Newham v The Peninsula School
[2021] FedCFamC2G 273
•17 November 2021
Federal Circuit AND FAMILY Court of Australia (DIVISION 2)
Newham v The Peninsula School [2021] FedCFamC2G 273
File number(s): MLG2164 of 2020 Judgment of: JUDGE RILEY Date of judgment: 17 November 2021 Catchwords: CONSUMER LAW – fee agreement whereby a teacher at a private school was entitled to a certain percentage remission from the prevailing rate of tuition fees for each of her daughters – whether the fee agreement permitted the school to unilaterally reduce the percentage of the remission – whether the contractual terms permitting such a reduction were unfair within the meaning of s.23 of the Australian Consumer Law – whether the school’s conduct in purporting to reduce the percentage of the remission was unconscionable within the meaning of s.21 of the Australian Consumer Law. Legislation: The Australian Consumer Law ss.21(1), 22(1), 23(1), (2) and (3), 24, 25(a) and (d) and 27 Cases cited: Australian Competition and Consumer Commission (ACCC) v ACN 117 372 915 Pty Ltd (in Liq) (formerly Advanced Medical Institute Pty Ltd)[2015] FCA 368
Australian Competition and Consumer Commission (ACCC) v Medibank Private Ltd (2018) 267 FCR 544 [2018] FCAFC 235
Jetstar Airways Pty Ltd v Free [2008] VSC 539
Number of paragraphs: 145 Date of hearing: 27, 28 and 29 September 2021 Place: Melbourne Counsel for the Applicant Jess Moir Solicitor for the Applicant Maurice Blackburn Lawyers Counsel for the Respondent Chris O’Grady QC with Andrew Denton Solicitor for the Respondent FCW Lawyers ORDERS
MLG2164 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MELISSA NEWHAM
ApplicantAND: THE PENINSULA SCHOOL (ACN 004 451 192)
Respondent
order made by:
JUDGE RILEY
DATE OF ORDER:
17 November 2021
THE COURT DECLARES THAT:
1.The amount of tuition fees payable under the fee agreement between Peninsula Grammar School and Ms Newham and her husband in respect of Mr and Ms Newham’s older daughter is 25% of the prevailing rate of tuition fees and, subject to Ms Newham’s ongoing employment at Peninsula Grammar School, and any further agreement, that percentage of the prevailing rate of tuition fees payable in respect of the older daughter is to remain fixed until the older daughter completes year 12.
2.The amount of tuition fees payable under the fee agreement between Peninsula Grammar School and Ms Newham and her husband in respect of Mr and Ms Newham’s younger daughter is 30% of the prevailing rate of tuition fees and, subject to Ms Newham’s ongoing employment at Peninsula Grammar School, and any further agreement, that percentage of the prevailing rate of tuition fees payable in respect of the younger daughter is to remain fixed until the younger daughter completes year 12.
3.Peninsula Grammar School engaged in unconscionable conduct, in breach of s.21(1) of the Australian Consumer Law, by sending to Ms Newham the letter dated 9 April 2020.
Note: The form of the order is subject to the entry in the court’s records.
Note:This copy of the court’s reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE RILEY:
Introduction
This is an application in contract and unconscionable conduct.
The applicant, Ms Newham, has been a teacher at Peninsula Grammar School (previously The Peninsula School) since January 2011. She was employed at first on a fixed term contract, and then, from 30 January 2012, on a permanent basis. She teaches commerce and is Head of House.
The respondent is Peninsula Grammar School. The school is a co-educational, Anglican, independent school. It has about 1,300 students from kindergarten to year 12. It has both day students and boarders. It is located in Mt Eliza. The principal of the school is Stuart Johnston.
Ms Newham has two daughters. So these reasons for judgment will not come up in a Google search of the girls’ names in years to come, the parties agreed that the girls’ names should not be used in these reasons for judgment. I will refer to them as the older girl and the younger girl.
Ms Newham’s contract of employment as a permanent was signed by Ms Newham on 11 November 2011. The contract of employment stated that permanent, full time staff would receive a concession for tuition fees of 65% of the prevailing rate for the eldest child in the family who was enrolled at the school and 50% for younger children.
The girls attended the school from February 2012 until May 2015. During that time, they received the concessions mentioned above for their tuition fees. The older girl commenced at prep level and the younger girl commenced at kinder level. They left when the older girl was in grade 3 and the younger girl was in grade 2. At that point, they went to the local primary school. Ms Newham said in paragraph 24 of her affidavit affirmed on 1 June 2021 that she and her husband could not afford to send the girls to Peninsula Grammar if the tuition fee concessions were 65% and 50% of the prevailing rate.
In or about August 2017, when the older girl was in grade 5, Ms Newham was thinking about secondary schools. She heard that some teachers at Peninsula Grammar had negotiated higher rates of tuition fee remission than the 65% and 50% that she had been given. She approached Mr Johnston, the principal, and asked if she could have a higher level of fee remission. He said that, if he did give a higher level of fee remission, Ms Newham would have to agree to the girls staying at the school until they finished year 12.
Peninsula Grammar had a policy of each student cohort being at least 40% girls. The school’s waiting list for boys was often very long, while the enrolments for girls were “incredibly competitive” between schools in Peninsula Grammar’s catchment, to quote Mr Johnston. The school did what it could to secure the enrolment of girls, so that it could immediately offer spots to boys who had been waiting. In September 2017, the enrolments of girls at Peninsula Grammar were dropping.
In this context, Mr Johnston arranged for his executive assistant, Ms Oddy, to send Ms Newham an email on 28 September 2017 that attached a fee calculation spreadsheet. The spreadsheet, with the girls’ names redacted, is attached as Annexure A. It showed the projected tuition fees for each year level from 2018 until 2025, when the younger girl will finish year 12. The spreadsheet indicated that the projection was based on an assumed 4% annual increase in the base rate for tuition fees.
The spreadsheet indicated that, in respect of the older girl, the concession would be 75%, and in respect of the younger girl, 70% from the base rate. For each year until the younger girl finished year 12, the spreadsheet set out figures for each girl for the amount of fees that would be payable if they were given no concession, and the amount of fees that would be payable with the nominated concessions, assuming a 4% annual increase in the base rate of tuition fees.
The spreadsheet indicated that, assuming a 4% annual increase in the base rate of tuition fees, the total amount that Ms Newham would pay in tuition fees would be $117,588, and her total concession would be $307,353, for the period 2018 to 2025 inclusive.
The older girl wanted to finish primary school at her local school. Eventually, Ms Newham and the school agreed that the older girl would recommence at Peninsula Grammar in year 7 in 2019 and the younger girl would recommence at Peninsula Grammar in year 5 in 2018 on the basis that their tuition fees would be remitted by 75% for the older girl and 70% for the younger girl.
In November 2017, Ms Newham, her husband and the school signed an enrolment agreement for the younger girl. In June and July 2018, they all signed an enrolment agreement for the older girl.
The girls duly commenced at the school, the younger one in 2018 in year 5 and the older one in year 7 in 2019.
On 9 April 2020, in the context of the COVID-19 pandemic and online learning, Mr Johnston sent an email to parents, including Ms Newham, saying that all students would have their tuition fees reduced by at least 30% for the period May to August 2020, but students who already received a higher remission would not be eligible for this reduction.
A few minutes later on 9 April 2020, Mr Johnston sent staff, including Ms Newham, an email saying that, in the unprecedented circumstances, all children of staff would have a flat tuition fee remission of 50%, instead of their existing tuition fee remission.
Ms Newham challenged the increase in fees payable for her children, including by filing this legal proceeding on 23 June 2020. The school undertook not to require Ms Newham to pay the additional fees until the dispute was resolved.
By letter dated 1 April 2021, Mr Johnston informed staff that their original level of fee remissions would be reinstated from January 2021, and any additional fees staff had paid in 2020 would be credited to their accounts.
Ms Newham continued to be concerned that the school would again reduce the amount of her tuition fee remission before her daughters finished year 12. Ms Newham submitted that:
(a)the 2020 reduction in her tuition fee remission was, and any future reduction would be, in breach of the terms of her agreement with the school for the enrolment of her daughters, and in breach of her employment contract; and
(b)the 2020 reduction in her fee remission was unconscionable conduct within the meaning of s.21 of the Australian Consumer Law.
In these circumstances, she seeks:
1.A declaration that the amount of tuition fees payable under [the younger girl’s] Enrolment Agreement is 30% of the prevailing rate of tuition fees and (subject to Ms Newham’s ongoing employment at Peninsula Grammar) the percentage of the prevailing rate of tuition fees payable will remain fixed until [the younger girl] completes year 12.
2.A declaration that the amount of tuition fees payable under [the older girl’s] Enrolment Agreement is 25% of the prevailing rate of tuition fees and (subject to Ms Newham’s ongoing employment at Peninsula Grammar) the percentage of the prevailing rate of tuition fees payable will remain fixed until [the older girl] completes year 12.
3.A declaration that, under the Contract of Employment, Ms Newham is entitled to a 70% concession in respect of [the younger girl’s] tuition fees while [the younger girl] is enrolled at Peninsula Grammar and a 75% concession in respect of [the older girl’s] tuition fees while [the older girl] is enrolled at Peninsula Grammar.
4.An order that Peninsula Grammar perform its contractual obligations.
5.A declaration that Peninsula Grammar engaged in unconscionable conduct, in breach of s 21(1) of the Australian Consumer Law.
6. Interest.
7. Costs.
The school argued that:
(a)the terms of its contracts with Ms Newham permitted it to reduce the rates of tuition fee remission for her children, particularly in exceptional circumstances such as a global pandemic;
(b)Ms Newham’s employment contract was not affected by the fee remission agreement;
(c)the school’s conduct in 2020 was not unconscionable; and
(d)the court was in no position to assess the school’s possible future unconscionability.
MATERIAL RELIED UPON
At the final hearing on 27, 28 and 29 September, the applicant relied upon:
(1)the affidavit affirmed by Melissa Newham on 1 June 2021;
(2)the affidavit affirmed by Melissa Newham on 2 August 2021;
(3)the affidavit affirmed by Melissa Newham on 13 September 2021;
(4)the amended statement of claim filed on 2 September 2021;
(5)the amended reply filed on 17 September 2021;
(6)the court book filed on 23 September 2021;
(7)her amended outline of submissions dated 17 September 2021; and
(8)her amended submissions in reply dated 22 September 2021.
At the final hearing on 27, 28 and 29 September, the respondent relied upon:
(1)the affidavit sworn by Stuart Johnston on 12 July 2021;
(2)the affidavit sworn by Stuart Johnston on 13 September 2021;
(3)the court book filed on 23 September 2021;
(4)the respondent’s amended defence filed on 6 September 2021;
(5)its outline of submissions filed on 20 September 2021; and
(6)its closing written submissions filed on 29 September 2021.
Ms Newham and Mr Johnston were both cross-examined.
the terms of the agreement
Ms Newham submitted that the terms of her agreement with the school in respect of fees were partly oral and partly in writing. Neither party suggested that the terms of the fee agreement were to be implied.
oral terms
To the extent that the terms of the fee agreement were oral, Ms Newham said that the terms were contained in her discussions with Mr Johnston in late 2017. The effect of those discussions was that Mr Johnston advised that the school was willing to provide tuition fee concessions to Ms Newham at a rate of 70% for the younger girl (on the basis that younger girl would be enrolled from Term 1 2018) and 75% for older girl (on the basis that the older girl would be enrolled from Term 1 2019). That much was not disputed.
However, Ms Newham also pleaded that the discussion “proceeded on the basis” that the percentage of the concessions would be “fixed” at 70% for the younger girl and 75% for the older girl until they each finished year 12. The school did not accept that the concessions were fixed at any particular rate or that the parties’ discussion “proceeded on the basis” that they were.
From Ms Newham’s use of the words, “proceeded on the basis”, it is clear that it was not an express term of the oral part of the agreement that the fee remissions would be in fixed percentages. She did not allege that was an implied term. Therefore, it could only have been a written term.
Having said that, Ms Newham gave evidence that:
“[a]t no point in any of the meetings … or other discussions in relation to the re enrolment of my daughters did Mr Johnston (or anyone else at the School) say to me that the rates of remission were subject to any other condition or were liable to change”.
The school did not suggest otherwise.
written terms
To the extent that the terms of the fee agreement were in writing, Ms Newham said that the terms were contained in the fee calculation spreadsheet and in the enrolment agreements.
the spreadsheet
Ms Newham said the spreadsheet was an offer in relation to fees, which she accepted. She said that the spreadsheet, which is described above and which is Annexure A, meant that she would receive a 75% tuition fee reduction for the older girl and a 70% tuition fee reduction for the younger girl for each year until they finished year 12. Ms Newham said that the 75% and 70% tuition fee reduction was from the prevailing rate for students who received no tuition fee reduction. She acknowledged that the spreadsheet contemplated that the prevailing rate for students who received no fee reduction would increase by an estimated 4% per annum. However, she said that the spreadsheet meant that she would continue to receive a tuition fee reduction of 75% and 70% of the prevailing rate, whatever it was, until her children finished year 12. Ms Newham said that these were the terms of her contract with the school for the fee reduction.
The school argued that the spreadsheet did not mean that the 75% and 70% reductions would continue until the girls finished year 12. Firstly, the school said that the spreadsheet was just an estimate. That is true, in so far as the spreadsheet specifies the prevailing rate of tuition fees, on the assumption of a 4% annual increase, and the actual amount that would be payable for each of Ms Newham’s daughters each year, if the assumption of a 4% annual increase in the prevailing rate eventuated. However, there was nothing in the spreadsheet that suggested that the concessions of 75% and 70% from the prevailing rates were estimates. According to the spreadsheet, those percentages were fixed. The only variable was the prevailing rates of tuition fees.
Secondly, the school argued that the applicant’s arguments about the spreadsheet did not take account of the 2012 policy. The 2012 policy is considered below. For now, I am just considering the documents relied on by the applicant.
Ms Newham’s interpretation of the spreadsheet is correct. Apart from the estimates issue and the 2012 policy issue, the school did not argue that the spreadsheet had any other meaning. That is, based on the spreadsheet alone, the terms of the fee reduction agreement were that Ms Newham would receive fee reductions of 75% and 70% from the prevailing rate for tuition fees, for her older and younger daughters respectively, for each year until they each reached year 12.
the fee remission letters
The school sent Ms Newham a letter in respect of the enrolment of each girl. The letters were in substantially the same terms. The letter in respect of the younger girl was dated 31 January 2018 and the letter in respect of the older girl was dated 23 July 2018. The letter for the older girl said:
Dear Melissa
Re: Staff Remission – [child’s name]
I am pleased to be able to confirm the following remission arrangements for [child’s name] as outlined below commencing Term l, 2019.
The School undertakes to educate your daughter to the end of Year 12, provided that she does her best to gain advantage from what our School has to offer. It is expected that fee accounts and monies owing, will be settled promptly and all other procedures and conditions of the enrolment agreement are adhered to.
The details for [child’s name] are as follows:
[child’s name] - Year Level 07, 2019: 75% Remission based on your current FTE
It is a condition of the offer for Staff Remission that the arrangement remain confidential between the Parents and Peninsula Grammar. In the event that confidentiality is not upheld the school reserves the right to terminate the Staff Remission. (emphasis in original)
Yours sincerely
Stuart Johnston
Principal
The reference to “FTE” means “full time equivalent”.
The letters confirmed the arrangement specified in the spreadsheet that the school would educate the girls until they finished year 12, with a 75% or 70% (as applicable) tuition fee reduction from the prevailing rate, provided that:
(a)the girls did their best to gain advantage from all the school has to offer;
(b)their mother continued to work at the school full time; and
(c)she did not disclose the level of tuition fee reduction she had obtained.
The letters were consistent with the spreadsheet. The letters did not contain any indication that the fee remission levels could be changed from 70% and 75% for any reason.
the bursary authorisation forms
Ms Newham also relied on the “Scholarship/Family Allowance/Bursary Authorisation” forms. There was one of these in respect of each of her daughters. They were substantially the same. The one for the older girl was as follows:
SCHOLARSHIP/FAMILY ALLOWANCE/BURSARY AUTHORISATION FORM Student Name [Older girl’s name] – Year 07, 2019 Parents’ Names Greg & Melissa Newham Student ID Type of remission Staff Remission Amount of remission 75% on Tuition fees. Remission commencement date Bill 1, 2019 Date to be reviewed This staff remission is dependent upon Melissa’s ongoing employment at Peninsula Grammar Form generated by Kylie Oddy Comments
This form deals only with the level of fee remission, not the dollar figures that Ms Newham would be required to pay.
Ms Newham noted that this form did not contain any indication that the level of the fee remission was subject to change. The school said that it would not have, because it was a purely internal document.
Contrary to Ms Newham’s submission, the form did contain an indication that the level of fee remission was subject to change. It had a section headed, “Date to be reviewed”. The comment in that section was:
This staff remission is dependent upon Melissa’s ongoing employment at Peninsula Grammar.
That is consistent with the letters dated 31 January 2018 and 23 July 2018 from the school offering a 75% and 70% remission, which said that the remissions were based on Ms Newham’s “current FTE”. It meant that the remission levels could be changed if Ms Newham ceased to be employed by the school on a full time basis.
Otherwise, the form did not indicate in any way that the remission levels could be changed.
The fact that the forms dealt with one basis for changing the remission levels, but no other, suggests that there was no other basis on which the remission levels could be changed.
The bursary form was not a contractual document, because it was not exchanged between the parties. However, it does tend to reinforce Ms Newham’s claims.
the enrolment agreements
The parties also referred to the enrolment agreements, which were in the same terms for each girl. The one for the younger girl was signed on 3 November 2017 and the one for the older girl was signed on 20 July 2018.
The parties referred to the following passages of the enrolment agreements:
The Caregivers acknowledge that the terms and conditions of enrolment in this Agreement together with the Board of Directors Enrolment and Fee Statement, as prescribed by the School and which, subject to clause 7, may at the School’s discretion be amended from time to time, form part of a legally binding Agreement between the Caregivers and the School and the Caregivers agree to be bound by those terms and conditions. (bolding in original, underlining added)
DEFINITIONS AND INTERPRETATION
“Agreement” means this Agreement, and any subsequent variations as consented to in writing between the School and the Caregivers. The Caregivers shall be deemed to have consented to such variations if those variations are:
a. not substantial; or
b.substantial, but the Caregivers do not exercise their rights within the prescribed period, pursuant to clause 23 of this Agreement.
…
“Fees” means any amount charged to the Caregivers by the School, including, without limitation, registration fees, Entry Fees, Tuition Fees, Boarding Fees, Uniform Shop charges, camp and excursion fees, administration charges, Extra Subject fees, withdrawal penalties, kindergarten bonds, software licensing fees, transport fees, VET fees, TOPSA fees, Parents’ Association contributions, PDP fees, Holding Fees, additional charges for integration aides or special services not met by government funding and any other optional charges as specified in the Regulations. (emphasis added)
…
“Net Annual Fee” means both Tuition Fees and Boarding Fees as specified in the Regulations less any scholarship or discount if applicable.
…
“Regulations” means the document headed Board of Directors Regulations and Fees, which is issued annually and amended from time to time. The Caregivers hereby acknowledge receipt of a copy of the Regulations.
…
“Tuition Fees” means the fees specified in the Regulations
…
In this Agreement:
-Where there is a reference to the discretion of the Principal, the Principal in exercising his discretion shall have regard to the best interests of the School’s student body, its staff and its community;
…
CONDITIONS OF ENROLMENT
…
3.The Caregivers agree that continued enrolment of the Student is at the absolute discretion of the Principal, having regard to the best interests of the remainder of students, staff and the School community.
4. It is a condition of enrolment that the Student and the Caregivers comply with the School Rules. The Caregivers agree to share a mutual obligation with the School in supporting the Student's compliance with the School Rules. The Caregivers acknowledge that the Principal has the absolute right to dismiss or suspend the Student from the School for unsatisfactory attendance, conduct or performance, failure to obey the School Rules or for any other reason considered by the Principal to be good or sufficient. Without limiting the generality of the foregoing, the Caregivers acknowledge that the Principal has the absolute right to dismiss or suspend the Student owing to the failure by the Student to behave in a socially acceptable manner outside School hours. If the Student is dismissed from the School under this clause the Tuition Fees shall only be payable up to and including the end of the Student's final week at the School and not any further period. No Tuition Fee relief shall be payable by the School nor sought by the Caregivers if the Student is suspended from the School for a finite period.…
7.The Fees shall be prescribed by the School, and are due and payable within 30 days of the respective issue dates nominated in the Regulations. The Caregivers acknowledge that the Fees are subject to increase at any time without notice. Except in exceptional circumstances, the School undertakes to increase the fees only in respect of a forthcoming School year, and not in respect of the current School year. Should an increase occur and the increase is unacceptable to the Caregivers, they may give Notice to withdraw the Student, provided this Notice is received by the School within 14 days of the Caregivers’ notification of the increase. In this circumstance only, the requirement for one Term’s Notice of withdrawal under this Agreement is waived. (emphasis added)
…
9.If the Fees are not paid by the date due, an administration charge, as prescribed by the Regulations, will be charged. Charging of the administration charge is not a penalty for late payment but a calculation of expenses incurred by the School in managing the outstanding account. At the discretion of the Principal the Student's enrolment may be suspended until all outstanding Fees in respect of the Student and any siblings of the Student for whom the Caregivers are liable to pay Fees have been paid in full. Without limiting the foregoing, the School may in its discretion refuse to readmit the Student at the commencement of any Term if any amount of Fees in respect of the Student or any siblings of the Student for whom the Caregivers are liable to pay Fees remain outstanding. The Caregivers agree that they shall be responsible to the School for any and all costs incurred by the School in recovering outstanding Fees by any means, including legal action.
…
23.The Caregivers acknowledge that the School may from time to time vary the terms of this Agreement. Should the School notify the Caregivers of a substantial variation and the variation is unacceptable to the Caregivers, they may give Notice to withdraw the Student, provided this Notice is received by the School within 14 days of the Caregivers’ notification of the variation. In this circumstance only, the requirement for one Term’s Notice of withdrawal under this Agreement is waived. (emphasis added)
...
[25-34][These clauses concerned the school providing credit to parents for fees and the school taking security over the parents’ real and personal property.]
Ms Newham argued that the enrolment agreements did not concern the percentage of tuition fee remission payable by staff, but only the base rate of tuition fees payable by parents generally.
I do not accept Ms Newham’s submission in this regard. The enrolment agreements defined fees to include “any amount” charged to caregivers. That must include the amount charged to a staff member after the deduction of any remission percentage. The enrolment agreements permitted that amount to be varied, by stipulating a specific amount or by stipulating a different percentage.
unfair contract terms
Ms Newham then argued that the terms of the enrolment agreement that permitted one party to unilaterally double the amount payable under the contract, without notice or consent, were unfair contract terms within the meaning of the Australian Consumer Law (“the Act”) and therefore void. The Act is in schedule 2 of the Competition and Consumer Act 2010. The doubling of the amount payable occurred in relation to the older girl, because her remission level went from 75% to 50%, which meant that, instead of paying 25% of the base rate, Ms Newham was asked to pay 50% of the base rate.
Ms Newham said that her fee agreement with the school was a consumer contract within the meaning of s.23(3) of the Act. That subsection provides that:
A consumer contract is a contract for:
(a) a supply of goods or services; …
…
to an individual whose acquisition of the goods …[or] services … is wholly or predominantly for personal, domestic or household use or consumption.
The school did not dispute that its fee agreement with Ms Newham was a consumer contract.
Ms Newham then said that the terms of the fee agreement that permitted the school to unilaterally decrease the percentage of the fee remission in respect of her daughters was void under s.23(1) of the Act. That subsection provides that:
A term of a consumer contract … is void if:
(a) the term is unfair; and
(b) the contract is a standard form contract.
Section 27 of the Act deals with standard form contracts. It provides that:
(1) If a party to a proceeding alleges that a contract is a standard form contract, it is presumed to be a standard form contract unless another party to the proceeding proves otherwise.
(2) In determining whether a contract is a standard form contract, a court may take into account such matters as it thinks relevant, but must take into account the following:
(a) whether one of the parties has all or most of the bargaining power relating to the transaction;
(b) whether the contract was prepared by one party before any discussion relating to the transaction occurred between the parties;
(c) whether another party was, in effect, required either to accept or reject the terms of the contract (other than the terms referred to in section 26(1)) in the form in which they were presented;
(d) whether another party was given an effective opportunity to negotiate the terms of the contract that were not the terms referred to in section 26(1);
(e) whether the terms of the contract (other than the terms referred to in section 26(1)) take into account the specific characteristics of another party or the particular transaction;
(f) any other matter prescribed by the regulations.
Neither party suggested that s.26(1) of the Act had any application to this case.
The school disputed that the enrolment agreements were standard form contracts.
The school said in paragraph 66 of its closing submissions that it was not seeking to enforce the terms of the enrolment agreements as such, but was only:
… pointing to them as part of the broader context weighing against the term asserted by the applicant. Under this head, s 27 of the [Act] has no role to play.
I do not understand that statement to mean that the school is completely abandoning any reliance on the enrolment agreements. Consequently, it is necessary to consider whether the enrolment agreements contain the unfair terms Ms Newham alleges.
The school then argued that the fee agreement consisted not only of the enrolment agreements, but also of the conversations between Ms Newham and Mr Johnston and the spreadsheet. The school argued that those three items combined could not be said to amount to a standard form contract. The school noted that Ms Newham herself said that the fee agreement contained “bespoke terms, specifically agreed between” herself and the school. That being so, the school submitted that Ms Newham could have negotiated changes to the enrolment agreement.
It is true that the fee agreement had three parts, being the conversations, the spreadsheet and the enrolment agreements. The fee agreement overall was bespoke, in that Ms Newham was able to negotiate the percentage of fee remission. However, the enrolment agreement was not bespoke. It was patently a standard form agreement. It is fanciful to suggest that Ms Newham could have negotiated any variation of it. In terms of s.27 of the Act, the school has not proved that the enrolment agreement was not a standard form contract.
For present purposes, it is sufficient that one component of the fee agreement, being the enrolment agreements, were standard form contracts.
The school then disputed that the relevant terms of the enrolment agreements were unfair.
Section 24 of the Act defines “unfair”. It provides that:
(1) A term of a consumer 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.
Subsections 25(a) and (d) of the Act are also relevant. They provide that:
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:
(a)a term that permits, or has the effect of permitting, one party (but not another party) to avoid or limit performance of the contract;
…
(d) a term that permits, or has the effect of permitting, one party (but not another party) to vary the terms of the contract;
In terms of s.24(2)(a) and s.24(3) of the Act, Ms Newham did not dispute that the terms of the enrolment agreements that she impugns were transparent.
The school noted that, for a contract to be unfair, it must fulfil all three of the components of s.24(1) of the Act.
In terms of s.24(1)(a) of the Act, and whether the impugned terms cause a significant imbalance in the parties’ rights and obligations under the fee agreement, the school noted Australian Competition and Consumer Commission (ACCC) v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd)[2015] FCA 368, where North J said at [950]:
… As to the nature of a significant imbalance in rights, in Director General of Fair Trading v First National Bank plc [2002] 1 AC 481 at 494;[2001] UKHL 52, Lord Bingham said at [17] of a regulation in similar terms:
The requirement of significant imbalance 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 his 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.
The school also noted that Cavanough J said in Jetstar Airways Pty Ltd v Free [2008] VSC 539 a [105], in relation to the Fair Trading Act 1999 (Vic), which has somewhat similar policy underpinnings as the Act:
I recognise the perils of attempting to paraphrase statutory language, but, in my view, the context of the word “significant” in s 32W shows that it means, principally at least, “significant in magnitude”, or “sufficiently large to be important”, being a meaning not too distant from “substantial”…
It appears to me that the impugned terms of the enrolment agreement would cause a significant imbalance in the parties’ rights and obligations arising under the contract because they allow the school to dramatically and unilaterally increase the amount payable by Ms Newham for her daughters’ education.
However, the school said that the enrolment agreements did not allow for a unilateral increase in the amount payable by Ms Newham because, in the event of a reduction in the remission percentage, she could have withdrawn her daughters from the school on 14 days’ notice rather than the usual one term’s notice. Withdrawing children from the school could be described as the nuclear option. However, more to the point, the ability to withdraw children from the school on a shorter than usual timeframe does not mean that the fee increase would not be unilateral.
The school also said that the enrolment agreements did not allow for a unilateral increase in the amount payable by Ms Newham because, by the definition of “agreement” in the enrolment agreements, she was deemed to have consented to any variation. That definition is as follows:
“Agreement” means this Agreement, and any subsequent variations as consented to in writing between the School and the Caregivers. The Caregivers shall be deemed to have consented to such variations if those variations are:
a. not substantial; or
b.substantial, but the Caregivers do not exercise their rights within the prescribed period, pursuant to clause 23 of this Agreement.
On any view, the variation made by the school on 9 April 2020 was substantial. Clause 23 did not permit any debate about the variation. It only permitted the parents to withdraw their children from the school on 14 days’ notice, rather than on one term’s notice.
However, the deeming provision is itself unfair, within the meaning of the Act.
In terms of s.24(1)(a) of the Act, the deeming provision causes an imbalance in the parties’ rights and obligations, because it means that the contract can be varied by the school without Ms Newham’s actual consent.
In terms of s.24(1)(b) of the Act, the deeming provision is not reasonably necessary to protect the legitimate interests of the school. The school submitted that the term was necessary to enable it to adapt to a change in its commercial circumstances. It can be readily accepted that the school would need to increase tuition and other fees over the potentially 13 years of a child’s enrolment.
However, the school could protect its legitimate interests, and adapt to a change in its commercial circumstances, in many ways other than imposing a term giving the school unilateral power to increase fees during the currency of the contract. For example, the school could enter into a new enrolment agreements with parents each year, with the amount of the tuition fees for the year spelt out in the new, yearly agreement.
Moreover, by s.24(4) of the Act, the deeming provision is presumed to be not reasonably necessary to protect the legitimate interests of the school unless the school proves otherwise. The school has not proved otherwise. There was a lot of evidence about the financial position of the school. However, the figures show that, throughout 2020, the school was a long way from insolvency. While its operating expenditure was forecast to reach relatively low levels later in 2020, the operating expenditure was still safely in the black. Moreover, the school had substantial funds in its capital account. It was not suggested that the school could not draw on the capital account for operational purposes if it really needed to. Also, when asked how the school would manage if things went “really, really bad”, Mr Johnston said in his oral evidence that the school had access to plenty of money in a previously undisclosed trust account.
Most significant, however, is the fact that, by letter dated 1 April 2021, the school reversed its decision to reduce the level of staff fee remissions, and credit the accounts of any staff members who had paid the additional amounts. This reversal demonstrates that reducing the level of staff fee remissions had not been reasonably necessary to protect the legitimate interests of the school.
The decision to reduce the level of staff fee remissions could perhaps be described as panicked. It was entirely understandable, in the uncertainty at the beginning of the COVID-19 pandemic. However, that does not mean that the decision to reduce the level of staff fee remissions was reasonable necessary to protect the legitimate interests of the school, much less that a contractual term permitting that reduction was reasonably necessary to protect the legitimate interests of the school.
In terms of s.24(1)(c) of the Act, the deeming provision would cause detriment to Ms Newham by requiring her to pay more for her daughters’ education, and by taking away her right to actually agree on the amount of the fee remission applicable to her daughters’ education.
In concluding that the deeming provision is unfair, I have taken into account that the deeming provision is transparent, and I have taken into account the contract as a whole. Cavanough J said in Jetstar at [128] that reading the contract as a whole:
…does not mean that 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.
The school did not point to any term of the enrolment agreements that could reasonably be seen as counterbalancing the deeming provision. The school referred to the term permitting Ms Newham to withdraw her daughters from the school on 14 days’ notice rather than on one terms’ notice, and terms allowing a parent to obtain credit from the school for the payment of fees in exchange for the school obtaining a security interest in the parent’s real and personal property. These terms do not counterbalance the deeming provision. They just allow parents to take the drastic action of terminating their children’s education at the school, or go into debt.
The impugned terms of the enrolment agreements allowed for unilateral amendment by the school, which caused a significant imbalance in the parties’ rights and obligations under the enrolment agreements. That satisfied s.24(1)(a) of the Act.
Paragraph 24(1)(b) of the Act, requires consideration of whether the impugned terms were reasonably necessary to protect the legitimate business interests of the party who would be advantaged by the term, namely, the school. As discussed above, the impugned terms were not reasonably necessary, because the legitimate business interests of the school could have been protected in other ways.
Paragraph 24(1)(c) of the Act, requires consideration of whether the impugned terms would cause a detriment (whether financial or otherwise) to Ms Newham if relied upon. Ms Newham submitted that the school’s reliance on the impugned terms would cause her a significant personal and financial detriment.
The school submitted that the impugned terms would not cause Ms Newham a financial detriment if relied upon, because Ms Newham did not maintain that she could not afford the increase in the amount that the school required her to pay. Whether Ms Newham could afford the increase or not is beside the point. It is still obviously a financial detriment to be required to pay more for the same service.
The school argued that the impugned terms would not cause Ms Newham a personal detriment if relied upon, because the personal detriment of withdrawing her children from the school, in the absence of evidence that she could not afford to pay the increased fees, would be Ms Newham’s choice. That is obviously correct.
Nevertheless, each of the components of s.24(1) of the Act is satisfied. It follows that the impugned terms of the enrolment agreements are void.
As noted by Ms Newham, s.23(2) of the Act provides that:
The contract continues to bind the parties if it is capable of operating without the unfair term.
The enrolment agreements in the present case are capable of operating without the unfair terms. Therefore, the enrolment agreements in other respects continue to apply.
the 2012 staff fee remission policy
The school relied on the 2012 policy relating to staff fee remissions. The policy was contained in a standard form letter sent to staff on 8 December 2011 in the following terms:
Dear Staff Member
New Staff Child Fee Remission Policy - 2012
As you are aware, The Peninsula School currently offers remission of tuition fees to children of permanent members of staff.
At present, a full-time staff member’s eldest child is entitled to a 100% fee remission and any younger children a 50% fee remission. Permanent part-time staff members are offered remissions on a pro-rata basis.
As classes at most year levels are full, the School maintains waiting lists for all year levels, several years in advance. Under the existing policy, staff children occupy non-priority positions on waiting lists and are offered remission positions at the School only if no other non-staff children remain on the relevant waiting list. Where no remission positions were available but staff members were keen to secure their child’s place within the School, we have on occasion offered some staff members’ children full fee positions.
I have become increasingly aware that this policy has caused a level of discontent amongst staff members who have been unable to secure a remission position for their child or children at the School.
In light of this feedback, the Board of Directors has reconsidered the remission policy, and from 1 February 2012 a new policy will come into effect. This new policy will apply to all staff members who join the School from today’s date, those who have joined the staff during Term 4, 2011, as well as those current staff members who choose to opt in to the new scheme.
Under the new scheme, children of staff will be entitled to a higher priority placement on the waiting lists (Priority 2), sitting behind only non-staff children with siblings currently at the School. The remission level for the eldest child will be reduced to 65%. All subsequent children will remain at 50% remission.
Within Priority 2, staff children will be ranked according to their date of initial registration on our waitlists. No sibling priority will be afforded to staff children unless their siblings are in full-fee paying positions in which case any position offered to the younger sibling would be a full-fee position. If a staff member did not wish to accept a full fee position for the younger sibling, under the new scheme he or she would be returned to the Priority 2 position on the relevant waiting list.
If you have a child who is not yet registered, I would encourage you to do so as soon as possible to secure his or her place on our waiting list. In line with the current waiting list policy, children’s applications may be freely transferred from one year’s waiting list to another in line with parents’ wishes, and the child will retain his or her original registration date on the relevant waiting list.
Conversion to the New Policy
As a current staff member, you are requested to choose between continuing your remission entitlements under the current policy and converting to the new staff remission policy. All of your children must be covered by the one policy only.
If you choose to convert to the new policy, please do so in writing by 1 February 2012. I have attached an election form to this letter. No conversions may be made after this date, nor may you revert to the previous policy after the conversion is made.
Please note that this election may only be made by staff members who:
•currently have a child at the School in a 100% remission position under the current policy;
•who have children who are not yet attending the School; or
•do not yet have any children.
In the interests of fairness, any staff member with a child who attended the School on a 100% remission position and who has completed their schooling, or who will complete their schooling this year, will be unable to convert to the new policy for their younger children.
If you do make the election to convert to the new scheme, your eldest child's position will convert to a 65% remission position from the commencement of the 2012 School year. Any younger children who are current students of the School will continue to receive their 50% remission or, if they are future students, will be entitled to Priority 2 waitlist placement.
If you have a child or children currently attending the School, or a child confirmed to commence in 2012, in a full fee position you may elect to convert to the new policy, effective from the commencement of the 2012 School year. Again, this election must be made by 1 February 2012.
Continuation of Current Policy
If you choose not to convert to the new scheme, your entitlements will simply continue pursuant to the current policy. Further, any sibling of a staff member’s child who occupies a full fee position is entitled to Priority 1 waitlist placement solely in respect of full fee positions that may become available in the year level for which the sibling is waitlisted. However, if the sibling wishes to take up a remission position, they will occupy the lowest priority on the relevant waitlist.
Cessation of Employment
Naturally, if your employment at the School ceases, all remission positions will immediately revert to full fee positions. In these circumstances, any siblings of those children whose positions have reverted to full fee positions will then be entitled to Priority 1 waitlist placement from the date of reversion for so long as those children continue at the School.
Scholarships
Finally, if your child is awarded a scholarship, no additional fee remissions will be available. The maximum remission any first child can receive under the new scheme is 65% and subsequent children 50%.
Our aim in developing this new scheme is to not only continue our policy of offering staff children a substantial remission which, in many cases, is over and above remissions offered at comparable schools, but also to greatly improve accessibility of places within the School to staff children.
No doubt, questions will arise as we manage our transition to this new scheme, and naturally if you are unsure about how the new policy will affect you and your children, please do not hesitate to bring your queries to my attention.
Melanie and Marita in the Admissions Office are also fully aware of the logistics of these policy changes, and would be pleased to provide any further information or clarification. Please also contact Melanie or Marita should you wish to make any changes to your child’s preferred year of entry to the School.
Yours sincerely,
Stuart Johnston
Principal
Mr Johnston explained that, pre-2012, staff were entitled to a 100% fee remission for their first child, if a place was available for them. Very often, there was not a place available. The attraction of the new policy was that it gave a lower level of fee remission for the first child, but many more places were available to staff.
Ms Newham opted to convert to the new fee remission policy. She did so by a note dated 31 January 2012 which was in the following terms:
Dear Mr Johnston
I hereby agree to convert to the new Staff Child Fee Remission Policy 2012, as outlined in your letter dated 8 December 2011.
I acknowledge that the School reserves the right to vary this Policy in exceptional circumstances at any time. In the event of the variation of the policy, I acknowledge that the School would provide notice of any change prior to the commencement of the following School year. (emphasis added)
The school submitted that:
(a)the 2012 remission policy was a central document;
(b)Mr Johnston had regard to it at all relevant times;
(c)the applicant agreed to be covered by it in 2012;
(d)it was not suggested that the 2012 policy did not continue to apply;
(e)any reasonable person would harmoniously construe the enrolment agreements, the spreadsheet and the 2012 policy; and
(f)such a construction clearly gives the school the right to reduce the level of staff fee remissions in the exceptional circumstance of the COVID-19 pandemic in 2020.
Ms Newham submitted, firstly, that the 2012 staff remission policy did not apply because, self-evidently, Ms Newham did not receive a remission of 65% for the older girl and 50% for the younger girl.
That is correct. Mr Johnston had regard to the 2012 policy but, on his admission, departed from it at will, and granted staff fee remissions on an individual basis.
Ms Newham submitted that the 2012 policy pre-dated the spreadsheet and the enrolment agreements, and was superseded by them. That is also correct. Having departed from the 2012 policy by giving Ms Newham a greater level of fee remission, the school cannot maintain that other aspects of the policy continued to apply. If the school had wished other aspects of the 2012 policy to apply, the school could easily have added to the spreadsheet words to the effect of, “concession levels subject to change in exceptional circumstances at the school’s discretion”.
Ms Newham also submitted that the 2012 policy was not an enforceable contract, because no consideration was provided to Ms Newham in respect of the policy. That is correct as well. It was just a policy. Ms Newham eventually received consideration in the form of the education of her daughters and she gave consideration in the form of the payment of fees. However, that consideration was pursuant to the agreement constituted by the discussions in late 2017, the spreadsheet and the enrolment agreements (less the void terms).
There is another problem with the 2012 policy. It does not itself say anything about reducing the level of staff remission in exceptional circumstances or otherwise. It is only Ms Newham’s note dated 31 January 2012 that mentions that.
Reading that note as a whole, it clearly means that the school would give notice of any change to the fee remission levels prior to the commencement of the year in which the change was to have effect. That is, notice would have to have been given in 2019 for a change to take effect in 2020. The school did not give such notice. It purported to change the fee remission levels on 9 April 2020 “from the commencement of this term”. While the note said the school could change the level of fee remission “at any time”, the note indicated that the change would not apply until the following year.
All in all, the 2012 policy and the note do not alter the meaning of the spreadsheet.
the employment agreement
Ms Newham noted that her contract of employment, which was dated 9 November 2011, provided that she was entitled to a 65% tuition fee remission for her first child who was enrolled at the school, and a 50% tuition fee remission for her second child. The relevant term of the contract of employment was as follows:
Staff concessions on school fees at The Peninsula School are to be made available to all members of staff with permanent tenure. In the case of full-time staff concessions for tuition fees only (not extras, registration fee or enrolment fee) are 65% for the eldest child in the family and 50% for subsequent children enrolled at the school. This means that each family is entitled to one 65% concession and a maximum of 50% remission for each subsequent child even if both husband and wife are employed at the School.
Ms Newham submitted that, when she entered into the agreement with the school for the remission of tuition fees of 75% and 70%, her contract of employment was thereby varied. She said that was because of the inconsistency between the two agreements. Ms Newham submitted that the school breached her contract of employment by varying the level of her tuition fee remission on 9 April 2020 from 75% and 70% for the older and younger girls respectively to 50% for each child.
The school submitted that the tuition fee arrangements that were agreed to between the school and Ms Newham were completely separate from her employment contract. The school submitted that staff fee remissions of 65% and 50% were “to be made available” to Ms Newham, but she did not rely on those remission levels in this proceeding.
The employment contract gave Ms Newham an entitlement to enter into another contract on more favourable terms than the standard terms available to members of the general public. Ms Newham exercised her right to enter into the other contract on favourable terms. In fact, she was able to negotiate even more favourable terms than those to which her employment contract entitled her.
However, those circumstances did not make the other contract part of Ms Newham’s employment contract. Ms Newham’s employment contract was entirely separate from the other contract. That is, Ms Newham’s fee remission contract did not vary her employment contract.
unconscionable conduct
Ms Newham said that the school behaved unconscionably within the meaning of s.21(1) of the Act.
Section 21(1) of the Act provides that:
A person must not, in trade or commerce, in connection with:
(a)the supply or possible supply of goods or services to a person; or
(b)the acquisition or possible acquisition of goods or services from a person;
engage in conduct that is, in all the circumstances, unconscionable.
Section 22(1) of the Act provides that:
Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier) has contravened section 21 in connection with the supply or possible supply of goods or services to a person (the customer), the court may have regard to:
(a)the relative strengths of the bargaining positions of the supplier and the customer; and
(b)whether, as a result of conduct engaged in by the supplier, the customer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and
(c)whether the customer was able to understand any documents relating to the supply or possible supply of the goods or services; and
(d)whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the customer or a person acting on behalf of the customer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and
(e)the amount for which, and the circumstances under which, the customer could have acquired identical or equivalent goods or services from a person other than the supplier; and
(f)the extent to which the supplier’s conduct towards the customer was consistent with the supplier’s conduct in similar transactions between the supplier and other like customers; and
(g) the requirements of any applicable industry code; and
(h)the requirements of any other industry code, if the customer acted on the reasonable belief that the supplier would comply with that code; and
(i)the extent to which the supplier unreasonably failed to disclose to the customer:
(i)any intended conduct of the supplier that might affect the interests of the customer; and
(ii)any risks to the customer arising from the supplier’s intended conduct (being risks that the supplier should have foreseen would not be apparent to the customer); and
(j)if there is a contract between the supplier and the customer for the supply of the goods or services:
(i)the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the customer; and
(ii)the terms and conditions of the contract; and
(iii)the conduct of the supplier and the customer in complying with the terms and conditions of the contract; and
(iv)any conduct that the supplier or the customer engaged in, in connection with their commercial relationship, after they entered into the contract; and
(k)without limiting paragraph (j), whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the customer for the supply of the goods or services; and
(l) the extent to which the supplier and the customer acted in good faith.
The school noted that, in Australian Competition and Consumer Commission (ACCC) v Medibank Private Ltd (2018) 267 FCR 544 [2018] FCAFC 235, Beach J, with whom Murphy and Perram JJ agreed, said that:
233.First, one is referring to a statutory standard rather than an equitable standard. The context of s 21 makes this clear; s 20 deals with unconscionable conduct within the meaning of the unwritten law. Further, both the lens “in all the circumstances” (s 21(1)) and the non-exhaustive list of matters to which the Court may have regard (s 22(1) in this case) indicate that neither the boundaries nor content of the equitable doctrine are defining or limiting features. Nevertheless, the statutory construct may include aspects of the equitable construct.
234.Second, the evaluation of the conduct in all the circumstances requires “close consideration of the facts” (Thorne v Kennedy [2017] HCA 49;(2017) 350 ALR 1 at [41], citing Kakavas v Crown Melbourne Ltd[2013] HCA 25;(2013) 250 CLR 392 at [14]). Now such an observation was made when applying the equitable doctrine, and is particularly apposite in that context when considering the parties’ relationship, one party’s relative special disadvantage vis-à-vis another, whether situational or constitutional, and the conduct said to constitute the unconscientious taking advantage thereof. Necessarily such matters are fact specific. But equally, if not more so, such close consideration of the facts is necessary in the context of s 21. And s 22 elaborates on the factual matters and circumstances that are to be considered. Clearly, forensic analysis rather than platitudinous philosophy is required to identify the boundaries and content of the relevant conduct in context, before one considers the secondary characterisation of unconscionability.
Ms Newham argued that the school behaved unconscionably by:
(a)demanding that, from the commencement of term 2 in 2020, she pay tuition fees for her daughters at a reduced level of fee remission, being 50% and 50% instead of 75% and 70%; and
(b)notifying Ms Newham on 5 June 2020 by a letter between solicitors that, if she did not pay the increased amounts demanded, the school:
(i)would charge her $300 for every 30 days that the demanded increase was not paid; and
(ii)would have a right to:
(A)suspend her daughters’ enrolments;
(B)refuse to readmit her daughters at the beginning of term 3; and
(C)recover the costs of legal action against Ms Newham.
Ms Newham said that the unconscionability arose in circumstances where:
i.Ms Newham was an employee of Peninsula Grammar and was therefore in a position of vulnerability vis-à-vis the school;
ii.Peninsula Grammar was aware of Ms Newham’s vulnerability;
iii.Peninsula Grammar believed that Ms Newham was unable to pay 50% of the prevailing rate of tuition fees;
iv.Peninsula Grammar was aware of the detriment that unenrolment would cause to [the girls].
There was no dispute that the school’s conduct occurred in trade or commerce.
The school denied that Ms Newham was in a position of vulnerability in relation to the school. The school argued that Ms Newham’s employment with the school actually advantaged her, because it made her eligible for a fee remission. However, that submission does not address the correct point in time.
The court is asked to consider whether the school’s conduct on 9 April 2020 was unconscionable. As the matter stood at that time, Ms Newham had a contractual right to fee remissions of 75% and 70% for the older and younger daughters respectively. She was an employee of the school.
It seems to me that Ms Newham was in a position of vulnerability in relation to the school. As the school was her employer, it had the capacity in many ways to make her life difficult, or her job untenable, if Ms Newham did not comply with the school’s demands, subject to the protections in the Fair Work Act 2009.
In relation to affordability, the school argued the court should proceed on the basis that Ms Newham could have afforded to pay the tuition fees at the reduced rate of remission. That submission was made in circumstances where Ms Newham had originally said that she could not afford the tuition fees at the reduced rate of remission, but withdrew that claim when the school asked her disclose her and her husband’s financial circumstances.
The evidence that the school believed that Ms Newham and her husband were unable to pay their daughters’ tuition fees at the reduced rate of remission consisted of:
(a)the girls being removed from the school in May 2015, in circumstances where Ms Newham told Mr Johnston that the reason was her inability to afford the fees;
(b)Ms Newham telling Mr Johnston that she could only afford to re-enrol the girls in 2018 and 2019 if she got a more substantial fee remission than 65% and 50%; and
(c)Ms Newham and her husband were both employed as teachers, as shown on the enrolment agreements.
While it is possible that Ms Newham’s financial position had changed substantially between 2015 and 2020, it is probably unlikely. In any event, the fee remission level the school announced on 9 April 2020 was worse financially than the arrangement Ms Newham had said she could not afford in 2015. Instead of being 65% and 50% remissions, the new arrangement was 50% and 50%.
Mr Johnston said that other teachers had been able to afford the fees with the reduced rate of remission. However, other teachers might have partners in more lucrative employment than teaching, or have financial support from the students’ grandparents.
While the evidence about Ms Newham’s financial position in April 2020 is not without difficulty, from the school’s point of view at that time, there was ample reason to believe that Ms Newham would not have been able to afford the tuition fees at the reduced rate of remission.
The school also disputed that the girls leaving the school would necessarily be detrimental for them. The school argued that this question could only be decided based on the individual circumstances of each girl, and Ms Newham had not adduced any evidence of those circumstances. For example, the school argued that there was no evidence about which school the girls might attend, and queried whether it might be with the same people they had attended the local primary school during their hiatus from Peninsula Grammar.
Realistically, and on the balance of probabilities, the only other school that the girls could have attended would be a State school. It was a very strange submission for the school to say that moving to a State school would not be a detriment for the girls. It conflicts with the way the school markets itself, which is to the effect that it offers so much more than State schools, and is therefore worth the money that parents are asked to pay.
I consider that it would have been a detriment for to the girls to be required to leave the school. It would have been disruptive to their education, to their relationships with their teachers and to their friendship groups. Those disruptions would have been particularly difficult during the period of on-line learning brought about by the pandemic. Removal from the school would also have meant that the girls would not have received “all that the school has to offer”.
However, the school argued that there were various other circumstances that meant that the school’s actions were not unconscionable.
Firstly, the school noted that, in April 2020, there were the unprecedented uncertainty and economic damage forecast for the school and its community. It is true that the world faced a great deal of uncertainty in April 2020. However, contracts are binding and cannot be unilaterally altered. When an entity enters into a contract to provide a particular service for a particular price, it bears the risk that the input costs of providing that service will become prohibitively expensive before the contract ends.
Secondly, the school said that it was possible that events similar to the pandemic might happen in the future. This is speculative.
Thirdly, the school said that it applied an equitable approach to all remissions. By this, it appears that the school meant that each staff member received a 50% remission for each of their children, rather than some children receiving a 100% fee remission and others receiving a 20% fee remission (exhibit 3). I accept that the school’s approach of 9 April 2020 was equitable as between teachers, but it was grossly unfair for those who had secured a higher level of remission.
Fourthly, in relation to s.22(1)(b) of the Act, the school argued that the its action was necessary to protect the legitimate interests of the school. This point has been addressed above. The school could have protected its legitimate interests with a different contractual arrangement. Moreover, as the school’s eventual withdrawal of the demand made on 9 April 2020 makes clear, the demand was not reasonably necessary to protect its legitimate interests.
Fifthly, in relation to s.22(1)(c) of the Act, the school argued that Ms Newham was able to understand the documents relating to the fee agreements. Ms Newham did not suggest otherwise. I accept that she was able to understand them.
Sixthly, in relation to s.22(1)(d) of the Act, the school argued that Ms Newham did not allege that any undue influence or pressure was exerted on her, or any unfair tactics were used. Ms Newham may not have expressly relied on s.22(1)(d) of the Act, but it is clear that her case rested on such a claim. The school simply used its extraordinary power in the relationship to demand, without any consultation or negotiation, that Ms Newham pay substantially more for the service in question. The fact that many teachers succumbed to that demand demonstrates the extent of the school’s power in this situation.
Seventhly, in relation to s.22(1)(e) of the Act, the school argued that, even under the demand of 9 April 2020, Ms Newham was still able to obtain private school education for her children at half the fees that she would have been required to pay at another private school. That is not the correct comparator. It is notorious that teachers at private school obtain substantial fee remissions for their children. The question is what level of fee remission Ms Newham could have obtained at another private school at which she was a teacher. There was no evidence about this. The court is not able to assess this matter.
Eighthly, in relation to s.22(1)(f) of the Act, the school argued that its conduct towards Ms Newham was consistent with its conduct towards other staff, except for three out of 42, who continued to receive their pre-COVID-19 concessional remissions. With those exceptions, I accept that the school’s conduct towards Ms Newham was consistent with its conduct towards other staff.
Ninthly, in relation to s.22(1)(i) of the Act, the school argued that it did not fail to disclose any information to the applicant. Ms Newham did not claim otherwise. I accept that the school did not fail to disclose any information to Ms Newham.
Tenthly, in relation to s.22(1)(l) of the Act, the school argued that it acted in good faith. Ms Newham did not argue otherwise. I accept that both parties acted in good faith.
In terms of the other matters mentioned in s.22(1) of the Act, I note the following.
In relation to s.22(1)(a) of the Act, the school was in a much stronger bargaining position than Ms Newham. That is demonstrated by the fact that the school did not even attempt to renegotiate the levels of fee remission. It simply sought to impose its will, and did so successfully in relation to all of the teachers at the school except Ms Newham.
Paragraphs 22(1)(g) and (h) of the Act are not relevant.
In relation to s.22(1)(j) of the Act:
(a)the school was not at all willing to negotiate with Ms Newham about the terms of the variation of the contract announced on 9 April 2020;
(b)as discussed above, the terms purporting to allow the school to vary the level of remission were void for unfairness;
(c)by purporting to vary the terms of the contract on 9 April 2020, the school did not comply with the actual terms of the contract; and
(d)the conduct of the school after the school purportedly varied the contract was threatening, in that the school notified Ms Newham on 5 June 2020 by a letter between solicitors that, if she did not pay the increased amounts demanded, the school:
(i)would charge her $300 for every 30 days that the demanded increase was not paid; and
(ii)would have a right to:
(A)suspend her daughters’ enrolments;
(B)refuse to readmit her daughters at the beginning of term 3; and
(C)recover the costs of legal action against Ms Newham.
In relation to s.22(1)(k) of the Act, the school sought to rely on terms of the fee agreements which purported to give the school the right to unilaterally vary the fee agreements. However, as discussed above, those terms are void for unfairness.
Weighing up all the matters mentioned in s.22(1) of the Act, and all of the circumstances of the matter generally, I consider that the school’s purported variation of the fee agreements by the letter dated 9 April 2020 was unconscionable. That is particularly because the school was in a vastly stronger bargaining position than Ms Newham, and because the school purported to exercise contractual terms that were void for unfairness.
To the extent that Ms Newham may have sought a declaration that the school would be unconscionable to seek to impose any reduction in the remission rate in the future, I accept the school’s contention that the court cannot assess that at present. It would depend on the circumstances existing at the time.
Conclusion
I am persuaded that the impugned terms of the fee agreement were void for being unfair and the school’s conduct in sending Ms Newham the letter dated 9 April 2020 was unconscionable. There will be declarations reflecting these conclusions. I will hear the parties on any further orders to be made.
I certify that the preceding one hundred and forty-five (145) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Riley. Associate:
Dated: 17 November 2021
“Annexure A”
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