Australian Securities and Investments Commission v Bank of Queensland Limited

Australian Securities and Investments Commission v Bank of Queensland Limited - [2021] FCA 957 - FCA 2021 case summary — Zoe

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Regulatory context 7 Division 2 of Part 2 of the Act is headed 'Unconscionable conduct and consumer protection in relation to financial services'. 8 Subdivision BA of Division 2 is headed 'Unfair contract terms'. The relevant provisions upon which ASIC relies fall within that subdivision: s 12BF - unfair terms of consumer contracts and small business contracts; s 12BG - meaning of unfair; s 12BH - examples of unfair terms; and s 12BK - standard form contracts. 9 Subdivision G of Division 2 is headed 'Enforcement and remedies'. The powers of the Court to make the orders and declarations sought are said to arise under s 12GNB - orders to redress loss or damage suffered by non-party consumers; and s 12GNC - kinds of orders that may be made to redress loss or damage suffered by non-party consumers. 10 The various statutory provisions were collected by Gleeson J in ASIC v Bendigo at [9]-[14], and I acknowledge that the following summary largely adopts her Honour's summary of those provisions. 11 Section 12BF relevantly provides: (1) A term of a … small business contract is void if: (a) the term is unfair; and (b) the contract is a standard form contract; and (c) the contract is: (i) a financial product; or (ii) a contract for the supply, or possible supply, of services that are financial services. (2) The contract continues to bind the parties if it is capable of operating without the unfair term. … (4) A contract is a small business contract if: (a) at the time the contract is entered into, at least one party to the contract is a business that employs fewer than 20 persons; and (b) either of the following applies: (i) the upfront price payable under the contract does not exceed $300,000; (ii) the contract has a duration of more than 12 months and the upfront price payable under the contract does not exceed $1,000,000. (5) In counting the persons employed by a business for the purposes of paragraph (4)(a), a casual employee is not to be counted unless he or she is employed by the business on a regular and systematic basis. (6) For the purposes of subsection (4) and despite subsection 12BI(3), in working out the upfront price payable under a contract under which credit is or is to be provided, disregard any interest payable under the contract. 12 Section 12BK(1) provides that if a party to a proceeding alleges that a contract is a standard form contract, it is presumed to be a standard form contract unless another party to the proceeding proves otherwise. 13 Relevantly, s 12BAA(7)(k) provides that, subject to subsection (8), a 'credit facility (within the meaning of the regulations)' is a financial product for the purposes of Division 2. 14 Regulation 2B(1) of the Australian Securities and Investments Commission Regulations 2001 (Cth) (Regulations) provides that the provision of credit for any period is a 'credit facility' for the purposes of s 12BAA(7)(k). By reg 2B(3)(a), 'credit' means a contract, arrangement or understanding under which payment of a debt owed by one person (a debtor) to another person (a credit provider) is deferred or a debtor incurs a deferred debt to a credit provider. By reg 2B(3)(b)(i) and (ix), 'credit' includes any form of financial accommodation and a financial benefit arising from or as a result of a loan. 15 Section 12BG deals with when a term will be 'unfair' and provides that: (1) A term of a contract referred to in subsection 12BF(1) is unfair if: (a) it would cause a significant imbalance in the parties' rights and obligations arising under the contract; and (b) it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and (c) it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on. (2) In determining whether a term of a contract is unfair under subsection (1), a court may take into account such matters as it thinks relevant, but must take into account the following: (b) the extent to which the term is transparent; (c) 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 paragraph (1)(b), a term of a contract is presumed not to be reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term, unless that party proves otherwise. 16 Section 12BH provides some examples of the kind of terms that may be unfair including, relevantly: (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; … (g) a term that permits, or has the effect of permitting, one party unilaterally to vary financial services to be supplied 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; … (k) a term that limits, or has the effect of limiting, one party's right to sue another party; … (m) a term that imposes, or has the effect of imposing, the evidential burden on one party in proceedings relating to the contract. 17 Turning to enforcement and remedies, s 12GNB(1) of the Act relevantly provides: Without limiting the generality of section 12GD, if: (a) a person: … (ii) is a party to a contract who is advantaged by a term (the declared term) of the contract in relation to which the Court has made a declaration under section 12GND; and (b) the contravening conduct or declared term caused, or is likely to cause, a class of persons to suffer loss or damage; and (c) the class includes persons who are non-party consumers in relation to the contravening conduct or declared term; the Court may, on the application of ASIC, make such order or orders (other than an award of damages) as the Court thinks appropriate against a person referred to in subsection (2) of this section. 18 Section 12GNB(3) relevantly provides: (3) The Court must not make an order under subsection (1) unless the Court considers that the order will: … (b) prevent or reduce the loss or damage suffered, or likely to be suffered, by the non-party consumers in relation to the contravening conduct or declared term. 19 Section 12GNC relevantly provides: Without limiting subsection 12GNB(1), the orders that the Court may make under that subsection against a person (the respondent ) include all or any of the following: (a) an order declaring the whole or any part of a contract made between the respondent and a non-party consumer referred to in that subsection, or a collateral arrangement relating to such a contract: (i) to be void; and (ii) if the Court thinks fit - to have been void ab initio or void at all times on and after such date as is specified in the order (which may be a date that is before the date on which the order is made); (b) an order: (i) varying such a contract or arrangement in such manner as is specified in the order; and (ii) if the Court thinks fit - declaring the contract or arrangement to have had effect as so varied on and after such date as is specified in the order (which may be a date that is before the date on which the order is made);

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Authorities on unfairness 20 There is now a body of useful authorities which consider unfair terms in contracts. The relevant provisions under the Act were considered in Australian Competition and Consumer Commission v CLA Trading Pty Ltd [2016] FCA 377 (Gilmour J). The Australian Consumer Law (ACL), which appears as Schedule 2 to the Competition and Consumer Act 2010 (Cth), has a corresponding legislative regime to that under the Act. 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). Section 24, which falls within Part 2.3, is headed 'unfair terms' and is in identical terms to s 12BG of the Act. 21 The meaning and application of the various elements of s 24 of the ACL have been considered in a number of cases, including Australian Competition and Consumer Commission v Chrisco Hampers Australia Limited [2015] FCA 1204; (2015) 239 FCR 33 (Edelman J); Australian Competition and Consumer Commission v JJ Richards & Sons Pty Ltd [2017] FCA 1224 (Moshinsky J); and Australian Competition and Consumer Commission v Ashley & Martin Pty Ltd [2019] FCA 1436 (Banks-Smith J). 22 In ASIC v Bendigo Gleeson J summarised the relevant principles, adopting in part the submission of the parties in that matter and referring in particular to the above cases at [17]-[36]. Those authorities relating to the ACL may be applied to the corresponding s 12BG of the Act. Her Honour's summary was adopted as a whole by the parties in this matter. It is not necessary to repeat that summary, but these reasons should be taken to repeat and apply the principles as summarised by her Honour. 23 I should add that in addition to the matters set out in ASIC v Bendigo, in relation to transparency and s 12BG(2)(b) of the Act, it is accepted that some terms in contracts may be inherently unfair, regardless of how comprehensively they may be drawn to the customer's attention: Australian Competition and Consumer Commission v CLA Trading at [54]. See also Jackson J's more recent consideration of transparency in the context of s 24(2)(a) of the ACL in Australian Competition and Consumer Commission v Smart Corporation Pty Ltd (No 3) [2021] FCA 347 at [69]-[72].

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The Bank's standard form contracts 29 Since November 2016, the Bank used the following general conditions for small business lending contracts: (a) Guarantee Facility General Conditions dated September 2016 (Guarantee); (b) Business Term Loan General Conditions dated September 2016 (Term Loan); (c) Commercial Rate Loan Facility General Conditions dated September 2016 (Commercial Rate Loan); (d) Business Overdraft and Business Line of Credit General Conditions dated September 2016 (Overdraft); and (e) Facility General Conditions dated November 2016 (General Conditions). (together, Standard Form Terms) 30 Between 16 November 2016 and 30 June 2019, the Bank entered into: (a) 1,128 standard form contracts with businesses which incorporated one or more of the Standard Form Terms for which the upfront price payable under the contract did not exceed $300,000; and (b) 1,319 standard form contracts with businesses which incorporated one or more of the Standard Form Terms for which the contract had a duration of more than 12 months and the upfront price payable under the contract exceeded $300,000 but did not exceed $1 million. (together, Standard Form Contracts) 31 As at 30 June 2019, the Bank had on foot: (a) 938 active standard form contracts with businesses which incorporated one or more of the Standard Form Terms for which the upfront price payable under the contract did not exceed $300,000; and (b) 1,148 active standard form contracts with businesses which incorporated one or more of the Standard Form Terms for which the contract had a duration of more than 12 months and the upfront price payable under the contract exceeded $300,000 but did not exceed $1 million. 32 At least some, and likely a significant number, of the counterparties to the Standard Form Contracts are businesses that employed fewer than 20 persons at the time of entry into the Standard Form Contract. It is not known how many of the Standard Form Contracts are small business contracts within the meaning of s 12BF(4) of the Act because the Bank does not store data in relation to numbers of employees as part of its lending process. 33 Accordingly, at least some, and likely a significant number, of the Standard Form Contracts are small business contracts within the meaning of s 12BF(1) and s 12BF(4) of the Act. 34 Each Standard Form Contract is a standard form contract within the meaning of s 12BF(1)(b) and s 12BK of the Act. 35 Each Standard Form Contract is a credit facility within the meaning of s 12BAA(7)(k) of the Act and the Regulations and a financial product within the meaning of s 12BF(1)(c)(i) of the Act.

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The eleven BOQ contracts 36 The originating process identifies eleven particular contracts made between customers and the Bank. They are defined as the First BOQ Contract, Second BOQ Contract and so on, and fall within the group of Standard Form Contracts. They are referred to collectively as the Schedule Contracts (ASIC has disclosed the parties to those contracts to the Bank by way of a confidential schedule but their identity is otherwise confidential). 37 Each of the Schedule Contracts is a small business contract within the meaning of s 12BF(1) and s 12BF(4) of the Act, for the following reasons: (a) the First BOQ Contract is a guarantee facility that incorporates the terms of the Guarantee with a limit of $20,000 for five years. At the time of entry into the contract, the other party to the contract conducted a business that had 17 employees (and ASIC's senior counsel noted that in International Litigation Partners Pte Ltd v Chameleon Mining NL (Receivers and Mangers Appointed) [2012] HCA 45; (2012) 246 CLR 455 at [28], the High Court found, although in the context of cognate corporations legislation, that a bank guarantee is relevantly a credit facility, because it is financial accommodation); (b) the Second BOQ Contract is a guarantee facility that incorporates the terms of the Guarantee with a limit of $13,441 for five years. At the time of entry into the contract, the other party to the contract conducted a business that had five employees; (c) the Third BOQ Contract is a business term loan that incorporates the terms of the Term Loan for $800,000 with a term of 15 years. At the time of entry into the contract, the other party to the contract conducted a business that had no employees; (d) the Fourth BOQ Contract is a business term loan that incorporates the terms of the Term Loan for $464,000 with a term of 25 years. At the time of entry into the contract, the other parties to the contract conducted a business that had no employees; (e) the Fifth BOQ Contract is a commercial rate loan that incorporates the terms of the Commercial Rate Loan for $800,000 with a term of three years. At the time of entry into the contract, the other party to the contract conducted a business that had one employee; (f) the Sixth BOQ Contract is a commercial rate loan that incorporates the terms of the Commercial Rate Loan for $650,000 with a term of five years. At the time of entry into the contract, the other party to the contract conducted a business that had two employees; (g) the Seventh BOQ Contract is an overdraft facility that incorporates the terms of the Overdraft for $50,000. At the time of entry into the contract, the other party to the contract conducted a business that had three employees; (h) the Eighth BOQ Contract is an overdraft facility that incorporates the terms of the Overdraft for $600,000. At the time of entry into the contract, the other parties to the contract conducted a business that had three employees; (i) the Ninth BOQ Contract is a bank guarantee that incorporates the terms of the General Conditions for $7,218.75 for 60 months. At the time of entry into the contract, the other party to the contract conducted a business that had three employees; (j) the Tenth BOQ Contract is a bank guarantee that incorporates the terms of the General Conditions for $4,166.67 for 60 months. At the time of entry into the contract, the other party to the contract conducted a business that had two employees; and (k) the Eleventh BOQ Contract is an overdraft facility that incorporates the terms of the General Conditions for $25,000 repayable on demand. At the time of entry into the contract, the other parties to the contract conducted a business that had four employees. 38 Each of the Schedule Contracts is a standard form contract within the meaning of s 12BF(1)(b) and s 12BK of the Act. 39 Each of the Schedule Contracts is a credit facility within the meaning of s 12BAA(7)(k) of the Act and the Regulations and a financial product within the meaning of s 12BF(1)(c)(i) of the Act.

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Identified unfair terms 40 Annexure A to these reasons contains the relevant impugned clauses extracted from each of the Guarantee, Term Loan, Commercial Rate Loan, Overdraft and General Conditions. A sample copy of the Guarantee is contained in Annexure B to these reasons. A sample copy of the Term Loan is contained in Annexure C. A sample copy of the Commercial Rate Loan is contained in Annexure D. A sample copy of the Overdraft is contained in Annexure E. A sample copy of the General Conditions is contained in Annexure F. Those annexures bear pagination from the statement of agreed facts which is not part of the source documents and may be ignored for present purposes. 41 The Standard Form Terms include: (a) indemnification clauses that apply to losses not caused by a customer's default and that have the effect of limiting the Bank's vicarious liability for its agents (Guarantee clause 5; Commercial Rate Loan clauses 17.1(c), 17.1(d),17.1(e), 17.1(g) and 17.2; General Conditions clauses 10.1(c), 10.1(d), 10.1(e), 10.1(f), 10.1(h) and 10.2 and clause 4.5 of Part E); (b) event of default clauses that allow the Bank to unilaterally determine whether a default has occurred (Guarantee clause 11(a) (bullet 17); Term Loan clause 13(a) (bullet 15); Commercial Rate Loan clause 22(l); Overdraft clause 12(a) (bullet 15); General Conditions clause 13(l)); (c) event of default clauses that do not permit the customer to remedy a default capable of remedy and which create defaults based on events which may or may not involve any material change in credit risk (Guarantee clause 11(a) (bullets 6, 7, 17); Term Loan clause 13(a) (bullets 5, 6, 15); Commercial Rate Loan clauses 22(e), 22(l), 22(t); Overdraft clause 12(a) (bullets 5, 6, 15); General Conditions clauses 13(e), 13(l), 13(t)); (d) event of default clauses that create defaults based on events that may or may not involve any material change in credit risk (Guarantee clause 11(a) (bullets 6, 7, 17); Term Loan clause 13(a) (bullets 5, 6, 15); Commercial Rate Loan clauses 22(e), 22(l), 22(t); Overdraft clause 12(a) (bullets 5, 6, 15); General Conditions clauses 13(e), 13(l), 13(t)); (e) unilateral variation clauses which permit the Bank to vary the upfront price of the contract, the financial services to be supplied under the contract and other terms of the contract (Guarantee clause 8(b), Term Loan clauses 8(b), 9(c) and 10(c), Commercial Rate Loan clauses 25.2, 39.1(a), 39.1(g), 39.1(h), 39.1(i), 39.1(j); Overdraft clauses 2(d), 7(b), 8(c) 9(c) and 13; General Conditions clauses 16.2, 32.1(a), 32.1(h), 32.1(i), 32.1(j) and 32.1(k) and clause 6.1 of Part C); and (f) conclusive evidence clauses that have the effect of imposing an evidential burden on the customer in proceedings relating to the contract (Commercial Rate Loan clause 35.1; General Conditions clause 28). These clauses also have the effect of allowing the Bank, but not the customer, to terminate the contract if the customer does not pay an amount stated in a certificate by a stated date.

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Event of default clauses 54 Each of clause 11(a) (bullets 6, 7 and 17) of the Guarantee; clause 13(a) (bullets 5, 6 and 15) of the Term Loan; clause 12(a) (bullets 5, 6 and 15) of the Overdraft; clauses 22(e), 22(l) and 22(t) of the Commercial Rate Loan; and clauses 13(e), 13(l) and 13(t) of the General Conditions are event of default clauses which are impugned. 55 The significant imbalance in the event of default impugned terms is created: (a) first, by the disproportionately severe default consequences set out at [56]-[57] below; (b) secondly, because none of the event of default clauses permit the customer to remedy a default which may be capable of remedy; (c) thirdly, because each of the clauses creates a default based on events that may not involve any credit risk to the Bank (for example by providing misleading or untrue information such as a director's date of birth or by failing to keep to an agreement with a third party); and (d) fourth, in relation to the following clauses, because they create an event of default in the circumstances set out below: (i) an untrue or misleading statement being made or repeated by the customer (or its guarantors) which can in the context of the contract be insignificant (for example an error as to a director's date of birth): Guarantee clause 11(a) (bullet 6); Term Loan clause 13(a) (bullet 5); Overdraft clause 12(a) (bullet 5); Commercial Rate Loan clause 22(e); General Conditions clause 13(e); (ii) the Bank unilaterally forms an opinion that something has happened where the Bank's opinion may be wrong or it may also be reasonable to hold the opposite opinion and the customer has no entitlement to rectify any matter on which the Bank's opinion is based: Guarantee clause 11(a) (bullet 17); Term Loan clause 13(a) (bullet 15); Overdraft clause 12(a) (bullet 15); Commercial Rate Loan clause 22(l); General Conditions clause 13(l). 56 Default consequences under the Guarantee, the Term Loan and the Overdraft include: (a) the Bank is entitled to make the outstanding sum due under the facility with the customer payable immediately and on demand: Guarantee clauses 11(b), 13(a); Term Loan clause 13(b); Overdraft clause 12(b). In the case of the Guarantee, the Bank is permitted to claim the outstanding sum including the face value of all current bank guarantees: clause 11(b); (b) the Bank is entitled to pay out any security interest that has priority to its security on any property and add that amount to the money the customer owes the bank: Guarantee clause 17(g); Term Loan clause 19(g); Overdraft clause 18(g); (c) in the case of the Term Loan, the customer might be liable for an unspecified amount of break costs. It is not clear from the terms of the Term Loan how those costs are calculated: clause 6(f)(c). BOQ submits that, to calculate break costs, the Bank applies a formula to determine the cost incurred to re-arrange its own funding as a result of the break cost event. The customer does not know what formula is used and cannot calculate the break costs themselves, but can contact the Bank to find out the amount of any break costs without incurring an administration fee; (d) the Bank is entitled to enforce its rights under the agreement or any security: Guarantee clause 11(b); Term Loan clause 13(b); Overdraft clause 12(b). The customer indemnifies the Bank and may be held liable for all costs (including the Bank's legal costs) of enforcing the agreement or any security: Guarantee clauses 11(b), 14; 17(c); Term Loan clauses 13(b), 16, 19(c); Overdraft clauses 12(b), 15, 18(c). Those costs are of an unspecified amount and are incurred in circumstances where the customer has no control over how they are incurred. Further, the customer is liable to the Bank whether or not the Bank has actually paid any money: Guarantee clause 17(c), Term Loan clause 19(c); Overdraft clause 18(c); (e) the Bank is entitled to debit any account the customer holds with the Bank to satisfy the amounts payable as set out in subparagraphs (a) to (d) above: Guarantee clauses 6(a), 17(b); Term Loan clause 18(b); Overdraft clause 18(b); (f) there is no right of set-off for the customer but there is for the Bank: Guarantee clause 13(a); Term Loan clause 15(a); Overdraft clause 14(a); (g) the customer is automatically in default under every other agreement with the Bank, potentially triggering additional payments: Guarantee clause 11(b), Term Loan clause 13(b), Overdraft clause 12(b); (h) in the case of the Guarantee, the Bank is entitled to terminate any of its obligations under the facility: clause 12(b); (i) the customer does not have any right to prevent any of the above by demonstrating that it has remedied (or will remedy) any default that can be remedied or that there is no credit risk to the Bank; and (j) the Bank may be required to give notice before the exercise of any of these powers but it is not clear in what circumstances that will be so or how much notice will be given: Guarantee clause 11(b), Term Loan clause 13(b), Overdraft clause 12(b). 57 Default consequences under the Commercial Rate Loan and the General Conditions include: (a) the Bank is entitled to make the outstanding sum due under the facility with the customer payable immediately and on demand: Commercial Rate Loan clause 23.1; General Conditions clauses 5.1, 14.1; (b) the Bank is entitled to pay out any security interest that has priority to its security on any property and add that amount to the money the customer owes the Bank: Commercial Rate Loan clause 50; General Conditions clause 43; (c) the customer might also be liable for an unspecified amount of break costs. It is not clear from the terms of the Commercial Rate Loan or the General Conditions respectively how those costs are calculated: Commercial Rate Loan clause 20.1(c), General Conditions clause 11.1(e). BOQ submits that, to calculate break costs, the Bank applies a formula to determine the cost incurred to re-arrange its own funding as a result of the break cost event: Commercial Rate Loan clauses 20.2-20.9, General Conditions clauses 11.2-11.9. The customer does not know what formula is used and cannot calculate the break costs themselves, but can contact the Bank to find out the amount of any break costs without incurring an administration fee: Commercial Rate Loan clause 20.12, General Conditions clause 11.12; (d) the Bank is entitled to enforce its rights under the agreement or any security: Commercial Rate Loan clause 23.4(c); General Conditions clause 14.4(d). The customer indemnifies the Bank and may be held liable for all costs (including the Bank's legal costs) of enforcing the agreement or any security: Commercial Rate Loan clauses 15.1, 17.1(c), 23.4(d); General Conditions clauses 8.1(a), 10.1(c) 14.4(e). Those costs are of an unspecified amount and are incurred in circumstances where the customer has no control over how they are incurred. Further, the customer is liable to the Bank whether or not the Bank has actually paid any money: Commercial Rate Loan clause 45, General Conditions clause 38; (e) the Bank is entitled to debit any account the customer holds with the Bank to satisfy the amounts payable as set out in subparagraphs (a) to (d) above without notice to the customer: Commercial Rate Loan clauses 4.2, 15.2, 23.4(f); General Conditions clauses 4.2, 8.2, 14.4(g); (f) the Bank is entitled to refuse to make any undrawn portion of the facility limit available: Commercial Rate Loan: clause 24.3(g); General Conditions clause: clause 14.4(h), (i); (g) the Bank is entitled to terminate any of its obligations under the facility: Commercial Rate Loan clause 23.4(h); General Conditions clause 14.4(i). (h) there is no right of set-off for the customer but there is for the Bank: Commercial Rate Loan clause 33; General Conditions clause 26; (i) the customer does not have any right to prevent any of the above by demonstrating that it has remedied (or will remedy) any default that can be remedied or that there is no credit risk to the Bank; and (j) the Bank may be required to give notice before the exercise of any of these powers but it is not clear in what circumstances that will be so or how much notice will be given: Commercial Rate Loan clause 23, General Conditions clause 14. 58 Each of the impugned event of default clauses would cause detriment to the customer if relied upon within the meaning of s 12BG(1) because of the relevant default consequences outlined above. 59 The impugned event of default terms fall within the list of examples of terms set out in s 12BH(1) that may be unfair: see s 12BH(1)(b) and (h). When regard is had to each of the Guarantee, Term Loan, the Overdraft, the Commercial Rate Loan and the General Conditions as a whole, there is nothing otherwise within the terms of those documents which mitigates the unfairness of the impugned terms. 60 ASIC had initially submitted that the event of default clauses were not transparent, but at the hearing indicated it no longer submitted that was the case, having regard to the findings of Gleeson J in ASIC v Bendigo Bank at [63]-[65] to the effect that similar clauses did not lack transparency. I would follow Gleeson J's reasons and in this case am not persuaded that the relevant clauses lack transparency.

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Unilateral variation or termination clauses 61 Clause 8(b) of the Guarantee; clauses 8(b), 9(c) and 10(c) of the Term Loan; clauses 2(d), 7(b), 8(c), 9(c), 13 of the Overdraft, clauses 25.2, 39.1(a), 39.1(g), 39.1(h), 39.1(i) and 39.1(j) of the Commercial Rate Loan; and clauses 16.2, 32.1(a), 32.1(h), 32.1(i), 32.1(j), 32.1(k) and clause 6.1 of Part C of the General Conditions are unilateral variation or termination clauses which permit the Bank to vary the upfront price of the contract, the financial services to be supplied under the contract and other terms of the contract. 62 These terms create a significant imbalance in the parties' rights and obligations because: (a) some terms allow the Bank to vary the financial services or permit the Bank to reduce the amount of funds that the customer would otherwise be able to utilise without any notice to the customer: Overdraft clauses 2(d), 13; Commercial Rate Loan clauses 25.2, 39.1(a); General Conditions clauses 16.2, 32.1(a); (b) they permit the Bank to unilaterally vary the contract and the obligations of the parties at will; and (c) the customer has no corresponding rights. 63 Terms which allow the Bank to cancel any part of the facility would cause the customer detriment if relied upon because they reduce the amount of funds available to the customer. If the customer wishes to terminate the facility as a result of the Bank relying on one of these terms, unspecified fees and break costs may be payable (although the Bank submits that a customer may contact the Bank to find out the amount of any break costs without incurring an administration fee, as noted at [56(c)] and [57(c)] above): see for example Commercial Rate Loan 39.1(a) read together with clause 18-20; General Conditions clause 16.2, 32.1 read together with clause 11. That would have the effect of imposing a termination fee regardless of the reason for termination. 64 Terms which allow the Bank unilaterally to vary the terms of the contract, unless used to benefit the customer (for example, to reduce fees and charges or interest payable) would cause detriment if relied upon because: (a) if the customer accepts the change, it will incur higher fees and charges (or some other consequence which is detrimental to it); and (b) if the customer elects to terminate unspecified fees and break costs may be payable (noting the Bank's submission, again, that the customer may contact the Bank to find out the amount of any break costs without incurring an administration fee, as noted at [56(c)] and [57(c)] above): see for example Term Loan clause 6(f), Commercial Rate Loan clauses 18-20, General Conditions clause 11. That would have the effect of imposing a termination fee regardless of the reason for termination. 65 These terms fall within the list of examples of terms set out in s 12BH(1) that may be unfair: see s 12BH(1)(a), (b), (d) and (g). When regard is had to each of the Guarantee, Term Loan, the Overdraft, the Commercial Rate Loan and the General Conditions as a whole, there is nothing otherwise within the terms of those documents which mitigates the unfairness of the impugned terms. 66 I note that similar terms were found to be unfair by Gleeson J in ASIC v Bendigo at [66]-[69].

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Declarations that terms unfair 75 Section 12GND(2), read with s 12GND(3), empowers the Court to declare that a term of a small business contract, that is a standard form contract and a financial product, is an unfair term, on application by ASIC: ASIC v Bendigo at [84]. I am satisfied that the matters required to be established to enliven the Court's power to make declarations as set out in s 12GND(2) and (3) of the Act have been made out. 76 In ASIC v Bendigo, Gleeson J was satisfied that the requirements for making a declaration pursuant to those provisions were satisfied in respect of each of the impugned terms because (at [88]): (1) There is a significant legal controversy in this case which is being resolved. The proposed declarations relate to conduct that contravenes the Act and the matters in issue have been identified and particularised by the parties with precision. (2) It is in the public interest for the ASIC to seek to have the proposed declarations made and for the proposed declarations to be made. ASIC, as the statutory authority responsible for enforcing the Act has a genuine interest in seeking the declaratory relief. (3) The Bank is a proper contradictor because it is the respondent and is the subject of the proposed declarations. The Bank therefore has an interest in opposing the making of the proposed declarations. 77 Those same findings are applicable in this case. 78 Further, the declarations sought are appropriate because they serve to record the Court's disapproval of the contravening conduct, vindicate the claim by ASIC that the Bank had contravened the Act, assist ASIC to carry out the duties conferred upon it by the Act, and deter other corporations from entering into contracts containing unfair terms: ASIC v Bendigo at [90]; Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 (ACCC v Coles) at [78]. 79 Finally, there is also utility in making the declarations because they serve to enliven the Court's power under s 12GNB to make orders that are sought: ASIC v Bendigo at [91].

[55]

Declarations that terms void 80 Pursuant to s 12BF(1), any term of a small business contract that is unfair is void. ASIC submits, in relation to each term found to be unfair, that it is appropriate, for all of the reasons given above at [75]-[79], for corresponding declarations to be made. 81 The parties submit that the power to make such a declaration is to be found in s 21 of the Federal Court of Australia Act 1976 (Cth). 82 The principles with respect to the grant of declaratory relief, and this Court's jurisdiction to make declarations under s 21 of the Federal Court of Australia Act, were recently extensively analysed and addressed by the Full Court in Clarence City Council v Commonwealth of Australia [2020] FCAFC 134 at [57]-[75]. The following summary of the factors that it is said must be present before there can be a declaratory order, from Young P AO, Declaratory Orders (2nd ed, Butterworths, 1984), is also useful and was cited in Clarence City Council at [68]: 1. There must exist controversy between the parties …; 2. The proceedings must involve a 'right' …; 3. The proceedings must be brought by a person who has a proper or tangible interest in obtaining the order, which is usually referred to as 'standing' or 'locus standi' …; 4. The controversy must be subject to the court's jurisdiction both within the court's own charter and also within the jurisdiction so far as private international law rules are concerned …; 5. The defendant must be a person having a proper or tangible interest in opposing the plaintiff's claim …; 6. The issue must be ripe … It must not be merely of academic interest, hypothetical or one whose resolution would be of no practical utility. 83 The express provision in s 12GND(5) that that section does not limit any other power to make declarations forecloses any argument that the power in that section limits the Court's jurisdiction under s 21. 84 The parties submit, in addition, that s 12GNB provides the Court with power to make such a declaration. 85 In ASIC v Bendigo the breadth of the orders that the Court can make under s 12GNB was referred to by Gleeson J at [100]. 86 As is apparent from the terms of s 12GNC, relief can extend to orders declaring a contract or parts of a contract to be void, and to orders varying the terms of a contract in a specific manner. 87 I note in particular her Honour's reference at [101] to ACCC v Coles and the making of orders by consent in civil penalty proceedings brought by the Australian Competition and Consumer Commission. Relevantly, Gordon J said in ACCC v Coles: [70] The applicable principles are well established. First, there is a well-recognised public interest in the settlement of cases under the Act: NW Frozen Foods Pty Ltd v Australian Competition & Consumer Commission (1996) 71 FCR 285 at 291. Second, the orders proposed by agreement of the parties must be not contrary to the public interest and at least consistent with it: Australian Competition & Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79 at [18]. [71] Third, when deciding whether to make orders that are consented to by the parties, the Court must be satisfied that it has the power to make the orders proposed and that the orders are appropriate: Real Estate Institute at [17] and [20] and Australian Competition & Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 at [1]. Parties cannot by consent confer power to make orders that the Court otherwise lacks the power to make: Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 at 163. [72] Fourth, once the Court is satisfied that orders are within power and appropriate, it should exercise a degree of restraint when scrutinising the proposed settlement terms, particularly where both parties are legally represented and able to understand and evaluate the desirability of the settlement: Australian Competition & Consumer Commission v Woolworths (South Australia) Pty Ltd (Trading as Mac's Liquor) [2003] FCA 530 at [21]; Australian Competition & Consumer Commission v Target Australia Pty Ltd [2001] FCA 1326 at [24]; Real Estate Institute at [20]-[21]; Australian Competition & Consumer Commission v Econovite Pty Ltd [2003] FCA 964 at [11] and [22] and Australian Competition & Consumer Commission v The Construction, Forestry, Mining and Energy Union [2007] FCA 1370 at [4]. [73] Finally, in deciding whether agreed orders conform with legal principle, the Court is entitled to treat the consent of Coles as an admission of all facts necessary or appropriate to the granting of the relief sought against it: Thomson Australian Holdings at 164. 88 As Gleeson J noted in ASIC v Bendigo, those principles also apply in cases of this kind. 89 Each counter-party to each Standard Form Contract in relation to which a declaration has been made pursuant to s 12GND is a non-party consumer for the purpose of s 12GNB(1)(c). 90 The parties jointly submit that the term 'suffer loss' in s 12GNB(1)(b) should not be read as importing a requirement that the Bank in relying on an impugned term has acted unfairly and improperly. However neither actual unfairness nor actual loss or damage is a precondition to the exercise of power under s 12GNB. The orders sought are preventative in nature. Importantly, the Court must not make the order unless it is satisfied that the order will prevent or reduce the loss or damage relevantly likely to be suffered by the non-party consumers in relation to the declared term: s 12GNB(3)(b). 91 Accordingly, and I accept, the Court need not be satisfied that any 'declared term' has actually caused a non-party consumer to suffer loss or damage as referred to in s 12GNB(1)(b), or of any of the matters in s 12GNB(3)(a). 92 In this case I am satisfied as to the matters in s 12GNB(3)(b). I accept the joint submissions that: (a) each of the impugned terms is unfair within the meaning of s 12BG; (b) reliance by the Bank on any of the impugned terms would cause or be likely to cause the counter-party to suffer loss or damage; and (c) it is not necessary for the Court to make any findings as to the nature of the loss or damage likely to be suffered, but the loss or damage would likely be what is characterised as detriment in relation to each of the impugned terms in Annexure A to these reasons. 93 Having regard to the principles that I have discussed and the statutory terms, I am satisfied that the Court has power to make the declarations sought to the effect that the impugned terms are void ab initio, as set out specifically in the orders. I also accept the parties' submission that it is appropriate to make such declarations.

[57]

Varying the terms 95 The parties agree that orders should be made varying the various identified BOQ contracts and more generally varying the impugned clauses where utilised in standard form contracts. Orders to that effect can be made where appropriate under s 12GNB of the Act and having regard to s 12GNC(b). Orders were made by Gleeson J under s 12GNB varying the relevant contracts in ASIC v Bendigo. 96 Upon making the various declarations, each impugned term will be a 'declared term' under s 12GND: s 12GNB(1)(a)(ii). 97 The Bank is a person referred to in s 12GNB(2)(b): s 12GNB(1). 98 Each counter-party to each Standard Form Contract in relation to which a declaration has been made pursuant to s 12GND is a non-party consumer for the purpose of s 12GNB(1)(c). 99 As already noted, the Bank accepts that the impugned terms are terms which are likely to cause a class of persons, being those customers of BOQ who have small business contracts with BOQ which incorporate the Standard Form Terms, to suffer loss and damage: s 12GNB(1)(b). The Court need not be satisfied that any impugned term in relation to which a declaration has been made has actually caused a non-party consumer to suffer loss or damage: s 12GNB(1)(b). The orders sought are preventative in nature. The parties submit that the term 'suffer loss' in s 12GNB(1)(b) should not be read as importing a requirement that the Bank in relying on an impugned term has acted unfairly or improperly. 100 Again, the Court must not make the order unless it is satisfied that the order will prevent or reduce the loss or damage (relevantly) likely to be suffered by the non-party consumers in relation to the declared term: s 12GNB(3)(b). 101 In relation to the Guarantee, the parties agree that the matters in s 12GNB(3)(b) are satisfied because: (a) each of clauses 5, 8(b) and 11(a) (bullets 6, 7 and 17) is unfair within the meaning of s 12BG; (b) reliance by the Bank on any of those clauses would cause or be likely to cause the counter-party to suffer loss or damage in the form of the detriment referred to in [51], [56], [58] and [63]-[64] above; and (c) the orders are drafted to vary clauses 5(a), 8, 11(a) such that they are no longer unfair within the meaning of the Act. This is largely because if the proposed variations are made the terms would not apply to small business contracts or would apply in a manner that is appropriately restricted. The orders are also drafted to vary clause 20(a) to incorporate a definition for 'small business customer'. 102 In relation to the Term Loan, the parties agree that the matters in s 12GNB(3)(b) are satisfied because: (a) each of clauses 8(b), 9(c), 10(c) and 13(a) (bullets 5, 6 and 15) is unfair within the meaning of s 12BG; (b) reliance by the Bank on any of those clauses would cause or be likely to cause the counter-party to suffer loss or damage in the form of detriment referred to in [56], [58] and [63]-[64] above; and (c) the orders are drafted to vary clauses 8, 9(c), 10(c) and 13(a) such that they are no longer unfair within the meaning of the Act. This is largely because if the proposed variations are made the terms would not apply to small business contracts or apply in a manner that is appropriately restricted. The orders are also drafted to vary clause 22(a) to incorporate a definition for 'small business customer'. 103 In relation to the Commercial Rate Loan, the parties agree that the matters in s 12GNB(3)(b) are satisfied because: (a) each of clauses 17.1(c), 17.1(d), 17.1(e), 17.1(g), 17.2, 22(e), 22(l), 22(t), 25.2, 35.1, 39.1(a), 39.1(g), 39.1(h), 39.1(i) and 39.1(j) is unfair within the meaning of s 12BG; (b) reliance by the Bank on any of those clauses would cause or be likely to cause the counter-party to suffer loss or damage in the form of the detriment referred to in [51], [57]-[58], [63]-[64] and [69] above; and (c) the orders are drafted to vary clauses 17, 22, 25.2, 35.1 and 39 such that they are no longer unfair within the meaning of the Act. This is largely because if the proposed variations are made the terms would not apply to small business contracts or apply in a manner that is appropriately restricted. The orders are also drafted to vary clause 62 to incorporate a definition for 'small business customer'. 104 In relation to the Overdraft, the Court the parties agree that the matters in s 12GNB(3)(b) are satisfied because: (a) each of clauses 2(d), 7(b), 8(c), 9(c), 12(a) (bullets 5, 6 and 15) and 13 is unfair within the meaning of s 12BG; (b) reliance by the Bank on any of those clauses would cause or be likely to cause the counter-party to suffer loss or damage4 in the form of the detriment referred to in [56], [58] and [63]-[64] above; and (c) the orders are drafted to vary clauses 2(d), 7, 8(c), 9(c), 12(a) and 13 such that they are no longer unfair within the meaning of the Act. This is largely because if the proposed variations are made the terms would not apply to small business contracts or apply in a manner that is appropriately restricted. The orders are also drafted to vary clause 21(a) to incorporate a definition for 'small business customer'. 105 In relation to the General Conditions, the parties agree that the matters in s 12GNB(3)(b) are satisfied because: (a) each of clauses 10.1(c), 10.1(d), 10.1(e), 10.1(f), 10.1(h), 10.2, 13(e), 13(l), 13(t), 16.2, 28, 32.1(a), 32.1(h), 32.1(i), 32.1(j) and 32.1(k), 6.1 of Part C and 4.5 of Part E is unfair within the meaning of s 12BG; (b) reliance by the Bank on any of those clauses would cause or be likely to cause the counter-party to suffer loss or damage in the form of the detriment referred to in [51], [57]-[58], [63]-[64] and [69] above; and (c) the orders are drafted to vary clauses 10, 13, 16.2, 28, 32, 6.1 of Part C and 4.5 of Part E such that they are no longer unfair within the meaning of the Act. This is largely because if the proposed variations are made the terms would not apply to small business contracts or apply in a manner that is appropriately restricted. The orders are also drafted to vary clause 54 to incorporate a definition for 'small business customer'. 106 I am satisfied as to the matters referred to in [101]-[105], for the reasons advanced by the parties as set out above.

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