Lobux Pty Ltd v Willshaun Pty Ltd - [2022] FCA 204

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…

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: [2022] FCA 204
Decision Date: 11 March 2022

CaseChat Overview and Summary

Lobux Pty Ltd, the manufacturer, brought an action against Willshaun Pty Ltd, the purchaser, over the sale of a custom-made Hooklift Backdoor Vacuum Tank. Lobux sought delivery of the tank, costs of delivery, and a declaration that certain terms in the agreement were unfair and void. Willshaun, on the other hand, resisted the claim and argued that Lobux had repudiated the contract by delaying the delivery and not fulfilling certain specifications. Additionally, Willshaun claimed that Lobux had not fulfilled its obligations under the contract and sought damages for the loss of opportunity.

The primary legal issues in this case were whether Willshaun's removal of the tank constituted a valid termination of the contract, whether Lobux was entitled to damages for the loss of opportunity, and whether certain clauses in the agreement were unfair contract terms under the Australian Consumer Law. The court found that Willshaun had prevented Lobux from completing the construction of the tank, which constituted a breach of contract. Therefore, Lobux was not liable for any delay or defects in the machine. The court also found that the expert's opinions were based on hearsay and assumptions that were not established by the evidence, and therefore, they were rejected as having no weight. Furthermore, the court found that certain clauses in the agreement, including the retention of title clause, the security interest clause, and the charge over all assets clause, were unfair contract terms under the Australian Consumer Law. These clauses were deemed to be significantly weighted in favour of Lobux and imposed a disadvantageous burden on Willshaun.

The court ordered Willshaun to deliver the tank and any keys to Lobux at its business premises during business hours, with Willshaun bearing the cost of delivery. The court also declared that certain clauses in the agreement were unfair contract terms and void under the Australian Consumer Law. The court invited the parties to make submissions on any further relief that may be appropriate in relation to the unfair contract terms, as well as any costs associated with the proceedings. The court's decision was based on the principles of fairness and freedom of contract, which are fundamental to Australian contract law. The court also noted that the Australian Consumer Law aims to prevent the abuse of standard form consumer contracts, which are not individually negotiated. The court's decision in this case reinforces the importance of ensuring that contracts are fair and reasonable, and that parties do not take advantage of each other.

Orders

Orders of the court

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.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

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.

Ratio Decidendi

Legal Principle Established

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)

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…