Evans v Davantage Group Pty Ltd

BEACH J: 1 The issue to be decided is whether a contractual promise in a discretionary risk product is illusory. 2 That issue requires me to consider the distinction between an option or discretion of a promisor whether to perform a promise and an option or discretion as to its manner of performance. That issue also requires an appreciation of the relationship between two related concepts, namely, the concept of contractual consideration and the concept of assessing whether a promise is illusory, even if exchanged for another promise or an act of performance such as using a smoke ball. 3 In resolving this issue, equity is of no assistance. Her moderating grace and subtlety have no relevance to the common law principles that I must apply. And these are not just principles that have been pleasingly preserved like a desiccated flower pressed within the leaves of a dusty tome of Elizabethan poetry. Rather, they are hard-edged principles animated by and to be applied in the contemporaneous commercial but consumer setting that I am considering. And they are to be applied to the substance of the transaction rather than merely its form. 4 Between 1 July 2013 and 28 May 2015, the respondent trading as "National Warranty Company" issued financial products in the form of motor vehicle warranties pursuant to its Australian financial services licence (AFSL) through the provision of product disclosure statements in accordance with Pts 7.6 and 7.9 of the Corporations Act 2001 (Cth) (the Act). 5 On 23 August 2014, the applicant purchased a motor vehicle from an entity trading as John Fautley Motors for $17,295. At that time, the applicant entered into a warranty agreement with the respondent for that vehicle, the cost of which was $1,895 (the Applicant Warranty). The 26,000 to 28,000 group members in the class action before me have likewise entered into similar warranty agreements with the respondent, but for present purposes it is sufficient to focus only on the Applicant Warranty. 6 The Applicant Warranty, which is self-described as "a discretionary risk product", comprises: (a) a single and front page Customer Contract & Declaration dated 23 August 2014, signed by the applicant and the respondent's authorised representative; and (b) a product disclosure statement titled "Sentinel Warranty - Product Disclosure Statement" dated 4 September 2013 (Applicant PDS). 7 Clause 11.1 of the Applicant PDS states: The Warranty is a discretionary risk product. This means that you are entitled to have your claim for assistance heard, but that NWC is not obliged to pay all claims that come within the terms and conditions of the Warranty. You are entitled to have NWC decide whether or not to pay the entire claim or to make a contribution to your claim. We will always consider the merits of your claim when making this decision to ensure that we exercise our discretion in a fair or just way. If we decide not to pay your claim, you will be responsible for the repair costs yourself. Because NWC retains the discretion regarding the payment of claims, NWC may also decide to contribute to or pay entirely for repairs that do not come within the terms and conditions of the Warranty. Because the Warranty is a discretionary product, it does not offer the same level of protection that an insurance policy may give you. Davantage Group Pty Ltd is not an insurance company and we are not required to maintain the same financial resources that an insurance company does. We do meet the 'financial resources' licence condition attached to our AFS licence. 8 It was also a term of the Applicant Warranty that any decision that the respondent made in respect of a claim was subject to external dispute resolution by the Financial Ombudsman Service (FOS) as it then was (cl 13), in accordance with the terms of the then applicable terms of reference published by the FOS. 9 In the class action before me brought by the applicant on behalf of group members, it is alleged and accepted for present purposes that between 1 July 2013 and 28 May 2015 each group member entered into a warranty agreement with the respondent which contained a clause with wording the same or substantially similar to cl 11.1, as well as an FOS term. As I say, the number of group members is approximately 26,000 to 28,000. 10 The group members' warranty agreements cover 49 distinct products each offered pursuant to a separate PDS, the majority of which offered more than one warranty plan that was based upon the level of cover, the age of the particular vehicle and its distance travelled. 11 The maximum amount that each group member was to pay as consideration for the warranty agreement was set by the respondent, although the actual amount paid by each group member was set at the discretion of the respondent's authorised representative offering the particular product and was occasionally negotiated. Accordingly, the amounts paid as consideration by group members for identical warranty agreements varied. 12 In terms of the class action, it is estimated that the total amount paid by group members as consideration for these warranty agreements was approximately $32 million. 13 Now in the class action the applicant has brought the following three types of claims personally and on behalf of group members. 14 First, the applicant says that the respondent's obligations to the applicant and group members under the warranty agreements are illusory by reason of cl 11.1, such that the warranty agreements fail for lack of consideration and that as a consequence the respondent ought to make restitution of the consideration paid by the applicant and group members. 15 Second, the applicant says that by reason of the respondent's unfair sales tactics concerning the warranty agreements and the unfair terms and conditions thereof including cl 11.1, as well as the vulnerability of the applicant and group members, the respondent in selling the warranty agreements engaged in unconscionable conduct within the meaning of s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) and ought to pay damages. 16 Third, the applicant says that cl 11.1 and like clauses are unfair terms within the meaning of s 12BF(1)(a) of the ASIC Act and inseverable such that the warranty agreements are void, and that as a consequence the respondent must make restitution of the consideration paid by the applicant and group members. 17 On 12 March 2019, and on the application of the respondent heard earlier that morning, which application was opposed by the applicant, I stipulated and set down for separate determination the following question: Are the Respondent's promises in the Applicant Warranty that are subject to clause 11 of the Applicant Warranty, illusory? 18 Three procedural points should be noted. First, I subsequently made orders under ss 33J, 33X and 33Y of the Federal Court of Australia Act 1976 (Cth) fixing the opt out date of 13 May 2019 and ensuring notification to group members of these proceedings, my stipulation of the separate question and their right to opt out before the commencement of the hearing on the separate question. Second, I extracted from the respondent as the price that had to be paid for stipulating the separate question detailed undertakings to ensure that it could not fragment these proceedings by making any application for leave to appeal if it was disturbed by my answer to the question. Third, I set down for trial on 20 April 2020, assuming this to be still necessary, the balance of the issues concerning the applicant's personal claims and the common issues. 19 The desirability of stipulating the separate question concerning the Applicant Warranty arises from the claim headed "Absence of Consideration - No Contract" in the further amended statement of claim which alleges the following: [11] Upon a proper construction of the Applicant Warranty including the terms set out in [cl 7 and cl 11], the Respondent is not obliged to pay all claims that come within the terms and conditions of the Applicant Warranty and has a discretion whether to pay any such claim and if so in what amount (the Overriding Discretion Clause). [12] Each Group Warranty contained terms, set out in the relevant Group PDS, which provided to the same or substantially similar effect, in respect of the relevant Group Warranty, as the Overriding Discretion Clause provided in the Applicant Warranty (together with the Overriding Discretion Clause, the Overriding Discretion Clauses). [13] By reason of the Overriding Discretion Clauses the promises on the part of the Applicant and Group Members to pay to the Respondent the Premium Payment and Group Premium Payments were unsupported by consideration from the Respondent, because the Respondent's purported obligations under the Applicant Warranty and Group Warranties were so qualified by the Overriding Discretion Clauses as to be illusory and not obligations at all. [14] In the premises, the NWC Warranties did not constitute or give rise to legally valid and binding contracts, by reason of an absence of consideration. 20 The answer to the separate question that I have stipulated will address the issues in [11] and [13], which are issues common to all group members in relation to the relevant promises subject to the cl 11.1 type discretion and therefore will address the issue in [12]. But it will not answer the issues raised by [14] owing to other issues raised in [13A] to [13D] of the defence to the further amended statement of claim dealing with other types of consideration received by various sub-groups, the fact that some warranty agreements were "free on their terms" in respect of one sub-group, and that in terms of another sub-group no payment was made to the respondent. Further, the respondent has raised various defences [17A] to any restitutionary claim assuming that the consideration or benefit of the promise was illusory. 21 Generally, the respondent's response to the assertion that the relevant promise is illusory is that the promise found in cl 11.1 of the Applicant Warranty provides to the effect that the respondent is obliged to hear any claim and, in exercising its discretion whether to pay the entire claim or make a contribution to the claim, must consider the claim's merits and act in a fair or just way, and then pay the sum so determined by that procedure. Accordingly, it says that the relevant promise is not illusory. Moreover, the respondent says that it is "settled law" that a contract is illusory only when a party's promise to perform is subject to an unfettered discretion. But it says that its discretion is fettered by an express requirement that the merits of the claim be considered and that the discretion be exercised in a fair or just way. Contrastingly, the applicant says that cl 11.1 is illusory and that even if the proper construction of the discretion clauses is as the respondent asserts, the conclusion to be drawn does not alter. 22 Let me begin with some features of the Applicant Warranty.

(b) Placer and other authorities 39 Kitto J described an illusory promise in Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 in the following terms (at 356): …It is that whenever words which by themselves constitute a promise are accompanied by words showing that the promisor is to have a discretion or option as to whether he carry out that which purports to be a promise, the result is that there is no contract on which an action can be brought at all… 40 This was said in the context where he was considering the validity of a contract under which the Commonwealth had promised to pay "a subsidy…of an amount or at a rate determined by the Commonwealth from time to time", but not more than the duty paid. Kitto J drew on Vaughan Williams LJ's decision in Loftus v Roberts (1902) 18 TLR 532 at 534 where the principle was said to be encapsulated by the statement that "[p]romissory expressions reserving an option as to the performance do not create a contract" (see the passage in Leake on Contracts (3rd ed) p 3, approved by Vaughan Williams LJ and later by Lord Wright in Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503 at 517). Kitto J characterised the Commonwealth's promise as "a promise to pay such subsidy if any as may be decided upon from time to time by or under the authority of the appropriate repository of Commonwealth power, namely the Parliament" (at 357). That is, the Parliament's discretion to pay the subsidy was not relevantly fettered or measurable or subject to an objective standard, and thus the contract was illusory and invalid. 41 The other members of the majority, Taylor and Owen JJ, stated (at 359 to 360): …But a promise to pay an unspecified amount of money is not enforceable where it expressly appears that the amount to be paid is to rest in the discretion of the promisor and the deficiency is not remedied by a subsequent provision that the promisor will, in his discretion, fix the amount of the payment… 42 The majority concluded that the Commonwealth's promise, in substance, was a promise to pay such subsidy if any as may be decided upon from time to time by or under the authority of the Commonwealth (at 357 and 361), and therefore did not create any contractual obligation. They said (at 361) that there was no identifiable criteria by which it could be said that the parties intended the amounts or rates to be determined and that this was left "solely to the discretion of the Commonwealth". Accordingly the contract was unenforceable. 43 Now the respondent says that Placer stands for the proposition that a promise to pay money should be treated as illusory only if there is an express statement that the discretion is to decide whether any payment at all should be made. But in my view Placer is more nuanced. It is saying that where a promise to pay leaves the amounts or rates to be determined in substance solely at the discretion of the promisor, then such a promise is illusory and the relevant contract is unenforceable. And in such a case, the promise is not impugned because it is vague or uncertain, for the meaning may be only too clear, but rather because the promise is illusory. 44 I would say at this point that the description which I have just given is apt to describe the effect of the overriding discretionary clauses in the Applicant Warranty. Indeed, the scope and prominence of the discretion reserved to the respondent strikes at the core of the bargain between the applicant and the respondent. 45 Moreover, the present case is a clearer instance of a discretion removing or negating the necessary substantive promissory content than the contractual provision discussed in Placer. The discretion in the present case is overt. It does not emerge only upon a careful reading and examination of the purported contract. 46 Further, even if the stipulated lens is whether there is an unfettered discretion, it is necessary to fasten on what discretion is said to be unfettered. In the present case, the discretion to decide whether to pay the claim in full or not is in substance unfettered. And it is not productive to assess whether there is the last vestige of an objectively ascertainable obligation. The relevant inquiry is whether in substance the promisor has reserved performance of the promise by its discretion to such a degree that the promise is illusory. 47 Let me next say something about Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1. 48 In Crown, the High Court considered whether there was a collateral contract to leases that required the landlord to offer a renewal of the leases for a further five year term. The relevant statement made by the landlord's representative to the tenants was that they would be "looked after at renewal time". The majority held that there was no collateral contract because the landlord's statement did not have the quality of a contractual promise (at [3] and [28] per French CJ, Kiefel and Bell JJ, at [75] and [132] per Keane J and at [196] per Nettle J). 49 In terms of the collateral contract question, the case appears to have been run on the basis that the landlord's discretion as to the rent and other terms was unfettered, it not being raised whether that discretion was constrained by an implied obligation to act honestly or honestly and reasonably in choosing the terms on which it would offer to renew the lease. In this context Nettle J reasoned that as a lease at a rent to be determined at the discretion of the lessor is not enforceable, so "a promise to make an offer to lease on such terms is illusory" (at [199]). Contrastingly, Gageler J (in dissent) held that on a proper construction of the collateral agreement, the landlord's promise was to make an offer to renew, but with the terms of that renewal left solely to the promisor (at [62] to [64]). Gageler J found that the promise was not illusory. But importantly he said at [62]: What the illustration demonstrates is that, in order to determine whether or not an agreement has left a party with a choice as to whether or not to perform a promise, it is first necessary to be quite clear about the content of the promise in question. Where, as here, the promise is no more and no less than a promise to make an offer, the promisor cannot be said to be left with a choice as to whether or not to perform the promise merely because the terms of the offer to be made are left to the promisor. 50 Clearly, in order to determine whether a promise is illusory in the case before me, "it is first necessary to be quite clear about the content of the promise in question", to use Gageler J's words. 51 Further, it is important to distinguish between a discretion whether to perform at all and the grant of a contractual power with a discretion as to the manner of performance of particular obligations. The Placer principle is concerned with the former. The Applicant Warranty is a good example of the former with its clear and express reservation of whether to pay anything at all resting in the respondent's discretion. Thorby v Goldberg (1965) 112 CLR 597 at 605 per Kitto J and at 613 per Menzies J is an example of the latter, where it was held that the contract was enforceable, although it left the directors with a discretion as to the methods they used in achieving the desired aim of reorganising the company in accordance with the defined purposes set out in the contract. As Menzies J said at 613: It is an objection to a contract if one party is left to choose whether he will perform it but it is an entirely different matter if there is an obligation to do a specified thing of a general description but it is left to the party who is to perform it to choose the particular thing that he will do in performance of it. 52 Now the respondents drew my attention to Meehan v Jones (1982) 149 CLR 571 where the issue was whether a sale of land contract with a "subject to finance" clause leaving it to the discretion of the purchaser to determine whether the available finance was "satisfactory", was by reason of the purchaser's discretion in that regard illusory and hence invalid. 53 Mason J (with whom Wilson J agreed) noted that "courts should be astute to adopt a construction which will preserve the validity of the contract" (at 589). He found that, properly construed, the purchaser's obligation to complete if he obtained finance satisfactory to him was "subject to an implied obligation that he [would] act honestly, or honestly and reasonably, in endeavouring to obtain finance and in deciding whether to accept or reject proposals for finance" (at 588). Accordingly, it was not an "absolute or unfettered right to decide what [was] satisfactory", but one whereby the purchaser could only avoid performance "in the event, acting honestly, or honestly and reasonably, he [was] unable to obtain suitable finance" (at 589). Mason J stated (at 589 to 590): There is in this formulation no element of uncertainty - the courts are quite capable of deciding whether the purchaser is acting honestly and reasonably. The limitation that the purchaser must act honestly, or honestly and reasonably, takes the case out of the principle that: "…where words which by themselves constitute a promise are accompanied by words which show that the promisor is to have a discretion or option as to whether he will carry out that which purports to be the promise, the result is that there is no contract on which an action can be brought." See Thorby v. Goldberg (1964) 112 CLR 597, 605 citing Loftus v. Roberts (1902) 18 TLR 532, 534, Placer Development Ltd v The Commonwealth (1969) 121 CLR 353, 359-361, cited by Gibbs J in Godecke v Kirwan (1973) 129 CLR, 647. The judgment of the purchaser as to what constitutes finance on satisfactory terms is not an unfettered discretion - it must be reached honestly, or honestly and reasonably. 54 Further, he considered that courts were quite capable of deciding whether a purchaser was acting honestly and reasonably. 55 But Meehan is readily distinguished from the present case. Meehan concerned a contract for the sale of land in Roma, Queensland on which an oil refinery had been built with a "subject to finance" clause for the protection of the purchaser if it could not arrange the necessary funds to complete the purchase. Gibbs CJ (at 581) identified the essential distinction in that case from the principle in Placer as "that principle does not apply where the discretion or option of the contracting party relates, not to the performance of the contractual obligations themselves, but only to the fulfilment of a condition upon which the contract depends" (my emphasis). In other words, the discretion did not strike at the core promise flowing from the purchaser to the vendor in return for the purchase price. As Gibbs CJ explained at 581 to 582: The fact that the condition is one whose performance lies wholly or partly within the power of one of the parties to the contract does not mean that there is no binding contract once the condition is fulfilled. There is a concluded agreement as to the terms of the contract which, if the condition is satisfied, leaves no discretion in either party as to whether he shall carry them out. Once the condition is fulfilled, within the time allowed by the contract for its fulfilment, the contract becomes completely binding. 56 Unlike in Meehan, in the present case, even if the applicant satisfies all of the conditions specified in cls 5 and 8 of the Applicant Warranty, the respondent retains a discretion whether to pay the applicant anything at all. As the applicant correctly submitted, the respondent's discretion strikes at the heart of the performance contemplated by the bargain struck between the parties. It is not confined to a condition that if satisfied or waived will otherwise compel the respondent to make a payment for a claim that satisfies the other terms and conditions of the Applicant Warranty. 57 Further, the respondent can gain little comfort from Mason J's reasoning. Mason J regarded the purchaser's discretion as sufficiently constrained by an implied obligation that the purchaser had to act honestly, or honestly and reasonably, in endeavouring to obtain suitable finance. So if acting honestly and reasonably satisfactory finance was available, the purchaser was obligated to proceed with the completion of the sale. But in the case before me, cl 11.1 of the Applicant Warranty permits of a situation that even if the respondent considers the merits of the claim, and even if those merits favour payment of the claim, the respondent can still reject the claim in whole or in part. Further, it should be obvious that an implied obligation of the kind found by Mason J of honesty, or honest and reasonableness, concerning a subject to finance clause in a contract for the sale of land is a standard readily susceptible to ascertainment, application and enforcement. It is not difficult to ascertain what steps were made to secure adequate finance by the purchaser, what finance was offered, why it considered any finance offered was unsuitable and the kind of finance that would otherwise have been appropriate given the nature of the property and the sale price. 58 But in the present case there is no such meaningful standard. Now undoubtedly, standards such as honesty or reasonableness or both have a conceptual fluidity to them. And there is no difficulty in their application when they are applied: (a) to achieve a contractual object; or (b) to circumscribe a manner of performance of an obligation or the exercise of a contractual power to achieve the purposes for which the power was conferred. 59 Contrastingly, in the present case, a standard such as "fair or just" has no relevant boundary constraints of the type just discussed. 60 Those words properly construed do not impose any substantive constraint on the discretion. Rather, the discretion is regarded as having been exercised in a fair or just way only because the customer has been heard and the respondent has considered the merits of the customer's claim. But merely receiving, hearing and considering a customer's claim is not sufficient to avoid the illusory characterisation. Moreover, in reality the words "fair or just", which are words drafted and chosen by the respondent to include in the Applicant PDS, merely emphasise that the respondent remained legally free to act in its own interests. I will return to these matters later. 61 The respondent also made reference to three other cases. 62 In Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130, McHugh JA, by reference to Placer and to Meehan, stated that a "consideration is illusory if its payment or fulfilment depends upon an unfettered discretion vested in the promisor" (at 151). But McHugh JA, speaking in the context of commercial or employment agreements for the provision by the promisee of services, stated that the proper conclusion ordinarily to be drawn is that services were not intended to be performed gratuitously. And so he said that in such cases (at 151): In the absence of express words or necessary implication, it will be proper to conclude that the services were to be paid for by reference to some standard of measurement. The usual standard is that of reasonable remuneration based on market or industry criteria. Where there is a firm promise to pay or remunerate the promisee in return for his services, a conclusion that the consideration was illusory will only be drawn where no standard exists by which the promise can be valued. But even when no objective criterion of measurement is available, it may still be possible to infer a promise to act honestly and/or reasonably. Moreover, notwithstanding that the promisor retains a discretion, the consideration will not be illusory if the discretion must be exercised within specified parameters. In Lewandowski v Mead Carney-BCA Pty Ltd [1973] 2 NSWLR 640, this Court held that a promise to pay "a salary within a range of $7,000-$9,000 per annum" was not illusory. The promise imported an obligation to pay a minimum salary of $7,000 per annum. In Thorby v Goldberg (1964) 112 CLR 597, the High Court held that a contract was made although one party was given "considerable discretion" as to how it carried out its obligations. Kitto J said (at 605) that "an agreement is not void for uncertainty because it leaves one party or group of parties a latitude of choice as to the manner in which agreed stipulations shall be carried into effect, nor does it for that reason fall short of being a concluded contract". 63 But this scenario is distinguishable. Clearly a meaningful standard could be implied in a well-recognised category of case. Moreover, the discretion was not whether there should be any payment at all but rather how much. The phraseology used by McHugh JA should not be disembodied from its context. 64 Memery v Trilogy Funds Management Ltd [2012] QCA 160 also does not assist the respondent. The Queensland Court of Appeal held that the respondent's obligation to use its best endeavours to advance the loan meant that there was no unfettered discretion, and thus valid consideration. But in that case the necessary quid pro quo for the borrower's obligation to pay the loan application fee was supplied by the lender's conditional obligation to use its best endeavours to advance the loan. And the best efforts or best endeavours contractual standard to achieve a contractual object is a well-established and ascertainable standard. It is a substantive constraint on the discretion. But the position is quite different in the context before me. There is no conditional obligation to which the respondent is subject in the event that a claim falls within the terms and conditions of the Applicant Warranty, and no matter how persuasive the merits in favour of the applicant. The respondent retains the overriding discretion to refuse to pay any amount for the claim. Further, there is no relevant contractual object of the type discussed in these other cases. 65 Further, in LSKF Holdings Pty Ltd v Shield Lifestone Holdings Pty Ltd (2018) 128 ACSR 542 the New South Wales Court of Appeal considered whether a shareholders' agreement involving a promise to fund at the request of the board is invalid in consequence of absence of consideration where such request of the board had to be unanimous, and each shareholder appointed a director. The agreement provided that directors had to act in good faith and in the best interest of the company, but that a director may have regard to and act in the interest of his appointing shareholder (at [7] to [10]). It was contended that the promise to fund was essentially discretionary and in substance not enforceable. Leeming JA (Payne and White JJA agreeing) proceeded on the basis that if the discretion to fund was unfettered, then the promise was illusory. But he found that the directors were not free to act self-interestedly, being subject to duties as directors, and that a breach of those duties to the company were enforceable. He held that the relevant consideration was not illusory. But LSKF Holdings is distinguishable. The discretion there related to funding arrangements in a shareholders' agreement. The discretion was significantly constrained by the express, substantive requirement of the director to act in accordance with his statutory and fiduciary duties. The content of those duties of course provided defined, ascertainable and justiciable criteria against which to judge any request for a shareholder loan. 66 Before proceeding with a detailed analysis of the competing arguments concerning the Applicant Warranty, let me make some further general points. 67 First, I accept that courts are well familiar with determining whether, in the exercise of a contractual discretion, the party has acted honestly, or honestly and reasonably. And where the promisor breaches such an obligation, damages for breach of that obligation may be calculated on the loss of the commercial opportunity to obtain a benefit, valued by the probabilities and possibilities once it has been established on the balance of probabilities that there has been the loss of a chance. Those probabilities and possibilities include how the promisor would or might act, conformably with its contractual obligations. Relatedly, I also accept that depending upon the context, a party's promise to exercise a discretion, honestly, or honestly and reasonably, may have some value, and that a party's promise to exercise an unfettered discretion may also have value depending upon the context. But to accept those propositions does not answer the present case if the promise is properly characterised as illusory. If it is illusory, the loss of any chance let alone its value is an illusion. 68 Second, I also accept that it is settled doctrine that courts will not inquire into the adequacy of consideration, such that they will not seek to measure the comparative value of one party's promise and of the act or promise given by the other party in exchange for it. This is none other than the pithy peppercorn principle. As Lord Somervell of Harrow said in Chappell & Co Ltd v Nestlé Co Ltd [1960] AC 87 at 114: A contracting party can stipulate for what consideration he chooses. A peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw away the corn. 69 That is all true, providing of course that one is not in the realm of an illusory promise. 70 Third, I also accept that it is generally the case that courts strive to ascertain and give effect to the parties' objectively ascertained contractual intentions such as to preserve the validity of the contract. As Lord Wright stated in Scammell (G) & Nephew Ltd v H C & T G Ouston [1941] AC 251 at 268: The object of the court is to do justice between the parties, and the court will do its best, if satisfied that there was an ascertainable and determinate intention to contract, to give effect to that intention, looking at substance and not mere form. 71 Of course, the present case does not involve a negotiated contract between two commercial parties, where the usual principles and presumptions to be attributed to rational business persons in a commercial context for commercial contracts apply. In such a context courts are astute to uphold the validity of the contract struck by commercial entities both aware of the terms of the agreement. But whether this principle applies with the same force to agreements in the consumer context is more problematic. On one view, it may be said that rather than being astute to uphold the validity of such agreements, the courts should be astute to the dangers of one-sided and unbalanced arrangements that reserve overriding discretions to the stronger commercial entity. But I do not need to toy further with such a proposition. I am prepared to assume in favour of the respondent for the purposes of the following analysis that the applicant and the respondent are equally matched commercial actors.

At a glance

Court

Decision date

Before

Source

Judgment (6 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (12)

Cited By (4)