Act 2010 (Cwth), and the regulations under section 139G of that Act (FTA section 27). The ACL applies to create rights at law in consumers that fall within the terms of the ACL including unfair terms provisions in Section 23 to 28 of the ACL, and the consumer guarantee provisions in sections 54-57 of Part 3-2 of the ACL. Whilst the ACL creates a cause of action at law and a range of remedies for parties, it does not of itself confer any jurisdiction on this Tribunal to hear those actions and provide those remedies.
3. In order for a party to rely upon rights created by the ACL in this Tribunal, the party must show how the Tribunal obtains the jurisdiction to entertain that action. This involves a two-step process: 1. Whether the subject matter of the claim falls within the ACL; and if so 2. Whether the Tribunal is vested with the jurisdiction to hear that claim.
4. In relation to the first issue, the ACL provides statutory rights and protection to consumers who have acquired 'goods' or services valued at $40,000.00 or less (section 2; Schedule 2 section 3).
5. Under section 32 of the FTA, the ACL (NSW) applies to and in relation to: (a) Persons carrying on business within this jurisdiction, or (b) Bodies corporate incorporated or registered under the law of this jurisdiction, or (c) Persons ordinarily resident in this jurisdiction, or (d) Persons otherwise connected with this jurisdiction.
6. The Applicant is resident in NSW. The Respondent is a corporation which operates its business from Queensland. The rental agreement was for a vehicle to be provided for the Applicant's use in NSW. I am satisfied that the Applicant is a consumer who may enjoy and enforce rights under the ACL.
7. The only means by which the Tribunal can obtain the jurisdiction over ACL matters appears to be via the Fair Trading Act 1987 (NSW)(CCA). Section 79J FTA gives the Tribunal jurisdiction to hear claims falling under the FTA. Section 79D of the FTA defines a 'consumer' to include a natural person to whom a supplier has supplied or agreed to supply goods or services, whether under a contract or not. The Applicant meets this description.
8. The contract contemplates an agreement by the respondent to hire out certain specified equipment to the Applicant (in this case a vehicle) in exchange for the Applicant paying a weekly rental for a minimum term. Some other terms of the contract are referred to below. I am satisfied the claim arises from the supply of goods to the consumer (under a contract or not), and constitutes a claim by payment of a sum of money (FTA section 79E), and/or relief from payment. The goods to which the claim relates were supplied in NSW (FTA section 79K). The claim was made within the period of time allowed in Section 79L FTA.
9. The claim is therefore maintainable under the FTA and is within the Tribunal's monetary jurisdiction.
10. The Tribunal must consider whether the parties should be bound by the Rental Agreement Standard Terms and Conditions, subject to any other applicable provisions of the ACL. If the Tribunal is satisfied the applicant has proved a breach of any relevant provision of the ACL, the Tribunal may make orders under Section 79N of the FTA, including orders for payment of a sum of money, and/or relief from payment. The Tribunal has a discretion in respect of which remedy it determines is appropriate. Under Section 79R(2) of the FTA, the Tribunal can impose such conditions on any order it deems appropriate. Under Section 79U of the FTA, the Tribunal must make remedial orders which are "fair and equitable to all the parties to the claim.".

The Applicant's Evidence at the initial hearing

1. The Applicant wanted a vehicle predominantly for deliveries for his or his family's business. He acquired the vehicle in his own name, but he has an ABN.
2. The Applicant first located the vehicle in February 2015 at the dealer known as Pride and Joy Motors ("P and J") at Cabramatta. The Applicant states he was referred to the Respondent as a way to afford to acquire this vehicle.
3. The Applicant claims the vehicle was purchased by the Respondent, and rented back to the customer at the above weekly rental. He made an initial payment of $1,212.95 to the Respondent.
4. Soon after taking possession of the vehicle on 25 February 2015, he noticed the temperature gauge had moved into the extreme high range indicating an overheating engine. He also noticed that the tyres were constantly deflating, even when the vehicle was not being driven. He discussed the overheating issue with P and J who suggested he return the vehicle to them for repairs. He did not mention the issue with the deflating tyres at this time. He returned the vehicle on 28 February 2015 and collected it on 3 March 2015.
5. The actions taken by P and J resolved the overheating issue, but the tyres continued to deflate. In early April 2015, he drove the vehicle to an independent mechanical repairer in Berala. The mechanic advised that there was pre-existing damage to the 20 inch rims/wheels. They appeared to have been welded causing the tyres to constantly deflate. The Applicant then contacted P and J suggesting that the vehicle was not roadworthy or of acceptable quality. P and J instructed the Applicant to take the vehicle to a tyre store in Granville. He did so, and the store removed all 4 of the 20 inch rims and replaced them with standard 17 inch Holden rims. He asked P and J to fit new 20 inch rims but they refused.
6. On 13 April 2015, the Applicant emailed the Respondent requesting immediate stop to all payments as he was "in the process of claiming bankruptcy". The Respondent replied noting that the rental agreement cannot be included in his bankruptcy while he was in possession of the rental item. The Respondent provided a location to surrender the vehicle, and the Applicant surrendered the vehicle to that place on 16 April 2016.
7. The Applicant notes that he surrendered the vehicle because: 1. He had notified Harley Finance (a related company to the Respondent) 2. The rental vehicle was not roadworthy, not fit for its purpose and not meeting a certain standard, and 3. The customer had lost all faith with the Respondent, and with P and J. 4. The rental agreement refers to a vehicle with 20 inch rims, not 17 inch rims
8. In support of his claim that the vehicle was of unacceptable quality, he notes that the purchase price was $10,990, and that a vehicle of this value "should last at least 12 months. He states that the damage to the wheels and rims were there at the time of supply to him, and made the vehicle "non-roadworthy". He would not have chosen the vehicle had he been aware of all the problems. The Applicant told me that he has no report from the Berala repairer.
9. He believes the terms of the rental agreement are unfair because the Respondent has leased a defective vehicle, and justice requires that he should not have to pay out the rental contract in these circumstances.

The Respondent's Evidence

1. On behalf of the Respondent, Mr Walker provided the following material evidence: 1. The Applicant entered into the Rental Agreement on 5 March 2015. The Applicant would have received the Rental Agreement including all terms and conditions by email. He signed with the assistance of "Docu-sign" (an electronic stamp). [The Applicant states he did not recall this, but acknowledged that it may have occurred]. 2. It is a commercial rental agreement. The Respondent was informed that the applicant's purpose in acquiring the vehicle was for the delivery of goods. 3. The Respondent does not choose the vehicle. It merely provides a rental option, with an option to buy at the end of the term. 4. The Respondent accepts no responsibility for the condition of the vehicle. They buy the vehicle chosen by the customer and then rent it back to that customer, Mr Walker referred specifically to Clause 11 of the Rental Agreement which provides as follows: RELIANCE AND WARRANTIES A The Hirer acknowledges that in deciding to enter into this agreement: 1. It has not relied in any way on the Owner's skill or judgment 2. It has satisfied itself as to the condition and suitability of the equipment and its fitness for the hirer's purposes, and 3. It had previously examined the equipment and satisfied itself as to its compliance with the specifications contained in the equipment schedule as well as its condition, quality, fitness for its intended purpose and the validity of the warranties of the manufacturer and/or supplier. B Any or all of the conditions or warranties expressed by the Owner … as to the condition, suitability, quality, fitness for purpose, safety or title of the equipment are hereby negated and excluded to the full extent permitted by law and the Owner gives no such warranty or condition and the Hirer acknowledges that the Owner has not given any such warranty or condition. 1. The Applicant has provided no independent evidence that the vehicle is not of acceptable quality. He appears to have returned the vehicle because it does not match the appearance he was anticipating. 2. After the Applicant surrendered the vehicle, the Respondent claimed that it paid over $1,000 for work on the vehicle to bring it into a re-marketable condition. This included a minor repair to the exhaust, removal of decals (stickers) with resulting paint damage requiring repair, replacement of a spare wheel and a general service and detail. The Respondent did not claim this from the Applicant.
2. The Respondent then wrote to the Applicant seeking the amount due for the remaining minimum term of the contract (45 x $163.59) plus the amount owing at the time of the surrender (1 weeks rent plus $35 dishonour fee), less the bond held. Total amount due was $6,905.87.
3. The applicant responded that he was claiming bankruptcy. The Applicant subsequently advised that he was no longer pursuing bankruptcy and offered to pay $3,400 by installments.

Submissions received subsequent to the Directions Hearing

1. The Applicant provided the following submissions: Whether the Respondent is a "linked credit provider" to which Part 5.5 of the Australian Consumer Law (ACL) (Schedule 2 to the Competition and Consumer Act 2010 (Cwth)) applies? If so, whether the Applicant is entitled to enforce the consumer warranties (including S.54 of the ACL) against the linked credit provider
2. The Applicant was unable to confirm whether the Respondent is a "linked credit provider", and therefore cannot determine if the consumer warranties can be enforced. Whether these provisions do not apply because the Applicant did not also make application against the supplier (motor vehicle dealer) (s 279 ACL) ?
3. The Applicant states he made a complaint to NSW Fair Trading against P and J. NSW Fair Trading "closed and linked" the matter to a claim against the Respondent. He was not aware that he had to make an application against both the Respondent, and P and J. Whether the unfair contract terms provisions in 23 to 28 of the ACL apply to the contract entered into by the parties? In particular, whether the circumstances of this matter amounted to a consumer contract or a small business contract?
4. The Applicant did not answer this question directly. His submission refers to the alleged unfairness of aspects of the Rental Agreement - eg Clause 8a of the Agreement providing that "the Hirer's obligations including the obligation to pay rent continues notwithstanding any defect … of the Equipment". The Applicant also repeats the alleged defects referred to in his initial evidence, but he does not indicate whether the relevant ACL provisions apply in his circumstances. If the provisions apply, whether any of the terms of the contract are unfair (as defined in the ACL), and if so, what remedy the Applicant is entitled to.
5. The Applicant states he is seeking a refund of the total amount he has paid; namely $2,046.14.
6. The Respondent made submissions, relying largely on a statement dated 15 March 2017 of Mr Murray Badger who is the Group Risk Manager of the Respondent.
7. The Respondent's submission and Mr Badger's statement do not address any of the questions posed by the Tribunal. It largely restates the evidence given by Mr Walker at the November 2016 hearing, and relies on the terms of the Rental Agreement to establish the Applicant's liability.

Consideration

1. The issues that arise from the above matters are as follows: 1. Is the Respondent a linked credit provider for the purposes of S 278 of the ACL? 2. If so, can the Applicant bring proceedings against the Respondent to recover his loss or damage from breach of consumer warranty under section 54, 55, 56, 57, 60, 61 or 62 of the ACL arising out of a related supply? 3. If so, has the Applicant established that he has suffered any loss or damage arising out a breach of any of the above consumer warranties? 4. Does the Applicant have an independent cause of action against the Respondent? In particular, has the Applicant established that the unfair contract provisions in Section 23 to 28 of the ACL apply to the circumstances of this case?

Is the Respondent a linked credit provider?

1. Sections 278 of the ACL provide as follows: Division 1 -- Linked credit contracts 278 Liability of suppliers and linked credit providers relating to linked credit contracts (1) If a consumer who is a party to a linked credit contract suffers loss or damage as a result of: (a) a misrepresentation relating to the credit provided under that linked credit contract, or to a supply of goods or services (a related supply ) to which that contract relates; or (b) a breach of the linked credit contract, or of a contract for a related supply; or (c) the failure of consideration in relation to the linked credit contract, or to a contract for a related supply; or (d) a failure to comply with a guarantee that applies, under section 54, 55, 56, 57, 60, 61 or 62, in relation to a related supply; or (e) a breach of a warranty that is implied in the linked credit contract by section 12ED of the Australian Securities and Investments Commission Act 2001 ; the linked credit provider who is a party to the contract, and the supplier of a related supply, are jointly and severally liable to the consumer for the amount of the loss or damage. (2) A linked credit contract is a contract that a consumer enters into with a linked credit provider of a person (the supplier ) for the provision of credit in relation to: (a) the supply by way of sale, lease, hire or hire-purchase of goods to the consumer by the linked credit provider where the supplier supplies the goods, or causes the goods to be supplied, to the linked credit provider or (b) the supply by the supplier of goods or services, or goods and services, to the consumer.
2. I am satisfied that the Applicant did enter into a linked credit contact with the Respondent. There is no dispute that the Applicant had no contact with, or knowledge of the Respondent prior to his approach to the supplier P and J. He was introduced to the Respondent by the supplier. The supplier P and J has sold the vehicle to the Respondent who has then leased the goods backed to the Applicant. This is therefore a linked credit contract and the Respondent is a liked credit provider.

Can the applicant bring proceedings against the Respondent (the linked credit provider) to recover any loss or damage incurred in the context of the breach of a consumer warranty by the supplier P and J?

1. Section 279 of the ACL provides: 279 Action by consumer to recover amount of loss or damage (1) If a linked credit provider and a supplier of the goods or services, are liable under section 278 to a consumer for an amount of loss or damage, the consumer may recover the amount by action in a court of competent jurisdiction. (2) The consumer must bring the action against the linked credit provider and the supplier jointly. (3) Subsection (2) does not apply if: (a) the supplier has been dissolved or the winding up of the supplier has commenced; or (b) both of the following apply: (i) in the opinion of the court in which the action is taken, it is not reasonably likely that a judgment obtained against the supplier would be satisfied; (ii) that court has, on the application of the consumer, declared that that subsection `does not apply in relation to the proceedings.
2. It is clear that for the linked credit provider to be liable at all under these provisions, the consumer must bring the action against the linked credit provider and the supplier jointly. This has not occurred in these proceedings. The supplier P and J is not a party to these proceedings. The Applicant states he was not aware of the need or his legal entitlement to bring proceedings against two respondents jointly. Under Section 45 of the Civil and Administrative Tribunal Act, parties generally have the carriage of their own matters, subject to any application for leave to be represented. The Applicant in this matter was placed on notice of the relevant provisions, and did not request the joining of any other party as a Respondent. None of the exceptions in Section 279(3) apply. In these circumstances, the named Respondent cannot be liable under these linked credit provider provisions.
3. I note in passing that I would have been most unlikely to find on the evidence that the Applicant had established a breach by the supplier of any of the consumer warranties [had I been able to consider the Respondent's liability under these provisions, which I was not]. The most relevant of these warranties is that under Section 54 of the ACL which is a guarantee that any goods supplied will be of acceptable quality. I note that the Applicant has provided no independent evidence of the alleged defects of the vehicle (particularly the alleged altered wheel rims). In these circumstances, had I been required to do so, it is most unlikely I would have found a breach of this or any other consumer warranty by the supplier, such as to found a cause of action against the linked credit provider.

Does the Applicant have an independent cause of action against the Respondent? In particular, has the Applicant established that the unfair contract provisions in Section 23 to 28 of the ACL apply to the circumstances of this case?

1. Sub-section 250(1) gives the Tribunal power to declare that a term of a consumer or small business contract is an unfair term, in this case, on the application of a party to the contract (being the Applicant). This power only exists if the contract is a standard form contract (sub-section 250(3)). The Applicant claims that the obligation to continue to pay rental charges even where the equipment hired is defective is unfair (Clause 8a). Although he did not frame his submissions in this way, his application indicates that he would like this term declared unfair and therefore void by operation of section 23 of the ACL.

What term or terms of the Rental Contract are being examined?

1. I am considering only the provision of the Rental Agreement which the Applicant has alleged is unfair - clause 8a of the Agreement. In the initial hearing, the Applicant had raised issues of unfairness but not couched these issues in terms of the ACL provisions. I then directed the parties to the relevant provisions of the ACL and invited them to make further submissions. The Applicant's submission refers only to Clause 8a. He says it is "unreasonable that payment should be made on a vehicle that is not fit for the purpose as it needed numerous repairs. The vehicle had defects that were not disclosed prior to signing the rental agreement. The applicant would not have selected the vehicle if aware of these defects. It is unfair to expect payment when the vehicle was unsafe and required repairs."
2. I accept that the Applicant was not legally represented in these proceedings. Nevertheless, having directed his attention to the relevant provisions, it is not now appropriate for me to peruse the Rental Agreement to determine whether any term other than that identified by the Applicant as potentially unfair. To do so would be procedurally unfair to the Respondent as it would be taken by surprise, and not have a proper opportunity to provide its submissions.

Do the provisions apply to the Rental Agreement entered into between the parties? 1. Is the Agreement a consumer contract or a small business contract?

1. The unfair contract provisions in Sections 23 to 28 of the ACL apply to a consumer contract which is defined as a contract for: (a) a supply of goods or services; or (b) a sale or grant of an interest in land; to an individual whose acquisition of the goods, services or interest is wholly or predominantly for personal, domestic or household use or consumption. or to a small business contract which is defined as follows: A contract is a small business contract if: (a) the contract is for a supply of goods or services, or a sale or grant of an interest in land; and (b) at the time the contract is entered into, at least one party to the contract is a business that employs fewer than 20 persons; and (c) either of the following applies: (i) the upfront price payable under the contract does not exceed $300,000; (ii) the contract has a duration of more than 12 months and the upfront price payable under the contract does not exceed $1,000,000.
2. The contract in these proceedings is for the supply of a vehicle by way of hire. The Applicant is clear that he hired the vehicle for the purpose of deliveries for his or his family's business. The fact that he hired it in his own name does not change the nature of the contract. The supply was clearly not "for personal domestic or household use or consumption", therefore this is not a consumer contract. It is a small business contract. Although there was no clear evidence of the size of the business, the evidence appears to suggest that the Applicant has his own or a small family business which is most likely to have no formal employees or less than 20 employees. The Respondent has not established otherwise.
3. The upfront price is defined as follows in the ACL: 26 (2) The upfront price payable under a contract is the consideration that: (a) is provided, or is to be provided, for the supply, sale or grant under the contract; and (b) is disclosed at or before the time the contract is entered into; but does not include any other consideration that is contingent on the occurrence or non-occurrence of a particular event. The total agreed price in the Schedule to the contract is $6,616.41.
4. I am satisfied therefore that the contract between the parties is a small business contract to which the unfair contract provisions in Part 2.3 of the ACL.

Is the Rental Agreement a standard form contract?

1. Sub-section 23(1) of the ACL provides, relevantly, that a term of a small business contract is void if the term is unfair and the contract is a standard form contract.
2. Section 27 of the ACL sets out the basis upon which the Tribunal is to determine if a contract is a standard form contract. Sub-section 27(1) provides that if a party to a proceeding alleges that a contract is a standard form contract, it is presumed to be such unless another party to the proceeding proves otherwise. Sub-section 27(2) provides that in determining if a contract is a standard form contract, the Tribunal may take into account such matters as it thinks relevant. This includes the following matters which must be taken into account: (a) whether one of the parties has all or most of the bargaining power relating to the transaction; (b) whether the contract was prepared by one party before any discussion relating to the transaction occurred between the parties; (c) whether another party was, in effect, required either to accept or reject the terms of the contract in the form in which they were presented; (d) whether another party was given an effective opportunity to negotiate the terms of the contract; (e) whether the terms of the contract take into account the specific characteristics of another party or the particular transaction; and (f) any other matters prescribed by the regulations. The Competition and Consumer Regulations 2010 do not prescribe any further matters.
3. There is no issue in this case that the said rental contract is a standard form contract. The Respondent has not sought to prove otherwise. The presumption that it is a standard form contract has therefore not been disturbed.
4. In any event, the contract has each of the characteristics described in sub-section 27(2) of the ACL - the contracts were pre-prepared, generic contracts which were offered to the Applicant on a 'take it or leave it' basis.

Is the Agreement an excluded agreement?

1. Section 28 of the ACL sets out some contracts to which Part 2.3 does not apply. However, it does not exclude the contracts in issue in this dispute.

Is the allegedly unfair term a term which defines the main subject matter of the contract?

1. Section 26 provides that the Tribunal's power to declare that a term of a contract is unfair does not apply to a term that defines the main subject matter of the contract, which sets the upfront price payable under the contract, or which is a permit required, or expressly permitted by a law of the Commonwealth or (in this case) NSW. As noted above, the upfront price payable under the contract is defined to mean the consideration that is provided, or is to be provided, for the supply, sale of grant under the contract, and is disclosed at or before the time the contract is entered into, but does not include any other consideration that is contingent on the occurrence or non-occurrence of a particular event.
2. I am satisfied that the main subject matter of the rental contract is limited to those matters central to the consideration that passed between the parties when the contract was formed. This includes the total agreed price, the term of the contract, and the monthly payments.
3. Clause 8a is not a term dealing with the main subject matter of the contract. It is an ancillary or subsidiary term. It has no effect unless there is a "defect, breakdown, accident or seizure of the Equipment". In this sense it was not a term concerned with the existence of the contract, and it is not a term necessary to give effect to the supply of the Equipment ("the vehicle"). It is therefore a term which is not excluded from consideration as an unfair term.

Is Clause 8a of the Rental Agreement an unfair term?

1. Section 24 defines the meaning of "unfair" for the purposes of Part 2.3 of the ACL and sets out the matters the Tribunal may and must take into account in determining if a term of a contract is unfair: 24 Meaning of unfair (1) A term of a consumer contract or small business contract is unfair if: (a) it would cause a significant imbalance in the parties' rights and obligations arising under the contract; and (b) it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and (c) it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on. (2) In determining whether a term of a contract is unfair under subsection (1), a court may take into account such matters as it thinks relevant, but must take into account the following: (a) the extent to which the term is transparent; (b) the contract as a whole. (3) A term is transparent if the term is: (a) expressed in reasonably plain language; and (b) legible; and (c) presented clearly; and (d) readily available to any party affected by the term. (4) For the purposes of subsection (1)(b), a term of a contract is presumed not to be reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term, unless that party proves otherwise.
2. Section 25 of the ACL provides some examples of unfair contract terms, without limiting the meaning of that term: 25 Examples of unfair terms Without limiting section 24, the following are examples of the kinds of terms of a consumer contract or small business contract that may be unfair: (a) a term that permits, or has the effect of permitting, one party (but not another party) to avoid or limit performance of the contract; (b) a term that permits, or has the effect of permitting, one party (but not another party) to terminate the contract; (c) a term that penalises, or has the effect of penalising, one party (but not another party) for a breach or termination of the contract; (d) a term that permits, or has the effect of permitting, one party (but not another party) to vary the terms of the contract; (e) a term that permits, or has the effect of permitting, one party (but not another party) to renew or not renew the contract; (f) a term that permits, or has the effect of permitting, one party to vary the upfront price payable under the contract without the right of another party to terminate the contract; (g) a term that permits, or has the effect of permitting, one party unilaterally to vary the characteristics of the goods or services to be supplied, or the interest in land to be sold or granted, under the contract; (h) a term that permits, or has the effect of permitting, one party unilaterally to determine whether the contract has been breached or to interpret its meaning; (i) a term that limits, or has the effect of limiting, one party's vicarious liability for its agents; (j) a term that permits, or has the effect of permitting, one party to assign the contract to the detriment of another party without that other party's consent; (k) a term that limits, or has the effect of limiting, one party's right to sue another party; (l) a term that limits, or has the effect of limiting, the evidence one party can adduce in proceedings relating to the contract; (m) a term that imposes, or has the effect of imposing, the evidential burden on one party in proceedings relating to the contract; (n) a term of a kind, or a term that has an effect of a kind, prescribed by the regulations. With respect to sub-section 25(n) no additional terms have been prescribed by the Competition and Consumer Regulations 2010.
3. Section 24 of the ACL sets out a three-limb test for determining if a term of a contract is unfair. Each limb of the test must be satisfied for a term to be found unfair. The Tribunal must be satisfied that the term: 1. would cause a significant imbalance in the parties' rights and obligations arising under the contact; and 2. is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and 3. would cause a detriment (whether financial or otherwise) to a party if it were to be applied or relied on. In determining whether a term is unfair the Tribunal may take into account any matter it thinks relevant, but it must take into account the extent to which the term is transparent and the terms of the contract as a whole.
4. Sub-section 24(3) of the ACL provides that a term will be transparent if it is expressed in reasonably plain language, if it is legible, if it is presented clearly, and if is readily available to any party affected by the term.
5. I note that the Applicant suggested it is not his signature on the rental Agreement. I accept however the explanation of Mr Walker that the agreement including all the terms and conditions were sent to the Applicant via email and that he E-signed the contract. The Applicant could not remember clearly whether this had occurred.
6. Having found this, I must accept that the Terms and Conditions of the Rental Agreement (including Clause 8a) were available for consideration by the Applicant. It is a reasonably lengthy contract consisting of 21 Pages, 15 multi-part Terms and a Schedule, and some attached documents. Nevertheless, the Terms are legible and, at least in relation to Clause 8a in reasonably plain language. I am satisfied that this term is transparent.
7. A term will be unfair on the first limb if it results in a significant imbalance in the parties' rights and obligations under a contract. The Explanatory Memorandum states [at clause 5.23] that this [involves] a factual determination of whether any such significant imbalance exists." The meaning to be attributed to the term "significant" appears to have been the subject of some judicial controversy. In Director of Consumer Affairs Victoria v AAPT [2006] VCAT 1493, President Morris determined [at 95]: The word "significant" simply means "important" or "of consequence". It does not mean "substantial". It is not a word of fixed connotation and beside being elastic is somewhat indefinite.
8. By contrast, in Jetstar Airways Pty Ltd v Free [2008] VSC 539, Cavanough J specifically disagreed [at 104] with President Morris' analysis and concluded instead [at 105]: I recognise the perils of attempting to paraphrase statutory language, but, in my view, the context of the word "significant" in s 32W shows that it means, principally at least, "significant in magnitude", or "sufficiently large to be important", being a meaning not too distant from "substantial." If that be right, the interpretation of s 32W adopted in AAPT is all the more unlikely. Essentially, the Jetstar test sets the test for imbalance at a higher threshold than the AAPT test.
9. In Director-General of Fair Trading v First National Bank plc [2002] 1 AC 481, a case decided under the UTCCR, Lord Bingham said [at 494]: The requirement for a significant imbalance is met if a term is so weighted in favour of the supplier as to tilt the parties' rights and obligations under the contract significantly in his favour. This may be by the granting to the supplier of a beneficial option or discretion or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty.
10. In the circumstances of this case, I am satisfied that the requirement to continue to pay rent despite any defect or breakdown in the vehicle does produce a significant imbalance in the parties' rights and obligations under contract. It means that the Hirer (the Applicant in this case) is potentially liable to continue to fulfil his side of the bargain, though he has no continuing access to the equipment (in this case the vehicle) for which he is paying rent.
11. On the second limb of the test for unfairness, the Tribunal must consider if Clause 8a is reasonably necessary to protect the legitimate interests of the Respondent. However, it must do so in the context where sub-section 24(4) of the ACL creates a presumption that a term of a contract is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term, unless that party proves otherwise. In other words, the onus is on the Respondent to prove to the Tribunal that this Term is necessary to protect is legitimate interests.
12. The Respondent has not made any submissions in relation to this issue. He has not identified any legitimate interest which Clause 8a protects. For example, this is not a case where it was contended that this Clause enables the Respondent to offer the rent of the equipment at a lower overall cost than it would otherwise be obliged to: see generally, Jetstar Airways Pty Ltd v Free [2008] VSC 539. Furthermore, the Respondent is the owner of the vehicle. Any loss the Respondent might incur from the Hirer ceasing to pay rent could presumably be offset from action which it could take against the dealer in relation to the condition in which the vehicle was sold.
13. There is thus no basis on the evidence upon which I could find that Clause 8a is necessary to protect the legitimate interests of the Respondent.
14. On the third limb of the test, the Tribunal must consider if Clause 8a would cause a detriment to the Applicant if it were to be relied upon. There can be no doubt in this case that the application of this clause, in the circumstances where the vehicle is defective or has broken down could, in result in a significant detriment to the Applicant, in so far as he remains liable to pay the rental under the Agreement without having the use of the vehicle being rented.

Conclusion - Not Fair and Equitable to make an Order in favour of the Applicant

1. Having found all three limbs of Section 24(1) satisfied in respect of Clause 8a of the Rental Agreement, and despite having found that this Term is "transparent" as described, I am satisfied that this Term is an unfair term. By operation of section 23(1) of the ACL this term is therefore void.
2. This does not automatically mean that the Applicant is entitled to the orders that he seeks. He requests to be refunded the full amount he has paid under the rental Agreement, and to be relieved from paying any further amounts due in the balance of the 12 month period. This request relies on his argument that the vehicle was not roadworthy and safe or fit for its purpose. However I have already noted the complete lack of independent evidence as to the condition of the vehicle at the time the Applicant surrendered it. He claims to have taken the vehicle to another mechanic but there is no report from that mechanic. The Applicant acknowledged that P and J did arrange for certain work to be completed. What remained was the problem with the deflating tyres. This was also fixed but involved the replacement of the existing wheel rims with smaller rims. This evidence alone, without further independent evidence, does not establish on the balance of probabilities that the vehicle was defective, un-roadworthy or (to use the words of the ACL) not of acceptable quality at the time the Applicant surrendered it.
3. If it has not been agreed or established that the vehicle was not of acceptable quality at the time the Applicant surrendered it, then the Respondent is not required to rely on Clause 8a (which I have determined to be void) as a basis for the Applicant's continuing liability. The Respondent's evidence indicates that it relies on Clause 7 of the Rental Agreement in determining the Applicant's liability. This Clause sets out the Hirer's liability on termination of the Agreement, including where the Equipment is "abandoned".
4. Sub-section 79U(1) of the FT Act requires the Tribunal to be satisfied that the orders it makes are fair and equitable to all parties. This discretion must be exercised according to law. Having considered the above matters, I cannot be satisfied it would be fair or equitable to make an order in the Applicant's favour. His actions in surrendering the vehicle are not clearly or obviously associated with the condition of the vehicle. He has submitted no compelling evidence to establish that the vehicle could not be used for the purpose for which he acquired it, at the time he surrendered it. On this construction of the facts, the Respondent is not required to rely on the void term in order to establish the Applicant's liability.
5. I have considered whether there is any other basis for making an order in the Applicant's favour pursuant to Section 79N of the FTA. I am not satisfied that there is any other cause of action available to the Applicant. I therefore dismiss the Applicant's claim. In order to dispose of this matter, I will make orders in favour of the Respondent pursuant to Section 79O of the FTA. I note that the Applicant has not challenged the figures provided by the Respondent, and that these payout figures appear to be in accordance with the calculations set out in the Rental Agreement. I therefore order the Applicant to pay the Respondent the amount claimed being $6,905.87. I order that this amount be paid on or before 24 April 2017. B Shipp Senior Member Civil and Administrative Tribunal of New South Wales 31 March 2017 I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 June 2017