Consumer Bill’s bonkers bit

There’s an element in the proposed national unfair contract terms law that:

• isn’t in the Productivity Commission report that recommended the new law
• isn’t in the Victorian law that is already in force in Victoria
• isn’t in the United Kingdom law that served as the model for Victoria’s law, and
• is bonkers.

It makes no sense.  It’s bananas.  And the Explanatory Memorandum that accompanies the Bill admits as much.

The definition of ‘unfair term’

Since the proposed law voids ‘unfair terms’, it needs to say what that expression means.  Here’s how it does that.

Meaning of unfair

(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.

OK, that’s cool as far as it goes.  There are two conditions that define an unfair term:

• My rights are significantly greater than yours, or my obligations are significantly less.
• That disparity isn’t reasonably necessary to protect my legitimate interests.

We can understand that.  Fine.

An example

Before we get to the bonkers bit, let’s dream up an example of how that definition might work.  Let’s say that there was a court decision that ISPs could be liable to massive damages if they receive a copyright infringement allegation and don’t suspend the alleged account within 5 minutes. 

Well, every ISP would add a contract term that allowed it to immediately suspend a customer in those circumstances.

That term would clearly be ‘fair’.  The powerful and unbalanced right to suspend is necessary for the ISP to protect itself against big damages awards.  End of story ?  Would a court have to think about it a moment longer ?  Hasn’t the definition of ‘unfair’ been applied and resolved in this case ?

Well, not quite.  Thanks to the bonkers bit.

The other thing the court would have to do

The draft law directs the judge:

In determining whether a term of a consumer contract is unfair under subsection (1), a court must take into account the extent to which 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.

Think about that.  We have a term that, according to the definition in the proposed law, is not unfair.  But the poor judge can’t just say that.  She also has to consider its ‘transparency’. 

Well, what if it’s totally ‘non-transparent’ ? 

What does she do ?  What can she do ?  She has already concluded that the term ‘is reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term.’  If she also decides it was ‘non-transparent’ is she obliged to reverse the result ?  Does lack of transparency have the effect that it is ‘not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term’ ?

‘I am satisfied that that the term is reasonably necessary to protect your legitimate interests’ she says.  ‘But it isn’t presented clearly.  So now I rule it is not reasonably necessary to protect your legitimate interests.’ 

Get it ?  A factor that is not part of the definition, but (for bonkers reasons) is described as a mandatory consideration, changes the outcome.  If it can do that, why is it not part of the definition of unfairness ?  If it can’t, why is it mentioned at all ?

Why is it so ?

Bonkers logic lead to bonkers results.  Imagine this … We introduce a law that says:

• You must not say rude things to tram drivers.
• In determining whether person has been rude, the court must have regard to the direction of travel of the tram.

You see, the direction of the tram isn’t an element of rudeness.  It’s like saying ‘to decide if a person is tall, the court must have regard to whether it is Tuesday.’  There’s just no logical connection.

And here’s the punch line:  the Explanatory Memorandum admits the nonsense

Transparency, on its own account, cannot overcome underlying unfairness in a contract term. Furthermore, the extent to which a term is not transparent is not, of itself, determinative of the unfairness of a term in a consumer contract and the nature and effect of the term will continue to be relevant.

Translation:

• The clearest, most readable, most transparent wording cannot make an unfair term fair.
• Obscurity, complexity and non-transparency don’t make a fair term unfair.

So here’s the question …

What the hell is the transparency ‘factor’ doing in the Bill ?   If the legislators want to say that obscure terms can be unfair – purely because of their obscurity and no other factor – fine.  But don’t say that the only test is reasonable necessity for the term to exist, but then direct judges to consider ‘transparency’.