Esquilant v Paypal Australia Pty Limited

THE CLAIM

1. In the application filed with the Tribunal the applicant claimed the amount of $39,500 in compensation or damages arising from the inability to use the respondent's platform for e-commerce after 11 October 2018.
2. No order was identified as being sought that the respondent refund any monies held in any account, or that the respondent remove the limitation placed on his account.
3. However, at the hearing, the applicant identified that he sought the following orders: 1. Payment of $39,500 for "loss of income" due to the "suspension or cancellation" of his personal Paypal account. 2. Lifting the limitation placed by the respondent on the applicant's personal account.
4. The applicant identified the causes of action he relied upon as follows: 1. Breach of contract. 2. Unconscionable conduct (ss 21-22 of the ACL); and 3. Unfair contract terms (ss 23-28 of the ACL).

Applicant's Documentary Evidence

1. The applicant filed and served bundles of documents on 3 February 2021 and 17 March 2021. Both sets of documents were admitted into evidence subject to weight and relevance.
2. The applicant's documents relevantly included: 1. A chronology of events. 2. "eBay Sales Data" graphs setting out "sales record 2018-2020"; "revenue loss 2018-2020; and "effects of Paypal limitation on sales revenue". 3. Two tables under the heading "raw data". The first table was headed "sales revenue August 2017-September 2018". The second table was headed "raw data sales October 2018-December 2020". 4. Two separate emails from the respondent dated 6 July 2018. 5. Email from the respondent dated 11 July 2018. 6. Email from the respondent dated 3 October 2018. 7. Email from the respondent dated 18 July 2019. 8. A 'transcript" prepared by the applicant of a recording he made of a telephone conversation with a representative of the respondent on 23 December 2020. 9. Extracts from the Australian Competition and Consumer Commission website regarding unfair contract terms and unconscionable conduct. 10. A typed "notes/outline" made by the applicant of a conversation he had with a representative of the respondent on 21 March 2019.

Respondent's Documentary Evidence

1. The respondent filed and served a bundle of documents on 11 February 2021 which were admitted into evidence subject to weight and relevance. 1. The respondent's documents relevantly included: 2. A written submission setting out why it opposed the applicant's claim. 3. A screenshot of the account information of the applicant in respect of account number XXX. That account was in the name of the applicant and identified the "preferred email address" as XXX. 4. A printout of transactions records of the account in the name of the applicant (account number XXX) with email XXX in the period from 2016 to 2018. 5. Copies of the respondent's Acceptable Use Policy and User Agreement for Paypal Services.

Applicant's Oral Evidence

1. The applicant stated that there were two separate accounts, one in his name and one in the name of his company. The applicant submitted that the company was a separate legal entity, and if the respondent placed a limitation on the account of Lux Cuttings Pty Limited it was not entitled to place a limitation on his personal account.
2. The applicant stated that the respondent had never given any clear reason why a limitation was placed on his personal account; and that he had been orally told that he had been 'blackballed' by the respondent. According to the applicant, there was no point in seeking to internally appeal the respondent's decision to place a limitation on his personal account as it has been made clear to him that the respondent could unilaterally decide to place a limitation on an account irrespective of the merits of the decision.
3. The applicant claimed that there was no basis for suspending his personal account. The applicant asserted that there was a difference between using the "company account" to sell goods for the company; and using his personal account for the same purpose.
4. In respect of loss, the applicant asserted that the graphs and tables he had prepared which were set out in his documentary evidence showed he had lost income of "over $100,000" because his Paypal account had been, in effect, suspended. The applicant asserted that he could distinguish between loss of sales to Lux Cuttings Pty Limited and his personal losses, because the transactions were separate.
5. The applicant acknowledged that he had not provided any financial source documents in his evidence, such as income tax returns; bank records; financial records; or accountant's reports. The applicant asserted that he had prepared the various tables provided on the basis of his own knowledge of his financial affairs and the financial affairs of Lux Cuttings Pty Limited.
6. The applicant did not dispute that the Acceptable User Policy and User Agreement contained in the respondent's documents were the applicable terms and conditions at the time he and Lux Cuttings Pty Limited held accounts with the respondent.
7. There was no evidence to indicate there were any funds owed to the applicant (or Lux Cuttings Pty Limited remaining in the suspended account of the applicant which the applicant was entitled to.

Respondent's Evidence

1. The respondent submitted that the account records of the applicant clearly showed transactions in respect of the business activities of "Lux Cuttings". The respondent had placed a limitation on the account due to risks it had detected in the types of items being sold. The respondent was entitled to place a limitation on the account of "Lux Cuttings" under Clause 16 its User Agreement. Any personal account operated by the applicant was clearly an "associated account" under Clause 16.3 of the User Agreement, and liable to the same limitation as the "Lux Cuttings" account.
2. The respondent denied that it had no proper legal basis for placing a limitation on the applicant's account (or on any account of, or associated with, Lux Cuttings Pty Limited).

Jurisdiction

1. The jurisdiction of the Tribunal in consumer claims derives from Part 6A of the Fair Trading Act 1987 (NSW) ('the FTA').
2. The applicant is a "consumer" with the definition under s 79D (1) of the FTA.
3. The respondent has "supplied" "services" under s 79G (2) (a) and s 79F (1) (i) of the FTA.
4. No submission was made by the respondent that the applicant was not a "consumer" within the meaning of the FTA, and in any event by reason of s 79H of the FTA a person is presumed to be a consumer until the contrary is proved.
5. There was nothing in the evidence to indicate that the Tribunal does not have territorial jurisdiction under s 79K of the FTA. The services provided by the respondent were supplied in NSW.
6. The applicant's claim has been brought within 3 years of the date of the cause of action (either in contract or under the ACL) on any view, because the proceedings have been commenced within 3 years of the respondent placing a limitation on the applicant's account. Accordingly, the proceedings are within the time limit under s 79L of the FTA.
7. The amount claimed by the applicant in the proceedings ($39,500) or the order sought that the respondent remove the limitation on the applicant's account, do not exceed the monetary limit of the Tribunal's power to make orders under s 79S of the FTA.
8. The Tribunal has jurisdiction in this matter, subject to any other statutory limitations on its powers to consider particular causes of action.
9. Part 6A of the FTA deals with the jurisdiction of the Tribunal and types of remedial orders that can be made. It does not deal with the causes of action the Tribunal can consider. It is, however, well established that the Tribunal can consider breach of contract; and breach of any relevant provision of the Australian Consumer Law 2010 (NSW) ('the ACL'). By reason of ss 28 and 32 of the FTA, the ACL is a law of NSW.

Breach of Contract

1. The Tribunal is satisfied that there was a contract between the parties and the terms of that contract are set out in the Acceptable User Policy and User Agreement for PayPal Services contained in the respondent's documents.
2. By reason of opening an account with the respondent and accepting the terms and conditions of the respondent, the applicant is bound by those terms and conditions (Flight Centre Travel Group Limited t/as Aunt Betty v Goel [2021] NSWCATAP 44 at [37]-[42]).

Relevant Terms of the Contract

1. Clause 4.4 of the User Agreement states that a "potential seller risks" of using Paypal is that the respondent may "limit access to your account restricting access to your funds and/or your ability to receive funds and make withdrawals" if "we believe there is an increased risk associated with you, your account, or any transactions in your account".
2. Clause 6.2 of the User agreement states that: "By opening a personal account, you warrant that you are using it primarily for personal, domestic or household purposes".
3. Clause 16 of the User Agreement relevantly states: 16. Limiting accounts 16.1 If you have a personal account and we have reason to believe that it is being used for a purpose other than a personal, domestic or household purpose, we may limit or close your account or require you to upgrade to a premier or business account. 16.2 If we hold a reasonable belief that there is an increased risk associated with your PayPal account or other service you receive from us or a Related Body Corporate we may limit your access to sending, receiving or withdrawing funds or using guest checkout or direct Card payment processed by PayPal for up to 180 days. We may take these actions beyond 180 days if we reasonably believe the risk still exists or are prohibited by law from releasing funds or unrestricting your account. 16.3 We may limit access to sending, receiving or withdrawing funds from your account if it is associated with another account or service you receive from us or a Related Body Corporate (including PayPal account or an account you hold with eBay) which has been limited, is not in good standing, or poses a risk to the integrity, security or reliability of us or our systems. We may determine your PayPal account is associated with another account or service by comparing information we or our Related Bodies Corporate hold about you including names, email addresses or IP addresses. 16.4 The following is a non-exhaustive list of events which may lead to your account being limited. … (n) A risk assessment of your account conducted by us. … (w) Any other activities we reasonably deem as high risk selling or receiving activity. 16.5 In assessing a risk we will investigate your account and consider the reasonable risk of a Reversal, a breach or likely breach of this Agreement, or other potential losses occurring to us or our users. 16.6 If access to your account is limited, you will be notified and may be requested to provide information relevant to your account, subject to other actions we may take in accordance with this Agreement. 16.7 Following our investigation, if we reasonably believe there is no longer a risk, we will restore access to your account, subject to any other actions we make take in accordance with this Agreement. 16.8 If we reasonably believe a risk still exists, we may take various actions to protect PayPal, our users, a third party, or you from Reversals, fees, fines, penalties, legal action and/or regulatory risks and any other liability. The actions we may take include, but are not limited to the following: … (b) Continue to limit your account access to protect us against the risk of Reversals, legal and/or regulatory risks and any other liability. The actions we make take include, but are not limited to the following: … (b) Continue to limit your account access to protect us against the risk of Reversals, legal and/or regulatory risk or because we may be prohibited by law from releasing funds or unrestricting your account; … (d) Refuse to provide our Services to you in the future. …
4. Clause 17 of the User Agreement identifies the circumstances in which either party may close their account.
5. Clause 19 of the User Agreement identifies the mechanism for making complaints to the respondent, and how those complaints are to be dealt with. Clauses 19.9 and 19.10 point out that the respondent is a member of the Financial Ombudsman Service Australia, and if a person is dissatisfied with the respondent's handling of their complaint, it may contact the Financial Ombudsman Service Australia.

Has the Respondent Breached the Contract?

1. The onus is upon the applicant to prove, on the balance of probabilities, that the respondent breached the terms of the User Agreement. The respondent does not bear the onus of proving it did not breach the terms of the agreement.
2. In the email of 6 July 2019, the applicant was provided a reason why the 'Lux Cuttings' account was suspended. Although the written reasons are brief, the Tribunal is satisfied that the applicant subsequently made oral enquiries with the respondent, and the respondent explained the reasons for its decision. The respondent also gave an explanation at the hearing on 19 May 2021.
3. It is unclear from the respondent's documents whether there were two accounts (one in the name of Lux Cuttings Pty Limited and one in the name of the applicant) or only one account in the name of the applicant. The transaction records provided by the respondent only appear to refer to one account.
4. However, the evidence of the applicant was that there were two accounts, and when the Lux Cuttings Pty Limited account was suspended (i.e. a limitation placed on using the account) the applicant proceeded to use his personal account for business purposes. This is supported by the respondent having sent two separate emails (6 July 2018 and 3 October 2018) regarding "permanent limitation" of access.
5. On the applicant's own evidence, his "personal account" was being used for business purposes after the suspension of the Lux Cuttings Pty Ltd account. Consequently, despite the submissions of the applicant, the respondent did not have to have a fresh reason to suspend his personal account. The applicant was entitled to place a "permanent limitation" on the applicant's personal account under Clause 16.3 of the User Agreement because that account was clearly "associated" with the account of Lux Cuttings Pty Ltd which had been suspended. The applicant was also in breach of Clause 6.2 of the User Agreement, because he was not using his personal account primarily for personal, domestic or household purposes.
6. The application before the Tribunal was brought in the name of the applicant, not in the name of Lux Cuttings Pty Ltd. Accordingly, the applicant has no standing (nor the Tribunal has any power) to make a finding that the respondent was in breach of Clause 16 of the User Agreement by deciding to place a permanent limitation on the Lux Cuttings Pty Ltd account on 6 July 2018.
7. In this regard, the Tribunal notes the applicant made clear at the hearing that the cause of action being pursued was in respect of the decision to place a permanent limitation (i.e. suspend) his personal account; and that Lux Cuttings Pty Ltd was a separate legal entity with a separate account.
8. If the Tribunal had to determine whether the decision of the respondent to suspend the Lux Cuttings Pty Ltd account on 6 July 2018 was in breach of Clause 16.2 of the User Agreement, the Tribunal would not have been satisfied that breach had been proved on the balance of probabilities. The respondent only must hold a "reasonable belief that there is an increased risk" associated with the account.
9. The words "reasonable belief" must be given their plain and ordinary meaning. A believe is "reasonable" provided it is not illogical, irrational, or there is no evidence to support the belief. There is nothing in the terms of the contract that require the respondent to give a detailed explanation or evidence to support its decision, nor is the Tribunal satisfied that such a term should be implied in law to give the contract business efficacy.
10. The applicant also asserts that the respondent has made an irrevocable decision to limit his personal account, and that seeking an internal review (or further internal review) of this decision is futile. The Tribunal is not satisfied the applicant has proved the respondent has breached the terms of the contract set out in Clause 19 of the contract.

Evidence of Loss

1. Even if the Tribunal was satisfied that the respondent had breached the contract in respect of its decision to place a permanent limitation on his personal account, the Tribunal is not satisfied the respondent has proved any personal loss incurred by him as a result of this decision.
2. The evidence provided by the applicant to establish loss was significantly inadequate. No personal financial or taxation records were provided. No report by an account was provided. The applicant simply asserted that the tables in his documentary evidence showed his personal loss (rather than the loss of Lux Cuttings Pty Limited) by reason of the respondent's decision to suspend his account, which caused an inability or restriction on the sale of goods (particularly on the eBay website).
3. In regard to evidence of loss, the applicable principles were summarised in Sabouni v Redevelop Building and Developments Pty Ltd [2021] NSWSC 31 at [41]-[42] as follows: … The Court must do the best it can to make a reliable assessment of damages, where damages are difficult to assess, including where a party has failed to lead the best evidence of damages: Commonwealth of Australia v Amann Aviation Pty Ltd above at 83, per Mason CJ and Dawson J, 125 per Deane J, 153 per Gaudron J. In Uszok v Henley Properties (NSW) Pty Ltd [2007] NSWCA 31 at [135], Beazley JA observed that: "Where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat the only remedy it provides for breach of contract, an award of damages … . Such damages should not be nominal only, notwithstanding that the award may be difficult to assess. …" (Citations omitted) On the other hand, the case law also recognises that damages must be proved with a degree of precision which reflects the proof that is reasonably available to the parties: State of New South Wales v Moss (2000) 54 NSWLR 536 at [72]; Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 77 ALJR 768 at [38]. In Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275 at 319, Pincus J noted that "if the evidence called on behalf of [the plaintiff] fails to provide any rational foundation for a proper estimate of damages, the Court should simply decline to make one". That approach was approved by Brooking J in JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237 at 243 and by the Court of Appeal in Troulis v Vamvoukakis [1998] NSWCA 237 where Gleeson CJ observed that, where damages were susceptible of evidentiary proof, but there was an absence of raw material to which good sense may be applied, "[j]ustice does not dictate that … a figure should be plucked out of the air". That decision has been approved in subsequent cases, including McCrohan v Harith [2010] NSWCA 67 at [128], where McColl JA (with whom Campbell JA and Handley AJA agreed) held that an estimate of damages, in the nature of a "guess", should not be made where precise evidence of the damages suffered could have been adduced, but was not. I followed that decision in Re Hair Industrie Penrith Pty Ltd, Hair Industrie Merrylands Pty Ltd [2015] NSWSC 1578 at [20], on which I have drawn for the summary which appears above.
4. The applicant has failed to provide evidence that establishes any rational foundation for an estimate of damages, and even if the applicant had established breach of contract the Tribunal would not award damages in any event.

Unconscionable Conduct

1. The applicant is not relying upon any consumer guarantee provisions of the ACL (NSW). Accordingly, it is unnecessary for the Tribunal to consider whether the provisions of s 131A of the Competition and Consumer Act 2010 (C'th) means that the Tribunal does not have jurisdiction in regard to such provisions if the respondent has supplied "financial services" or "financial products".
2. Otherwise, the Tribunal has jurisdiction to consider "unconscionable conduct" claims under ss 20-22 of the ACL (NSW): Herbert v American Express Pty Ltd & Ors [2016] NSWCATAP 47.
3. The applicant has failed to provide evidence that satisfies the Tribunal that he was under an "special disadvantage" or that the respondent has unconscientiously taken advantage of that "special disadvantage". It is not sufficient that parties have an inequality of bargaining power: Australian Securities and Investment Commission v Kobelt [2019] HCA 18; (2019) 267 CLR 1; McDonald v Yakiti Pty Ltd & Ors [2021] NSWCA 114.
4. The User Agreement of the respondent, which the applicant agreed to, clearly sets out that the respondent may place a permanent limitation on an account, and the circumstances in which this may occur. That User Agreement also set out a complaints and disputes process, including rights of users to seek information or make a complaint to the Australian Securities and Investments Commission and the Financial Ombudsman Service. The applicant is not an elderly person; or person with English as a second language; or has a medical condition or disability that prevents or significantly restricts his ability to protect his own interests.

Unfair Contract Terms

1. Sections 23-28 of the ACL refer to "unfair terms" of a "consumer contract" or "small business contract".
2. The User Agreement between the respondent and the applicant was for the respondent to provide services or facilities so that payments could be made to the applicant in respect of goods purchased by consumers from the applicant's business over the internet.
3. It is not a "consumer contract" within the meaning of s 23 (3) of the ACL because the applicant, on his own evidence, did not use the service "wholly or predominantly for personal, domestic, or household use or consumption.
4. There was also no evidence to establish that the contract was a "small business contract" within the meaning of s 23 (4) of the ACL because the applicant has not provided any evidence about how many people he (rather than Lux Cuttings Pty Limited) employed; or the duration of the contract; or the contract price.
5. The applicant did not clearly articulate what terms of the User Agreement were "unfair". However, the Tribunal construes the substance of his submissions to be that the terms allowing the respondent to place a permanent limitation on the contract are unfair because this can be done unilaterally and without giving extensive reasons. The applicant also complains that the respondent's complaints and resolution process is unfair.
6. In any event, the Tribunal is not satisfied that the User Agreement or any relevant part of the User Agreement is "unfair' within the definition contained in s 24 of the ACL (this definition is discussed in AWD Cavallo Investments Pty Ltd v Smokevitch [2021] NSWCATAP 183).
7. The terms of the User Agreement are transparent; legible; expressed in plain language; they do not cause a significant imbalance of the parties rights and are reasonably necessary to protect the interests of the party advantaged by the term. Considering the types of items that may be sold by e-commerce, the respondent has a legitimate right to assess risks to it in respect of allowing its service to facilitate payment for such items and place restrictions on accounts.
8. Further, although a permanent limitation being placed on an account may cause detriment to the account holder (s 24 (1) (c) of the ACL) this is ameliorated by the complaints and disputes provisions of the User Agreement. Mere detriment, or potential detriment, is insufficient to establish that a contract term is unfair under s 24 of the ACL. Whether a term or terms are unfair need to be assessed objectively, and in the full context of the provisions of the contract and the type of commercial arrangement the contract is dealing with.

I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 August 2021