Do you own a company that contracts with customers or enters into terms and conditions with customers? A recent Supreme Court of Appeal decision found that a party cannot contract out of liability for misleading or deceptive conduct under Australian Consumer Law.
The Victoria Supreme Court of Appeal confirmed that a party cannot contract our of liability for misleading or deceptive conduct under Australian Consumer Law. Basically the Court of Appeal resolved that allowing parties to avoid the operation of s236 through a contractual provision would allow parties to diminish the operation of s18 together with other statutory consumer protection provisions.
The details
Party A entered into a Confidentiality Deed with Party B after purchasing the entire share capital of a company from Party B. Amongst other things, the Confidentiality Deed provided that:
‘Subject to clause 10.4 Party A unconditionally and irrevocably release Party B and its Representatives from any liability which may arise, whether directly or indirectly, in relation to, in connection with, or as a result of the provision of the Confidential Information or any reliance placed by any person Confidential Information or the non disclosure of any Information, including any liability resulting from any negligence, default or lack of care on the part of Party B or any of its Representatives or from any misrepresentation or any other cause.’
Party A subsequently brought successful proceedings in the Victorian Supreme Court against Party B for misleading or deceptive conduct under s18 of the ACL on account of the Company’s (purchased by Party A) alleged business practices.
Through the Victorian Supreme Court of Appeal, Party B put forward that it was not liable under s18 of the ACL to Party A for the following reasons:
* no representations were made, and no responsibility was accepted as to the accuracy and completeness of the information provided;
* Party A agreed not to rely, and/or had not relied, upon any representations, but would rely upon their own investigations; and
* the contract between them purported to exclude, release or limit Party B’s liability to Party A.
These submissions were dismissed by the Court of Appeal. Thereafter, the Court of Appeal determined that s236 confers a remedy where a person has contravened s18 by way of damages payable, and that contracting out of such a provision would undermine the intended operation of s18 of the ACL. This is despite there being no ACL provisions which expressly prohibit ‘contracting out’ of s18 or s236 (regarding damages) of the ACL.
The Court of Appeal also made a distinction between ‘contracting out’ of liability and the implications of contractual terms on assessing whether liability is made out in the first instance. Contractual terms may be argued where an issue arises as to whether the customer’s assertion of reasonable reliance has been proven.
Importantly the Court confirmed that settlement agreements can compromise a claim, or potential claim, even if the effect is a compromise on liability for damages for breaches of s18.
The ramifications of the Court of Appeal’s decision are significant, as the principles will apply to all transactions which the statutory consumer protection provisions encompass.
