Submission and argument that
Financial Services Providers reliance on deeming clauses within their terms and
conditions is misfounded … [many sources and paraphrased quotes]
‘Deemed’ – to adjudge a point of view as fact
[my df].
“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?].
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. An
obvious nonsense.
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. 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?
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.
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.
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. 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!
Therefore the precursor to any
litigation is whether or not the deeming clause is unfair because the intent of
the FSP is unconscionable. 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.
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.
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. 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. 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.
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. I would say that pecuniary penalties apply
for both inclusion and act and the victim needs to be compensated.
Further …Unconscionable conduct - irreconcilable
with what is right or reasonable and show no regard for conscience. [pecuniary
penalty circa $1.1m]
Recent decisions (Australian
Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90)
made it clear that for conduct to be seen as unconscionable the determining
factor was the respondent’s conduct and not the applicant’s response. It is the
‘conduct’ which is at issue and not the applicant else it could be said that
the applicant is being tried for the conduct of the respondent. A
nonsense.
Whilst it is noted that it
is not sufficient for unfair, unjust, wrong or unreasonable conduct by itself
to be deemed unconscionable it is quite sufficient when that conduct involves
deliberate wrongdoing.
The newly amended prohibition on
unconscionable conduct now makes it clear that the statutory prohibition
against unconscionable conduct is not limited by the common law concept of
unconscionable conduct. The amendments
also make clear that inherent systems or patterns of such conduct are
prohibited, whether or not an individual is disadvantaged by the alleged
behaviour. The focus, therefore, is on conduct which may offend good
conscience, whether or not a "victim" is involved. Importantly, there is now no distinction
between consumer and business transactions in the factors the court may have
regard to for the purpose of determining whether conduct is unconscionable.
A clause in a contract can also
be declared unconscionable, even if there was no unconscionable conduct in the
way the contract was signed. For example the Victorian Supreme Court has held
that a clause in the fine print of a contract that created an onerous
obligation was unconscionable.
Therefore, given the weight of
discussion, why do FSP’s continue to include transparent ‘deeming’ clauses when
that very inclusion seems to labeL them as unconscionable?
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