Issue 1
96 The first issue is whether the primary judge erred in concluding that the consumer guarantees in Div 1 of Pt 3-2 of the Australian Consumer Law, and the associated remedies, applied to supplies of computer games by Valve to consumers in Australia. This issue is raised by grounds 1 and 2 of the notice of appeal. Consistently with the approach taken in the parties' submissions, it is convenient to address these grounds together.
97 Valve submits that, should the Court find that Valve's supply took place in Australia or that s 5(1)(g) applied (matters discussed under issues 2 and 3 below), then on the proper construction of Div 1 of Pt 3-2, and particularly s 67, of the Australian Consumer Law, s 54 did not apply to supplies made pursuant to the SSA because the objective proper law of that contract was the law of Washington State. By the expression "objective proper law of the contract", Valve refers to the system of law with which the contract has its closest and most real connection. As noted above, the primary judge found that this was, in the case of the SSAs between Valve and Australian consumers, the law of Washington State, and there is no challenge to that finding on the appeal or cross-appeal.
98 Valve submits that s 67 "preserves and respects" the objective proper law of the contract, in the sense of the system of law with which the contract has its closest and most real connection. It submits that where the objective proper law of the contract is foreign, the Division - either as a matter of the proper construction of s 67, or else as a necessary implication - does not apply to supplies under that contract.
99 Valve submits that s 67, which has the heading "Conflict of laws", takes as its premise the proposition that where the objective proper law of a contract is not Australian law, the Division will not apply. It submits that this is necessarily implicit in the words "would be the law of any part of Australia but for a term of the contract that provides otherwise" in s 67(a) and the words "the provisions of this Division apply in relation to the supply under the contract despite that term" at the end of the section. Valve submits that: the choice s 67 makes is that where it is only because of such a term that the proper law of the contract is foreign law, the Division applies to the supply under the contract regardless; it is necessarily implicit in the scheme of the section that where, in the absence of such a term, the objective proper law of the contract would be foreign law in any event, the Division does not apply; otherwise, the drafting of s 67(a) would make no sense; after all, the section does not lay down a blanket rule that the Division applies regardless of the objective proper law of the contract; and if that had been the Parliament's intention, it would have been easy to say so, but the Parliament did not.
100 Valve submits that once this premise is accepted (ie, that the Division does not apply to supplies under contracts the objective proper law of which is foreign) the operation of s 67 is clear. That is, the section is concerned only with contracts the objective proper law of which is Australian law, but which contain two classes of "terms" that attempt to put supplies under the contract beyond the reach of the Division. In this respect, Valve submits:
(a) The first class of term is described in s 67(a). This is where the offending "term" is directed to the whole of "the proper law of [the] contract". The choice of language matters. The words "proper law" signify the entire system of law governing the contract. Section 67(a) operates where the proper law of the contract is objectively Australian, but the offending term stipulates that the whole system of law governing the contract is foreign law. Clearly, given his Honour's finding that the objective proper law of the SSA was that of Washington State, s 67(a) could not operate to render the Division applicable to supplies under the SSA.
(b) The second class of term is described in s 67(b). This is expressed in narrower language, and again the choice of language matters. It is directed to terms that attempt to "substitute": (i) "the provisions of the law of a country other than Australia", or (ii) "the provisions of the law of a State or Territory", "for all or any of the provisions of this Division". Two matters of construction should be noted.
(c) First, the word "substitute" necessarily involves change: the replacement of the otherwise applicable set of provisions ("this Division") with a different set of provisions. One cannot substitute a thing for the thing itself. The use of the word is required by the premise from which s 67 proceeds: that the Division applies only to contracts the objective proper law of which is Australian. Only in respect of such contracts can any possibility of "substitution" arise. Where the objective proper law of the contract is foreign, "the provisions of this Division" do not apply to supplies under the contract in the first place and no question of substitution, purported or otherwise, can arise. Since the objective proper law of the SSA was that of Washington State, the primary judge erred in construing s 67(b) as operating to render the Division applicable to supplies under the SSA.
(d) Secondly, the words "the provisions" are evidently directed to something more specific than s 67(a)'s "the proper law of a contract", and the way in which the words "the provisions" are specifically used in s 67(b) demonstrates that this must be so. A clause that provided, for example, that the proper law of a contract was the law of Western Australia could never fall foul of s 67(b). By providing that the system of law governing the contract was the law of Western Australia, the clause would not "substitute" or purport to substitute "the provisions of the law of [that] State" for "the provisions of this Division", because the Australian Consumer Law is part of the system of law that applies in Western Australia. (Indeed, so much is assumed by the use of the words "the law of any part of Australia" in s 67(a): so long as the law of the contract is that of some part of Australia, the intention and effect of the cooperative scheme is that the Australian Consumer Law will apply.)
(e) It follows that the words "the provisions of the law of a State or a Territory" in paragraph (b)(ii), and the same words "the provisions of the law of a country other than Australia" in paragraph (b)(i), must be construed as limiting the scope of s 67(b) to "terms" in contracts which, on their proper construction, specifically attempt to replace the "provisions of this Division" with a specific set of "provisions", such as a statute or code, of a State, Territory or country other than Australia. Where the term at issue does no more than stipulate the parties' express choice of the proper or governing law by reference to the system of law of a particular jurisdiction, and makes no (even indirect) reference to Div 1 of Pt 3-2, it is s 67(a), not s 67(b), which regulates the enforceability of the parties' choice. For this reason, too, the primary judge erred in construing s 67(b) as applying the Division to supplies under the SSA.
101 As to the primary judge's textual and contextual analysis of s 67, Valve makes the following submissions:
(a) First, the primary judge held that Valve's construction would require additional words to be read in at the end of both ss 67(b)(i) and (ii). That is, the italicised words would need to be added: "the provisions of the law of a country other than Australia where the proper law would include Division 1". Similarly, the primary judge held that Valve's construction required the implication of the following italicised words at the end of s 67: "the provisions of this Division apply in relation to the supply under the contract despite that term but they do not apply if the law with the closest and most real connection to the contract is other than the law of a part of Australia". The primary judge held that such a large implication of words was unwarranted and proceeded to consider the requirements in Wentworth Securities Ltd v Jones [1980] AC 74 at 105-106 for the implication of words into a statute, holding that Valve had not satisfied those demanding requirements.
(b) However, there is no such requirement or need for words to be implied into the text of s 67 to give effect to Valve's submitted construction. Valve's construction is apparent from the words of s 67 as they appear in the statute. In order to have a "substitution", the provisions of Div 1 have to be the applicable law in the first place so that they can be substituted out and replaced by something else. Once a determination has been made that the proper law of a contract is that of a foreign state, such a substitution cannot occur.
(c) Further, the primary judge's reading in of hypothetical additional words disregards certain words and phrases in s 67, which must be given work to do. Section 67 concludes that "the provisions of this Division apply" if the circumstances described in s 67(a) or (b) are found to exist. This makes it plain that there are circumstances where the provisions of Div 1 do not apply to certain supply contracts. Further, s 67 uses the words "but for a term of the contract" (in s 67(a)) and "despite that term" (at the end of s 67). These direct attention to identifying the proper law of the contract between the consumer and supplier, disregarding any terms contained in the contract which may purport to impose another law as the governing law of the contract. Those words would be unnecessary if a lengthy explanation was added at the end of s 67 along the lines posited by the primary judge.
(d) Secondly, the primary judge compared s 67 of the Australian Consumer Law with s 8 of the Insurance Contracts Act, without having regard to the differences in the context and application of those different statutes. Unlike the Australian Consumer Law, s 8(1) of the Insurance Contracts Act expressly provides that the Act applies to contracts of insurance the proper law of which is Australia.
(e) Thirdly, the primary judge held that there was no other provision of Div 1 that supports Valve's submission. To the contrary, Valve's submission is consistent with the existence of s 64 within Div 1, as well as s 276 of the Australian Consumer Law and s 5 of the Competition and Consumer Act. The headings of ss 64 and 67 must be given work to do when construing those provisions in the context in which they both appear (Acts Interpretation Act 1901 (Cth), s 13; see Tran v Commonwealth (2010) 187 FCR 54 at 69-71 and the authorities cited therein). The purpose of s 67 is apparent from its heading - it provides a framework for resolving "conflict of laws" issues. By contrast, s 64 is headed "Guarantees not to be excluded etc. by contract" and that section renders void any provision of a contract which purports to exclude, restrict or modify the application of the consumer guarantees. That presupposes that the proper law of the contract in question is the law of Australia, or would be but for a term of the contract which purports to nominate the law of another country as the governing law. If the primary judge's construction is correct, there would be no reason for s 67 to exist as it would only duplicate the work of s 64. Similarly, s 276 performs the same function in respect of remedies.
(f) Fourthly, the primary judge had regard to the fact that Div 1 is not limited to contracts but also covers supplies more generally. While this is true, the provision in question, s 67, itself only refers to contracts and supplies under those contracts.
(g) Fifthly, the primary judge's findings as to construction were based on what was described as a concession by Valve that "in the absence of s 67, Division 1 would apply to any contract irrespective of its proper law" (Reasons, [102]). There was no such concession in these terms. What was accepted was expressly premised on the relevant conduct occurring "in Australia" or being subject to the "extended operation of the Act." But more fundamentally, his Honour's reasoning process is unsustainable. In construing s 67, the necessary premise is that the section is present in the Division, not that it is "absent". It makes no sense to construe a provision on the basis that it adds nothing to the statute. The only rational conclusion to draw from the legislative decision to include a conflict of laws provision is the opposite: that the proper law of the contract matters to the application of the Division.
102 Valve also makes the following submissions in relation to the history and purpose of s 67 and policy considerations:
(a) The primary judge noted that unlike the previous consumer protection regime of the Trade Practices Act, which implied terms into contracts for supply, the Australian Consumer Law sought to establish a simpler regime of statutory consumer guarantees. However, the mere change in the statutory method for providing consumer guarantees (from implication into contract to statutory guarantees of general application) did not necessitate any change as to the circumstances in which those guarantees would apply. Valve submits that s 67 was consciously re-introduced by Parliament into the Australian Consumer Law in 2011 to preserve the objective proper law of the contract as the correct guide in determining whether or not the consumer guarantees under Div 1 apply to the supply of goods or services under contracts.
(b) In considering the policy considerations behind s 67, the primary judge referred to some hypothetical scenarios in which it was said that suppliers might set up arrangements to avoid the Australian Consumer Law if Valve's construction were accepted. Valve submits that its construction does not defeat the legislative scheme and that his Honour's examples are unrealistic.
103 In our view, for the reasons that follow, Valve's contention to the effect that the consumer guarantees in Div 1 of Pt 3-2 of the Australian Consumer Law do not apply to a supply that takes place under a contract the objective proper law of which is the law of a country other than Australia is to be rejected.
104 Division 1 of Pt 3-2 contains a series of guarantees, referred to in the heading to the Division as "consumer guarantees", that apply to the supply of goods and services in a variety of circumstances. Subdivision A deals with guarantees relating to the supply of goods; Subdivision B deals with guarantees relating to the supply of services; Subdivision C contains provisions to the effect that the guarantees are not to be excluded etc by contract; and Subdivision D deals with miscellaneous matters. The guarantees apply to the supply of goods or services. The word "supply" is defined in s 2 of the Australian Consumer Law as including, in relation to goods, "supply (including re-supply) by way of sale, exchange, lease, hire or hire-purchase" and, in relation to services, "provide, grant or confer".
105 Applying general principles of statutory construction, the substantive provisions of Div 1 of Pt 3-2 are presumed to regulate only conduct in Australia: see Jumbunna Coal Mine, No Liability v Victorian Coal Miners' Association (1908) 6 CLR 309 at 363 per O'Connor J; Barcelo v Electrolytic Zinc Company of Australasia Ltd (1932) 48 CLR 391 at 423-425 per Dixon J; Wanganui-Rangitikei Electric Power Board v Australian Mutual Provident Society (1934) 50 CLR 581 at 600-601 per Dixon J. This is, of course, subject to contrary provision, such as s 5 of the Competition and Consumer Act, which extends the operation of the Australian Consumer Law to conduct engaged in outside of Australia in certain circumstances.
106 It is apparent on the face of Div 1 of Pt 3-2 that it adopts the mechanism of providing that certain consumer guarantees apply to certain transactions, in contrast to the mechanism (adopted by the predecessor provisions) of implying terms into a contract. The consumer guarantee provisions are therefore capable of application whether or not there is a contract. It is unnecessary to consider, for example, whether terms are too uncertain to constitute a contract, in determining whether the guarantees apply.
107 The evident purpose of s 64 is to ensure that parties cannot 'contract out' of the consumer guarantees. If, for example, parties to a contract for the supply of goods purport to agree that one or more of the consumer guarantees will not apply, that term of the contract would be void by force of s 64.
108 In this context, s 67 appears to be another provision designed to ensure that the operation of the consumer guarantees cannot be avoided. It is directed at two particular situations involving a contractual term - one is described in paragraph (a), the other in paragraph (b). In each case, as set out in the concluding words of the section, "the provisions of this Division apply in relation to the supply under the contract despite that term". The first situation (paragraph (a)) is where "the proper law of a contract for the supply of goods or services to a consumer would be the law of any part of Australia but for a term of the contract that provides otherwise". This paragraph would cover a situation where a contract that is closely connected to Australia contains a term providing, for example, that the contract is governed by the law of another country. In the situation to which paragraph (a) is directed, s 67 makes clear that the provisions of Div 1 of Pt 3-2 apply in relation to the supply under the contract despite the term. (In the present case, paragraph (a) has no application because the system of law with which the SSAs between Valve and Australian consumers had the closest and most real connection was the law of Washington State.)
109 The second situation (paragraph (b)) is where a contract for the supply of goods or services to a consumer contains a term that "purports to substitute, or has the effect of substituting" the provisions of the law of a country other than Australia, or the provisions of the law of a State or Territory, for all or any of the provisions of Div 1 of Pt 3-2. This paragraph would cover a situation, for example, where a term of a contract provides that an alternative consumer guarantees regime, found in the law of another country, is to apply in lieu of the provisions in Div 1 of Pt 3-2 of the Australian Consumer Law. In such situations, s 67 again makes clear that the provisions of Div 1 of Pt 3-2 apply in relation to the supply under the contract despite that term.
110 It is important to emphasise that no provision of the Australian Consumer Law expressly limits the operation of Div 1 of Pt 3-2 in the way contended for by Valve. That is to say, no provision expressly states that, where the supply of goods or services is made pursuant to a contract, the provisions of the Division apply only if the law with which the contract has its closest and most real connection is the law of Australia or of a part of Australia. It follows that Valve's contention depends upon an implication to be drawn, either from s 67 or from the provisions of the Division more generally.
111 There does not appear to be a sound basis upon which to draw such an implication. The provisions in Subdivisions A and B are expressed in terms of the supply of goods or services. They do not draw a distinction between a supply pursuant to a contract and other supplies. Neither the text of these provisions, nor their consumer protection purpose, suggest that they are limited in the way contended for by Valve. Further, given the legislative move away from contractual implications to direct guarantees, it would make little sense if the guarantees applied (at least as regards contracts) only where the proper law of any contract of supply was that of Australia or a part of Australia.
112 Valve's contentions would have the effect of elevating s 67 to a provision that specifies the scope of application of Div 1 of Pt 3-2. But the role of s 67 is more limited. As we have indicated above, s 67 is one of a number of provisions (including ss 64 and 276) designed to prevent certain attempts by parties to 'contract out' of, or otherwise avoid, the consumer guarantees. It may be accepted that there is some overlap between ss 64 and 67. Such overlap sometimes occurs: see, eg, Western Australian Planning Commission v Southregal Pty Ltd (2017) 259 CLR 106 at [44]-[55] per Kiefel and Bell JJ. But s 67 does not merely duplicate the work of s 64. It is directed to particular types of terms relating to the applicable law.
113 We do not accept that, in the context of Div 1 of Pt 3-2 as a whole, the premise of s 67(a) is that the consumer guarantee provisions apply only where the objective proper law of a contract of supply is the law of Australia or part of Australia. Granted, s 67(a) is directed to this particular situation. That may be explained in part by the legislative history of the provision. But in the context of the Division as it now stands, s 67(a) should be seen as being directed to a particular attempt to avoid the operation of the consumer guarantees, rather than resting on the premise suggested by Valve.
114 In summary, s 67 is designed to ensure the full reach of Div 1 of Pt 3-2. It would be inconsistent with the statutory scheme and the statutory purpose to read s 67 as limiting the scope of operation of the Division such that a supply of goods or services is not covered where the supply is pursuant to a contract the objective proper law of which is the law of another country.
115 For these reasons, which are substantially the same as those of the primary judge, we would reject grounds 1 and 2 of the notice of appeal.
116 It is convenient to note here a discrete submission by Valve to the effect that its supply of goods (computer games) to Australian consumers occurred outside Australia and, therefore, the consumer guarantee in s 54 of the Australian Consumer Law did not apply (in accordance with the principles set out in [105] above). Although this submission seems to go beyond grounds 1 and 2 of the notice of appeal, it is arguably covered by ground 4. It is not clear whether such a submission was made to the primary judge. In any event, we are prepared to deal with it. Valve submits that: its supply of computer software subscriptions, including games, to consumers was made in accordance with the SSA; this supply was effected in Washington State, on the basis that a reference to the "supply" of goods includes a reference to agreeing to supply goods (see s 11(b) of the Australian Consumer Law); and, applying this, Valve's supply of goods took place where Valve agreed to supply consumers with computer software, including games (namely, in Washington State). In our view, this submission should be rejected. Although the definition of supply includes an agreement to supply, it does not follow that the supply in this case is to be located where the agreement was made. In the present case, the supply of computer games by Valve to customers in Australia took place where the customer downloaded the computer game on his or her computer. Further, by virtue of s 5(1) of the Competition and Consumer Act, Div 1 of Pt 3-2 of the Australian Consumer Law also applied to conduct outside Australia by bodies corporate carrying on business within Australia. For the reasons set out in relation to issue 3 below, the consumer guarantees in the Australian Consumer Law applied on this basis also.