Lobux Pty Ltd v Willshaun Pty Ltd
[2022] FCA 204
•11 March 2022
FEDERAL COURT OF AUSTRALIA
Lobux Pty Ltd v Willshaun Pty Ltd [2022] FCA 204
File number(s): QUD 64 of 2020 Judgment of: DOWNES J Date of judgment: 11 March 2022 Catchwords: CONTRACTS – where customer removed custom-made machine before its construction was completed – where customer said it would return the machine but failed to do so – whether removal of machine was a valid termination of the contract – where customer had requested changes to design of machine which had delayed its manufacture – where customer then sought to rely on delay and defects in machine as basis for alleging repudiation – where customer prevented performance of contract by other party – whether entitled to allege breach of agreement in those circumstances – whether entitled to damages for loss of opportunity where lay opinions relied upon were based on inadmissible hearsay
CONSUMER LAW – where customer alleged numerous clauses in agreement were unfair within meaning of s 24 Australian Consumer Law and therefore void – whether retention of title clause was an unfair term – whether term creating a security interest in the goods was an unfair term – whether term creating charge over all assets including future assets was an unfair term – where goods were custom-made machine which required investment of time and money by manufacturer – whether terms reasonably necessary to protect legitimate interests of manufacturer of custom-made machine
EVIDENCE – expert briefed by party prior to commencement of litigation – independence of expert not established – expert not informed of critical facts relating to machine being inspected – assumptions briefed to expert not established by the evidence – expert inspected machine once in April 2019 – opinions of expert rejected as having no weight
Legislation: Australian Securities and Investments Commission Act 2001 (Cth)
Competition and Consumer Act 2010 (Cth) Sch 2 ss 23, 24, 25, 250
Evidence Act 1995 (Cth) ss 59, 136
Personal Property Securities Act 2009 (Cth)
Federal Court Rules 2011 (Cth) r 16.02(1)
Personal Properties Securities Regulations 2010 (Cth)
Contracts Review Act 1980 (NSW) s 7
Cases cited: Australian Competition and Consumer Commission v Chrisco Hampers Australia Ltd (2015) 239 FCR 33; [2015] FCA 1204
Australian Competition and Consumer Commission v CLA Trading Pty Ltd [2016] ATPR 42-517; [2016] FCA 377
Australian Competition and Consumer Commission v Fuji Xerox Australia Pty Ltd (2021) 150 ACSR 165; [2021] FCA 153
Australian Competition and Consumer Commission v Smart Corporation Pty Ltd (No 3) (2021) 153 ACSR 347; [2021] FCA 347
Barnes v Forty Two International Pty Ltd (2014) 316 ALR 408; [2014] FCAFC 152
Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11
QAD Inc v Shepparton Partners Collective Operations Pty Ltd (2021) 159 IPR 285; [2021] FCA 615
Division: General Division Registry: Queensland National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 240 Date of hearing: 26 October 2021 and 9 November 2021 Counsel for the Applicant: Ms S Long Solicitor for the Applicant: Celtic Legal Counsel for the Respondent: Mr S Russell Solicitor for the Respondent: Cooper Grace Ward
Table of Corrections 11 April 2022 In paragraph 143, in the first sentence, “ever endeavour” has been replaced with “every endeavour”. ORDERS
QUD 64 of 2020 BETWEEN: LOBUX PTY LTD ACN 008 032 488
Applicant
AND: WILLSHAUN PTY LTD ACN 077 535 507
Respondent
ORDER MADE BY:
DOWNES J
DATE OF ORDER:
11 MARCH 2022
THE COURT ORDERS THAT:
1.The name of the respondent be amended to Willshaun Pty Ltd ACN 077 535 507.
2.The respondent shall forthwith deliver up the 81658TDBS Hooklift Backdoor Vacuum Tank with Suction Boom bearing serial number 18111 (and any keys) to the applicant at 11 Shaw Road, Ingleburn, New South Wales, and the respondent shall pay the costs of such delivery.
3.Delivery by the respondent pursuant to order 2 shall occur during business hours.
4.By 4.00 pm Wednesday 16 March 2022, the respondent shall file and serve any submissions (limited to 5 pages) as to the necessity for any further relief in relation to clauses 5.2(a), 5.2(b), 12, 13.4, 13.7, 16.3 and 21.3 of the terms and conditions of the agreement, and the form of that relief.
5.By 4.00 pm Friday 18 March 2022, the applicant shall file any submissions in reply to the submissions filed by the respondent pursuant to order 4 (limited to 5 pages).
6.The parties shall file and serve any submissions as to costs (limited to 5 pages) by 4.00 pm Friday 18 March 2022.
7.Liberty to apply.
THE COURT DECLARES THAT:
1.Clauses 5.2(a), 5.2(b), 12, 13.4, 13.7, 16.3 and 21.3 of the terms and conditions of the agreement entered between the applicant and respondent on or about 26 September 2018 are unfair contract terms within the meaning of s 24 of the Australian Consumer Law (being Schedule 2 to the Competition and Consumer Act 2010 (Cth)) and are void by operation of s 23 of the Australian Consumer Law.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
DOWNES J:
INTRODUCTION
[1]
CHRONOLOGY
[7]
THE ISSUES
[47]
Which documents formed the agreement between the parties?
[48]
Does the agreement have any unfair terms?
[56]
Impugned terms and conditions
[56]
Legal principles
[61]
Analysis
[69]
Clause 5.2
[72]
Clause 5.8
[78]
Clause 6.4 (first two sentences)
[85]
Clause 10.3
[95]
Clause 11
[106]
Clause 12
[116]
Customer information and work authorisation forms
[122]
Consequence of being an unfair term
[128]
Were any terms of the agreement breached by Lobux such that Willshaun was entitled to terminate the agreement?
[129]
The parties’ contentions
[129]
Contractual obligation as to timing of delivery
[133]
Delivery period was an estimate only
[136]
Whether Lobux made every endeavour to achieve delivery within 8 weeks
[138]
Whether tank met required contractual standard
[183]
Did Willshaun suffer any loss and damage by reason of any breach of the agreement by Lobux?
[203]
The claim for estimated costs to rectify defects in the tank
[203]
The claim for lost profits
[205]
The pleaded case
[206]
Analysis
[208]
What, if any, relief should be granted to any party?
[227]
CONCLUSION
[237]
INTRODUCTION
This case concerns the manufacture of a “Hooklift Backdoor Vacuum Tank” by the applicant (Lobux) for, and at the request of, the respondent (Willshaun).
Prior to the completion of the manufacture of the tank, Willshaun removed it from the possession of Lobux on the premise that it was going to have some work done on it elsewhere and then it would be returned. The tank was not returned (and has never been returned). Nor was the balance of the purchase price paid. Instead, Willshaun has used the tank in its business operations and was still doing so as at the date of the trial.
Lobux registered a security interest over the tank pursuant to the Personal Property Securities Act 2009 (Cth) (PPSA) and brought this proceeding, seeking orders for, in effect, the return of the tank and ancillary orders in relation to that relief.
Notwithstanding that it has not paid the entire purchase price for the tank, that the construction of the tank was not complete when it was removed, and that it has been using the tank in its business since September 2019, Willshaun has brought a cross-claim which alleges (amongst other things) that the tank is not fit for purpose. The cross-claim also seeks a declaration to the effect that it is not required to pay any further money for the tank by way of purchase price. The cross-claim also seeks orders which have the effect of preventing Lobux from enforcing its security interest, including a declaration that a broad range of contractual terms are void ab initio pursuant to s 250 of Schedule 2 of the Competition and Consumer Act 2010 (Cth).
The court heading does not contain the correct spelling of Willshaun’s name and this will be corrected in the orders which I will make.
Otherwise and for the following reasons, I will order that:
(a)Willshaun shall forthwith deliver up the 81658TDBS Hooklift Backdoor Vacuum Tank with Suction Boom bearing serial number 18111 (and any keys) to Lobux at 11 Shaw Road, Ingleburn, New South Wales, and shall pay the costs of such delivery.
(b)Delivery by Willshaun shall occur during business hours.
(c)It be declared that clauses 5.2(a), 5.2(b), 12, 13.4, 13.7, 16.3 and 21.3 of the terms and conditions of the agreement entered between the applicant and respondent on or about 26 September 2018 are unfair contract terms within the meaning of s 24 of the Australian Consumer Law (being Schedule 2 to the Competition and Consumer Act) and are void by operation of s 23 of the Australian Consumer Law.
(d)By 4.00 pm Wednesday 16 March 2022, the respondent shall file and serve any submissions (limited to 5 pages) as to the necessity for any further relief in relation to clauses 5.2(a), 5.2(b), 12, 13.4, 13.7, 16.3 and 21.3 of the terms and conditions of the agreement, as well as the form of that relief. These submissions should take into account the findings in these reasons, the evidence adduced at the trial and whether there is utility in making any further orders.
(e)By 4.00 pm Friday 18 March 2022, the applicant shall file and serve any submissions in reply to the submissions filed by the respondent referred to in (d) (limited to 5 pages).
(f)The parties shall file and serve any submissions as to costs (limited to 5 pages) by 4.00 pm Friday 18 March 2022.
(g)Liberty to apply. This order will enable the parties to return to Court should there be any issues relating to the delivery up of the tank by the respondent.
CHRONOLOGY
On or about 23 May 2018, Lobux submitted quotation number 1805002 to Willshaun for the manufacture and supply of a 101658HDBS Hooklift BackDoor Vacuum Tank with Suction Boom with a capacity of 10,000 litres and other details and specifications for a total price of $140,000 plus GST. The quotation was prepared by Mr Michael Crawford, the sole director of Lobux.
On 30 August 2018, Willshaun purchased a truck that was capable of having the proposed vacuum tank mounted to it.
On 30 August 2018, Ms Robin Glover, an employee of Lobux, sent an email to Mr William (aka Liam) Walsh, director of Willshaun, and copied to Mr Crawford as follows:
Good Evening Liam,
Further to your discussions with Michael Crawford,
Attached please find: -
Invoice 00000047 – Deposit on tank only. (Further discussion required prior to revised quote and invoice being issued).
Customer Information Form –
Work Authorisation Form –
Please complete and return the Customer Info and Work Authorisation Forms to [email protected] at your earliest convenience
Our Terms of Trade
If you require further information, please do not hesitate to contact the undersigned.
(emphasis added)
I infer from the emphasised words in the email that there had been some discussion or communications between the parties about a revised quotation being issued by Lobux. This inference finds support from the fact that a further quotation was issued on 24 September 2018, as referred to below.
The 30 August 2018 email attached an invoice from Lobux in the amount of $33,000 (including GST) with the description “Deposit on 1 x 101658HDBS Hooklift Backdoor Vacuum Tank with Suction Boom & Saddle Tanks Capacity: 10,000 litres”. The email also attached documents entitled “work authorisation form”, “customer information form” and “tank sales Australia - terms & conditions of trade”.
On 3 September 2018, Ms Glover sent a further email to Mr Walsh as follows:
Afternoon Liam,
As discussed, please reply to confirm receipt of.
On 6 September 2018, Willshaun paid the sum of $15,000 to Lobux and a further $15,000 the next day.
On 24 September 2018, Lobux provided Willshaun with quotation number 1809005. This quotation was for an 81658TDBS Hooklift BackDoor Vacuum Tank with Suction Boom with a capacity of 8,000 litres and other details and specifications for a total price of $140,000 plus GST.
The quotation also stated: Delivery time: 8 weeks from 30% deposit, “Progress Payments applicable” and under “other specifications”, it was stated, “Built to AS 1210 for vacuum vessel and AS 2809 for waste transport”.
Mr Crawford gave this evidence about this quotation:
This is the quotation that you contend is the relevant one for these proceedings?‑‑‑It is.
It’s dated 24 September 2018?‑‑‑Correct.
You prepared this document?‑‑‑I did.
You selected the item name?‑‑‑I did.
Mr Walsh never asked you for an “81658 TDBS Vacuum Tank”?‑‑‑Incorrect.
This quotation is for a tank with a capacity of 8000 litres?‑‑‑Correct.
You decided to change the description of the tank which was to be produced?‑‑‑No. I didn’t.
Mr Walsh didn’t ask you to change the volume of the tank?‑‑‑Yes. He did. He brought the truck to me. He measured the truck. He couldn’t fit any more than 8000 litres on it.
I infer from this evidence that the truck which Mr Crawford was referring to was the truck which had been purchased by Willshaun on 30 August 2018.
On 26 September 2018, Ms Glover sent a reply email to her email of 3 September 2018, including the attachments of the 30 August 2018 email, to Mr Walsh and copied Mr Crawford:
Good afternoon Liam,
Attached please find updated invoice reflecting payment received.
Could you please organise for the balance of $3000.00 to be paid at your earliest convenience.
Also, as previously requested, could you completed the attached paperwork and return.
Mr Walsh executed the customer information form and work authorisation form in the presence of a witness, “P. Hayward” who appears to have dated the documents 26.9.18. One of the forms was countersigned by Ms Glover and it bears the date “16/10/18”. The work authorisation form refers to a “Hooklift Backdoor Vacuum Tank with suction boom 10,000 LT”. There was no evidence as to who wrote these words; however, they did not appear on the form when it was sent to Willshaun by Ms Glover.
Each of the forms stated above the signature of Mr Walsh:
I have read and understood the TERMS AND CONDITIONS OF TRADE (overleaf or attached) of Lobux Pty Ltd T/A Tank Sales Australia which form part of, and are intended to be read in conjunction with this [form] and agree to be bound by these conditions. …I agree that if I am a director/shareholder (owning at least 15% of the shares) of the Customer I shall be personally liable for the performance of the Customer’s obligations under this contract.
The balance of the deposit, being $3,000, was paid to Lobux on 27 September 2018.
Lobux commenced the manufacture of the tank on 27 September 2018.
Although the September 2018 quotation stated, “Delivery time: 8 weeks from 30% deposit”, the tank was not manufactured and delivered within eight weeks of payment of the deposit. It is Lobux’s pleaded case that the estimated date of completion was revised because of the variations to the scope and design of the tank requested by Willshaun.
On 5 October 2018, Lobux sent an email to Willshaun which stated in part:
you have requested a larger engine and blower than that quoted, due to not knowing the price at this stage, please keep in mind that the amount will change slightly.
There is no evidence that Willshaun responded to this email when it was received and asserted that it had not made such a request.
Mr Crawford gave oral evidence about the change in size of the motor and blower, as well as other changes which were requested by Mr Walsh on behalf of Willshaun:
…both quotes he had were for a 123-horsepower four-cylinder Caterpillar. Along the proceedings he changed it to a larger blower which required 200 horsepower – 220 horsepower was available. Instead of a 4.4 litre, it was a 7-litre motor which was one of the changes he had made and he had to pay the motor direct.
…
It was one of the changes to the scope and design of the vacuum tank?‑‑‑The original quote was for a four-cylinder motor which had the engine management system fitted by Caterpillar. The six-cylinder one didn’t come fitted with it.
…
You didn’t tell Mr Walsh that he would incur further costs?‑‑‑Yes, I did.
You didn’t tell Mr Walsh it would take more time to deliver?‑‑‑Yes, I did. Everyday he would come in and make a change. I told him it was going to take longer. And in the end, I told him to stop making changes.
Mr Walsh didn’t request any of the variations in paragraph 22 of your affidavit, did he? 21, I’m sorry. I’m corrected?‑‑‑No, he ..... he requested all of them.
In fact, these were changes that you made to produce a tank that was appropriate for Mr Walsh’s purposes?‑‑‑No. It was a change from what was quoted originally which was 1600 CFM to the larger blower. I will explain it to you not knowing exactly what is involved. But if you had ordered a four-cylinder car and when it’s delivered you said, “No. I want a six-cylinder car” the radiator, engine, gearbox, fuel tank, batteries – everything would have had to have been changed. Very similar in this case. The blower that he had requested or changed to was, I think, twice the capacity of the original one. Therefore, the aircloner, cyclone, primary, secondary, pipework, fuel tank, batteries, frame all had to be upgraded. And Mr Walsh was no idiot. He knew what mechanical things were. And he came in and saw it every couple of days. Things being changed – and asked for changes along the way.
The September 2018 quotation also stated, “Progress Payments applicable”. By December 2018 and other than payment of the deposit, Willshaun had not made any progress payments.
On 19 December 2018, following discussions between Mr Crawford and Mr Walsh, an email was sent by Ms Glover to Ms Hayward (the partner of Mr Walsh who assists in the business operated by Willshaun) which attached an invoice for a new Caterpillar industrial engine and which stated:
Further to discussions with Michael, attached please find the invoice for the motor as mentioned. If this could be paid direct to Energy Power Systems Australia Pty. Ltd. in lieu of a progress payment it would be appreciated.
This payment was deducted from the quoted purchase price of $140,000 plus GST as reflected in an invoice number 00000047, which stated that the payment was made “in lieu of a progress payment”. The invoice referred to quotation 180095, which was the September 2018 quotation (as did all subsequent invoices).
On 12 January 2019, invoice PP47a was issued for a progress payment in the amount of $11,000 and this was paid by Willshaun.
Other third party invoices were sent to Willshaun for payment on 11 March 2019, 12 March 2019 and 15 March 2019. In an email of 15 March 2019, Ms Glover again referred to the third party supplier being paid “in lieu of progress payment”.
The circumstances leading to the payments to the third party suppliers are in dispute. According to Mr Crawford, the payments were made by Willshaun because of financial difficulties which Willshaun indicated it would have in making progress payments. According to Mr Walsh, the payments were made because Lobux said that it was having financial issues in paying suppliers.
However, it is objectively unlikely that, instead of requiring Willshaun to make further progress payments to it, Lobux instead requested that Willshaun pay third party suppliers directly as Mr Walsh claims. Lobux would have gained nothing by having these payments made to third parties rather than having progress payments made to it. By contrast, Willshaun was assisted by such an arrangement in that it was only being required to pay particular amounts required to be paid at the relevant time to enable Lobux to continue the construction of the tank. For these reasons, I accept the evidence of Mr Crawford that Willshaun indicated that it was having financial difficulties and made the arrangement to pay third party suppliers directly in order to assist Willshaun.
The inference that Willshaun was not in a financially strong position is supported by its conduct shortly following delivery of the final invoice by Lobux, as referred to below.
On 21 March 2019, Lobux issued invoice 00000047 to Willshaun for the amount of $84,563.78. The invoice credited the payment of the deposit, one progress payment and various payments to third party suppliers (as being “in lieu of progress payments”) and contained this description:
1 x New 81658TDBS Hooklift Backdoor Vacuum Tank with Suction Boom
Serial Number 18111
As per quote 1809005
Capacity: 8,000 litres
At the bottom of the invoice were the words:
COMPLETED WORKS WILL NOT BE RELEASED UNTIL BALANCE OF MONIES ARE RECEIVED
By this time, it had been discussed between Mr Crawford and Mr Walsh that Lobux would be in a position to deliver the completed tank by the end of March 2019. Mr Walsh therefore knew that the final invoice needed to be paid within the next ten days or so.
However, the final invoice was not paid and has never been paid. At trial and having regard to its closing submissions, Willshaun accepted that the “balance purchase price payable” by Willshaun to Lobux is $84,563.78. The submissions of Willshuan also referred to it having an “obligation to pay the balance of the purchase price”.
On 22 March 2019, being the day after the issue of the final invoice, Lobux agreed that Willshaun could transport the tank to an entity called Genuine Auto Electrics for the purposes of some minor works being done to it. Mr Walsh gave this evidence about the arrangement at trial:
And when you were there that night [on 22 March 2019], you told Mr Crawford that you wanted to take the tank to GAE Electrical the next day; is that correct?‑‑‑Yes.
And you told him that you wanted to do it because you wanted to get an emergency stop fitted?‑‑‑Yes.
And you needed GAE Electrical to fit that emergency stop because Lobux didn’t have anyone qualified to fit it; is that correct?‑‑‑Yes.
…
Okay. Now, the emergency stop was not something that you had initially asked Lobux to perform, was it?‑‑‑It’s a standard item on machinery.
My question was did you ask them to perform – to install an emergency – an electrical stop?‑‑‑No.
And it was on that basis that Michael told you that you could take it to – or could – by “it” I mean the vacuum tank to GAE to get it fitted; you agree with that?‑‑‑Yes.
It was understood by Lobux that the tank would be returned to it and it was on this basis that the tank was released. Mr Crawford’s evidence at trial was as follows:
The tank was taken at about 10 o’clock on a Friday night, promised to return lunch time the following Saturday, which all the workers came in to work on it, but no tank turned up.
This oral evidence was consistent with an email which Mr Crawford sent to Mr Walsh on 5 April 2019 which stated:
Further, as agreed, the tank was picked up on Friday the 22nd of March to go to "Genuine Electrics" at Narellan to have “E” stops and the Throttle Linear Actuator wired up (which was part of our quote). I have been advised that further works are been done which is not part of our quote and has not been approved by [Lobux] for payment. You told me that the Hooklift Tank/Unit was required for 4 hours and would then be returned to [Lobux] premises at 11 Shaw Road, Ingleburn on Saturday the 23rd of March to be finished and a final check on operation of the Hooklift Tank/Unit before commissioning and handing the unit over. As of today, the tank has not been returned, [Lobux] agreed to cover 1 days hire of a vehicle (Thursday 21/3/19) only and will not be liable for additional hire days.
(italics omitted)
As at 23 March 2019, the tank was incomplete and further work needed to be performed by Lobux before delivery could occur pursuant to the agreement. As to this, Mr Walsh gave this evidence:
And [Mr Crawford] told you [that] you could take it there, but it needed to be returned later that day?‑‑‑I don’t recall him telling me to return it. That’s incorrect.
But you knew you needed to return it to Lobux once the stop had been finished?‑‑‑Yes.
And you knew that the vacuum tank wasn’t finished at that time, didn’t you?‑‑‑Yes.
So Mr Crawford agreed to let you take the vacuum tank to GAE on 23 March to install the electrical stop; is that correct?‑‑‑Yes.
And that once that had been installed, there was agreement that you would bring it back to Lobux; is that correct?‑‑‑Yes.
And that Lobux would then finish the production of the vacuum tank?‑‑‑Yes.
On 5 April 2019, Mr Crawford sent an email to Mr Walsh which quoted the email dated 5 October 2018 and which also stated:
To answer your question in regards to the additional costs: -
Cyclone, Muffler, Air Cleaner, Pipework, Pulleys and additional labour approximately
$16,500.00.The Motor, Blower & Retractable Hose Reel were approx. $9,000.00 more expensive
FYI: -Please see attached email (5/10/18) where it states "you have requested a larger engine and blower than that quoted, due to not knowing the price at this stage, please keep in mind that the amount will change slightly".
Also attached is the email (19/12/18) requesting payment of the motor invoice, which you in turn paid for, this amount being deducted from your invoice.
…
The Hooklift Tank/Unit has not been paid for and remains the property of [Lobux] and must be returned to [Lobux] at Ingleburn for completion. We shall be requesting that the Auto Electrician advise when they have completed their work so we can arrange for the return of the Hooklift Tank/Unit (see attached "letter").
If the above is not adhered to, a fee of $3000.00 per day will apply from the date of removal from the Auto Electrician until full payment is received.
PLEASE NOTE: If the unit is attempted to be used, [Lobux] WILL NOT BE HELD LIABLE FOR ANY DAMAGE CAUSED as it has not passed final inspection and commissioned for work use.
On 26 April 2019, Willshaun arranged to have the tank inspected by Technoweld and a report prepared of that date which was signed by Mr Fry.
The tank has never been returned to Lobux and the invoice dated 21 March 2019 has never been paid. Willshaun claims that by its conduct in removing the tank, its contract with Lobux was terminated.
On 14 January 2020, Lobux registered a security interest on the Personal Property Securities Register against the tank pursuant to the PPSA.
THE ISSUES
The following issues arise:
(1)Which documents formed the agreement between the parties? In particular, was the tank to be manufactured the one referred to in the May 2018 quote or September 2018 quote?
(2)Does the agreement contain any unfair terms within the meaning of s 24 Australian Consumer Law?
(3)Were any terms of the agreement breached by Lobux such that Willshaun was entitled to terminate the agreement?
(4)Did Willshaun suffer any loss and damage by reason of any breach of the agreement by Lobux?
(5)What, if any, relief should be granted to any party?
Which documents formed the agreement between the parties?
It was common ground that the documents which formed part of the agreement between Lobux and Willshaun included the executed work authorisation form (which referred to a 10,000 litre tank), executed customer information form and attached ‘terms & conditions of trade’.
There is dispute, however, in relation to whether the May 2018 quote (which referred to a 10,000 litre tank) or the September 2018 quote (which referred to an 8,000 litre tank) forms part of the agreement.
Willshaun has not run its case on the basis of a complaint about the size of the tank. Further, Lobux submits that regardless of which of the quotations are accepted as being the “correct” quotation, it bears no material effect on the agreement, insofar as it is relevant to the present dispute.
Notwithstanding this, Willshaun submits that the Court should find that the May 2018 quote formed part of the relevant contractual documentation. It submits that this is because:
(a)there is no direct evidence that the September 2018 quote was sent to Willshaun;
(b)Willshaun paid the $30,000 deposit (excluding GST) on 6 and 7 September 2018, some 18 days before the September 2018 quote even existed;
(c)the work authorisation form, accompanied by the deposit, referred to a tank with a capacity of 10,000 litres, consistently with the May 2018 quote; and
(d)certain importation documents refer to a tank with a capacity of 10,000 litres, consistently with the May 2018 Quote.
However, there is direct evidence that the September 2018 quote was sent to Willshaun. Mr Crawford deposed in his first affidavit that this quote was provided to Mr Walsh of Willshaun on 24 September 2018, and this evidence was not challenged. Further, the September 2018 quote was supplied by Willshaun to Mr Fry (its expert witness) and is referred to in his first report, and so it must have been received by Willshaun.
Further, the September 2018 quote was given following the email from Lobux dated 30 August 2018 which sought payment of the deposit and referred to the need for further discussions being held before a revised quote would issue. That is, the deposit was paid in anticipation of a revised quote, not as a deposit in relation to the quote issued some four months earlier.
While it is correct that documentation such as the work authorisation form referred to 10,000 litres, this is probably an error. Of more significance is the fact that the type of tank which was, in fact, removed in March 2019 by Willshaun and which is referred to in the invoices issued by Lobux is an 81658TDBS Hooklift BackDoor Vacuum Tank with Suction Boom (which is the tank referred to in the September 2018 quote) and not a 101658HDBS Hooklift BackDoor Vacuum Tank with Suction Boom (which is the tank referred to in the May 2018 quote). This is established by the report issued by Technoweld dated 26 April 2019, which states that it was asked by Willshaun to conduct an inspection of an 81658TDBS Hooklift BackDoor Vacuum Tank with Suction Boom on 26 April 2019. The invoice from Genuine Auto Electrics Pty Ltd dated 8 April 2019 also referred to an 81658TDBS Hooklift BackDoor Vacuum Tank with Suction Boom.
Accordingly, the May 2018 quote did not form part of the agreement between the parties. Rather, the September 2018 quote is one of the documents forming part of their agreement.
Does the agreement have any unfair terms?
Impugned terms and conditions
Willshaun alleges that 18 clauses of the ‘terms & conditions of trade’ along with a statement on the work authorisation form and customer information form were unfair terms within the meaning of s 24(1) Australian Consumer Law (being Schedule 2 to the Competition and Consumer Act). The clauses and statement are set out in Schedule A to the statement of cross-claim.
Several of the impugned clauses were abandoned by Willshaun during closing submissions (namely those listed in paragraphs 1(a), 1(b), 1(f), 1(g), 1(h) and 1(n) of Schedule A).
Paragraph 1 of the notice of cross-claim seeks declaratory relief pursuant to s 7 of the Contracts Review Act 1980 (NSW). However, there was no reference to this legislation in Willshaun’s closing submissions, and it appeared not to be pressed.
Lobux conceded that clauses 13.4, 13.7, 16.3 and 21.3 were unfair terms (being the clauses in paragraphs 1(o) – 1(r) of Schedule A).
Taking into account these matters, the remaining terms will now be considered.
Legal principles
Section 23 of the Australian Consumer Law provides:
23 Unfair terms of consumer contracts and small business contracts
(1) A term of a consumer contract or small business contract is void if:
(a) the term is unfair; and
(b) the contract is a standard form contract.
(2) The contract continues to bind the parties if it is capable of operating without the unfair term.
(3) A consumer contract is a contract for:
(a) a supply of goods or services; or
(b) a sale or grant of an interest in land;
to an individual whose acquisition of the goods, services or interest is wholly or predominantly for personal, domestic or household use or consumption.
(4) A contract is a small business contract if:
(a) the contract is for a supply of goods or services, or a sale or grant of an interest in land; and
(b)at the time the contract is entered into, at least one party to the contract is a business that employs fewer than 20 persons; and
(c) either of the following applies:
(i)the upfront price payable under the contract does not exceed $300,000;
(ii) the contract has a duration of more than 12 months and the upfront price payable under the contract does not exceed $1,000,000.
(5)In counting the persons employed by a business for the purposes of paragraph (4)(b), a casual employee is not to be counted unless he or she is employed by the business on a regular and systematic basis.
The meaning of unfair for the purpose of s 23 is provided by s 24, which provides:
24 Meaning of unfair
(1) A term of a consumer contract or small business contract is unfair if:
(a)it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and
(b) it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
(c) it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.
(2) In determining whether a term of a contract is unfair under subsection (1), a court may take into account such matters as it thinks relevant, but must take into account the following:
(a) the extent to which the term is transparent;
(b) the contract as a whole.
(3) A term is transparent if the term is:
(a) expressed in reasonably plain language; and
(b) legible; and
(c) presented clearly; and
(d) readily available to any party affected by the term.
(4) For the purposes of subsection (1)(b), a term of a contract is presumed not to be reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term, unless that party proves otherwise.
Section 25 provides a non-exhaustive list of examples of terms with may be unfair terms, including relevantly:
25 Examples of unfair terms
Without limiting section 24, the following are examples of the kinds of terms of a consumer contract or small business contract that may be unfair:
...
(f) a term that permits, or has the effect of permitting, one party to vary the upfront price payable under the contract without the right of another party to terminate the contract;
...
(k) a term that limits, or has the effect of limiting, one party’s right to sue another party;
...
(emphasis added)
Section 250 of the Australian Consumer Law provides:
250 Declarations relating to consumer contracts and small business contracts
(1) The Court may declare that a term of a consumer contract is an unfair term, on application by:
(a) a party to the contract; or
(b) the regulator.
(2) The Court may declare that a term of a small business contract is an unfair term, on application by:
(a) a party to the contract, if the party was a business of the kind referred to in paragraph 23(4)(b) at the time the contract was entered into; or
(b) the regulator.
(3) Subsections (1) and (2) do not apply unless the contract is a standard form contract.
(4) Subsections (1) and (2) do not apply if Part 2 – 3 does not apply to the contract.
(5) Subsections (1) and (2) do not limit any other power of the court to make declarations.
In Australian Competition and Consumer Commission v Fuji Xerox Australia Pty Ltd (2021) 150 ACSR 165; [2021] FCA 153, Stewart J noted that the provisions regarding unfair contract terms under the Australian Securities and Investments Commission Act 2001 (Cth) are materially identical to the unfair contract provisions under the Australian Consumer Law.
The following general principles in relation to unfair contract terms were identified by Gilmour J (albeit in the context of interpreting the Australian Securities and Investments Commission Act) in Australian Competition and Consumer Commission v CLA Trading Pty Ltd [2016] ATPR 42-517; [2016] FCA 377 at [54]:
(a)the underlying policy of unfair contract terms legislation respects true freedom of contract and seeks to prevent the abuse of standard form consumer contracts which, by definition, will not have been individually negotiated;
(b)the requirement of a “significant imbalance” directs attention to the substantive unfairness of the contract;
(c)it is useful to assess the impact of an impugned term on the parties’ rights and obligations by comparing the effect of the contract with the term and the effect it would have without it;
(d)the “significant imbalance” requirement is met if a term is so weighted in favour of the supplier as to tilt the parties’ rights and obligations under the contract significantly in its favour – this may be by the granting to the supplier of a beneficial option or discretion or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty;
(e)significant in this context means “significant in magnitude”, or “sufficiently large to be important”, “being a meaning not too distant from substantial”;
(f)the legislation proceeds on the assumption that some terms in consumer contracts, especially in standard form consumer contracts, may be inherently unfair, regardless of how comprehensively they might be drawn to the consumer’s attention;
(g)in considering “the contract as a whole”, not each and every term of the contract is equally relevant, or necessarily relevant at all. The main requirement is to consider terms that might reasonably be seen as tending to counterbalance the term in question.
(citations omitted)
In Australian Competition and Consumer Commission v Smart Corporation Pty Ltd (No 3) (2021) 153 ACSR 347; [2021] FCA 347 at [65], Jackson J adopted the principles set out in CLA Trading to Part 2 – 3 of the Australian Consumer Law, which contains s 23 and s 24 on the basis that the legislation was not materially different. I will adopt the same approach.
In Australian Competition and Consumer Commission v Chrisco Hampers Australia Ltd (2015) 239 FCR 33; [2015] FCA 1204, Edelman J summarised the principles in relation to the application of s 24 at [43] as follows:
(1) for a term to be unfair it must satisfy the requirements of all of s 24(1)(a) to (c);
(2) the onus is upon the applicant to prove the matters in s 24(1)(a) and (c) but it is upon the respondent in relation to s 24(1)(b);
(3) s 24(2)(a) only requires the Court to consider transparency in relation to the particular term that is said to be unfair and only in relation to the matters concerning that term in s 24(1)(a) to (c);
(4) similarly, the assessment of the contract as a whole in s 24(1)(c) only requires the Court to consider the contract as a whole in relation to the particular term that is said to be unfair and only in relation to the matters concerning that term in s 24(1)(a) to (c);
(5)as the Explanatory Memorandum to the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth) provided at [5.39], “if a term is not transparent it does not mean that it is unfair and if a term is transparent it does not mean that it is not unfair”; and
(6) guidance can be had to s 25 which provides examples of unfair terms.
Analysis
It was common ground that the agreement was a standard form contract.
The next issue is whether the contract was a small business contract. The agreement was for the supply of goods, namely the tank; the upfront price payable under the agreement was less than $300,000; and Mr Walsh gave unchallenged evidence that Willshaun employed fewer than 20 employees. Consequently, the contract was a small business contract: s 23(4) Australian Consumer Law.
What remains to be considered is whether each of the impugned clauses is unfair.
Clause 5.2
The impugned parts of clause 5.2 provided:
At [Lobux’s] sole discretion, the Price shall be either;
(a) as indicated on any invoice provided by [Lobux] to [Willshaun]; or
(b) the Price as at the date of delivery of the Goods according to [Lobux’s] current price list; or
…
Clauses 5.2(a) and 5.2(b) are transparent within the meaning of s 24(3) Australian Consumer Law. They are expressed in reasonably plain language, they are legible, they are presented clearly and they were readily available to Willshaun. Willshaun did not submit otherwise.
However, clauses 5.2(a) and 5.2(b) operate to permit Lobux to vary the price under the agreement without the right of Willshaun to terminate. This is an example of an unfair term identified in s 25(f). As the terms and conditions do not provide any means of termination or other challenge by Willshaun in the event of such a unilateral variation of price, and do not contain any qualification or limitation on Lobux’s ability to vary the price, these clauses give rise to a significant imbalance in the parties’ rights of the kind described in CLA Trading.
Further, Lobux has not demonstrated that the clauses are reasonably necessary in order to protect its legitimate interests. It has therefore not rebutted the presumption which arises pursuant to s 24(4) Australian Consumer Law.
These clauses, if relied upon, would cause detriment to Willshaun within the meaning of s 24(1)(c) as they would allow for the unilateral variation of price by Lobux without restriction.
Consequently, clauses 5.2(a) and 5.2(b) are unfair terms within the meaning of s 24 Australian Consumer Law.
Clause 5.8
Clause 5.8 provides that:
[Willshaun] shall not be entitled to set off against, or deduct from the Price, any sums owed or claimed to be owed to [Willshaun] by [Lobux] nor to withhold payment of any invoice because part of that invoice is in dispute.
Lobux submits that the clause is reasonably necessary to protect its legitimate interests in circumstances where it is exposed to incurring significant costs in the production of the tank prior to payment being made and received from Willshaun.
Furthermore, Lobux submits that the clause is transparent as it is “obvious on its face what it provides”. I agree that the term is transparent within the meaning of s 24(3) Australian Consumer Law. It is expressed in reasonably plain language, it is legible, it is presented clearly and it was readily available to Willshaun.
Other than making passing reference to clause 5.8, Willshaun did not make specific submissions to support its claim that clause 5.8 is an unfair term or to demonstrate that all of the elements of s 24(1) had been met in relation to it.
If the agreement did not contain clause 5.8, a customer such as Willshaun could avoid paying the price for the machine ordered by it by making a spurious claim against Lobux for damages or by raising any form of dispute about the invoice. Absent clause 5.8, Lobux would be required to bear the burden of the costs incurred by it in relation to the manufacture of the machine until any such dispute was resolved.
While the effect of clause 5.8 is to shift the risk associated with any dispute away from Lobux, it does not “tilt the parties’ rights and obligations under the contract significantly in its favour” so as to justify a finding that there is a significant imbalance in the parties’ rights and obligations under the agreement. Further, in circumstances where Lobux will be exposed to incurring significant costs in the production of the tank prior to payment being received from Willshaun, the clause is reasonably necessary to protect Lobux’s legitimate interests.
Having regard to the agreement as a whole, and taking into account these matters, I am not persuaded that clause 5.8 is an unfair term.
Clause 6.4 (first two sentences)
The first two sentences of clause 6.4 which are the subject of Willshaun’s claim state:
The delivery period quoted commences from the date [Lobux] receives the required deposit with any time specified by [Lobux] for Delivery of the Goods is an estimate only. [Lobux] will not be liable for any loss or damage incurred by [Willshaun] as a result of Delivery being late.
Willshaun submits that the impugned sentences in clause 6.4 (along with clauses 12.2, 13.4, 13.7, 16.3 and 21.3) have the effect of severely limiting its right to sue Lobux within the meaning of s 25(k) of the Australian Consumer Law.
However, this submission cannot be accepted in relation to the first sentence of clause 6.4 which identifies when the delivery period commences and that any time specified by Lobux for delivery is an estimate only. That sentence does not “have the effect of severely limiting its right to sue Lobux” which is the professed basis of challenge to clause 6.4.
The second sentence in clause 6.4 does limit Willshaun’s right to sue Lobux. This corresponds with s 25(k) which lists, as an example of a term that may be unfair, a term that limits, or has the effect of limiting, one party’s right to sue another party. However, that the clause corresponds to an example given in the legislation is not conclusive, having regard to the words used in the chapeaux in s 25.
Lobux submits that clause 6.4 did not cause a significant imbalance in the parties’ rights and obligations arising under the agreement because time of delivery was not expressed to be of the essence and it was “inherently subject to change”.
Clause 6.4 forms part of an overall agreement for the manufacture of a custom-made machine. As it is custom-made, it is self-evident that issues might arise in its manufacture which Lobux could not reasonably anticipate when it gave its estimated delivery time of eight weeks from 30% deposit. Time was not expressed to be of the essence in the agreement and the delivery period referred to in the quotation is expressly agreed by the parties to be an estimate only. While clause 6.4 does operate to exclude Lobux’s liability for damages if delivery was later than that estimated, this was not unfair to Willshaun in these circumstances.
Further, the third sentence in clause 6.4, which is not the subject of complaint by Willshaun, provides that both parties agree that they shall make every endeavour to enable the “Goods” to be delivered at the time and place as was arranged between both parties. This ameliorates the limitation on the liability of Lobux which is found in the second sentence because it means that, although Lobux will not be liable if its estimated delivery date is not achieved, it still promises to make every endeavour to achieve it.
Clause 6.4 is also transparent within the meaning of s 24(3) Australian Consumer Law. It is expressed in reasonably plain language, it is legible, it is presented clearly and it was readily available to Willshaun. Willshaun did not submit otherwise.
In these circumstances and for these reasons, the impugned sentences in clause 6.4 are reasonably necessary to protect the legitimate interests of Lobux to exclude liability for loss as a result of delivery being later than any quoted (and estimated) date. Further, the inclusion of these sentences of clause 6.4 into the agreement did not cause a significant imbalance in the parties’ rights and obligations under the agreement, especially having regard to the third sentence in clause 6.4.
For these reasons, clause 6.4 is not an unfair term.
Clause 10.3
Clause 10.3 provides:
It is further agreed that, until ownership of the Goods passes to the Customer in accordance with clause 10.1:
(a) the Customer is only a bailee of the Goods and must return the Goods to [Lobux] on request.
(b) the Customer holds the benefit of the Customer’s insurance of the Goods on trust for [Lobux] and must pay to [Lobux] the proceeds of any insurance in the event of the Goods being lost, damaged or destroyed.
(c) the Customer must not sell, dispose, or otherwise part with possession of the Goods other than in the ordinary course of business and for market value. If the Customer sells, disposes or parts with possession of the Goods then the Customer must hold the proceeds of any such act on trust for [Lobux] and must pay or deliver the proceeds to [Lobux] on demand.
(d) the Customer should not convert or process the Goods or intermix them with other goods but if the Customer does so then the Customer holds the resulting product on trust for the benefit of [Lobux] and must sell, dispose of or return the resulting product to [Lobux] as it so directs.
(e) the Customer irrevocably authorises [Lobux] to enter any premises where [Lobux] believes the goods are kept and recover possession of the Goods.
(f) [Lobux] may recover possession of any Goods in transit whether or not delivery has occurred.
(g) the Customer shall not charge or grant an encumbrance over the Goods nor grant nor otherwise give away any interest in the Goods while they remain the property of [Lobux].
(h) [Lobux] may commence proceedings to recover the Price of the Goods sold notwithstanding that ownership of the Goods has not passed to the Customer.
By clause 10.1, which is not the subject of challenge as being an unfair term, the parties agreed that ownership of the tank would not pass until Willshaun had paid all amounts owing to Lobux and otherwise met all of its obligations.
Willshaun submits that clause 10.3 (along with clauses 11, 12.1 and 12.3) and the guarantee contained in the work authorisation form grant security interests to Lobux which provide “an overabundance of security in light of the reciprocal obligations of [Willshaun] and relative risk of non-payment by [Willshaun].”
The facts relied upon to submit that there is a relative risk of non-payment by Willshaun are not identified by reference to the evidence or otherwise. On its own case and at the time of entry into the agreement, Willshaun operated a small business. It had one director and only one or two employees. Lobux was engaged by Willshaun to manufacture a custom-made machine in relation to which it would incur upfront costs, and there was at least some risk that the machine would not be able to be readily sold if Willshaun did not pay the not insignificant price.
Lobux submits that clause 10 was reasonably necessary to protect its legitimate interests in circumstances where it is exposed to incurring significant costs in the production of the tank prior to payment being made and received from Willshaun.
In circumstances where clause 10.1 forms part of the parties’ agreement and is not challenged as being unfair, clause 10.3 identifies the parties’ rights and obligations when clause 10.1 applies.
That is, clause 10.3 identifies the terms of the parties’ agreement which apply to the situation where, as occurred here, the “Goods” came into the possession of the “Customer” in circumstances where the “Customer” had not paid for them and therefore ownership had not passed. Without clause 10.3, there would be a lack of clarity (and potential disputation) about the parties’ rights and obligations in this scenario, which would not be beneficial to either party.
For these reasons, clause 10.3 does not confer a security interest on Lobux as submitted by Willshaun and it does not “tilt the parties’ obligations under the contract significantly” in Lobux’s favour. For this reason and having regard to the agreement as a whole, the inclusion of clause 10.3 did not cause a significant imbalance in the parties’ rights and obligations under the agreement.
Clause 10.3 is transparent within the meaning of s 24(3) Australian Consumer Law. It is expressed in reasonably plain language, it is legible, it is presented clearly and it was readily available to Willshaun. Willshaun did not submit otherwise.
Further, clause 10.3 is reasonably necessary to protect the legitimate interests of Lobux in relation to the situation where Willshaun came into possession of the tank but had not paid all that was owing in relation to it, such that ownership in the tank had not passed.
For these reasons, clause 10.3 is not an unfair term.
Clause 11
Schedule A refers to clause 11, but without setting out any part of it. It appears to be accepted by Lobux that the attack is on the entirety of clause 11, and this is consistent with Willshaun’s submissions also. Clause 11 provides:
11.Personal Properties Securities Act 2009 (“PPSA”)
11.1 In this clause financing statement, financing change statement, security agreement, and security interest has the meaning given to it by the PPSA.
11.2 Upon assenting to these terms and conditions in writing the Customer acknowledges and agrees that these terms and conditions constitute a security agreement for the purpose of the PPSA and creates a security interest in all Goods and/or collateral (account) – being a monetary obligation of the Customer to [Lobux] for Services – that have previously been supplied and that will be supplied in the future by [Lobux] to the Customer.
11.3 The Customer undertakes to:
(a) promptly sign any further documents and/or provide any further information (such information to be complete, accurate and up-to-date in all respects) which [Lobux] may reasonably require to;
(i) register a financing statement or financing change statement in relation to a security interest on the Personal Property Securities Register;
(ii) register any other document required to be registered by the PPSA; or
(ii) correct a defect in a statement referred to in clause 11.3(a)(i) or 11.3(a)(ii);
(b) indemnify, and upon demand reimburse, [Lobux] for all expenses incurred in registering a financing statement or financing change statement on the Personal Property Securities Register established by the PPSA or releasing any Goods charged thereby;
(c) not register a financing change statement in respect of a security interest without the prior written consent of [Lobux];
(d) not register, or permit to be registered, a financing statement or a financing change statement in relation to the Goods and/or collateral (account) in favour of a third party without the prior written consent of [Lobux];
(e) immediately advise [Lobux] of any material change in its business practices of selling the Goods which would result in a change in the nature of proceeds derived from such sales.
11.4 [Lobux] and the Customer agree that sections 96, 115 and 125 of the PPSA do not apply to the security agreement created by these terms and conditions.
11.5The Customer waives their rights to receive notices under sections 95, 118, 121(4), 130, 132(3)(d) and 132(4) of the PPSA.
11.6 The Customer waives their rights as a grantor and/or a debtor under sections 142 and 143 of the PPSA.
11.7 Unless otherwise agreed to in writing by [Lobux], the Customer waives their right to receive a verification statement in accordance with section 157 of the PPSA.
11.8 The Customer must unconditionally ratify any actions taken by [Lobux] under clauses 11.3 to 11.5.
11.9 Subject to any express provisions to the contrary (including those contained in this clause 11), nothing in these terms and conditions is intended to have the effect of contracting out of any of the provisions of the PPSA.
Willshaun submits that clause 11, when considered with clause 10.3, 12.1, 12.3 and the work authorisation form, grants Lobux security interests which provide it with “an overabundance of security in light of the reciprocal obligations of [Willshaun] and relative risk of non-payment by [Willshaun]” and that therefore clause 11 is not reasonably necessary.
As observed earlier in these reasons, the facts relied upon to submit that there is a relative risk of non-payment by Willshaun are not identified by reference to the evidence or otherwise.
Lobux submits that clause 11 was not unfair as the terms of the clause were permitted under the PPSA or Personal Properties Securities Regulations 2010 (Cth) and the clause was reasonably necessary to protect its legitimate interests.
Those legitimate interests include, of course, protection of Lobux’s continued ownership of the tank pursuant to clause 10.1 (when that term applied). Lobux also had a legitimate interest in ensuring that Willshaun complied with its obligations under clause 10.3 (when that term applied).
While it is correct that, unlike clause 10.3, clause 11.2 creates a security interest in the tank in favour of Lobux, the balance of clause 11 is either permitted by the PPSA or is directed at protecting the security interest created by clause 11.2.
In the circumstances, clause 11 does not give rise to a situation where there is an “overabundance of security” when considered in the context of the agreement as a whole (leaving aside clause 12, which is addressed below). That is because clause 10.1 provides that ownership of the tank did not pass in certain circumstances, clause 10.3 delineated the parties’ rights and obligations when clause 10.1 applies and clause 11 provides Lobux with a form of legal protection of its ownership rights which protection was available to it pursuant to legislation which facilitated this.
Clause 11 is expressed in reasonably plain language, it is legible, it is presented clearly and it was readily available to Willshaun. It is therefore transparent within the meaning of s 24(3). Willshaun does not submit otherwise.
For these reasons, the clause does not cause a significant imbalance in the parties’ rights and obligations under the agreement and it is reasonably necessary to protect the legitimate interests of Lobux.
Clause 11 is not an unfair term.
Clause 12
Clause 12 provides as follows:
12. Security and Charge
12.1In consideration of [Lobux] agreeing to supply the Goods, the Customer charges all of its rights, title and interest (whether joint or several) in any land, realty or other assets capable of being charged, owned by the Customer either now or in the future, to secure the performance by the Customer of its obligations under these terms and conditions (including, but not limited to, the payment of any money).
12.2The Customer indemnifies [Lobux] from and against all [Lobux’s] costs and disbursements including legal costs on a solicitor and own client basis incurred in exercising [Lobux’s] rights under this clause.
12.3The Customer irrevocably appoints [Lobux] and each director of [Lobux] as the Customer’s true and lawful attorney/s to perform all necessary acts to give effect to the provisions of this clause 12 including, but not limited to, signing any document on the Customer’s behalf.
Willshaun again submits that clause 12 provides Lobux with “an overabundance of security in light of the reciprocal obligations of [Willshaun] and relative risk of non-payment by [Willshaun]” when read with clauses 10.3 and 11 as well as the work authorisation form.
Lobux submits that clause 12 was reasonably necessary to protect its legitimate interests in circumstances where it is exposed to incurring significant costs in the production of the tank prior to payment being made and received from Willshaun.
There was no submission by Willshaun that clause 12 was not transparent. However, clause 12.1 is not expressed in reasonably plain language which means that it cannot be concluded that it is transparent within the meaning of s 24(3) Australian Consumer Law. For example, the expression “any land, realty or other assets capable of being charged” is not expressed in reasonably plain language and would likely leave the customer in a position of uncertainty as to the meaning and effect of this clause.
When considered in the context of the agreement as a whole (including, in particular, clauses 10 and 11 which provide an appropriate level of protection of Lobux’s legitimate interests), clause 12 creates a significant imbalance in the parties’ rights and obligations arising under the agreement. It charges all rights, title and interests in all of the customer’s assets which are “capable of being charged” either “now or in the future”. Such a clause is excessive. Further, Lobux has not rebutted the presumption that the clause is not reasonably necessary in order to protect its legitimate interests. Finally, it is self-evident that clause 12 would cause detriment to Willshaun if Lobux sought to rely on it.
For these reasons, even if Willshaun had been able to claim damages (and had established that there was a breach of the agreement because of the failure to supply the tank by 19 November 2018), its evidence did not establish its pleaded claim for loss of profits alleged to have been suffered by it. That claim would have failed in any event.
What, if any, relief should be granted to any party?
Having regard to the findings above and the concessions by Lobux, Willshaun has succeeded in its claim that clauses 5.2(a), 5.2(b), 12, 13.4, 13.7, 16.3 and 21.3 of the terms and conditions are unfair and that the agreement is a standard form contract within the meaning of s 23(1) Australian Consumer Law, which means that these terms are void.
Willshaun seeks a declaration that these terms are void ab initio pursuant to s 250 of the Australian Consumer Law. However, s 250 provides that a declaration may be made that these terms are an unfair term. A modified form of declaration will be made.
My present view is that no additional order is warranted in relation to these unfair terms, having regard to the evidence which was adduced at the trial and the other findings which have been made. However, the parties will be invited to make submissions as to the necessity for any further relief being granted in relation to clauses 5.2(a), 5.2(b), 12, 13.4, 13.7, 16.3 and 21.3 of the terms and conditions of the agreement, which submissions should take into account the findings in these reasons, the evidence adduced at the trial and whether there is utility in making any further orders.
Having regard to its closing submissions and as its case for damages for breach of contract has failed, no order will be made as sought by Willshaun that Lobux pay it damages in the amount of $191,136.22.
Further and having regard to the findings which I have made, no order will be made as sought by Willshaun in its closing submissions that “nothing further is owing under the contract and ownership of the [tank] has passed to [Willshaun]”. That is because Willshaun has not paid Lobux all amounts owing under the agreement (including, even on its own case, the amount owed pursuant to the final invoice). Because of this and pursuant to clause 10.1 of the terms and conditions, ownership of the tank did not pass to Willshaun when it removed the tank from Lobux’s premises in March 2019.
Pursuant to clause 10.3(a) of the terms and conditions, and as ownership of the tank has not passed, Willshaun is only a bailee of the tank and must return it to Lobux on request.
By email dated 5 April 2019, Lobux requested that Willshaun return the tank to it.
Paragraph 2 of the amended originating application seeks an order requiring Willshaun to deliver the tank (and any keys) to Lobux or its agent at such time and at an address nominated by Lobux. This relief appears to be founded upon clause 10.3(a) of the terms and conditions, and no challenge is made to this form of relief in Willshaun’s submissions.
An alternative form of relief which is sought by Lobux is that it or its agent be permitted to enter and remain on any premises where it reasonably believes the tank is kept and recover possession of the tank, which relief appears to be founded upon the contractual right contained in clause 10.3(e) of the terms and conditions. Associated declaratory relief is also sought in connection with this relief.
However, it will expedite the return of the tank and its keys, at Willshaun’s cost (which it should bear), if Willshaun is ordered to deliver up the tank and keys to Lobux. This will also minimise disputes, including about the precise location of the tank and whether, if it is not located on property owned or controlled by Willshaun, an order that Willshaun permit entry onto the premises where the tank is located will have any utility. For the same reasons, the declaration which is sought by Lobux will also not be made.
CONCLUSION
Lobux is entitled to an order requiring Willshaun to deliver the tank (and any keys) to it. The order sought will be modified such that the tank is forthwith delivered back to Lobux at its business premises during business hours with Willshaun bearing the cost of its delivery. I will also grant the parties liberty to apply.
Willshaun is entitled to a declaration that clauses 5.2(a), 5.2(b), 12, 13.4, 13.7, 16.3 and 21.3 of the terms and conditions of the agreement are unfair contract terms within the meaning of s 24 of the Australian Consumer Law (being Schedule 2 to the Competition and Consumer Act) and are void by operation of s 23 of the Australian Consumer Law.
The parties will be invited to make submissions as to the necessity for any further relief being granted in relation to clauses 5.2(a), 5.2(b), 12, 13.4, 13.7, 16.3 and 21.3 of the terms and conditions of the agreement, which submissions should take into account the findings in these reasons, the evidence adduced at the trial and whether there is utility in making any further orders.
The parties will also be invited to make submissions about costs.
I certify that the preceding two hundred and forty (240) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Downes. Associate:
Dated: 11 March 2022