Sunday, August 17, 2014

Discussion on unconscionable conduct through the inclusion and actioning of ‘deeming’ clauses within standard form consumer contracts

1.     Submission and argument that Financial Services Providers reliance on deeming clauses within their terms and conditions is mis-founded …
a.     “Deemed’ – to adjudge a point of view as fact [my df].
b.    “Can an action or intention to action be deemed as unconscionable if that act or intention is against good conscience but as yet has no victim”.  The corollary is that there is no unconscionable intent until someone is affected? [Has the tree fallen if no one sees it fall?].
c.     Take for example a contract and in the fine print there is a clause which stipulates that one party has the right to terminate the contract if they ‘deem’ any issue they wish a breach of that contract and the contract becomes null and void without loss of benefit to the author of the contract.
d.    An obvious nonsense.
e.     Now let’s assume, in the normal run of events, that a company is in a strong position with services in demand or people needing those services.  People sign off the contract including the ‘deeming clause’ because they have little choice.  Say a tenancy lease or a credit card contract.
f.     At what point and under what circumstances does the enforcement of the deeming clause become unconscionable and do we even need an enforcement to recognise this term as unconscionable and to be read down?
g.    I believe that it is enough to make such clauses unconscionable even if there is no victim just because it may confuse, coerce and mislead people and it has the intent of doing just that and advantaging the author unconscionably at the expense of others.
h.     Take most credit contracts.   They will all have a similar deeming clause somewhere in their terms and conditions which allows an FSP to summarily terminate an agreement and demand instant repayment of a loan.  Yet there are provisions within the Code of Banking Practice, the Australian Consumer Law and the ASIC act which specifically preclude an FSP from actioning their deeming clause without due process.
i.      So, on one hand we have the FSP with their deeming clauses and alleged cancellation rights and we have the law on the other stopping or at least modifying the same alleged rights.
j.      As the FSP is well aware of the law and well aware of the way their deeming clause is inappropriate then isn’t the inclusion of such a clause by definition, unconscionable and unlawful because the intent of the clause is to take unconscionable advantage - even if it’s never acted on!
k.     Therefore the precursor to any litigation is whether or not the deeming clause is unfair because the intent of the FSP is unconscionable.
l.      I would say that any clause which purports to allow one party to just deem a contract null and void to someone’s disadvantage must be read down as it would be unconscionable to leave it there.
m.   Now, an FSP acts on the deeming clause and we have a victim.  Mr Victim had a credit contract and was using his ‘card’ for everyday things and accumulating frequent flyer points and paying his monthly commitments.  He was late a couple of times but fixed the arrears and all was well.  Then someone from the FSP decided to change policy and deemed the victim’s card cancelled and the victim had to repay the entire debit within a few days because that’s what the deeming clause said.
n.     This put the victim instantly in a state of special financial disadvantage for at least two very important reasons.  Firstly, he had to find the money elsewhere to pay the loan [if he could] and secondly he had relied on the line of credit and had no other money to live on or pay bills.  In effect he had relied on the FSP acting conscionably and in compliance with all parts of the law.
o.    Mr Victim complained but the FSP just pointed to the deeming clause as justification for the cancellation.  The FSP was well aware of the law but chose to mislead and coerce the victim into believing they had the right.
p.    Now, not only is the deeming clause unconscionable but the FSP has acted on that clause in the full knowledge of its effect on the victim.  The act is also unconscionable and caused Mr Victim to lurch into a state of special financial disadvantage.
q.    Perhaps Mr Victim has an actionable case against the FSP on at least two grounds.  Firstly, the FSP included such a clause with obvious unconscionable intent and secondly, it acted on it possibly outside the provisions of law.
r.      I would say that pecuniary penalties apply for both inclusion and act and the victim needs to be compensated.