Turner v MyBudget Pty Limited

Case [2018] FCA 1407

FEDERAL COURT OF AUSTRALIA

Turner v MyBudget Pty Limited [2018] FCA 1407

File number: NSD 297 of 2017
Judge: LEE J
Date of judgment: 18 September 2018
Catchwords:

CONTRACT – proper construction of interest provision in consumer contract – whether it authorises respondent to take and use interest earned on client funds for its own purposes – whether breach of trust or breach of fiduciary duty – held contract authorises respondent’s actions and no breach

CONSUMER LAW – Australian Consumer Law s 24(1) – meaning of an unfair term – relevant considerations – whether a term is unfair if it authorised respondent to take and use interest earned on client funds for its own purposes – discussion of matters relevant to establish an unfair term including meaning of a “significant imbalance in the parties’ rights and obligations arising under the contract” – held no unfair term

REPRESENTATIVE PROCEEDING – orders made under s 33ZB of Federal Court of Australia Act 1976 (Cth) binding group members who have not opted out
Legislation:

Australian Consumer Law ss 21, 23

Federal Court of Australia Act 1976 (Cth) Pt IVA, ss 33ZB, 43(1A)

Cases cited:

Australian Competition and Consumer Commission v Chrisco Hampers Australia Limited [2015] FCA 1204; (2015) 239 FCR 33

Australian Competition and Consumer Commission v CLA Trading Pty Ltd [2016] FCA 377; (2016) ATPR 42-517

Beaufort Developments (NI) Ltd v Gilbert-Ash NI Ltd [1998] UKHL 19; [1999] 1 AC 266

Cherry v Steele-Park [2017] NSWCA 295; (2017) 351 ALR 521

Cook v Addison (1869) LR 7 Eq 466

Director General of Fair Trading v First National Bank plc [2001] UKHL 52; [2002] 1 AC 481

Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 91 ALJR 486

Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7

Foskett v McKeown [2001] 1 AC 102

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41

Jetstar Airways Pty Ltd v Free [2008] VSC 539; (2008) 30 VAR 295

Southern Cross Commodities Pty Ltd (In Liq) v Ewing (1987) 11 ACLR 818; 5 ACLC 1,

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37

O'Sullivan v Management Agency and Music Ltd [1985]

Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522

Date of hearing: 1, 3 May 2018
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Regulator and Consumer Protection
Category: Catchwords
Number of paragraphs: 82
Counsel for the Applicant: Mr J C Kelly SC, Mr A Maroya, Mr D O’Connor
Solicitor for the Applicant: Financial Rights Legal Centre
Counsel for the Respondent: Mr C Moore SC, Mr D Sulan, Mr P J Strickland
Solicitor for the Respondent: Norton Rose Fulbright

ORDERS

NSD 297 of 2017
BETWEEN:

KELVIN TURNER
Applicant
AND: MYBUDGET PTY LIMITED ACN 82 093 118 597
Respondent

JUDGE:

LEE J

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Details
AGLC
Turner v MyBudget Pty Limited [2018] FCA 1407
Case
[2018] FCA 1407
Decision Date

CaseChat Overview and Summary

The matter of Turner v MyBudget Pty Limited was heard in the Federal Court of Australia. The dispute between the parties centred on the interpretation of an interest provision in a consumer contract between the client and MyBudget. The client argued that MyBudget was not authorised to take and use interest earned on client funds for its own purposes, and that this constituted a breach of trust or fiduciary duty. Conversely, MyBudget asserted that the contract explicitly allowed it to do so and no breach had occurred.

The court was required to determine the proper construction of the interest provision in the contract and whether it authorised MyBudget to take and use interest earned on client funds for its own purposes. Additionally, the court had to consider whether such an arrangement constituted a breach of trust or fiduciary duty. Furthermore, the court needed to assess whether the term was unfair under section 24(1) of the Australian Consumer Law, particularly focusing on whether it created a significant imbalance in the parties' rights and obligations.

The court found that the contract, when read as a whole, did indeed authorise MyBudget to take and use interest earned on client funds for its own purposes. The court held that no breach of trust or fiduciary duty occurred because the arrangement was clear and reasonable. Furthermore, the court concluded that the term was not unfair as it did not create a significant imbalance in the parties' rights and obligations. The court also found that the orders made under section 33ZB of the Federal Court of Australia Act 1976 (Cth) were binding on all group members who had not opted out of the proceeding.

The final orders of the court were that the originating application be dismissed and that the answers to the common questions regarding whether MyBudget held any interest in trust for the group members and whether the Interest Provision was an unfair term be answered "No". The parties were also required to provide a minute of the order they sought regarding costs by a specified date.

Orders

Orders of the court

1. The originating application be dismissed.

2. Pursuant to s 33ZB of the Federal Court of Australia Act 1976 (Cth) an order be made binding all group members who have not opted out of the proceeding, that the answers to the following two common questions:

(a) Does MyBudget hold any interest accrued or earned on the funds received by it or for the purpose of the service agreement made with group members in trust for the group members?

(b) Is the Interest Provision an unfair term for the purposes of s 23 of the ACL?

both be answered “No”.

3. By 4pm on 25 September 2018, the parties provide to the Associate to Justice Lee a minute of an order identifying the order they seek as to the costs together with any submissions upon which they rely.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

No implied term is pleaded and in the absence of express words to the effect that the interest earned on the client funds is to be appropriated by MyBudget the appropriate constructional choice is clear. C.3 Conclusion as to Proper Construction Read as a whole, the arrangement constituted by the Contract seems to me to be relatively straightforward. The submissions of MyBudget summarised above ought generally to be accepted. The client, who seeks assistance of MyBudget to manage their financial affairs in accordance with an agreed budget, provides the requisite authority to MyBudget to allow it to do so (see the Services Clause). In exchange for this service, the client agrees to pay an upfront and substantial Establishment Fee and an ongoing weekly Account Administration Fee. The former fee is to compensate MyBudget for making the initial arrangements, and the latter fee is to compensate MyBudget for ongoing management services (see the Administration Fee Clause). Apart from this large initial fee and the regular weekly fees, from time to time, other fees might be incurred in relation to additional services. These additional, non-standard services (additional withdrawals, withdrawing funds committed for future expenses, a transaction that requires immediate processing or if “fresh arrangements” need to be made) carry specified additional charges. It is against this background, of specific identified fees (either one off or regular) and the services provided by MyBudget that those fees are said to compensate, that one comes to the Absorption Clause. The absorption is for all bank fees and also cheque writing fees and postage for any cheques mailed. It seems to me that although the contractual intention may have been able to have been expressed in a more pellucid manner, it remains tolerably plain: no bank fees at all are to be chargeable to the client and also no interest is payable to the client. MyBudget obtains and suffers the pluses and minuses of the bank accounts necessary to discharge its obligations to provide the services. When read as a whole, a reasonable person in the position of Mr Turner would not conclude that the client is entitled to interest because, as the provision expressly states: “[i]nterest is not payable to clients”. The surplusage of the “discretion” in the third sentence may be accepted, but this is not a consideration so significant as to undermine the construction I have just identified. If a detailed analysis of a written contract leads to a conclusion that flouts business commonsense, the contract must be made to yield to business commonsense (albeit as an objectively ascertained matter); however, the primary task of contractual construction is the ascertainment of meaning of the words used. As Lord Hoffman noted in Beaufort Developments (NI) Ltd v Gilbert-Ash NI Ltd [1999] 1 AC 266 at 273, the argument of redundancy is seldom an entirely secure one. In the context of a series of otherwise straightforward provisions, it does not logically follow that a reasonable person’s interpretation of the third sentence would be that interest is reserved for the payment only of unforeseen extraordinary unspecified fees, which as MyBudget submits, would most likely be a rare occurrence, given the way in which clients’ fees are pooled and managed. The fact remains that here the parties agreed on a workable arrangement which netted off interest and bank fees. This result makes sense, by reference to the text, context and purpose of the Contract as a whole.D THE BREACH OF TRUST AND FIDUCIARY DUTY CASE

Ratio Decidendi

Legal Principle Established

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