Unfair Contract Terms Case Transferred to District Court

The Supreme Court of New South Wales transferred proceedings involving claims under the Australian Consumer Law to the District Court, finding that the District Court had jurisdiction over the claims.

Supreme Court New South Wales

Medium Neutral Citation: [NAME] v [COMPANY] [2024] NSWSC 501 Hearing dates: 29 April 2024 Date of orders: 03 May 2024 Decision date: 03 May 2024 Jurisdiction: Common Law Before: [NAME] Decision: (1) [ADDRESS] proceedings be transferred to the District Court; and (2) Costs of the proceedings be costs in the cause. Catchwords: CONSUMER LAW – enforcement and remedies – application to transfer [ADDRESS] proceedings to Supreme Court – declarations – Australian Consumer Law – Fair Trading Act 1987 (NSW) – whether declaratory relief necessary– claim that standard small business contract unfair and void – claimed unconscionable conduct – whether other claimed agreements came into existence CIVIL PROCEDURE – severance of proceedings – cannot justly be ordered CIVIL PROCEDURE – jurisdiction – transfers to and from other courts – whether claims within jurisdiction of [ADDRESS]– whether claims within jurisdiction of District Court – proceedings transferred to District Court Legislation Cited: Civil Procedure Act 2005 (NSW), ss 56, 140 Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law, ss 23, 24, 25, 27, 236, 237, 243, 250 District Court Act 1973 (NSW), ss 44, 134(1)(h), 135 Fair Trading Act 1987 (NSW), ss 28, 30, 71 Cases Cited: [NAME] v [NAME] (t/as [NAME] and [NAME]) & Anor [2003] NSWCA 59 STM123 No. 28 Pty Ltd v Eastern Suburbs Commercial Pty Ltd [2023] NSWSC 1266 The NTF Group Pty Ltd v PA Putney Finance Australia Pty Ltd [2017] NSWSC 1194 Category: Principal judgment Parties: [NAME] (Plaintiff) [COMPANY] (First Defendant) [COMPANY] (Second Defendant) [COMPANY] (Third Defendant) Representation: Counsel: [redacted] [NAME] (First Defendant)

Solicitors: [redacted] [NAME] (First Defendant) [NAME] (Third Defendant) File Number(s): 2024/68888 Publication restriction: Nil

JUDGMENT 1. In October 2023, [COMPANY] brought proceedings in the [ADDRESS] against [NAME] seeking to recover payments it claimed it was owed under a contract for the rental and maintenance of printing equipment, then of some $74,000.

2. That claim is defended. [NAME] also pursues a cross-claim against [NAME] and two other defendants. It seeks both declaratory relief under the Australian Consumer Law, ACL, a schedule to the Competition and Consumer Act 2010 (Cth), and the Fair Trading Act 1987 (NSW) in relation to its agreement with [NAME], which it claims is void and unenforceable, as well as compensation. It also seeks declaratory relief in relation to claimed agreements with [COMPANY] and [COMPANY], which it claims never came into existence, as well as other orders under the ACL. 3. [NAME]'s claims include that [NAME]'s unfair agreement is a standard form small business contract; that [NAME] has possession of [NAME]'s equipment, which should be returned to [NAME]; that it should be refunded payments it made to [NAME] under the void contract, as well as those it mistakenly made to [NAME]; and that it should also receive damages and/or compensation from them for their unconscionable conduct.

4. Those claims are also defended by [NAME] and [NAME]. [NAME] is not active in the proceedings.

5. In February 2024, [NAME] commenced these proceedings, seeking orders transferring the [ADDRESS] proceedings to this Court. [NAME] consented to those orders but [NAME] opposed them. It contends that what is in issue between it and [NAME] should remain in the [ADDRESS], even if it does not have jurisdiction in relation to the claims against [NAME], but there is no basis upon which the proceedings could justly be transferred to this Court. That was also disputed.

Issues 1. The Local and District Courts have the jurisdiction conferred upon them by statute. There is no question that what is in issue falls within the monetary limit of the [ADDRESS] and that it does not have jurisdiction to grant purely declaratory relief.

2. There is also no issue that the Court has power to order the transfer of the proceedings to this or the District Court: s 140 of the Civil Procedure Act 2005 (NSW). Such an order requires that the Court be satisfied that "there is sufficient reason for hearing the proceedings in the higher court": s 140(4).

3. In issue is: 1. whether any declaratory relief is necessary, given what is in issue between the parties; 2. whether what is in dispute in relation to [NAME]'s contract could justly be severed from what is claimed in relation to the other two defendants and remain to be dealt with in the [ADDRESS]; and 3. whether all that is claimed could be dealt with in the District Court or needs to be referred to this Court.

Can the proceedings justly be split? 1. Unfair contracts are dealt with in Pt 2-3 of Ch 2 General Protections of the ACL, as is misleading and deceptive and unconscionable conduct: Pts 2-1 and 2-3. Section 23 provides that unfair terms of "consumer" and "small business" contracts are void, although the contract continues to bind the parties if it is capable of operating without the unfair term.

2. The meaning of "unfair" is provided by s 24. It specifies when the term of a contract will be unfair, as well as the matters a court must take into account in determining whether it is unfair. Small business contracts are dealt with in s 27. 3. "Consumer" and "small business" are defined in ss 23(4) and (5). The latter requiring, in short, that at least one party to the contract made the contract in the course of carrying on a business at a time when it employs fewer than 100 persons, or that its turnover for the last income year was less than $10,000,000. [NAME] does not claim that it falls within that definition.

4. The cross-claim pleads that the [NAME] agreement is a standard form contact within the meaning of s 27 of the ACL as applied by s 28 of the Fair Trading Act, as well as a small business contract within s 23(4). 5. [NAME] claims that identified parts of the agreement are unfair terms within the meaning of s 24 and, in some cases, also s 25, which gives examples of unfair terms, with the result that they are void under s 23.

6. If a contract is a standard consumer or small business contract, s 250 empowers a court, on an application of a party to such a contract, to declare that a term is an unfair term. In the case of a standard small business contract, such a party must be "covered by paragraph 23(4)(b) at the time the contract was entered into". It appears that [NAME] was not covered by that paragraph. But that section does not "limit any other power of the court to make declarations": s 250(5). 7. "Court" is defined in s 2 to mean "any court having jurisdiction in the matter." It is the Fair Trading Act which generally regulates the jurisdiction of NSW courts in respect of the ACL.

8. Section 30 of the Fair Trading Act deals with the jurisdiction of this, the District and [ADDRESS] for the purposes of the ACL, by the way it defines "court". In the case of some provisions, "court" is defined to mean this Court: s 30(3). They include s 250 and Divs 2 and 4 of Pt 5-2 of the ACL. In Div 4 the kinds of orders which may be made are dealt with in s 243. They include declarations that the whole or part of any contract is void.

9. Section 71 of the Fair Trading Act deals with declaratory relief sought in respect of standard form consumer contracts, requiring that leave of this Court be obtained when a declaration under s 250 of the ACL is sought in respect of such a consumer contract. That requirement does not apply to the cross-claim, the Act not so regulating declaratory relief in respect of standard form small business contracts.

10. Section 21 of the ACL requires that persons must not engage in unconscionable conduct in trade or commerce in connection with the supply of goods or services. Actions for damages in respect of such conduct may be pursued and compensation orders also made: ss 236 and 237. Orders can also be made to address loss or damage suffered by third parties: [redacted]

11. Both injunctive relief, dealt with in Div 2 of Pt 5-2, and orders dealt with in Div 4, are not within the [ADDRESS]'s jurisdiction: s 30(3). They include those available under ss 232, 237 and 243.

12. Claims for damages, however, regulated as they are by Div 3 of Pt 5-2, do not fall within s 30(3). Actions for damages may thus be brought in any court of competent jurisdiction: s 236.

13. Despite this, given all that [NAME] pursues against [NAME] and the other parties, including in relation to the return of [NAME]'s equipment, I am not persuaded that splitting the cases as [NAME] suggested at the hearing, so that what it pursues and is pursued against it can be left to be dealt with by the [ADDRESS], can be justly ordered.

14. In short, [NAME] pleads not only that its contract with [NAME] was unfair, with the result that it is void and unenforceable, but also conduct which contravened Pt 2-3 of Ch 2 of the ACL, which entitles it to an injunction requiring payments it has made to be refunded; as well as misleading and deceptive conduct on the part of [NAME], which has prevented it returning the rented equipment to [NAME]; and that it has made payments under the [NAME] agreements and the claimed agreements with [NAME], which should be refunded.

15. What is advanced includes that [NAME] has no agreement with either [NAME] or [NAME]; it was in June 2020 that [NAME] approached, offering an alternative arrangement for printing equipment; it then represented that it had power to vary the [NAME] agreement to become responsible for payments under that agreement, which it would make; [NAME] took possession of the [NAME] equipment, which it has failed to return, making it impossible for [NAME] to return it to [NAME]; [NAME] had signed an agreement with [COMPANY] in June 2020 for rental of other printing equipment, under which it made payments which it does not challenge; but it had also mistakenly made payments to [NAME], with whom it had no agreement and later to [NAME], after it sought payments in 2023 under an agreement which it claimed it had entered with [NAME], but which it had never entered.

16. The loss and damage which [NAME] pursues thus includes any payments it is ordered to make under the [NAME] agreement, as well as the return of [NAME]'s equipment, in addition to the refund of what it mistakenly paid [NAME].

17. Given the common facts which will thus arise to be considered and all the orders sought against [NAME], it does not seem to me that the just, quick and cheap resolution of all of the real issues in these proceedings support them being split in the way in which [NAME] proposed: s 56 of the Civil Procedure Act.

Is the declaratory relief sought necessary? 1. Declaratory relief, even if claimed, may not be necessary. For example, in a claim for breach of contract or a similar cause of action, where the existence of the contract is in issue, it is not always necessary: STM123 No. 28 Pty Ltd v Eastern Suburbs Commercial Pty Ltd [2023] NSWSC 1266 at [27]. Unnecessarily claiming declaratory relief obviously does not accord with the obligations imposed on parties by s 56 in relation to the overriding purpose of the legislative scheme there specified. 2. [NAME] seeks declaratory relief in relation to its contract with [NAME], which it claims contains terms which are void and unenforceable, as well as compensation and other orders available under Divs 2 and 4 of Pt 5-2 of the ACL. That will depend on its terms, as well as the evidence which the parties lead. That, it must be accepted, is a necessary claim, given the scheme of the ACL, which specifies the kinds of orders which can be made in s 243. The exercise of the declaratory power there specified is not granted by s 30(3) of the Fair Trading Act to the [ADDRESS]. 3. [NAME] also seeks declaratory relief in relation to the claimed contracts under which [NAME] have sought payment of money from it, which it has refused to make. It denying that they ever came into existence, despite the payments it has made. It also seeks orders for repayment of those payments, which it claims it mistakenly made to both of them, it in fact having had no contractual obligation to do so, as well as the return of [NAME]'s equipment.

4. Inevitably determination of the repayment claims will require consideration of whether or not any contract ever came into existence with either [NAME] or [NAME] and will thus not necessarily also require declaratory relief. But [NAME] also pursues other relief in relation to [NAME] under the ACL, the grant of which is confined to this Court, which must also be considered.

5. It follows that even if the declaratory orders sought in respect of them are not necessary, the orders [NAME] pursued cannot be made.

[ADDRESS]'s jurisdiction 1. It was common ground that the [ADDRESS] has no power to grant purely declaratory relief, while this Court does have such power. Likewise, [NAME] contends that it cannot grant injunctive relief.

2. In The NTF Group Pty Ltd v PA Putney Finance Australia Pty Ltd [2017] NSWSC 1194, both the jurisdiction of the Local and District Courts under the ACL arose to be determined. There Parker J concluded that given the provisions made in s 30(3) of the Fair Trading Act, while the [ADDRESS] had power to award damages under the ACL, it had no power to make the orders there sought, they being orders that the agreements and guarantees there in question be declared void: at [6] and [30]. Those proceedings were therefore removed from the [ADDRESS]: at [37].

3. It follows that like in [COMPANY], these proceedings also cannot remain in the [ADDRESS], it still having no power to make the declaration sought in respect of the [NAME] agreement. Nor can it make the refund and return of property orders sought under ss 232 and 243, they falling within Divs 2 and 4 of Pt 5-2 of the ACL, which are not within the [ADDRESS]'s power to grant.

The jurisdiction of the District Court 1. The District Court may grant declaratory relief under s 134(1)(h) of the District Court Act 1973 (NSW): [NAME] v [NAME] (t/as [NAME] and [NAME]) & Anor [2003] NSWCA 59. There the declaratory relief pursued involved a claim against legal practitioners in an action for negligent advice given in respect of claims against a travel agent. It was concluded that the District Court had the necessary jurisdiction to make a declaration about a claimed indemnity for costs owed to the travel agent: at [12].

2. The District Court now also has power to deal with actions arising out of commercial transactions within its jurisdictional limit: s 44(1)(c1) of the District Court Act, enacted after [COMPANY] was decided. The absence of that jurisdiction was the basis on which Parker J concluded that it did not then have the necessary jurisdiction to deal with the claims there made under the ACL: at [44]-[52].

3. Section 135 of the District Court Act also deals with that Court's jurisdiction under the Fair Trading Act, permitting it to exercise all the powers and authority of this Court, "in any proceedings in which relief is sought under the Fair Trading Act and where the amount of the claim concerned does not exceed the amount for the time being specified in section 44(1)(a)".

4. What is specified in s 44(1)(a)(ii) is "the amount (if any) claimed does not exceed the Court's jurisdictional limit, whether on a balance of account or after an admitted set-off or otherwise". There is no issue that what [NAME] claims does not exceed that limit. The other matter dealt with in s 44 (1)(a)(i), the assignment of the matter to the Common Law Division if brought in the Supreme Court, is not relevant to the District Court's jurisdictional limit, with which s 135 deals.

5. In the District Court these legislative provisions have led to the view that once a monetary claim is made under s 236 of the ACL, within the limits of its jurisdiction, for damages under the Fair Trading Act, then it has jurisdiction to grant non-monetary relief under ss 237 and 243, in connection with that claim: [COMPANY] trading as trustee of the T&L Trust v Unicar Australia Pty Ltd [2020] NSWDC 51 at [282]. That approach followed what was decided in Provectus Care Pty Ltd v Epicor Software (Aust) Pty Ltd [2009] NSWSC 1281 at [6], and K & M Prodranovski Pty Ltd v Northshore Car Rentals Pty Ltd [2017] NSWSC 625 at [28] and [31].

6. I agree with that view.

7. It follows that while s 30(3) of the Fair Trading Act precludes the [ADDRESS] from exercising the power to grant the relief [NAME] pursues under the ACL, what it seeks does now fall within the jurisdiction of the District Court. The requirement of s 140 of the Civil Procedure Act, that there be sufficient reason for hearing the proceedings in that Court, is thus satisfied by the matters I have discussed.

Orders transferring the proceedings to this Court must be refused 1. That being so, I can see no basis for concluding that there is sufficient reason for this Court hearing what is raised by the [ADDRESS] proceedings, what is in issue falling within the jurisdiction of the District Court, as it does.

2. In the result I am satisfied that while orders transferring the proceedings to this Court must be refused, orders transferring them to the District Court must be made, what is in issue not all falling within the jurisdiction of the [ADDRESS], but being within that of the District Court.

Costs 1. The parties agreed that the costs of the proceedings should be costs in the cause.

Orders 1. For these reasons I order that: 1. [ADDRESS] proceedings be transferred to the District Court; and 2. Costs of the proceedings be costs in the cause.

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