Contractual time bars and claims for damages for misleading or deceptive conduct under s 236 of the ACL

A contractual provision which had the effect of excluding liability for damages for misleading or deceptive conduct under s 236 of the Australian Consumer Law if the complainant failed to give a notice of the proposed claim within a prescribed time limit was found to be unenforceable. Such a provision was also found to be ineffective in a “no transaction” case.

Brighton Australia Pty Ltd v Multiplex Constructions Pty Ltd [2018] VSC 246

Background

The case concerned the fit out, plastering and ceiling works at the new NAB offices at Docklands.

The Plaintiff, a plastering subcontractor, alleged that the Defendant, the head contractor, was guilty of misleading and deceptive conduct contrary to s 18 of the Australian Consumer Law (“Consumer Law”) by providing a construction program with the tender documentation which did not take into account significant structure and facade procurement delays which were known to the Defendant. The Plaintiff alleged that it priced the works based on the time, manner and sequence of works prescribed in the construction program. The Plaintiff alleged that these delays would preclude the Plaintiff’s works from being able to be commenced in the time and manner prescribed in the construction program and that, had it been informed of the Defendant’s structure and facade procurement delays, it would not have accepted the contractual risk allocation in the contract and not proceeded with the works and entered into the subcontracts.

The Defendant argued among other things that clause 46.3 of the subcontracts operated to exclude liability for such a claim in the event that the Plaintiff did not give a compliant notice within the time prescribed.

It was common ground that a prescribed notice had not been served within the time limit set out in the contract.

The Judge in charge of the TEC List made orders referring the matter to a Special Referee for determination.

Special Referee’s findings

The Special Referee found that the Plaintiff had not made out its case under s 18 of the Consumer Law.

Among other things, the Special Referee found that the Plaintiff was precluded from bringing the claim under the Consumer Law because notice of the claim was not given within the 7 day period prescribed under the subcontracts.  The Special Referee rejected the submission that clause 46.3 was in the nature of an exemption clause and found that the temporal limitation clause was permissible, following a series of New South Wales cases referred to below.  The Special Referee also rejected the Plaintiff’s submission that the New South Wales cases did not apply to “no transaction” cases (those in which a party claims that it would not have entered into the contract but for the misleading conduct of the offending party).

Adoption Hearing

The Plaintiff was unsuccessful in its opposition to the adoption of the Special Referee’s Report; however, the Court found that the Referee fell into legal error in finding that clause 46.3 was effective to exclude liability under ss 18 and 236 of the Consumer Law.

Claim notification time bar found to be contrary to public policy and unenforceable

During the adoption hearing, the Plaintiff argued that clause 46 was unenforceable and contrary to public policy for purporting to exclude statutory liability under the Consumer Law, see: Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546. Correct reference?

It was common ground that a clause excluding liability in the subcontracts would not be effective in preventing a claim under s 18 of the Consumer Law; however the Defendant argued that the temporal provision was a procedural limitation, which was enforceable in Consumer Law claims in accordance with New South Wales authority.

Justice Riordan set out the juridical basis for the accepted proposition that liability under s 18 of the Consumer Law cannot be excluded by contract.  The Court found that the case came within one of the categories of agreements identified in Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498 as being unenforceable for statutory illegality, namely that it is a “contract associated with or in the furtherance of illegal purposes”.  This was because:

(a)   the Consumer Law embraces public rather than private rights; and

(b)   the legislative purpose will not be fulfilled if the Court enforces private contractual arrangements.

The Defendant relied upon a number of first instance decisions in the Supreme Court of New South Wales in support of its contention that the temporal limitation in clause 46.3 was only “procedural” and not void or contrary to public policy: Owners SP 62930 v Kell & Rigby Pty Ltd [2009] NSWSC 1342; Lane Cove Council v Michael Davies & Associates [2012] NSWSC 727; Firstmac Fiduciary Services Pty Ltd v HSBC Bank of Australia Ltd [2012] NSWSC 1122. The Defendant also relied upon Western Australia v Wardley Australia Ltd (1991) 30 FCR 245 in support of a submission that the limitation period in s 82 of the Trade Practices Act 1974 (Cth)(analogous to s 236 of the Consumer Law) was only procedural and could be waived.

The Plaintiff argued in reply that the 7 day temporal limitation in clause 42.3 operated to exclude an entitlement to compensation that would otherwise exist for a period of six years and was therefore void or contrary to public policy and that the New South Wales decisions relied on by the Defendant were wrong. It also argued that Wardley did not support the Defendant’s submission that the limitation period in s 236 was procedural in this context.

Justice Riordan found that the “no exclusion principle” prohibited clauses imposing time restrictions on which a claim under the Consumer Law may be made.  Although Riordan J accepted that the 6 year limitation in s 236(2) of the Consumer Law may be procedural, his Honour said that any attempt to restrict the remedy by limiting the time in which an action can be brought is “an unacceptable interference with the public policy underpinning its provisions” ([129]), which is to protect people from being misled.

His Honour observed that it is not consistent with the public purpose of the Consumer Law to leave claimants uncertain about whether Courts, on a case by case basis, will determine contractual time bars to be so unreasonable as to be unenforceable: [130].

Exclusion clauses in a “no transaction” context

The Court alsoheld that if it were found that the Plaintiff would not have entered into the subcontract but for alleged misleading conduct, the Defendant would not have been entitled to rely upon clause 46.3.

This is an important authority to be considered when assessing the relief to be claimed under ss 18 and 236 of the Consumer Law.