Remedies - Assessment Task PDF

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Remedies assessment on Australian Consumer Law...

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Introduction The plaintiff (Morag) seeks advice as to whether she can avoid the loan agreement and mortgage from Atlas Finance Pty Ltd (“Atlas”). The relevant issue is whether Atlas conduct was unconscionable, and the signed contract and mortgage was unjust.

Trade or Commerce? The conduct of trade or commerce must be within Australia which includes any business.1 The words “trade or commerce” are words of “the widest import” and are not restrictive in its scope,2 the lending of money is the conduct of trade and commerce.3 The conduct between the parties was lending of money, therefore the conduct of Atlas and Morag is in trade or commerce.

Australian Consumer Law Morag may have a claim under the Australian Consumer Law 4(“ACL”) subject to the elements. Consumer Section 3 of the ACL provides that a person acquiring service is a consumer if the amount paid was ordinarily acquired for personal use. In this scenario, Morag borrowed $60,000 for domestic consumption to repair her property, while the amount exceeds $40,000 as it was for domestic use under s3 (3)(b) of the ACL Morag is a consumer. Goods or Services For a claim of unconscionability, the conduct must be of goods or services. Section 2 of the ACL defines “Services” as any benefit provided in trade and commerce of any contract for or about the lending of money. As the conduct involves the lending of money, the loan is a service under the ACL. Unconscionable Conduct For Atlas conduct to be deemed unconscionable, their conduct must be more than unfair, and it must be against conscience as judged against the norms of society.5 Unconscionable conduct “involves a consideration of all the circumstances to conclude whether or not the conduct in question falls below acceptable norms, standards or values such as to warrant it being determined to be unconscionable.” 6 As Jamie was employed by Atlas, Morag’s claim will be against Atlas. Section 20 of the ACL states a person (including corporation) in trade and commerce must not engage in unconscionable conduct within in the written law. The two-step test to determine unconscionable conduct set out in Amadio requires7; (1) advantage taken of a disadvantaged person whose judgement is rendered; (2) knowledge of the disadvantage. The facts suggest that Morag is inexperienced with financial matters,8 it is assumed that Morag’s 1 Competition and consumer Act 2010 – Sch 2 s2. 2 Australian Competition and Consumer Commission v Homeopathy Plus! Australia Pty Limited [2014] FCA 1412.

3 Esanda Finance Corporation Ltd v Peat Marwick Hungerford (1994) 61 SASR 424. 4 Above n 1.

5 Unconscionable Conduct (2018) Australian Competition and Consumer Commission .

6 Ipstar Australia Pty Ltd v APS Satellite Pty Ltd [2018] NSWCA 15 at 196. 7 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 8 Freeman v Brown [2001] NSWSC 1028.

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husband dealt with the finances as her only significant asset is her property which she inherited and throughout her life she has been employed as a casual suggesting at times she was financially depended on her husband. It is likely to conclude at the time of signing the agreement Morag was suffering from a special disadvantage. Civil Tech9 noted special qualified as the nature of the disadvantage,10 the agreement was signed with a false sense of security, the documents supplied to Atlas of Morag finances showed she was suffering from finance issues, she had little savings, was in debt and did not hold a permanent job. Further s21 of the ACL provides that a person (including corporation) in trade and commerce must not act unconscionably in connection with the supply of services. The statutory test of unconscionability requires the conduct to be unconscionable even if there is no disadvantage. As above Morag is a consumer and the loaning of money is a service. The terms of the loan contract provided the 15 % interest rate and how it’s calculated and the term that at any time the rate can be varied. S 22 of the ACL lists matters that courts look at when determining s21. The facts state that Morag did not understand the contract, at no time did she state this to Jamie. while Morag is not illiterate11 she suffers from the inexperience of financial matters. Thus, she did not have the capacity to understand the implications she may face. Further, she was alone and did not have assistance from an outside source: s22(1)(c).12 It is also arguable that Morag could have acquired credit services from another provider that may have declined her due to her financial situation or created a contract that would protect her assets: s22 (1) (e). Additionally, Atlas did not act in good faith, they did not act with ‘honest standards of conduct’,13 Jamie did not comply with Atlas procedures he obtained one property evaluation which was $100,000 more than what the fact state, Jamie failed to obtain a further evaluation which breaches Atlas’s company procedures: s22 (1)(l). It is arguable that the terms of the contract Atlas are not innocent they gave a woman who is on $31,000 a year thus she is a low-income earner a loan for twice the amount. Jamie had no regard to her disadvantage nor her ability to make repayments by instalments, in the case of a default the security of the house was put in place solely for Atlas protection, Morag suffering from an inability to protect her interests: s22 (1)(j)(ii) and (b). Finally, under s25 (1)(d) it may be deemed unfair regarding changing the terms of the contract, the varying of interest rate is not fair as it operates in a way that was not clear to Morag and can cause a disadvantage to her financial difficulties14 ACL 2015 states that it does not cover conduct covered by s21, therefore as both sections are argued, s21 should be dealt with first.

9 Minister for Industrial Affairs and Civil Tech [1998] [14]. 10 Dr Robert N Moles and Bibi Sangha, Contract Law Lecture: Recent Developments In Unconscionability Netk.net.au . 11 Above n 7. 12 Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCA 47. 13 Above n 6. 14 Director of Consumer Affairs Victoria v Train station Health Clubs Pty Ltd (Civil Claims) [2008] VCAT 2092. 15 Above n 1 s20 (2).

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Unjust Conduct Unjust mortgage and contract? The contract was formed in NSW under the Contract Review Act (“CRA”)16 it is preferable to apply the CRA rather than equity.17 Section 4 of the CRA defines unjust as unconscionable giving the term a wide meaning.18 During the signing of the contract there was no chance to negotiate or reject any of the provisions: s9 (2) (c) as Morag did not understand the terms, the terms of the contract are difficult to comply with as she is a casual employee employment is permanent the terms allow for the variation of interest rates without steady employment Morag will default: s9 (2) (d). Further, Morag was not advised she could have sought independent legal advice: s9 (2)(h). Post-contractual conduct under the CRA is inadmissible when determining an unjust contract19, but, for the purpose of the nature of the loan postcontractual conduct may be considered.20 Sections 76 and 77 of the National Credit Code21 sets out a two-step test to determine whether a contract is unjust. Section 76 (8) of the NCC defines unjust as unconscionable harsh or oppressive, and is wider than the common law interpretation of unconscionability.22 When considering this question s76 (2) list matters to determine if the contract is unjust. At no time was the provisions of the contract were explained, at one-point Morag asked what the repayment amount would be, as a professional credit provider who has experience Jamie should have known that Morag did not understand the contract and it should have been explained to her: s72 (2)(i) and (k). Additionally, discussed above Jamie created the contract in a way that the company would be protected should Morag default. The purpose for the loan was for lending assets, and there was no regard to Morag’s financial difficulties as Atlas would never suffer a loss due to the contract, as the security for default was the sole significant asset of the property this becomes a public interest: s72 (2)(e). 23 Remedies To claim a remedy/remedies, Morag must commence proceedings at any time within six years after the day on which the cause of action that relates to the conduct accrued.24 As Morag is seeking to void the loan agreement and mortgage remedies are limited, under s243 of the ACL the court has the power to order whole or part of a contract to a person who is likely to suffer damage to be void.25 Regarding an unjust contract, Morag under the National Credit Code can seek the court to order that the mortgage is discharged.26 Conclusion The Court is likely to find that Atlas conduct was unconscionable under the Australian Consumer Law. Additionally, it is likely that the mortgage and contract can be void due to unjust. 16 Contract Review Act 1980 (NSW). 17 Spina v Permanent Custodians [2009] NSWCA 206. 18 West v AGC (Advances) Ltd (1986 ) 5 NSWLR 610 19 Company Limited v Albert and Rose Khoshaba [2006] NSWCA 41. 20 Perpetual Trustee Co v Papantoniou [2014] NSWSC 685. 21 NATIONAL CONSUMER CREDIT PROTECTION ACT 2009 - SCHEDULE 1 National Credit Code. 22 Maisano v Car and Home Finance Pty Ltd [2005]. 23 Ibid. 24 Above n 1 s236 (2). 25 Ibid s243 (a)(i). 26Above n 21 s77 (d).

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Remedies Bibliography Books Butler, D. A et al, Contract Law (Oxford University Press, 2nd ed, 2013) Willmott, Lindy, Contract Law (Oxford University Press, 4th ed, 2013)

Cases Australian Competition and Consumer Commission v Homeopathy Plus! Australia Pty Limited [2014] FCA 1412. Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCA 47. Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Company Limited v Albert and Rose Khoshaba [2006] NSWCA 41. Director of Consumer Affairs Victoria v Train station Health Clubs Pty Ltd (Civil Claims) [2008] VCAT 2092. Esanda Finance Corporation Ltd v Peat Marwick Hungerford (1994) 61 SASR 424. Freeman v Brown [2001] NSWSC 1028. Ipstar Australia Pty Ltd v APS Satellite Pty Ltd [2018] NSWCA 15 at 196. Maisano v Car and Home Finance Pty Ltd [2005]. Minister for Industrial Affairs and Civil Tech [1998] [14]. Perpetual Trustee Co v Papantoniou [2014] NSWSC 685. Spina v Permanent Custodians [2009] NSWCA 206. West v AGC (Advances) Ltd (1986 ) 5 NSWLR 610

Legislation Competition and consumer Act 2010 – Sch 2 s2. Contract Review Act 1980 (NSW). NATIONAL CONSUMER CREDIT PROTECTION ACT 2009 - SCHEDULE 1 National Credit Code.

Journal Articles RAJACI, MAGGIE, PELMA RAJAPAKS and EILEEN WEB, "The Impact Of The Trade Practices Act 1974 (Cth) On The Liability Of Auditors" (2000) University of Tasmania Law Review 19(2), 212. 4

De Jersey, P., The Hon. (Chief Justice) 2002, Update on Case Law Developments, Banking and Financial Services Law Association Annual Conference, 7 June 2002.

Website Unconscionable Conduct (2018) Australian Competition and Consumer Commission https://www.accc.gov.au/business/anti-competitive-behaviour/unconscionable-conduct N Moles, Dr Robert and Bibi Sangha, Contract Law Lecture: Recent Developments In Unconscionability http://netk.net.au/Contract/10Unconscionability.asp

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