Australian Competition and Consumer Commission v Ashley & Martin Pty Ltd

Australian Competition and Consumer Commission v Ashley & Martin Pty Ltd - [2019] FCA 1436 - FCA 2019 case summary — Zoe

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Initial consultation 11 When a patient first approaches Ashley & Martin for treatment, the patient will speak to a receptionist by telephone and/or email a request for a consultation. That contact results in an appointment for the patient to see a 'hair loss consultant' for 60 minutes. Ashley & Martin then sends the patient an email to confirm the appointment. This appointment is known as the 'initial consultation'. The confirmatory email informs patients of the option to enrol on the day of the initial consultation and advises them to come to the initial consultation 'financially prepared'. It also appears from the annexures to the statement of agreed facts that an initial email is sent when an appointment is requested that states in two places that the first consultation is free. 12 Hair loss consultants are not medical doctors or otherwise healthcare professionals. They are trained by Ashley & Martin's medical director on how Ashley & Martin wishes them to conduct the initial consultation. 13 At the initial consultation the patient fills out a questionnaire and a checklist. The questionnaire includes questions about the reason for seeking treatment and the patient's medical history. The checklist requires a yes/no answer to a number of questions, including 'Do you understand what is involved with your program?', 'Have you been informed about our Maintenance program and the associated costs?' and 'Have you read, signed and received the Terms & Conditions?'. If the patient wishes to proceed with a Medical Treatment Program, the Ashley & Martin consultant completes the first page of the contract in front of the patient and the patient and the consultant sign the contract. 14 Most patients who signed a contract did so at the initial consultation. These patients were usually provided with non-prescription goods - such as shampoos, conditioners, herbal supplements and multivitamins - at the initial consultation. They were provided with the quantity of the non-prescription goods that Ashley & Martin estimated they would require for the whole term of their Medical Treatment Program.

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The consultation with an Ashley & Martin doctor 15 Generally at the initial consultation an appointment is made for the patient to see a medical doctor engaged by the respondent as an independent contractor. These doctors are referred to generally in communications as Ashley & Martin doctors. At the medical appointment an Ashley & Martin doctor meets with the patient for the first time. Ashley & Martin provides a protocol letter to the Ashley & Martin doctor that sets out its requirements and procedures for the contracted doctors. The information that the doctor must discuss under the protocol letter includes the risks to the patients of undertaking the Medical Treatment Program. Sample protocol letters were included in the tender bundle. 16 Some of the risks identified in the information include: (1) For female users, Ashley & Martin's sample protocol letters provide that the RealGROWTH lotion has possible side effects including scalp irritation, redness, itchiness, flakiness and facial hair growth, and a component (retinoic acid) may cause birth defects. Pregnancy and breastfeeding are to be avoided whilst using the lotion. The antiandrogen tablets prescribed for women of reproductive age had possible side effects including breast enlargement, weight gain, fluid retention, high blood pressure and headaches with a rare side effect of blood clots in leg veins, whilst that prescribed to postmenopausal or sterilised women had possible side effects including breast enlargement, period irregularities, headaches and lethargy. (2) For male users, the protocol letters provide that the RealGROWTH lotion has the uncommon (<1%) side effect of irritation, redness or scaling of the scalp, along with rare side effects including allergic reactions, palpitations, dizziness and swelling of the hands and feet. The Finasteride tablets have possible uncommon (<1%) side effects of decreased sex dive, impotence, decreased semen volume, ejaculation disorder and orgasm disorder, and have rare possible side effects including breast enlargement and tenderness, rashes, allergic reactions, testicular pain, depression and lethargy. They rarely may have an effect on fertility and decrease prostate specific antigen levels. (3) As to the non-pharmaceutical goods, the protocol letters provide that the LaserCap can have rare adverse reactions including headaches, dizziness or vertigo, and that patients may experience a drop in blood pressure when using it, and that the Saw Palmetto capsules can have a rare side effect of stomach upsets. 17 At the first appointment, male patients under 55 years old are usually prescribed Finasteride and Minoxidil. Finasteride is usually supplied by the doctor to the patient at the appointment. According to the 'doctor information pack 2015' tendered in the proceedings, it appears that Finasteride is supplied direct to Ashley & Martin for distribution to patients, but is only handled by an in-house doctor. Minodoxil is usually supplied shortly after the appointment with the doctor, as it is compounded by a third party pharmacy and so subject to compounding and postage times. 18 Male patients over 55 years old are generally prescribed Minoxidil and see their own general practitioner for a prescription for Finasteride. 19 Female patients are usually prescribed anti-androgen tablets known as Brenda 35 or Spironolacone and Minoxidil at their first appointment, and those products are supplied to them by Ashley & Martin after blood test results are returned (usually about two weeks after the initial consultation with an Ashley & Martin doctor).

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The Contracts - overview 22 The parties referred to the three iterations of the contracts as the First Contract, Second Contract and Third Contract respectively, and referred to them collectively or generally as the Contracts. I will adopt the same convention in the balance of these reasons. The First Contract was used during the period June 2014 to September 2016. The Second Contract was used during the period September 2016 to January 2017. The Third Contract was used during the period February 2017 to June 2017. A copy of each is attached to these reasons as Annexure A, Annexure B and Annexure C respectively. 23 The impugned terms of the Contracts are marked up in the attachments and will be addressed in detail below. 24 During the relevant three year period, Ashley & Martin entered into the First Contract with 18,981 patients; the Second Contract with 3,402 patients; and the Third Contract with 3,571 patients. Of those patients, approximately 93% were male. Only a small proportion of patients signed up for a LaserCap (2.42%, 2.08% and 1.12% respectively of patients who entered into the First, Second and Third Contracts). 25 Upon execution of the Contract, the patient is obliged to pay for all or part of the cost of the Medical Treatment Program, subject to the terms of the Contract. Based on the sample Contracts reflected in the data schedule, those payments ranged from $1,820 to $6,600. 26 The patient typically makes the first payment for the Medical Treatment Program by payment of a deposit specified in the Contract at the initial consultation when the Contract is signed. 27 Ashley & Martin prepares the form of the Contract before it participates in any discussions with a potential patient. 28 The Contracts that were signed by patients did not specify prices for specific goods or services to be supplied under each Contract but stated a single price. 29 Contracts were for a term of eight or 12 months, and provided for the supply of a quantity of goods estimated by Ashley & Martin to be sufficient for the patient's requirements during the term. 30 The following examples from the data schedule (with identifying data deleted) indicate the manner in which supply and pricing of the goods component of a Medical Treatment Program might differ between patients: Patient No Term Patient Age Goods supplied Quantity of each product Price No 1 8 months 33 Shampoo 4 bottles $5,700 Perth Clinic 1st Contract Conditioner 4 bottles RealGROWTH Topical Solution 500 mls RealGROWTH tablets 2 boxes Saw Palmetto 8 bottles LaserCap 1 No 2 12 months 29 Presol 3 bottles $3,000 Sydney Clinic 1st Contract Shampoo 'H' 7 bottles Conditioner 7 bottles RealGROWTH Topical Solution 7% 700 mls RealGROWTH tablets 3 boxes Saw Palmetto 12 bottles No 3 8 months 30 Shampoo 'V' 5 bottles $4,000 Gladstone Park Clinic 2nd Contract Conditioner 'S' 5 bottles RealGROWTH Topical Solution 7% 500 mls RealGROWTH tablets 2 boxes Saw Palmetto 2 bottles No 4 8 months 30 Shampoo 2 / 5 bottles $4,500 Dandenong Clinic 3rd Contract Conditioner 2 / 5 bottles RealGROWTH Topical Solution 7% 500 mls RealGROWTH tablets 2 boxes Saw Palmetto 2 bottles

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Pricing 32 During the relevant period, the 'standard' prices for the prescription and non-prescription goods supplied under the Contracts as determined by Ashley & Martin were as set out in the following table. These standard prices were the prices as referenced in the 'Refunds' clause in the First Contract and as referenced in both the 'Refunds' and 'Termination' clauses in the Second Contract and Third Contract, which are addressed below. The standard prices were incorporated in the aide memoire provided to the Court. There was no evidence as to the manner in which the difference between the cost price incurred by Ashley & Martin and the standard price was calculated. Good Standard price (for each unit) Cost to Ashley & Martin (for each unit) Fintab (Finasteride) Between $93 and $140 Between $38.50 and $60.64 (For 5mg: 30 tablet pack; For 1mg: 126 tablet pack) Minoxidil $190 Between $25.30 and $55.00 (100 ml bottle) Saw Palmetto $33 $3.52 (30 capsule bottle before May 2016) (30 capsule bottle prior to May 2016) $132 $18.15 (120 capsule bottle after May 2016) (120 capsule bottle after May 2016) Presol $18 $2.70 (250 ml bottle) Shampoo $15 Between $1.98 and $2.45 (250 ml bottle) Conditioner $15 $1.23 (250 ml bottle) Laser cap $2,800 $1,136.34 Hair Nutrient Complex (60 tablet pack) $60 $3.94 Anti-Androgen tablets (Brenda 35) $35 (1 month) $40.85 (3 months) $93 (3 months) Anti-Androgen tablets (Spironolactone) $35 (25 mg) $6.06 (25 mg) $93 (100 mg) $23.77 (100 mg)

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Legislative regime 33 The ACL appears as Schedule 2 to the Competition and Consumer Act 2010 (Cth). Chapter 2 of the ACL is headed 'General Protections' and includes statutory provisions addressing misleading or deceptive conduct (Part 2-1), unconscionable conduct (Part 2-2) and unfair contract terms (Part 2-3). This matter concerns s 23, s 24, s 25 and s 26, which fall within Part 2-3. 34 It can be accepted that unjustness and unfairness are of a lower moral or ethical standard than unconscionability, but the characterisation of unjustness or unfairness is, of course, evaluative and a task to be carried out with a close attendance to the statutory provisions: Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50 at [356], [363]-[364] (Allsop CJ); see also Australian Securities and Investments Commission v Kobelt [2019] HCA 18 at [118]-[119] (Keane J). 35 Section 23 provides, relevantly: Unfair terms of consumer contracts and small business contracts (1) A term of a consumer contract is void if: (a) the term is unfair; and (b) the contract is a standard form contract. (2) The contract continues to bind the parties if it is capable of operating without the unfair term. (3) A consumer contract is 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. … 36 It is common ground that the Medical Treatment Program involves the supply of goods and services for wholly or predominantly personal use or consumption and accordingly the Contracts comprise 'consumer contracts' within the meaning of s 23 of the ACL. Section 23 of the ACL provides that a term of a consumer contract is void if the term is 'unfair' and it is a 'standard form contract'. It is also common ground that the Contracts are standard form contracts. 37 Section 24 of the ACL provides: Meaning of unfair (1) A term of a consumer 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 consumer 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 consumer 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. 38 Therefore s 24(1) of the ACL requires the three elements in (a) to (c) to be satisfied before a term of a consumer contract is unfair. 39 Section 25 then sets out a list of potentially unfair terms: Examples of unfair terms (1) Without limiting section 24, the following are examples of the kinds of terms of a consumer 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. 40 Some explanation as to the listed examples is provided by the Explanatory Memorandum to the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth). At [5.49]-[5.57], it is explained that: (a) paragraphs 25(1)(a), (b), (d), (e), (f), (g), and (h) are examples of types of terms that allow a party to make changes to key elements of a contract, including terminating it, on a unilateral basis; (b) paragraphs 25(1)(i), (k), (l), and (m) are examples of types of terms that have the effect of limiting the rights of the party to whom the consumer contract is presented; (c) paragraph 25(1)(c) refers to terms that penalise, or have the effect of penalising, one party for a breach or termination of the contract (reflecting the common law concept of penalties); and (d) paragraph 25(1)(j) refers to terms that allow for a party to assign the contract to the detriment of the other party, without that party's consent. 41 The list comprises illustrations and does not establish a presumption that a particular term is unfair. Any impugned term must still be considered in its context and an assessment made as to whether in the circumstances it is unfair. 42 Finally (for present purposes), s 26 is relevant. Section 26 exempts certain terms from the operation of s 23. It provides: Terms that define main subject matter of consumer contracts or small business contracts are unaffected (1) Section 23 does not apply to a term of a consumer contract to the extent, but only to the extent, that the term: (a) defines the main subject matter of the contract; or (b) sets the upfront price payable under the contract; or (c) is a term required, or expressly permitted, by a law of the Commonwealth, a State or a Territory. (2) The upfront price payable under a consumer 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.

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Section 24 - general 43 There was no dispute between the parties as to the appropriate principles with respect to s 24. In Australian Competition and Consumer Commission v CLA Trading Pty Ltd [2016] FCA 377; (2016) ATPR 42-517 at [54], Gilmour J summarised them as follows: (a) The underlying policy of unfair contract terms legislation respects true freedom of contract and seeks to prevent the abuse of standard form consumer contracts which, by definition, will not have been individually negotiated: Jetstar Airways Pty Ltd v Free (2008) 30 VAR 295; [2008] VSC 539 at [112]. (b) The requirement of a 'significant imbalance' directs attention to the substantive unfairness of the contract: Director General of Fair Trading v First National Bank plc [2002] 1 AC 481; [2001] UKHL 52 at [37]. (c) It is useful to assess the impact of an impugned term on the parties' rights and obligations by comparing the effect of the contract with the term and the effect it would have without it: Director General of Fair Trading v First National Bank plc at [54]. (d) The 'significant imbalance' requirement 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 its 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: Director General of Fair Trading v First National Bank plc at [17] per Lord Bingham, applied in Australian Competition and Consumer Commission v ACN 117 372 915 Pty Limited (in liq) (formerly Advanced Medical Institute Pty Limited) [2015] FCA 368 at [950]. (e) Significant in this context means 'significant in magnitude', or 'sufficiently large to be important', 'being a meaning not too distant from substantial': Jetstar Airways Pty Ltd v Free at [104]-[105] per Cavanough J; cf Director of Consumer Affairs Victoria v AAPT Limited [2006] VCAT 1493 at [32]-[33]. (f) The legislation proceeds on the assumption that some terms in consumer contracts, especially in standard form consumer contracts, may be inherently unfair, regardless of how comprehensively they might be drawn to the consumer's attention: Jetstar Airways Pty Ltd v Free at [115]. (g) In considering 'the contract as a whole', not each and every term of the contract is equally relevant, or necessarily relevant at all. The main requirement is to consider terms that might reasonably be seen as tending to counterbalance the term in question: Jetstar Airways Pty Ltd v Free at [128]. 44 In Australian Competition and Consumer Commission v Chrisco Hampers Australia Limited [2015] FCA 1204; (2015) 239 FCR 33 Edelman J noted that s 24 is an example of a legislative technique which creates broad evaluative criteria to be developed incrementally and that it is not possible to state a precise or universal test for its application (at [39]). His Honour approved the following approach concerning the construction of s 24 (at [43]): (a) for a term to be unfair it must satisfy the requirements of all of s 24(1)(a) to (c); (b) the onus is upon the applicant to prove the matters in s 24(1)(a) and s 24(1)(c) but it is upon the respondent in relation to s 24(1)(b); (c) s 24(2)(a) only requires the Court to consider transparency in relation to the particular term that is said to be unfair and only in relation to the matters concerning that term in s 24(1)(a) to (c); (d) similarly, the assessment of the contract as a whole in s 24(1)(c) only requires the Court to consider the contract as a whole in relation to the particular term that is said to be unfair and only in relation to the matters concerning that term in s 24(1)(a) to (c); (e) as the Explanatory Memorandum provided at [5.39], 'if a term is not transparent it does not mean that it is unfair and if a term is transparent it does not mean that it is not unfair'; and (f) guidance can be had to s 25 which provides examples of unfair terms.

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Section 24 - Reasonably necessary to protect legitimate interest 48 It is not appropriate to attempt to define 'legitimate interest'. It will depend upon the nature of the particular business of the relevant supplier and the context of the contract as a whole. However, there is guidance in the authorities, even having regard to the fact that in those authorities the courts have considered different statutory provisions. 49 For example, a legitimate interest may not be purely monetary. A party's 'legitimate interests' are not confined to the reimbursement of expenses directly occasioned by the customer's default. A party may have interests in contractual performance which are intangible and unquantifiable: Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28; (2016) 258 CLR 525 at [26] (Kiefel J), [161] (Gageler J), [216], [266], [298] (Keane J). It may be of a business or financial nature: Paciocco (HCA) at [29] (Kiefel J). 50 The question of legitimate interest was discussed in Australian Competition and Consumer Commission v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd) [2015] FCA 368 (ACCC v AMI). The respondent company sold expensive erectile dysfunction treatment programs using high-pressure sales practices. There was no proper scientific evidence to support long-term treatment programs with the relevant medications. The result was that patients were committed to a period of treatment which had no proper medical justification, but which entailed considerable cost to the patient. The reason the respondent required doctors to recommend long-term treatment programs was that such contracts produced more revenue than short-term programs. Whilst in the context of unconscionable conduct, North J held (upheld on appeal): [925] For AMI and NRM to require doctors to recommend long-term treatment programs without a proper medical reason for so doing was to exploit the patients for the commercial benefit of AMI and NRM. That conduct was unconscionable because AMI and NRM had no legitimate interest in having patients agree to long-term contracts. They were not providing a treatment for a period which had a verified medical reason. That was not legitimate business. The inclusion in such circumstances of terms which are not reasonably necessary to protect the legitimate interests of a supplier is akin to the possible marker of unconscionable conduct referred to in s 51AB(2)(b) of the TPA, s 21(2)(b) of the ACL operating between 1 January 2011 and 1 January 2012, and s 22(1)(b) of the ACL in operation after 1 January 2012. 51 The question of what is 'reasonably necessary' will also involve consideration of the particular circumstances of the business. 52 The decision in JJ Richards provides some useful examples. In that case the respondent did not seek to rebut the presumption created by s 24(4) of the ACL and agreed that the impugned terms were not reasonably necessary to protect its legitimate interests. Nevertheless it was necessary for the Court to be satisfied as to those matters. Relevantly, Moshinsky J stated: [57] … (a) The automatic renewal clause: Contracts with JJR Customers are usually low value, with a low marginal cost to JJ Richards for each additional customer. Consequently, the automatic renewal clause is not reasonably necessary to protect JJ Richards' legitimate interests. (b) The price variation clause: Although JJ Richards' costs may increase for reasons beyond its control, the price variation clause goes beyond what is reasonably necessary in order to protect JJ Richards' legitimate interests. For example, on one view, the price variation clause would allow JJ Richards to increase its prices simply because it wished to increase its revenue or profitability. While increasing prices in order to increase its revenue or profitability would be in JJ Richards' interests, those are not legitimate interests in this context. (c) The agreed times clause: The agreed times clause goes beyond what is reasonably necessary to protect JJ Richards' legitimate interests by absolving JJ Richards of its performance obligations and requiring JJR Customers to assume the risk of non-performance under circumstances that they do not control. (d) The no credit without notification clause: The right to render charges when JJ Richards is unable to perform the service for any reason goes beyond what is reasonably necessary to protect JJ Richards' legitimate interests. (e) The exclusivity clause: The exclusivity clause goes beyond what is reasonably necessary to protect JJ Richards' legitimate interests. JJ Richards does not need to have exclusivity in relation to waste management in order to conduct its business. (f) The credit terms clause: The short credit term of seven days and the obligation on the JJR Customer to pay 'normal charges' during suspension without any limitations, irrespective of whether JJ Richards had in fact incurred any expenses, goes beyond what is reasonably necessary to protect JJ Richards' legitimate interests. (g) The indemnity clause: The unlimited indemnity in favour of JJ Richards, even where the loss incurred by JJ Richards is not the fault of the JJR Customer, goes beyond what is reasonably necessary to protect JJ Richards' legitimate interests. (h) The termination clause: Where monies remain outstanding from a JJR Customer, JJ Richards could recover those funds through ordinary legal recovery processes. JJ Richards could also charge interest for outstanding fees. By enabling JJ Richards to continue to charge JJR Customers for equipment they no longer require or enjoy, in circumstances where JJ Richards could recoup outstanding fees through other means, this clause goes beyond what is reasonably necessary to protect JJ Richards' legitimate interests in recovering outstanding monies. 53 It is clear (from [57(h)], for example) that Moshinsky J took into account other options that might be available to the respondent in terms of protecting its business interests in assessing the question of what is reasonably necessary. 54 This approach is supported by comments in Kobelt in which the High Court addressed the question of unconscionability. It was not a case that featured discussion of unfair terms provisions. However, in assessing whether conduct is unconscionable under s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), s 12CC(1)(b) of the ASIC Act provides that the Court may have regard to whether the service recipient was required to comply with provisions that were not reasonably necessary for the protection of the legitimate interest of the supplier. In that context Gageler, Nettle and Gordon JJ commented on the question of protection of legitimate interests. Gageler J noted that there were other means by which the respondent might have protected his legitimate interests which had a less restrictive effect on the relevant customers (at [98]). Nettle and Gordon JJ took into account when assessing whether the relevant system was reasonably necessary to protect the respondent's legitimate interests that 'there were alternatives' (at [264]) (that Nettle and Gordon JJ were in the minority in Kobelt does not in its context diminish the value of the particular comment). 55 What is 'reasonably necessary' might also involve an analysis of the proportionality of the term against the potential loss sufferable. 56 In Paciocco (HCA), Gageler J found that it could not be said that a late payment fee was not reasonably necessary for the protection of ANZ's legitimate interests by express reference to the average costs incurred by ANZ in connection to the event giving rise to the entitlement to charge the late payment fee: at [195]. 57 In Australian Competition and Consumer Commission v Get Qualified Australia Pty Ltd (in liq) (No 2) [2017] FCA 709 Beach J stated: [344] Further, the terms of the refund policy were not reasonably necessary to protect GQA's legitimate interests because the policy could be relied upon to refuse a refund in circumstances where GQA had not incurred any significant costs in relation to a particular consumer or GQA would not be out of pocket if a refund were provided and s 24(4) applied. 58 In Re Elsmore Resources Ltd [2016] NSWSC 856, the plaintiff brought an action under a handwritten settlement agreement under which the defendant agreed to a guarantee. By the guarantee, the defendant agreed to pay an amount to the creditor that was substantially more than what was lost. The creditor claimed that the terms of the settlement could not be said to be unreasonably difficult to comply with or not reasonably necessary for the protection of its legitimate interests. Black J dealt with the question by contrasting the potential loss to the contract-maker with the amount they could recover from enforcing the contract term, as follows: [81] … For the purposes of s 9(1) of the Contracts Review Act, it seems to me that the public interest would not be served, and that injustice would arise, where Elsmore seeks to rely on the Handwritten Terms to recover more than double the amount of its actual loss. It also seems to me that the Handwritten Terms imposed conditions that were not reasonably necessary for the protection of Elsmore's legitimate interests, where it sought to secure by a guarantee the recovery of more than double the loss that it had suffered. 59 Therefore, without limiting the matters relevant to the assessment, it is appropriate to have regard to matters such as available alternatives and proportionality.

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Section 26 69 As to s 26, it appears the court has not yet had occasion to rule on its scope. An analogous provision in s 12BI(2) of the ASIC Act also has not been the subject of determination. 70 As to 'the main subject matter of the contract', the Explanatory Memorandum states: [5.59] The exclusion of terms that define the main subject matter of a consumer contract ensures that a party cannot challenge a term concerning the basis for the existence of the contract. [5.60] Where a party has decided to purchase the goods, services, land, financial services or financial products that are the subject of the contract, that party cannot then challenge the fairness of a term relating to the main subject matter of the contract at a later stage, given that the party had a choice of whether or not to make the purchase on the basis of what was offered. [5.61] The main subject matter of the contract may include the decision to purchase a particular type of good, service, financial service or financial product, or a particular piece of land. It may also encompass a term that is necessary to give effect to the supply or grant, or without which, the supply or grant could not occur. 71 Therefore, s 26(1)(a) implies that a distinction can be drawn between terms that define the main subject matter of the contract and other terms. 72 As to 'the upfront price', the Explanatory Memorandum states: 5.63 Consideration includes any amount or thing provided as consideration for the supply of a good, service, financial service, financial product or a grant of land. It would also include any interest payable under a consumer contract. 5.64 The exclusion of upfront price means that a term concerning the upfront price cannot be challenged on the basis that it is unfair. Having agreed to provide a particular amount of consideration when the contract was made, which was disclosed at or before the time the contract was entered into, a person cannot then argue that that consideration is unfair at a later time. The upfront price is a matter about which the person has a choice and, in many cases, may negotiate. 5.65 The upfront price covers the cash price payable for a good, service, financial service, financial product or land at the time the contract is made. It also covers a future payment or a series of future payments. … 5.67 A key consideration for a court in considering whether a future payment, or a series of future payments, forms the upfront price may be the transparency of the disclosure of such a payment, or the basis on which such payments may be determined, at or before the time the contract is made. … 5.69 Other consideration (that is, further forms of consideration which are not part of the upfront price) under the consumer contract that is contingent on the occurrence or non‑occurrence of a particular event, is excluded from the determination of the upfront price. 5.70 Terms that require further payments levied as a consequence of something happening or not happening at some point in the duration of the contract are covered by the unfair contract terms provisions. Such payments are additional to the upfront price, and are not necessary for the provision of the basic supply, sale or grant under the contract. 73 Similar provisions in the UK Unfair Terms in Consumer Contracts Regulations have been the subject of decisions of the House of Lords in First National Bank (referred to in CLA Trading) and the Supreme Court in Office of Fair Trading v Abbey National plc [2010] 1 AC 696. 74 The UK Regulations were made under s 2(2) of the European Communities Act 1972 and their purpose was to give effect to a 1993 ECC Directive on unfair terms in consumer contracts. The regulations were thus interpreted taking into account the construction and purpose of the Directive. The provisions are not the same as s 26 and in fact have some important distinguishing features. Nevertheless, the detailed reasons in Abbey National provide some insight into the issues that arise in construing exclusion provisions such as s 26 of the ACL. 75 First National Bank concerned the construction of reg 3(2) of the 1994 Regulations. That regulation provided that: In so far as it is in plain, intelligible language, no assessment shall be made of the fairness of any term which - (a) defines the main subject matter of the contract, or (b) concerns the adequacy of the price or remuneration, as against the goods or services sold or supplied. 76 In First National Bank, it was held that a provision in a contract between banker and customer for the payment of post-judgment interest was not excluded from review, as it applied only in the event of default and so could not be characterised as a provision concerning the adequacy of price or remuneration as against the goods sold or supplied within the meaning of the UK Regulation. Rather, it was concerned to ensure that a right to interest did not come to an end upon entry of judgment. 77 Abbey National concerned reg 6(2) of the 1999 Regulations. It provided that: In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate - (a) to the definition of the main subject matter of the contract, or (b) to the adequacy of the price or remuneration, as against the goods or services supplied in exchange. 78 It was held that a provision in a contract between banker and customer for the imposition of fees in the event that the customer were to overdraw on a personal current account was excluded from review because such fees related to the adequacy of price. It was part of the package of costs that made up the price. It was irrelevant that the charges were contingent. The provision excluded an assessment of unfairness insofar as it related to the adequacy of the fees viewed against the services supplied. 79 The reference in Abbey National to the irrelevancy of the contingent nature of a payment highlights one of the significant differences between reg 6(2) there considered and s 26 of the ACL. The express carve out under s 26(2) of the ACL of consideration that is contingent does not appear in reg 6(2) of the UK provision. It can be seen immediately that for certain consumer or small business contracts in Australia, questions will remain under s 26 of the ACL as to whether particular charges or fees might fall within a package that comprises an upfront price or alternatively may be open to assessment because of their contingent nature. 80 Regardless, useful aspects of the reasons in Abbey National include: (a) it is important to recall that the provision excludes an attack on fairness only insofar as the relevant charges comprise the price or remuneration and only insofar as the attack relates to the adequacy or appropriateness in amount of the price or remuneration: it does not exclude an attack on the terms on other grounds (Lord Walker at [57], Lord Phillips at [95], [101]); (b) not every provision for payment is rendered immune from scrutiny. There can be monetary consideration that does not constitute either price or remuneration of goods or services provided in exchange, an example being the charges considered in First National Bank (Lord Walker at [43], Lord Phillips at [101]); (c) care should be taken not to exclude price or remuneration from the application of reg 6(2) on the basis that it is 'ancillary', 'incidental' , 'subordinate' or the like. Such descriptions may be of some assistance but 'it is important, in considering provisions which apply across an extraordinarily wide range of consumer contracts, to treat them with caution' (Lord Walker at [46]); and (d) nor do the expressions 'core term' or 'essential term' substitute for considering the content of paragraphs (a) and (b) of reg 6(2) (Lord Walker at [38]-[39]). A supply of services may be simple or composite. There may be no principled basis upon which to assess that some components are more 'essential' than others, and it may be that the main subject matter must be described in general terms. Similarly, it may be difficult to ascertain which price components are 'essential'. The regulation is not concerned with the 'essential price' but any consideration that falls within its language (Lord Walker at [40]-[42]). 81 It goes without saying that what might define the main subject matter and set the upfront price payable for the purpose of s 26 of the ACL will always depend upon the particular contract being construed. Delineation of terms by taxonomy or hierarchy will not necessarily assist with the application of s 26. Instead, it is important to steadily bear in mind the terms of the provision itself and its object, being to protect the 'basis for the existence of the contract' (Explanatory Memorandum [5.60]) whilst otherwise leaving open to challenge the terms of a contract that might be unfair. 82 Section 26 is drafted to protect from assessment a term 'but only to the extent' that it defines the main subject matter or sets the upfront price. The inclusion of the words 'but only to the extent' indicates that there is no generalised protection of any term that happens to touch upon obligations to supply goods or services. 83 Further, the provision is drafted with precision. It does not utilise general drafting expressions that are often used to denote a connection. That is, it does not refer to terms that 'relate to' or 'concern' supply or price. It is more specific. It addresses terms that 'define' the main subject matter or 'set' the upfront price. 84 Such level of precision does not lead to a task that is necessarily complicated. One would expect that in many cases identifying the main subject matter and the upfront price (with the assistance of the definition) will often be possible with little more than the application of common sense. Indeed, one would hope that is generally the case with consumer contracts. However, there is no doubt there will be cases where more complex questions may arise, for example as to whether particular charges or payments are contingencies or part of a package that comprises an upfront payment. 85 However, it is clear that the correct approach to the application of s 26 is to have careful regard to its particular terms and definitions when testing whether terms or parts of terms might fall within its ambit. Too broad an approach may tend to deny the object of the regime by extending protection from attack for unfairness beyond the scope of that anticipated by the Explanatory Memorandum and, more importantly, that reflected in the drafting. 86 I will return to the construction of s 26 in the context of the particular impugned clauses of the Contracts in due course.

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Medical Treatment Program 98 Under the heading 'Medical Treatment Program', it is provided that: If you request us to prepare a Medical Treatment Program we may, in our discretion, agree to prepare a Medical Treatment Program which will include use of Hair Loss Goods. 99 The Contract then states: [t]he Medical Treatment Program will incorporate pharmaceutical preparations which must be prescribed. Our supply to you of Hair Loss Goods and Hair Loss Services in accordance with a Medical Treatment Program is conditional on a medical practitioner's approval of the treatment pharmaceuticals for your specific usage. If a medical condition or allergic reaction precludes us undertaking a particular Medical Treatment Program, we will endeavour to transfer you to another program or Hair Loss Good upon request. 100 Again, it is clear from this clause that any Medical Treatment Program will include prescription medicines. 101 The ACCC observes that it is only Ashley & Martin's obligation to supply that is expressed to be conditional, and not the patient's obligation to pay. The term also has the effect that the patient cannot insist on the precise Hair Loss Goods and Hair Loss Services that were specified on the front page of the contract if the doctor advises that they are unsuitable, but that Ashley & Martin's obligation, in those circumstances, is to endeavour to transfer the patient to another program or Hair Loss Good on request. 102 Ashley & Martin relies on the term as an overarching defence to the ACCC's claims of unfairness. It relies on the following sentence as the basis for its supply term submission: Our supply to you of Hair Loss Goods and Hair Loss Services in accordance with a Medical Treatment Program is conditional on a medical practitioner's approval of the treatment pharmaceuticals for your specific usage. 103 It submits that the clause, properly construed, means that if a doctor advises that the prescription goods are unsuitable for the patient, then Ashley & Martin has no obligation to provide the products, the patient has no obligation to pay any money and the contract is at an end.

[33]

Termination 110 Leaving aside Ashley & Martin's supply term submission, the patient's rights to terminate after having entered into the agreement are set out expressly under the heading 'Termination': You may terminate your agreement with us at the following times by paying the following sums: • immediately after accepting the Medical Treatment Program and before the consultation with the medical doctor by paying 25% of the total price payable under the complete Medical Treatment Program; • within 2 days of accepting the Medical Treatment Program and after the consultation with the medical doctor by paying 50% of the total price payable under the complete Medical Treatment Program, and • at any time after 2 days after accepting the Medical Treatment Program and after consultation with the medical doctor by paying 100% of the total price payable under the complete Medical Treatment Program. 111 This clause, including the three limbs, is impugned. 112 The first limb contemplates that the patient enters into the Contract before seeing a doctor and thus before obtaining any medical advice about the medical treatments provided for in the Contract. It is clear from the reference to 'the consultation with the medical doctor' that it anticipates the consultation that Ashley & Martin organises with its doctor at the initial consultation with the hair loss consultant. Immediately upon signing the Contract, the patient is obliged to pay a minimum of 25% of the contract price. To put it in perspective, based on the aide memoire that 25% sum can range between $600 and $1,650, depending on the Contract. 113 The meaning of the second and third limbs is somewhat obscure, to adopt the ACCC's apt description. However, it appears that by the second limb if the patient sees the doctor within two days of signing the Contract then, after that consultation but before the expiry of two days, the patient may terminate, but must pay 50% of the contract price, that is, between $1,200 and $3,300. 114 By the third limb, after the lapse of the two days and after seeing the doctor, the patient effectively has no real right to terminate, being obliged to pay 100% of the contract price, that is, between $2,400 and $6,600. 115 The obscurity arises when one attempts to apply these terms to a situation where the two days have elapsed, but the patient has not yet seen the doctor. The second limb will not apply, because the time will not be 'within 2 days of accepting the Medical Treatment Program'. But the third limb also will not apply, because the time will not be 'after consultation with the medical doctor'. 116 However, Ashley & Martin relies upon its supply term submission. It contends that regardless of their construction, those terms that appear under the heading 'Termination' are not the sole means of termination. Those terms are simply permissive and coexist with the supply term and any common law and statutory rights of termination. 117 Ashley & Martin accepts that the second limb is unclear. However, it says that the objective intention of the parties is that the three limbs cover the period beginning with the acceptance of the Medical Treatment Program and accordingly, objectively construed, the second limb means that a patient may terminate on payment of 50% of the total price payable under the Medical Treatment Program within two days of seeing the doctor.

[34]

Are the terms in any event excluded from review 118 If Ashley & Martin is correct that certain terms are excluded from review under s 26(1), then there is no value in undertaking a fairness assessment of them. Logically, the question of exclusion should be considered first. 119 Ashley & Martin argues that part of the front page acknowledgment is excluded from review, that is, the clause: I [insert name] the undersigned acknowledge my agreement to undertake and pay for the program of treatment recommended by Ashley & Martin Pty Ltd. You must pay in full the RealGROWTH Treatment program. 120 Ashley & Martin also argues that the following sentence from under the heading 'Order, Delivery and Payment' is excluded from review: The Medical Treatment Program will set out the applicable Hair Loss Goods and Hair Loss Services and the time for delivery of the Hair Loss Goods and Hair Loss Services by us to you. 121 Ashley & Martin submits that the ACCC's complaint as to unfairness centres on the point at which the patient is contractually bound and when a patient will see a doctor; that the point of being contractually bound is when the subject matter is defined and the upfront price is set; that it follows that the ACCC challenges the core of the bargain and the way that it must be performed; and that s 26 prevents that challenge. 122 In my view, and having regard to the manner in which I consider s 26 operates, those terms to which Ashley & Martin refers do not fall within the ambit of s 26. It is important to remember that s 26 only protects terms 'to the extent, but only to the extent' that the term defines the subject matter of the contract or sets the upfront payment. An assessment of terms that considers only whether they relate to the price or subject matter will necessarily be incomplete. The terms or parts of the relevant terms are to be more precisely identified: they must define the subject matter or set the upfront price. 123 In this case, the main subject matter of the Contract is defined by the description of the Medical Treatment Program set out on the first page. The products and services are listed with a note immediately beneath them that states 'The items indicated by your consultant constitute your current Ashley & Martin program'. What is being purchased is the 'program of treatment recommended by Ashley & Martin'. There can be no complaint as to the content of those goods and services on the basis of unfairness. But nor does the ACCC make that complaint. 124 To the extent Ashley & Martin asserts protection of the second sentence referred to above, it refers to the 'applicable' goods and services. They are defined on the first page. The sentence of itself does not define or add to the definition of the main subject matter. It directs attention to the Medical Treatment Program itself. Nor do I consider the inclusion of a reference to the time of delivery comprises part of the main subject matter of the contract. There may well be cases where delivery comprises the main subject matter, but in these Contracts there is not the emphasis on a delivery timetable that one might expect to see if it was integral to the subject matter. 125 The first of the two sentences Ashley & Martin asserts are protected comprises an operable term confirming an obligation to pay, but the price to be paid is set by the upfront disclosure of the relevant total cost. By s 26, there is no capacity to argue the price as set is unfair within the meaning of s 23. 126 Ashley & Martin does not argue that any of the other costs or payments, for example the obligation to make termination payments, fall within the upfront price. This is not an occasion to consider the potentially difficult questions as to the scope of an upfront price that I touched upon above, such as whether certain fees or charges might form part of a package that comprises an upfront price or whether charges are by their nature contingent within the meaning of the relevant definition. 127 In this case the ACCC makes no complaint that the prices set out on the first page of the Contracts or the description of the goods and services to be provided are unfair. The ACCC's position is that objectively the Contracts are clearly contracts to supply identified medications and other products and services in return for a specified amount of money. The parts of the terms that define what is to be supplied and set how much it will cost on the first page of the Contract are unchallenged.

[36]

'No obligation' submission 129 Ashley & Martin submits that the Contracts, properly construed, create no obligation on the patients to sign before seeking advice from a doctor. It submits that the patient may choose to first see the doctor if they wish to do so. No evidence as to such a practice nor any examples were referred to. 130 I accept that there is nothing on the face of the Contract that goes so far as to expressly require the patient to execute the Contract before seeing the Ashley & Martin doctor. But the unfairness of the terms of the Contract is to be construed having regard to both construction and context: MyBudget at [69]. 131 The following are relevant: (a) nothing on the first page of the Contract informs the question of the timing of medical advice. There is no suggestion that the obligation to undertake and pay for the Medical Treatment Program is conditional upon or takes effect only upon confirmation from a doctor as to the suitability of the program; (b) there are various terms in the second page fine print Terms and Conditions that are consistent with a chronology that involves execution prior to medical advice. For example, under the heading 'Background and application' it is provided that 'You [the patient] may request us to advise you in relation to a Medical Treatment program in writing or by other means'. That anticipates advice post execution; (c) it is said that the Medical Treatment Program will include pharmaceutical products, but that supply is conditional upon medical advice: implicit in those terms is an assumption that no advice has been received prior to execution of the contract as to whether or not such products should be included. If adverse advice had been received about a product prior to execution, it is unlikely the consultant would include it in any Medical Treatment Program to start with; (d) the refund clause anticipates that the purchase of the program components precedes receipt of 'subsequent' medical advice and makes little sense if medical advice is received in advance; and (e) the termination clauses quite clearly refer to acceptance of the Medical Treatment Program preceding the consultation with the medical doctor, as discussed at [112] above. 132 Therefore, it can be seen that the terms of the Contract anticipate and assume in various places that execution precedes the provision of medical advice. 133 As to context, the patients are encouraged to attend the first consultation with finances in place. The checklist provided at the initial consultation addresses medical history. The consultant identifies the components of the Medical Treatment Program including the pharmaceutical components at the first consultation: apparently it is not necessary from the consultant's perspective that there be medical advice provided by a doctor before the consultant is in a position to select the appropriate components (taking into account the checklist information, one assumes). The consultant is able to proceed regardless. 134 Moreover, it is agreed by Ashley & Martin that the Contract is generally executed by patients at their first consultation and that an appointment with a doctor post-dates that consultation. Furthermore, the circumstances of the first consultation as described are consistent with an assumption that medical advice has not been received. So that is the relevant context in which the Contract is executed, even allowing for the fact that sometimes the circumstances may be different. 135 Therefore, I do not accept Ashley & Martin's submission to the effect that the unfairness assessment should proceed on the basis that patients are not obliged to take on the obligations provided by the Contract without first seeking medical advice. That submission does not reflect the tenor of the contractual terms and it does not reflect the agreed predominant circumstance in which a patient in fact incurs such liability (the initial consultation that precedes a doctor's appointment). 136 I also note that whilst for the purpose of this submission Ashley & Martin seeks to downplay the relevance of the course of conduct by which the Contract is signed at the initial consultation and products are supplied, it in fact relies on such conduct for other purposes. In the context of seeking to establish that the termination payments are reasonably necessary to protect its legitimate interests, Ashley & Martin relies on the fact that it supplies products and services at the initial consultation (addressed in detail below).

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Significant imbalance 138 In my view the regime provided under the First Contract imposes on the patient a disadvantageous burden or risk, that being a requirement that the patient enter into a Contract in circumstances where they do not have the opportunity to make an informed or real choice. 139 A person should not commit to medical treatment without informed consent, and such consent will not be informed until they have spoken to a doctor and received advice as to risks and suitability. Whilst that would seem hardly controversial, the significance of informed consent is reflected in the authorities. 140 In Rogers v Whitaker (1992) 175 CLR 479, the Court held at 489: There is a fundamental difference between, on the one hand, diagnosis and treatment and, on the other hand, the provision of advice or information to a patient. In diagnosis and treatment, the patient's contribution is limited to the narration of symptoms and relevant history; the medical practitioner provides diagnosis and treatment according to his or her level of skill. However, except in cases of emergency or necessity, all medical treatment is preceded by the patient's choice to undergo it. In legal terms, the patient's consent to the treatment may be valid once he or she is informed in broad terms of the nature of the procedure which is intended. But the choice is, in reality, meaningless unless it is made on the basis of relevant information and advice. (citations omitted) 141 In Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232, the Court held at [65]: The nature and purpose of a duty with the content established in Rogers v Whitaker concern the right of the patient to know of material risks which are involved in undergoing or forgoing certain treatment. This, in turn, arises from the patient's right to decide for himself or herself whether or not to submit to the treatment in question. That choice 'is, in reality, meaningless unless it is made on the basis of relevant information and advice'. (citations omitted) 142 The execution of a contract prior to receipt of medical advice is not necessarily of itself unfair. For example, the terms of the contract may include a cooling off period. The patient's obligations under the contract may be conditional upon the receipt and nature of medical advice. There are mechanisms whereby the interests of the patient might still be fully protected. 143 That is not so in this case. 144 In this case, the contractual regime between patients and Ashley & Martin is such that the patients commit to the program and to payment before seeing a doctor. They receive a long-term supply of non-prescription goods prior to meeting with the doctor. Once they see a doctor and have the opportunity to consider the risks they may not wish to proceed. The doctor may decline to prescribe integral components of the program, being the relevant prescription products, on the basis that they are not suitable for the patient. The patient is left with products that they may never use, as they no longer form part of a Medical Treatment Program designed for the patient. Absent the prescription drugs, the Medical Treatment Program is incomplete. They have been informed by the Contract that they should follow the Medical Treatment Program faithfully: and in any event there was no suggestion a program absent key components would be a program of value to patients. 145 Whether the Contract is unfair will depend on how it responds in such scenarios. 146 I reject Ashley & Martin's supply term submission to the effect that the supply term under the heading 'Medical Treatment Program' in the Terms and Conditions sheet provides a contractual panacea. Viewing the Contract as a whole, I do not consider that the clause properly construed provides that if a doctor advises that the prescription goods are unsuitable for the patient, then Ashley & Martin has no obligation to provide the products, the patient has no obligation to pay any money and the Contract terminates. 147 As the ACCC submits, it is only Ashley & Martin's obligation to supply that is expressed to be conditional, and not the patient's obligation to pay. The very next sentence deals with what might then happen: Ashley & Martin will endeavour to transfer the patient to another program or Hair Loss Good on request. It says nothing about the patient having no obligation to pay and it says nothing about termination. It says nothing about products already received. The Contract provides for termination elsewhere and under a heading (in bold font) 'Termination'. The supply term does not, in my view, as a matter of construction purport to grant mutual rights of termination without recourse. Further (and relevant to whether it is to be impugned), it is hardly transparent or presented clearly in the context of Terms and Conditions that separately expressly provide for termination. 148 Therefore, the respective rights are to be construed without regard to the construction of the supply term propounded by Ashley & Martin. 149 The focus then turns to the termination terms. 150 Taking into account the difficulty identified at [115] above in construing the provision and Ashley & Martin's answer to that difficulty, the termination terms have the effect that, once the patient signs a contract in the terms of the First Contract, they are obliged to pay 25% of the contract price if they decide not to proceed before seeing a doctor, rising to 50% if they terminate within two days of seeing a doctor, and then escalating to 100% after that two day period expires. By executing a binding unconditional contract at the initial consultation, that liability to pay is incurred without medical advice as to the goods and services for which they are paying. 151 Further, the ACCC submits that the patient's ability to freely give or withhold informed consent to medical treatment is circumscribed by the financial obligation which the patient undertakes and the risk of escalation under the termination terms. I accept that the sequence and short time periods in the termination terms operate to pressure a response within two days after seeing a doctor. The patient has only two days to consider the doctor's advice and assess risk, knowing that the obligation to pay will rise from 50% to 100% should they choose to terminate once the two days expires. The reason for the increase from 50% to 100% in the particular time frame was unexplained by Ashley & Martin. One could perhaps argue that it is designed to encourage early termination on doctor's advice and to provide Ashley & Martin with certainty as to its patient numbers and cash flow, but such arguments are not convincing. The countervailing and more significant effect is that the patient is likely pressured into making a decision within a short time frame. 152 The refund provision does not ameliorate the position. 153 The limited operation of the refund term has been noted above. It applies only where there is an adverse medical side effect (or arguably where the adverse medical side effect is anticipated by the doctor) and a doctor has deemed the product unsuitable. It also covers only a component of a tailored Medical Treatment Program. 154 In circumstances where Ashley & Martin is able to offer a substitute Hair Loss Good then it may be that the refund clause provides a reasonable outcome for the patient. However, in other cases the patient is left with a refund for the particular Hair Loss Good only. There is no refund for the other components of the Medical Treatment Program. The patient is left to pay for a program that cannot be undertaken, or to terminate and incur costs. The potential to continue an incomplete Medical Treatment Program is no answer, particularly when one recalls the direction on the first page of the Contract to 'follow your program faithfully to give you the best possible results'. The patient is also left with a long-term supply of other non-prescription products and for which, outside a Medical Treatment Program, the patient may have no use. 155 The interplay between the termination and refund clauses does not ameliorate the position. For example, even when a patient experiences adverse side effects from the treatment, Ashley & Martin's only obligation is to offer 'a substitute Hair Loss Good' or, at most offer the patient 'a refund at our standard price for the applicable Hair Loss Good'. The standard prices are between $15 and $2,800 (the latter being for the LaserCap) per Hair Loss Good. By the time an Ashley & Martin doctor 'has subsequently deemed' a Hair Loss Good to be 'unsuitable for you due to an adverse medical side effect', the conditions in the third limb in the termination clause will inevitably apply so that, subject to that refund, the patient remains obliged to pay 100% of the price. 156 The risk that a patient may not proceed with the Medical Treatment Program upon the receipt of medical advice falls almost entirely upon the patient. That is the case where the risk relates to the patient's desire not to proceed having considered the risks; where the patient receives advice that the Medical Treatment program is not suitable; and where the patient experiences side effects or an adverse medical event. Ashley & Martin has secured an upfront commitment to pay at the expense of providing to the patient the opportunity to first obtain medical advice. 157 The imbalance is exacerbated by the limited refund regime, the upfront cost of a long term supply of products that the patient may never use and the percentage increase in costs payable (50% to 100%) if they defer a decision to terminate the Contract by more than two days after receiving the doctor's advice. The 'obscurity' identified by the ACCC with respect to the second limb of the termination term increases the degree of difficulty for patients in identifying their contractual rights and such lack of transparency adds to the imbalance. 158 I also note that the patient is left to assess risk based on information from an Ashley & Martin doctor meeting with them for the first time and so outside the environment of a longstanding and trusting relationship with, for example, a family doctor. The need for a reasonable time period to digest and consider risk may well be heightened in such circumstances. As senior counsel for the ACCC noted, one of the possible risks of the Medical Treatment Program is infertility. That might be a risk that the patient wishes to discuss with others, and an unreasonably short period of time for assessment of risk might prevent that. These matters alone may not satisfy the test for significant imbalance but are not irrelevant when taken with the other matters to which I have referred. 159 For these reasons, when the First Contract is viewed as a whole, I consider that the impugned terms operate such that they create a significant imbalance between the parties' rights and obligations arising under the First Contract. 160 I should add that in reaching this conclusion I have had regard to the suggestion in CLA Trading and First National Bank that it is useful to compare the effect of the contract with the impugned term and the effect it would have without the impugned term. Such an exercise is less appropriate in this instance, where the alleged unfairness of the Contract is not created by a single term but rather is created by a number of terms operating in conjunction to create an overall effect. In any event, no such assessment is required and is not determinative. So much is apparent from s 23(2) of the ACL which contemplates that a contract may not be capable of operating without the unfair term. If it cannot operate, a comparison cannot usefully be undertaken. Ashley & Martin contends that the termination clauses are 'permissive' and that the patients would be worse off at common law, where they would be compelled to pay damages for breach. That result does not follow. It is not only the termination clause that is impugned but the bundle of impugned terms that impose an obligation to commit prior to medical advice. Furthermore, stripped of the impugned terms and the obligations they create, there may well be legitimate arguments to the effect that the contract for medical treatment properly construed would be conditional in that it is implicitly premised on informed consent. Regardless, the statutory task requires a consideration of all of the impugned terms considered together and whether they cause a significant imbalance in the parties' rights. For the reasons given, I have come to the view that they cause such significant imbalance.

[39]

Reasonably necessary to protect legitimate interests 161 Ashley & Martin bears the onus of proving that the impugned terms are reasonably necessary in order to protect its legitimate interests. Whilst Ashley & Martin submitted that the Court should have reference to its business operations and practices generally at the time of entry into the Contracts, it did not evince any evidence that disclosed indirect costs, the basis for the difference between the standard costs and the actual costs or the extent to which other costs were incorporated in the overall price. There was no evidence as to the cost or manner in which the consultant Ashley & Martin doctors' fees were paid, how the 'free' initial consultations were accounted for, whether unused products could be returned and utilised, or how services that were no longer required or provided following termination were taken into account. 162 The question of the extent of the legitimate interests and what is 'reasonably necessary' to protect them therefore falls to be determined on the basis of very general and limited information. 163 I accept that pre-estimates of financial interests that a business might seek to protect including pre-estimates of relevant costs might not necessarily convert to a scientific task. A considerable degree of conjecture may be involved. Other interests such as business reputation are also not easily quantifiable. It is therefore to be expected that there will be some degree of generality in assessing the legitimate interests being protected and whether the impugned clauses are reasonably necessary in order to protect them. 164 Even allowing for that considerable degree of generality, I am not satisfied that Ashley & Martin has rebutted the presumption in s 24(4). 165 It can be accepted that Ashley & Martin has a business reputation to protect and that such reputation is best protected if the patient completes the Medical Treatment Program and for the relevant term. It is also accepted that drugs utilised in a Medical Treatment Program may take some time to take effect. For Finasteride, results may take some three months. Minoxidil is said to be 'long term therapy'. One can also accept at a general level that Ashley & Martin has financial interests to protect. For example, it incurs direct costs in obtaining Hair Loss Goods to provide to patients (being the actual costs set out in the column headed 'Cost to Ashley & Martin' at [32] above). It can be seen that those direct costs for the products are significantly less than the costs said to be standard and payable by patients, particularly insofar as the non-prescription treatments are concerned. 166 Ashley & Martin submits that it has a legitimate interest in ensuring that the patient persists with treatment long enough to observe results and achieve results; that patients are provided with sufficient products to do so; and that if a Contract is terminated early at will then Ashley & Martin is paid a reasonable sum for the goods and services it has provided. 167 Ashley & Martin submits that there is a link between its legitimate interests and the termination fee for: (a) the payment of 25% of the total price payable if the contract is terminated before the patient sees the doctor. That payment compensates Ashley & Martin for the non-prescription goods supplied at the initial consultation and Ashley & Martin's indirect costs in relation to the initial consultation (these are not the subject of Agreed Facts); (b) the payment of 50% of the total price payable if the contract is terminated up to 2 days after the patient sees the doctor. That payment would compensate Ashley & Martin for the non-prescription goods supplied at the initial consultation, Ashley & Martin's indirect costs in relation to the initial consultation and the first appointment with the doctor and the prescription goods supplied at the first appointment with the doctor; and (c) the payment of 100% of the total price payable if the contract is terminated after 2 days after the first appointment with the doctor. That payment compensates Ashley & Martin for the fact that it may have supplied or incurred the cost of supplying all of the relevant Hair Loss Goods by that time. 168 Taking into account the principles discussed above, I consider it appropriate to have regard to both any proportionality evidence and the question of whether there are clear alternatives that are available to protect Ashley & Martin's legitimate interests. In so doing, I do not suggest the matters to be taken into account under s 24(4) are limited, but that such matters inform the question of what is reasonably necessary. For completeness, I note that although there is no express provision that it is the time of entry into the Contract that is the relevant time of assessment, that position is clearly implied: see the reasoning in Jetstar Airways Pty Ltd v Free [2008] VSC 539 at [119] in the context of the Fair Trading Act 1999 (Vic). 169 Ashley & Martin's submissions are undermined by the following: (a) protection of its business reputation does not explain why patients are bound to a payment obligation before seeking medical advice. It would not be in Ashley & Martin's interests that patients embark on a program that has adverse medical consequences without the patient having received medical advice. Deleterious outcomes would not assist reputationally; (b) protection of its business reputation does not explain why under the refund and termination provisions patients may be left with some products for which they must pay even in circumstances where components of the Medical Treatment Program are medically not suitable for them and so they cannot in any event complete the program; (c) protection of neither its business reputation nor indirect costs explains why commitment to the Medical Treatment Program and its costs is to precede medical advice. If the appointment with the doctor preceded such commitment and as a result a patient decided not to proceed, then Ashley & Martin would have incurred at that point the costs relating to the initial consultation (a consultation that based on the email referred to at [11] above is represented as free of charge) and the costs relating to facilitating an appointment with the doctor. It is unclear on the evidence how the doctor's fee is set and whether any gap or other fee is borne by Ashley & Martin or the patient (Ashley & Martin submitted it was a cost to Ashley & Martin). The indirect costs are not explained. In terms of proportionality, such limited potential exposure can sensibly be addressed with a patient by an appropriate reimbursement term without imposing on them the obligation to commit before seeing a doctor to paying the costs of the Medical Treatment Program and the concomitant obligations as to termination payments; (d) Ashley & Martin submits that it is a case of 'overs and unders': that sometimes the standard costs for products supplied up front might exceed, for example, the 25% payable on termination and sometimes it might not, and that on that basis the Court should be satisfied as to proportionality. Ashley & Martin did not undertake such a comparison utilising the direct (actual) costs or disclose information as to indirect costs, and so the argument can be given little weight; (e) Ashley & Martin elects to deliver the non-prescription components at the initial consultation and so supplies goods to patients for which Ashley & Martin has incurred the direct cost. Protecting the direct cost outlay is easily achieved by alternative means. There is no apparent obligation to supply non-prescription Hair Loss Goods prior to the medical appointment. Presumably a patient should not embark on utilising Hair Loss Goods until after the medical appointment and so there is no imperative that they be provided immediately. That Ashley & Martin chooses to supply the products at or about the time of the initial consultation is a matter for it, but protection of the direct cost outlay is easily achievable by deferring supply until after the medical advice is received. The refund and termination terms are not reasonably necessary to protect such interests; (f) the timeframes within which payment obligations escalate is not reasonably necessary to protect Ashley & Martin's interests. There is no explanation as to why, for example, within the space of two days the amount said to be necessary to protect legitimate interests rises from 50% of overall costs to 100% of overall costs. There is no evidence that suggests the interests of Ashley & Martin change or require different or greater protection as a result of that short passage of time; and (g) nor is it clear (with particular regard to the third limb) why 100% of the costs of the Medical Treatment Program (which costs include the cost of at least some services that because of termination will not be provided) is to be paid in order to protect the costs of products that may have been supplied. On its face such a calculation exceeds what is necessary to compensate for 'the fact that it may have supplied or incurred the cost of supplying all of the relevant Hair Loss Goods by that time.' Nor is it explained why compensation is based on standard as against actual costs. 170 I add with respect to the 'overs and unders' argument that although the estimates of exposure to termination payments in the aide memoire should be given little weight (as already noted), an assessment of the examples set out in [30] indicates the range of the potential exposure of patients taking into account their respective Medical Treatment Programs. The exposure (based on the aide memoire information) relating to those patients would be approximately as follows: Patient No. Termination timing Percentage of total price payable Sum payable by patient on termination 'Standard' price of goods supplied No 1 Immediately after appointment and before consultation with doctor 25% $1,425 $3,184 Within 2 days of accepting program and after consultation with doctor 50% $2,850 $3,464 After 2 days after accepting program and after consultation with doctor 100% $5,700 $3,464 or $4,414* No 2 Immediately after appointment and before consultation with doctor 25% $750 $660 Within 2 days of accepting program and after consultation with doctor 50% $1,500 $1,080 After 2 days after accepting program and after consultation with doctor 100% $3,000 $1,080 or $2,410* No 3 Immediately after appointment and before consultation with doctor Standard price of Hair Loss Goods or Services provided $414 $414 Within 2 days of accepting program and after consultation with doctor 50% $2,000 $694 After 2 days after accepting program and after consultation with doctor 100% $4,000 $694 or $1,644* No 4 Immediately after appointment and before consultation with doctor Standard price of Hair Loss Goods or Services provided $324 $324 After 2 days after accepting program and after consultation with doctor 100% $4,500 $604 or $1,554*

denotes difference based on any delay in supply of Minoxidil

[41]

Detriment 173 The ACCC asserts that patients incur both financial and non-financial detriment. 174 In my view, that the patient incurs detriment is apparent from the findings with respect to the significant imbalance. However, it is reinforced when one considers the circumstances in which the impugned clauses might be applied. 175 Even where having attended only the initial consultation and signed the contract, and on reflection the patient decides not to proceed, they have incurred a liability to pay 25% without having received advice as to whether they should have signed up for the Medical Treatment Program. They have agreed to incur liability where they do not know if it is appropriate that they do so. 176 Where a patient sees the doctor and decides not to proceed (even if the doctor has not advised that the Medical Treatment Program is unsuitable), then by the Contract the patient has already committed to pay between 50% and 100% of the contract price. 177 Where a patient sees the doctor and is advised that the medical treatment program is unsuitable, then again they have already committed to pay between 50% and 100% of the Contract price and cannot undertake the Medical Treatment Program for which they have paid. 178 Where a patient sees the doctor and commences the Medical Treatment Program but suffers an adverse side effect to a medication or treatment, they have again already committed to pay between 50% and 100% of the Contract price, cannot undertake the Medical Treatment Program for which they have paid, and their rights are otherwise limited to receiving a substitute medication or a refund for only the relevant product at Ashley & Martin's standard price. 179 Such outcomes quite clearly comprise financial detriment. The fact that they have already received some products does not ameliorate the detriment: they may not use the products at all and they cannot be used as part of a Medical Treatment Program. There is no benefit that outweighs the detriment. 180 The regime created by the Contracts did not deny the patients the opportunity to obtain medical advice. That is not the vice. The vice was the requirement that an obligation to undertake and pay for medical treatment be incurred without the opportunity for an informed choice. Once patients have received advice, the fact that they have already incurred costs regardless of whether they proceed with the program may interfere with the manner in which they assess the risks of treatment raised by the doctor and, importantly, the time they take to assess such risks. Such non-financial detriment is difficult to assess but still comprises detriment within the meaning of the Act. Even if I am wrong as to that, financial detriment is in my view clearly established. 181 In the end it is imperative to bear in mind the evaluative process involved in assessing unfairness. There will be occasions when an impugned term is an uncomplicated and distinct term within a contract. The task in such a case may be relatively simple. In other cases, such as this one, the task is not straightforward. 182 I am of the view that having regard to the elements of s 24(1), in the circumstances it is unfair to hold the patient to an agreement that required a commitment without informed consent and that required payment of the costs imposed upon termination. I consider the impugned terms read together and taking into account the terms of the First Contract as a whole are unfair within the meaning of s 24.

[42]

The Second Contract 183 The impugned terms of the Second Contract are marked up in Annexure B. 184 The Second Contract is materially similar to the First Contract. It is not necessary to repeat that which has already been said. It is appropriate to address only the relevant differences. 185 First, a reference to the termination provision is included on the first page near where the patient confirms his or her understanding of the Terms and Conditions. This inclusion increases the transparency of the fact that termination is expressly provided for. However, it has no effect on the timing of the incurring of the payment obligation or the operation of the termination provision. It rather highlights the transparency difficulty with Ashley & Martin's supply term submission as addressed above. 186 Second, under the heading 'Background and application' the sentence in the First Contract which reads 'These Terms and Conditions apply if you instruct us to prepare a Medical Treatment Program, and if you order any Hair Loss Goods or Hair Loss Services from us', now reads 'These Terms and Conditions apply when you enter into a binding agreement with us to proceed with a Medical Treatment Program'. There is a related change under the heading 'Order Delivery and Payment' in that the first sentence reads 'Once we have recommended a Medical Treatment Program, and you agree to proceed with the Medical Treatment Program by signing the Payment Agreement and these Terms you will have entered into a binding contract with us'. The phrase 'by signing the Payment Agreement and these Terms' is new. 187 The effect of these changes is to confirm that the patient is committed immediately upon signing the Second Contract. They do not ameliorate the difficulties with the balance of the terms as addressed with respect to the First Contract. 188 Third, the provision headed 'Termination' in the Second Contract provides: You may terminate your agreement with us at the following times, by paying the following sums: • immediately after accepting the Medical Treatment Program and before the consultation with the medical doctor by paying for any Hair Loss Goods and Hair Loss Services provided at our standard prices. • within 2 days of accepting the Medical Treatment Program and after the consultation with the medical doctor by paying 50% of the total price payable under the complete Medical Treatment Program; and • at any time after 2 days after accepting the Medical Treatment Program and after consultation with the medical doctor by paying 100% of the total price payable under the complete Medical Treatment Program. The percentages set out above take into account the proportion of expenses we incur at different stages of the Medical Treatment Program. We may, at our discretion, terminate our agreement with you immediately upon your failure to make a required payment. 189 The first limb is different from its equivalent in the First Contract in that the patient's immediate commitment is changed from having to pay 25% of the overall contract price to a commitment to pay for any Hair Loss Goods and Hair Loss Services at Ashley & Martin's standard prices. Based on the data schedule, the total standard price of goods provided at the initial consultation range between $360 and $732 (for Contracts without LaserCap) and between $2,950 and $3,568 (for contracts with LaserCap). The effect is relevantly the same - namely a commitment to pay what may be a significant sum for the supply of goods and services, before having received any medical advice about the Medical Treatment Program of which such goods and services are a component. I note that there was no evidence as to whether patients are informed in advance of the standard prices. The front page of the Contracts includes only the total payment for goods and services, but the parties did not address or rely on this point. 190 There is also a new sentence in the paragraph that follows the third bullet point, namely: The percentages set out above take into account the proportion of expenses we incur at different stages of the Medical Treatment Program. 191 This sentence appears to go to the question of whether the financial commitment that the patient makes in the 'Termination' clause, read together with the other impugned terms, is reasonably necessary in order to protect the legitimate interests of Ashley & Martin. Its inclusion does not resolve that question as matter of law. The sentence does not of itself add to the unfairness in my view, but it does not assist Ashley & Martin. 192 Fourth, there is a relevant change in the provision headed 'Entire Agreement'. The sentence in the First Contract read: The binding contract formed when you accept the Medical Treatment Program need not be in writing, but may be formed by your conduct where you accept any part of the Hair Loss Goods or Hair Loss Services. 193 In the Second Contract it reads: The binding agreement between us is formed when you agree to proceed with the Medical Treatment Program by signing the Payment Agreement and these Terms and Conditions. 194 This change reiterates that the patient is committed upon the signing of the contract.

[45]

The Third Contract 203 The terms of the Third Contract which the ACCC submits are unfair are marked up in Annexure C. 204 Again, it is only necessary to consider the differences between the Second Contract and the Third Contract insofar as they are relevant to the impugned terms. 205 The text above the signature on the first page contains new sentences which read as follows: I understand that if I wish to terminate the Medical Treatment Program before seeing the medical doctor or within 2 days after seeing the medical doctor, I will pay Ashley & Martin's standard prices for any Hair Loss Goods and Hair Loss Services that have been provided to me. If I terminate the Medical Treatment Program after that time, I will have to pay 100% of the total price payable under the complete Medical Treatment Program. If the medical doctor determines that I am not suitable for medical treatment, then Ashley & Martin will refund all monies already paid. 206 This change reflects changes made to the 'Termination' provision in the Terms and Conditions, which in the Third Contract reads as follows: You may terminate your agreement with us at the following times, by paying the following sums: • Immediately after accepting the Medical Treatment Program or after the consultation with the medical doctor by paying for any Hair Loss Goods and Hair Loss Services provided at our standard prices. • At any time after 2 days after accepting the Medical Treatment Program and after consultation with the medical doctor by paying 100% of the total price payable under the complete Medical Treatment Program. • If the medical doctor determines that you are not suitable for medical treatment for your hair loss condition then the company will refund all monies already paid. 207 Under the Third Contract the patient still commits immediately to paying for any Hair Loss Goods and Hair Loss Services provided at Ashley & Martin's standard prices. The changes to the termination provision clarify the sequence of events should a patient seek to terminate. There is improved transparency in the drafting of the three limbs. However, leaving aside the third limb, unfairness remains. A patient still commits to a Medical Treatment Program and commits to the payment for that program in circumstances where they do not have informed consent about the program. The patient's termination payment increases to 100% of the contract price when two days have elapsed and the patient has seen the doctor. Why the time frame for considering risk and advice is so short remains unexplained. 208 Even with the improved transparency, the significant imbalance and detriment identified with respect to the First Contract remains with the Third Contract. 209 Ashley & Martin has not persuaded me that the commitment to payment prior to medical advice or the refund or termination provisions are reasonably necessary to protect its legitimate interests. 210 As to the first limb of the Third Contract, Ashley & Martin submits that the payment compensates it for products and services already supplied. For the reasons already given (see [161] and [169] above), I am not satisfied that Ashley & Martin has established that such a payment is reasonably necessary to protect its interests. 211 As to the second limb, Ashley & Martin contends that the payment compensates it for the fact that it may have supplied or incurred the cost of supplying all of the Hair Loss Goods by that time. Ashley & Martin has not pointed to any reasons that justify an escalation in payment to 100% of the total price for the program in order to protect interests that do not appear to alter in substance over that time frame and where in fact the obligation to provide any ongoing services is reduced. Again, for the reasons already given I am not satisfied that such a payment is reasonably necessary to protect its interests. 212 It follows that I find that the impugned terms of the Third Contract are unfair. 213 As to the third limb, it reveals no unfairness. The ACCC does not contend it is unfair. For the first time, a clause is included that provides for a full refund if the medical doctor determines that a patient is not suitable for medical treatment. The concern about entry into a financial commitment for a medical treatment in the absence of informed consent is ameliorated by that provision.

[47]

Outcome 216 The ACCC has been successful in its application. By way of relief, it seeks by the originating application declarations as follows: 1 Pursuant to s 250 of the ACL, a declaration that the terms in contracts between the Respondent and consumers which are marked on the Personal RealGROWTH Program contract identified with code AU PRG01.10 (First Contract) in Annexure A to this application are unfair terms within the meaning of s 24 of the ACL, and are void pursuant to s 23 of the ACL, because they commit the consumer to pay for a medical treatment program before the consumer has had the opportunity to receive and consider medical advice and give or refuse informed consent to the medical treatment. 2 Pursuant to s 250 of the ACL, a declaration that the terms in contracts between the Respondent and consumers which are marked on the Personal RealGROWTH Program contract identified with code AU PRG09.16 (Second Contract) in Annexure B to this application are unfair terms within the meaning of s 24 of the ACL, and are void pursuant to s 23 of the ACL, because they commit the consumer to pay for a medical treatment program before the consumer has had the opportunity to receive and consider medical advice and give or refuse informed consent to the medical treatment. 3 Pursuant to s 250 of the ACL, a declaration that the terms in contracts between the Respondent and consumers which are marked on the Personal RealGROWTH Program contract identified with code AU PRG12.16 (Third Contract) in Annexure C to this application are unfair terms within the meaning of s 24 of the ACL, and are void pursuant to s 23 of the ACL, because they commit the consumer to pay for a medical treatment program before the consumer has had the opportunity to receive and consider medical advice and give or refuse informed consent to the medical treatment. 217 Ashley & Martin accepts that if the impugned terms were found to be unfair, the declarations would be appropriate. 218 The ACCC has also proposed orders as to consumer redress for those patients who terminated any of the First, Second or Third Contracts. Those proposed orders were not addressed by the parties, and Ashley & Martin must be heard in that regard. 219 Accordingly I will defer the making of declarations and deal with all questions as to relief concurrently. In the circumstances I will invite the parties to bring in a minute of proposed orders to program a further hearing to address relief. I will hear the parties as to costs. I certify that the preceding two hundred and nineteen (219) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Banks-Smith.

At a glance

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Judgment (47 paragraphs)

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