Christ Church Grammar School v Bosnich & Sehr
[2010] VSC 476
•29 October 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW & APPEALS LIST
No. SCI 10940 of 2009
| CHRIST CHURCH GRAMMAR SCHOOL (ACN 063 453 350) | Appellant |
| v | |
| FRANK BOSNICH and MELINDA SEHR | Respondents |
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JUDGE: | SIFRIS J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 7 September 2010 | |
DATE OF JUDGMENT: | 29 October 2010 | |
CASE MAY BE CITED AS: | Christ Church Grammar School v Bosnich & Sehr | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 476 | First Revision: 14 December 2010 |
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ADMINISTRATIVE LAW – Appeal from order of Victorian Civil and Administrative Tribunal – question of law – statutory interpretation – power and jurisdiction of tribunal to “make any order it considers fair” – whether “fair” means fair according to law – matter remitted to tribunal for rehearing – Victorian Civil and Administrative Tribunal Act 1988 s 148 – Fair Trading Act 1999 ss 108, 109.
ADMINISTRATIVE LAW – Procedural Fairness – argument raised by tribunal without notice to the respondent – respondent denied opportunity to properly consider and argue the issue.
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APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr P Riordan SC with Mr W Alstergren | White Cleland Pty |
| For the Respondents | Mr B Murphy | Best Hooper |
HIS HONOUR:
A. Background
The Fair Trading Act 1999
The Fair Trading Act 1999 (Vic) (“FTA”) seeks to promote and encourage fair trading practices and a competitive and fair market. Its stated purpose is to protect consumers and regulate trade practices. It provides for codes of practice and provides for unfair terms in consumer contracts to be declared void.
Many of the provisions of the FTA are taken from the Trade Practices Act 1974 (Cth) (“TPA”). The FTA deals with unconscionable conduct, misleading or deceptive conduct and numerous other specific trade practices. Although a main purpose is to protect consumers in relation to consumer contracts, that is, contracts for goods or services ordinarily acquired for personal, domestic or household consumption, the FTA also covers business contracts.
It is immediately apparent that the FTA is important and far reaching legislation dealing with day-to-day trading in the life of the community.
Jurisdiction is conferred on the Victorian Civil and Administrative Tribunal (“VCAT” or “the Tribunal”). The jurisdiction is generally unlimited.
Although the Courts in Victoria have jurisdiction under the FTA, they must stay any proceeding if satisfied that the proceeding would be more appropriately dealt with by the Tribunal (s 112 FTA).
Section 108(1) of the FTA provides that the Tribunal may hear and determine a consumer and trader dispute. Section 107 defines a consumer and trader dispute. It is a dispute between a seller and purchaser of goods or services. It includes a claim in negligence, nuisance and trespass and also personal injury claims not exceeding $10,000. Other than the limitation in relation to personal injuries, the jurisdiction is unlimited.
Section 108(2) enables the Tribunal to do a number of things in relation to a consumer and trader dispute. The Tribunal can, for example, vary any term of a contract, declare any term void, order the payment of a sum of money, order the refund of any money, order rescission of a contract or the specific performance or rectification thereof, declare that a debt is not (or is) owing and it may order that a party do, or refrain from doing, something. These powers are self-evidently extensive and considerable.
Section 109 of the FTA is headed “Additional powers of Tribunal”. Section 109(1) is in the following terms:
“In addition to its powers under Section 108, the Tribunal, in determining a consumer dispute or a trader-trader dispute, may make any order it considers fair, including declaring void any unjust term of a contract or otherwise varying a contract to avoid injustice” (emphasis added).
Consumer dispute and trader-trader dispute are defined in s 109(4). The parties agree that the dispute in this case is within the definition of a consumer dispute.
The important question in this case is whether in exercising its wide powers under s 108(2) and s 109(1) of the FTA and in particular, its power to make any order it considers fair, the Tribunal is at large or is constrained by the general law and legislation. This is an important question. Is the Tribunal obliged to apply the law when making any order or can it make an order in circumstances where a member may consider such order fair, even though there may be no legal basis for such an order? In other words, is palm tree justice permitted?
The facts
In April 2004, the respondents applied to the appellant to enrol their son James in kindergarten in 2005. The application for enrolment form included the following condition:
“I/We acknowledge that a term’s notice in writing to the Headmistress is required before the withdrawal of my/our child from the School (which includes a child who has been accepted to commence at the School) or a term’s fees in lieu of such notice will be charged (plus GST).”
The respondents were subsequently offered, and accepted, a place commencing in 2005. The acceptance form completed by the respondents in June 2004 contained the following term:
“We [the respondents] … undertake to give a minimum of a term’s notice, wholly within the school term, to the Headmistress, prior to the permanent or temporary withdrawal of a student from the School. (Failure to give such notice will result in a term’s fees plus GST being payable).”
The respondents’ son commenced three year old kindergarten in 2005 and continued at the school for the next four years, leaving when he had completed Grade 1 at the end of Term 4 in 2008. Although initially happy with James’ education, the respondents had some concerns regarding his situation in his final year at the school. They raised these concerns with his Grade 1 teacher, Ms Wilson, at a parent teacher interview in Term 1 and requested that he be moved to another class. Ms Wilson confirmed that she had discussed these matters with the respondents, but added that at a similar interview later in the year the respondents had indicated they were much happier with their son’s progress. The respondents gave evidence that they remained concerned with James’ experience at the school, so much so that they decided to move him elsewhere.
Term 4 began on 6 October 2008. By letter dated 15 October 2008, the respondents notified the appellant that their son would not be returning in 2009. They did not give any reason for their decision, nor was one sought by the appellant. On 22 October 2008, the appellant sent a letter acknowledging James’ withdrawal from the school, reminding the respondents of their obligation “under the terms and conditions of his enrolment…to give a term’s notice in writing or pay a term’s tuition fees in lieu” and enclosing an account for such fees. A further letter and invoice was sent on 24 February 2009.
There followed a period of correspondence between the parties. The respondents outlined their concerns regarding James’ schooling in a letter sent to Ms Gregory dated 30 March 2009. Ms Gregory responded on 3 April 2009, reminding the respondents of the obligation to pay “the penalty of a term’s tuition fees in lieu of notice.”
The respondents thereafter made an application to VCAT for a declaration that the debt of $3,268.00 was not due.
B. The decision
On 30 November 2009, the Tribunal made an order (“the Order”) in the following terms:
“No amount is owing by the Applicants to the Respondent in respect of the invoice for $3,268.00 dated 22 October 2008.”
The matter was heard by the Tribunal on 4 September 2009. Reasons for decision were given on 30 November 2009. Given the issues in this appeal, it is convenient to set out the relevant part of the decision in full:[1]
“12.The phrase ‘term’s notice’ is not defined. It means at least a school term; which is usually of approximately ten weeks long (sic). (Some terms are shorter than others, but usually only by a few days). There are periods of holidays between each term, of two or three weeks during the year with a much longer break of around eight weeks at the end of the year. It may be that a ‘term’s notice’ includes both the school term and the following holiday break, meaning the school would receive a minimum notice period of about twelve weeks. The acceptance form further prescribes, somewhat ambiguously, that the term’s notice must be given ‘wholly within the school term’. Again, common sense suggests this requirement is not to prohibit notice being given before a term commences, but rather is intended to ensure that notice is not, for example, able to given half way through a term that a student will leave half way through the next term. Ms Gregory explained that the Respondent would accept as valid a notice of withdrawal for a term if notice was given on or before the first day of the preceding term.
13.The practical effect of these provisions is that there will usually be at (sic) close to 12 weeks elapsing between the giving of acceptable notice and the commencement of the next term. If such notice is given at the beginning of the final term, that period is extended to about 18 weeks due to the summer break.
14.In the present case the Applicants had given written notice in a letter dated 15 October 2008, nine days after the commencement of the school term. It is not clear on what date the letter was received by the school but it would be expected that it was only a couple of days at most. Certainly, receipt of the letter was acknowledged by the Respondent by 22 October 2008, 14 days after the commencement of the term. Given the matters outlined above, the Respondent in the present case has thus received at least 16 weeks’ actual notice of the Applicants’ son’s withdrawal from the school, being the period elapsing between receipt of the notice and the commencement of the next term.
15.VCAT is given general power by section 109 of the Fair Trading Act to make any order it considers fair. In the present case, I consider that the fair outcome is that the Applicants should not be liable to pay a term’s fees to the Respondent. In making this decision, I make no finding regarding the effect of these terms and conditions in general, and restrict my findings to the facts of this case. It seems to me that the giving of notice by the Applicants in these particular circumstances may be said to have constituted substantial compliance with the term of the contract. On reflection, in reaching my decision I was conscious of the fact that there was no actual loss suffered by the Respondent as a result of the Applicants’ conduct. The financial ‘penalty’ imposed by the clause is (sic) in these circumstances was not referrable to any actual monetary or other quantifiable damage suffered by the Respondent.”
[1]Transcript of proceedings, Bosnich v Christchurch Grammar School, (VCAT, Member Klingender, 4 September 2009).
It should be noted at this stage, that no findings were made in relation to the duty of care issue or that any particular term of the contract, or the contract itself, was unjust.
The critical matters that informed the decision of the Tribunal were that there was substantial compliance, no loss and the requirement to pay a term’s school fees was, in effect, a penalty.
C. The appeal
Pursuant to s 148 Victorian Civil and Administrative Tribunal Act 1998 (Vic) (VCAT Act) the appellant appeals from the Order of VCAT. The grounds of appeal are set out in the Appellant’s Notice of Appeal dated 6 April 2010. On 26 February 2010, Mukhtar AsJ granted the appellant leave to appeal.
It was submitted that VCAT erred in making the order in circumstances where:
(a)Such an order was not in accordance with the general law or the provisions of the FTA;
(b)Such an order was not guided by the general law or the provisions of the FTA;
(c)Such an order was not a declaration that a contractual term was void on the ground of being unjust nor an order varying a contractual term to avoid injustice;
(d)The Tribunal made no finding that the respondent had engaged in any unfair conduct other than the attempted enforcement of the contractual term.
It was submitted, in essence, that s 109 FTA does not give VCAT jurisdiction to resolve disputes other than in accordance with law.
D. Palm tree justice or justice according to law?
In R v The Small Claims Tribunal and Syme; Ex parte Barwiner Nominees Pty Ltd,[2] Gowans J held that “clear words are required to abrogate the operation of the common law and I would think equally clear language would have to be used to exclude the operation of the Goods Act 1958”. The case concerned the Small Claims Tribunal. Section 18(2) of the Small Claims Tribunal Act 1973 (Vic) empowered the tribunal to make various orders. Section 34 required the tribunal to have regard to natural justice but gave it the ability to have control over its own procedures. Gowans J held that s 34 went no further than ousting the general law as to procedure and that clear words were required to exclude the operation of the common law.
[2][1975] VR 831 at 835.
The case is authority for the proposition that clear words (in a clear context) are required to oust the operation of the general law and permit the operation of “palm tree justice.”[3] Indeed, in the construction of statutes there is a presumption that the statute will not alter common law doctrines or invade common law rights.[4]
[3]The case was followed by the Full Court in Walsh v Palladium Car Park Pty Ltd [1975] VR 949 especially at 955.
[4]See generally Pearce & Geddes, Statutory Interpretation in Australia (6th ed, 2006) 182-185.
Is s 109(1) sufficiently clear and unambiguous in its intention so as to enable the law to be disregarded if it is considered unfair?
Section 109 of the FTA was first considered by Deputy President McNamara in Glen Bakker v Capital Arcade Pty Ltd:[5]
“It cannot be the case that whenever there is conduct between parties to a contract which is in accordance with its terms subjectively ‘unfair’ there is jurisdiction independent of statute to modify the arrangements between the parties (sic) Section 109 of the Fair Trading Act grants the Tribunal special additional powers in what it defines as ‘consumer disputes’ and ‘trader trades disputes’ (sic), neither of which this proceeding is, to make any order it considers fair. This provision for palm tree justice in consumer and small commercial disputes would have been necessary if there was a jurisdiction created by the Common Law or Equity and exemplified in the Olex Cables case to restrain any ‘unfair’ enforcement of powers given by a contract.”
[5][2000] VCAT 653 at [19].
In Chen v Mulholland (Civil Claims)[6] Senior Member Vassie considered s 109 and said:
“The third alternative submission was that the ‘Account Application’ document created an unjust term of a contract which, under section 109(1) of the Fair Trading Act, the Tribunal may and should declare void. I have already said that there is a ‘consumer dispute’ in the present case and so it is possible to call section 109 in aid. Like the ‘unfair terms’ provisions, section 109 has not attracted any authoritative exposition. To my mind, the general tenor of section 109 is of a state of affairs in which one party is susceptible to being overborne by the other party. My observation of Mr Chen was that he was an intelligent man with facility in English who was well able to understand what he signed. Even though he no doubt was in a ‘take it or leave it’ situation when he signed, there was no overbearing of him and I am not persuaded that the powers created by section 109 of the Fair Trading Act ought to be exercised. This particular alternative submission was put in brief terms. Likewise I have dealt with it in brief terms. I repeat that the occasion did not arise in which I had to deal with it at all.”
[6][2005] VCAT 2709 at [95].
Neither case is particularly relevant or particularly helpful despite reference to s 109. The second reading speech does not provide any relevant helpful assistance with regard to the present dispute.
In Law v MCI Technologies Pty Ltd[7] Morris J (the President of VCAT at the time) said that under s 109 FTA “ … the Tribunal is not bound by the principles of the common law or by statutory provisions; although such principles and provisions may provide guidance.”[8] The appellant submits that the President of VCAT erred and that I should not follow the decision.
[7][2006] VCAT 415 at [56].
[8]In coming to this conclusion, his Honour did not refer to any authorities.
Law v MCI Technologies Pty Ltd was considered in Dura (Australia) Constructions Pty Ltd v SC Land Richmond Pty Ltd (Domestic Building).[9] Senior Member Davis was considering s 53 Domestic Building Contracts and Tribunal Act 1995 (Vic)[10] and s 97 VCAT Act and at [34] said:
“I was referred to remarks of Morris J in Law v MCI Technologies especially concerning the notion of ‘fairness’: that is (at [40]) that the Tribunal being able to make any order it considers fair in a dispute under the Fair Trading Act 1999 ‘the Tribunal is not bound by the principles of the common law or by statutory provisions; although such principles and provisions may provide guidance’. This, if it was so, I say with due respect, could mean the Tribunal, under the guise of the ‘fair thing’ to do could ignore or put to one side well-established authority including even that of the High Court.”
[9][2006] VCAT 2120.
[10]Section 53 Domestic Building Contracts and Tribunal Act 1995 (Vic) provided:
“Settlement of building disputes
(1) The Tribunal may make any order it considers fair to resolve a domestic building dispute.
(2) Without limiting this power, the Tribunal may do one or more of the following-
(a)refer a dispute to a mediator appointed by the Tribunal;
(b)order the payment of a sum of money– …”
(emphasis added).
In the same case, but in relation to a different application,[11] Senior Member D Cremean agreed and said the following:
“If the Tribunal was free to do what is ‘fair’ in any case under s 97, as to the outcome of proceedings and not merely their procedural conduct, a great many mischiefs might occur and there would be the possibility of justice not being done according to law. Cases could be decided ad hoc according to the whims of the individual member concerned and without reference to the doctrine of binding precedent. Like cases might never be treated alike.”
[11][2006] VCAT 2120 at [34]. Section 97 of the VCAT Act requires the Tribunal to act fairly and according to the substantial merits of the case in all proceedings.
In Kiley v MCI Technologies (Civil Claims)[12] Deputy President B Steele considered Morris J’s comments in Law v MCI Technologies Pty Ltd, but distinguished the case before her on the basis that there was no wrongdoing proved against the respondent to justify the exercise of any such jurisdiction.
[12][2006] VCAT 2543.
Before deciding the correct approach, it is useful to consider some relevant New South Wales authorities.
In Jet 60 Minute Cleaners Pty Ltd v Brownette and Anor,[13] Hunt J said when considering the powers of s 23(2) Consumer Claims Tribunal Act 1974 (NSW):
“The Consumer Claims Tribunal is required to make such order as is, in its opinion, fair and equitable to all the parties to the proceeding before it: s 23(2). That obligation, however, in its context relates to the nature of the order to be made; it does not give the tribunal freedom to act otherwise than in accordance with the general law in determining whether the claim before it has been made out.”[14]
[13][1981] 2 NSWLR 232.
[14][1981] 2 NSWLR 232, 236.
In State Rail Authority of New South Wales v Consumer Claims Tribunal and Ors[15] when considering s 23(2), Hope JA, with whom Samuels JA and Clarke JA agreed, said:
“I would respectfully agree with the conclusion reached by Yeldham J in Fairey Australasia Pty Ltd v Joyce [1981] 2 NSWLR 314 at 321[16] that the tribunal is not concerned with ‘palm tree justice’, and with his conclusion, and with the conclusion of Hunt J in Jet 60 Minute Cleaners Pty Ltd v Brownette [1981] 2 NSWLR 232 at 236, that save in relation to the selection of the form of order the tribunal must act in accordance with and must apply the general law in determining the claim which has been made to it. As Gowans J said in R v Small Claims Tribunal; Ex parte Barwiner Nominees Pty Ltd [1975] VR 831 at 835-836:
‘Unless there is to be found in … the Act a direction as to the principles upon which the … Tribunal is to determine its function of making an order with respect to the issue in dispute or an order dismissing the claim, the Act is silent on that subject. There is nothing in the Act to the effect that the referee is to act as an arbitrator or to act according to equity and good conscience and I would not regard a statement of the kind set out in s 34 as sufficient to oust the operation of the general law, except as to procedure. Clear words are required to abrogate the operation of the common law and I would think equally clear language would have to be used to exclude the application of the general law in relation to the functions of a tribunal set up to determine claims under contract, and in particular to exclude the operation of the Goods Act 1958 in the determination of claims relating to the sale of goods’.”
[15](1988) 14 NSWLR 473, 477.
[16]Yeldham J in Fairey Australasia Pty Limited v Joyce & Anor [1981] 2 NSWLR 314 at 321 said:
“Plainly, if the legislature had intended that the only claims in respect of which a tribunal might have jurisdiction were those where one contracting party sues another, it could, and no doubt would have said so in express words. It is, of course, plain that the person against whom an order is made must be one who has a legal liability to the consumer. The Act is not concerned with “palm tree justice”. But provided the person who is not a party to the contract between the consumer and the person engaged in a business activity (which contract must exist in order to give the tribunal jurisdiction) but who is joined as a party to the claim might have a liability, whether under s 64(5) of the Sale of Goods Act or in tort, in my opinion a tribunal does have jurisdiction” (emphasis added).
In Ciciwill Pty Ltd v Consumer Claims Tribunal and Others[17] Hulme J, in considering the obligation for the Consumer Claims Tribunal to make orders which were fair and equitable, said:
“To these matters a number of provisions of the Consumer Claims Tribunal Act are relevant. Section 31 requires the Tribunal to make such orders as, in its opinion, will be fair and equitable to all the parties to a claim although this obligation does not entitle the Tribunal not to apply the general law in its determination of a claim: see State Rail Authority v Consumer Claims Tribunal.”
[17](1997) 41 NSWLR 737, 477.
As recently as September 2009, Member Ringrose in the NSW Consumer, Trader & Tenancy Tribunal considered the tribunal’s jurisdiction under s 8 Consumer Claims Act 1998 (NSW)[18] and said:
“In making orders under Section 8 of the Act, the Tribunal is obliged to consider all of the matters outlined in Section 13. Subsection (1) requires the Tribunal to make orders which will in its opinion be fair and equitable to all parties to the claim. The provision will allow, where appropriate, some flexibility in formulating the orders but it does not provide a warrant for setting aside established legal principles in disregarding relevant authorities (see Fairey Australasia Pty Limited v Joyce and anor (1981) 2 NSWLR 314).”
[18]Sepentukevski v Salih & Ors (General) [2009] NSWCTTT 518 (15 September 2009).
Section 22(2) of the Commercial Arbitration Act 1984 (Vic) specifically permits parties to agree to an arbitrator or umpire deciding any question by reference to “considerations of general justice and fairness.” If the parties do not agree, the question must be decided according to law.[19] However, even an agreement for the matter to be determined by reference to considerations of general justice and fairness does not mean an arbitrator is entitled to disregard the law entirely. In Woodbud Pty Ltd v Warea Pty Ltd[20], Young J noted that “it was most debatable” whether s 22(2) of the Commercial Arbitration Act 1984 (NSW), which is equivalent to s 22(2) of the Commercial Arbitration Act 1984 (Vic), goes much further than permitting the arbitrator to disregard evidentiary and procedural rules and technical rules relating to evidence, deeds and contracts.[21]
[19]Commercial Arbitration Act 1984 (Vic) s 22(1).
[20]Unreported, Supreme Court of New South Wales, Young J, 15 June 1995.
[21]See also comments of McDougall J in Hewitt v McKensey [2003] NSWSC 1186 at [59].
In my opinion, although the matter is not free from difficulty, the Tribunal is required, when deciding the merits of a case, to apply the law and not merely be guided by it. Any flexibility relates only to the form of the order and of course, to procedural and evidential matters. If this was not the case absurd results could follow. To the extent that the Supreme Court of Victoria has concurrent jurisdiction[22] different results could follow. The Court, not having the benefit of s 109, would have to apply the law while the Tribunal could do what it considered fair even if the law was to the contrary. Further, such a result would encourage idiosyncratic notions of fairness and justice.[23] If the intention was to exclude the operation of the law (as a matter of substance and not merely procedure or form) a specific section to such effect, clear and unambiguous, should have been inserted. I am therefore, with great respect, unable to agree with the opinion expressed by Morris J in Law v MCI Technologies Pty Ltd.
[22]Although the Court has concurrent jurisdiction, it must stay proceedings if the Tribunal is the more appropriate forum (see s 112(2) VCAT Act).
[23]To use the phrase in Muschinski v Dodds (1984) 160 CLR 583, 615 (Deane J).
The respondents’ counsel referred me to Australian Competition and Consumer Commission v Dukemaster Pty Ltd,[24] where Gordon J at [17] adopted with approval the reasoning of Foster J in Australian Competition and Consumer Commission v Allphones Retail Pty Ltd (No 2)[25] where his Honour notes at [113] that the word “unconscionable” in s 51AC of the TPA is not limited to the meaning of the word according to the established principles of common law and equity and then cites with approval a number of authorities in support of this proposition. The authorities referred to by Foster J (Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (No 2)[26] and Australian Competition and Consumer Commission v Simply No-Knead Franchising Pty Limited[27]) make it plain, it was submitted, that the factors listed in ss 51AA, 51AB and 51AC of the TPA do not limit the matters to which a Court may have regard and those matters fall outside specific equitable doctrines. However in my opinion, the cases do not go so far as to permit the Court to simply do anything it considers fair.
[24][2009] FCA 682.
[25][2009] FCA 17.
[26](2000) 96 FCR 491 at [24] and [25].
[27](2000) 104 FCR 253 at [31].
It may be accepted that s 51AC, and to a lesser extent s 51AB, extend the concept of unconscionability beyond the unwritten law (incorporated into s 51AA) and as a consequence, beyond established common law and equitable principles. The sections permit, in addition to specific identified matters, other matters that are considered relevant to be taken into account. Extending as it does beyond the unwritten law, it may further be accepted (contrasting ss 51AB and 51AC with s 51AA) that unconscionability not being restricted to the unwritten law embraces serious misconduct, unfairness and unreasonableness or some moral turpitude. Precisely what factors or conduct will give rise to a finding of unconscionability will depend on the circumstances.
In the context of the TPA, the sections referred to provide some basis for concluding that the Court is “at large.”[28] However, even if this is the correct analysis, and I express no concluded view, it does not follow that the Tribunal is at large in relation to its power under s 109(1). The section differs from the sections in the TPA. The section is concerned with the power of the Tribunal and not a standard of behaviour or conduct. Accordingly, the context and language of s 109(1) is sufficiently different to the TPA. The cases therefore do not cause me to change my view that fairness should be interpreted as fairness according to law.
[28]Australian Competition and Consumer Commission v Simply No-Knead (Franchising) Pty Ltd [2000] 104 FCR 253, 267 (Sundberg J).
In any event, the cases referred to make it clear that in considering what is unconscionable (and presumably unfair) it is necessary to undertake a careful and thorough analysis of the circumstances and conduct said to be unconscionable. There must be a process of reasoning.[29]
[29]Australian Competition and Consumer Commission v Allphones Retail Pty Ltd (No 2) [2009] FCA 17 at [114] (Foster J) and cited with approval by Gordon J in Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682 at [17]. This is significant. As Spigelman CJ noted in Attorney General of New South Wales v World Best Holdings Pty Ltd (2005) 63 NSWLR 557, while discussing the meaning of ‘unconscionable’ in the context of section 62B of the Retail Leases Act 1994 (NSW):
“Unconscionability is a concept which requires a high level of moral obloquy. If it were to be applied as if it were equivalent to what was “fair” or “just”, it could transform commercial relationships in a manner which the Minister expressly stated was not the intention of the legislation. The principle of “unconscionability” would not be a doctrine of occasional application, when the circumstances are highly unethical, it would be transformed into the first and easiest port of call when any dispute about a retail lease arises.”
In the instant case, the only unfairness suggested – apart from the “penalty point” which is dealt with below – is that there was substantial compliance with the term of the contract, a conclusion that conflicts with the law and is, as a consequence, untenable. Accordingly, even if “fairness” was “at large”, the process of reasoning is not adequate to warrant a conclusion of unfairness.
E. Did the Tribunal apply the law?
Putting to one side the clarity of expression and lack of detailed reasoning contained in the decision, if the Tribunal (despite identifying that it was moved by considerations of fairness) in any event based its decision on established legal principles, the appeal must fail.
As pointed out, the reasons are sparse. However, it is clear that the Tribunal decided “that the fair outcome is that the Applicants should not be liable to pay a term’s fees to the Respondents.”[30] The critical factors that informed the outcome were “substantial compliance” and “no actual loss.”[31]
[30]Bosnich v Christchurch Grammar School (Unreported, VCAT, Member Klingender, 30 November 2009) at [15].
[31]Bosnich v Christchurch Grammar School (Unreported, VCAT, Member Klingender, 30 November 2009) at [15].
Whilst it may be unfair to “penalise” a party where there has been substantial compliance with the known and acknowledged terms of a contract, it is not consistent with the law. Generally, parties are obliged to comply with all contractual terms in accordance with the precise nature and extent of the term. Anything other than complete compliance is usually a breach of contract.
The respondents were in breach of contract. They did not comply with a term. Substantial compliance does not generally eliminate or excuse the breach.[32] In this case, it was not argued – nor could it be – that as a matter of construction substantial compliance was sufficient. The specific term, or the contract itself, was not varied or declared unjust (as it might have been) pursuant to s 109(1). Rather, the decision was made on the narrow basis of being unfair. To this extent, it is not in accordance with the law, and the appeal on this aspect must succeed.
[32]See generally Seddon and Ellinghaus, Cheshire and Fifoot’s Law of Contract (9th Australian Edition 2008) 389. Whether or not there is a breach in circumstances where there is substantial compliance with a term of a contract is a matter of construction, see for example Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1983) 61 CLR 286.
The finding that there was no actual loss is problematic. It is dealt with below.
F. Procedural Fairness
The respondents, in their application before VCAT, did not seek to have the terms and conditions of the contract between themselves and the school amended or declared void on any ground other than the failure of the school to care for their child. The Tribunal proceeded to hear the evidence in relation to this and did not accept this ground. In relation to the actual loss or penalty point, it is apparent that the Tribunal raised the matter without notice to the appellant. It engaged in cross-examination of Ms Gregory in an effort to support its own ground upon which to decide the application. From an examination of the transcript, it is clear that Ms Gregory was not in a position, and did not expect, to answer questions as to whether the school would suffer loss as a result of a parent failing to give a full term’s notice of their intention to withdraw their child. The Tribunal asked Ms Gregory whether the requirement to pay one term’s tuition fees was referable to any actual costs incurred by the school as a result of the late notice. Ms Gregory responded “No, it isn’t. I’m not going to do that…I possibly could, but I’m not.”[33]Ms Gregory’s response suggests that while the school may perhaps suffer some loss as a result of late notice, she was not in a position to explain this at the hearing.
[33]Transcript of proceedings, Bosnich v Christchurch Grammar School, (VCAT, Member Klingender, 4 September 2009).
The Tribunal clearly failed to give the appellant an opportunity to properly consider the issue of the actual loss suffered by the school by reason of the late notice. This is particularly prejudicial to the school when it was not legally represented.
Further, the Tribunal failed to warn the appellant that if it did not call evidence of actual loss it would find against it.[34]
[34]John ZhiquiangXu v Director of Housing [2008] VSC 82 at [9].
Consequently, if the penalty issue formed part of the Tribunal’s decision, the appellant was not accorded procedural fairness.[35]
[35]It is far from clear that the relevant term is, in any event, capable of constituting a penalty in as much as it was a specific agreed term of the contract and not a clause relating to damages in the event of a breach.
It is not entirely clear what role the penalty point played in the Tribunal’s decision. In giving oral reasons at the hearing, the Tribunal Member stated that although she had raised the question of whether the relevant term constituted a penalty and “it’s certainly something that is in the back of my mind,”[36] for the purposes of the hearing it was not necessary to decide the issue. In the written reasons for decision however, the Tribunal Member concluded:
“On reflection, in reaching my decision I was conscious of the fact that there was no actual loss suffered by the Respondent as a result of the Applicant’s conduct. The financial “penalty” imposed by the clause in these circumstances was not referrable to any actual monetary or other quantifiable damage suffered by the Respondent.”[37]
[36]Transcript of proceedings, Bosnich v Christchurch Grammar School, (VCAT, Member Klingender, 4 September 2009).
[37]Bosnich v Christchurch Grammar School (Unreported, VCAT, Member Klingender, 30 November 2009) at [15].
Accordingly, a proper opportunity must be afforded to the appellant to adduce evidence and properly argue the matter.
G. Disposition
For the reasons given, it is both unfortunate and inevitable that the matter must be referred back to the Tribunal to be dealt with according to law. I am not prepared to, or indeed able to, decide each of the issues. Whether or not the specific term was unjust and whether or not any loss was suffered are matters that require further evidence and argument and are more properly dealt with by the Tribunal. I will therefore, set aside the order of the Tribunal and remit the proceeding to be heard and decided in accordance with these reasons. It is, in my view, appropriate in the circumstances of this case, that the Tribunal be constituted by a different Member to the Member who made the original order.
I will hear the parties on the form of the order and costs.
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