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Jetstar Airways Pty Ltd v Free

Jetstar Airways Pty Ltd v Free

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Case Copied 3 December 2008 76 min read

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IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

No. 8040 of 2007

JETSTAR AIRWAYS PTY LTD	Appellant
v
ELIZABETH WINIFRED FREE	Respondent

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JUDGE:	CAVANOUGH J
WHERE HELD:	Melbourne
DATES OF HEARING:	28 February, 3 March 2008
DATE OF LAST SUBMISSION:	14 March 2008
DATE OF JUDGMENT:	3 December 2008
CASE MAY BE CITED AS:	Jetstar Airways Pty Ltd v Free
MEDIUM NEUTRAL CITATION:	[2008] VSC 539

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FAIR TRADING – Statutory regulation of unfair terms in consumer contracts – Term in standard form airline contract requiring purchaser wishing to substitute a new passenger to pay an administrative fee and to pay the difference between the fare originally purchased and the fare available on the date of change – Held by VCAT to be an “unfair term” – Appeal on questions of law – Statutory interpretation – Role and meaning of “contrary to the requirements of good faith” – Relevant considerations in assessing whether a term “causes a significant imbalance in the parties’ rights and obligations arising under the contract to the detriment of the consumer” – Appeal allowed – Matter remitted for rehearing – Fair Trading Act 1999 Part 2B and ss 1, 8, 105, 108 and 163 – Victorian Civil and Administrative Tribunal Act 1998 s 148.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr M O’Bryan	Blake Dawson Waldron
For the Respondent	Mr T Walker	Consumer Affairs Victoria

HIS HONOUR:

Introduction

This is an appeal under s 148 of the Victorian Civil and Administrative Tribunal Act 1998 from an order of the Victorian Civil and Administrative Tribunal (“VCAT”) which was based on a finding that a particular condition of sale of an airline ticket was an “unfair term” for the purposes of Part 2B of the Fair Trading Act 1999 (“the FTA”). Appeals under s 148 are confined to questions of law. The respondent denies that this appeal raises questions of law (as distinct from questions of fact) but I am satisfied that it does, for reasons I will explain in due course. Indeed I consider that the appeal raises important and difficult issues of law, being questions as to how VCAT or a court is to assess whether a term in a consumer contract is an “unfair term” as defined. This is the first time since the introduction of Part 2B in October 2003 that its provisions have fallen for consideration by this Court. The Director of Consumer Affairs Victoria has come in to defend the appeal on behalf of the respondent pursuant to s 105 of the FTA.

For present purposes, the critical provisions of Part 2B of the FTA are ss 32W and 32X, which are as follows:

32W What is an unfair term?
A term in a consumer contract is to be regarded as unfair if, contrary to the requirements of good faith and in all the circumstances, it causes a significant imbalance in the parties' rights and obligations arising under the contract to the detriment…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2008] VSC 539
Decision Date: 3 December 2008

CaseChat Overview and Summary

In this case, Jetstar Airways Pty Ltd sought judicial review of a decision by the Victorian Civil and Administrative Tribunal (VCAT) that a term in their standard form contract was unfair. The dispute centred on a term that required passengers to pay an administrative fee and the difference in fare if they wished to substitute a new passenger on their booking. Free, the respondent, argued that this term was unfair under the Fair Trading Act 1999. The legal issues before the court were the interpretation of the statutory definition of an unfair term, the application of the good faith requirement, and the consideration of factors that contribute to a term causing a significant imbalance in the parties' rights and obligations.

The court found that VCAT had not given sufficient consideration to the requirement for good faith in the statutory definition of an unfair term. The court held that good faith required an assessment of the overall commercial context of the contract, including the commercial purpose and the relative bargaining power of the parties. The court also found that VCAT had not adequately considered all relevant factors in assessing whether the term caused a significant imbalance in the parties' rights and obligations, particularly the potential impact on the consumer if the term was not in place. The court held that the matter should be remitted to VCAT for rehearing in light of these errors.

The court's reasoning was that VCAT had not applied the statutory definition of an unfair term correctly, leading to an incorrect conclusion. The court held that good faith required an assessment of the commercial context of the contract and the relative bargaining power of the parties. The court also held that VCAT had not considered all relevant factors in assessing whether the term caused a significant imbalance in the parties' rights and obligations. The court held that the term should be assessed in the overall context of the contract, including the potential impact on the consumer if the term was not in place. The court allowed the appeal and remitted the matter to VCAT for rehearing.

Orders