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.

CHOICES AND OPTIONS

There is a war going on.

Not as you might suspect with guns, tanks and bombs but much more subtly with words and actions validated from those words.

Business is all about convincing people to move away from someone else and buy stuff from you.  Simple.  This happens quite lawfully by offering greater choice and options whilst convincing the hapless customer the someone else has less choice and fewer options.

The better our choices and options, the better our life.  “Perhaps the children would enjoy St Moritz this Christmas?” or “Which golf course to play today?” or even, “Do we have lamb or beef for dinner?”. 

The corollary to that is we remove choice and options when penalising people for doing something unlawful.  The more serious matters end up in goal whilst our courts preside over a multitude of ‘offences’ handing out orders which invariably enhance the winners options and choices whilst doing the opposite to the bad guy.

It seems clear that the good side is enhancement whilst the bad is restriction.

Now, for business, the trick seems to be to use language to make sure you retain and enhance your choices and options but at the same time using those same words to remove your client’s options and choices and their ability to go somewhere else for their widgets.  The law steps in when this becomes unconscionable and unlawfully disadvantaging.

The repository for all these ‘words’ is in ‘standard form terms and conditions’ which business trot out to ensure they remain top dog and it seems irrelevant to business whether or not those terms are lawful or conscionable because they rightly assume that people will also assume without reading them that ‘the words’ are indeed lawful  and must be complied with.  Now days they are eminently transparent in plain English and serve almost entirely to remove customer’s choices and options whilst enhancing their own.  This does not mean they are lawful and customers are treated as the bad guys.

Perhaps we should all have our own private booklet of terms and conditions which purport to allow us to enhance our choices and options.  One paragraph could read, “I am allowed to speed on the roads and can’t be booked”.  It’s in writing and must be obeyed!  Perhaps Judge Dredd would not see the point.

The war continues between say banks and legislation.  Banks want to gather in all the power for all the reasons discussed above whilst the law tries to protect people from the more unconscionable terms .  For example the banks deem themselves the sole purveyor of good and evil and demand the ability to remove a clients financial instruments [choices and options] at their sole discretion whilst at the same time denying customers of the same rights. 

The code of banking practice and the legislated national credit code prohibit this behaviour by ensuring the banks go through a process allowing customers options and choices before the banks can deem a client redundant and to be shed.  Yet those terms keep popping up and the courts keep ruling against them.

These days a term can be ruled by the courts as unconscionable whether or not anyone has been affected the same as actions by the banks using those terms can also be ruled as unconscionable.

Yet the game goes on.

Bad people try and take an unconscionable advantage by trying to mislead the public that their glossy booklets are actually lawful and must be obeyed.  Notice that few banks will put anything in writing and they will not want their conversations to be recorded.  Could it be that they know their actions to try and curtail customers options and choices to be unlawful?

This is war.

Respect is not earned - it is a God given right.

CAR INDUSTRY

When do we start taking the initiative and look outside political and media driven doom and gloom? 

When do we start to believe in our own Australian expertise and stop flailing about in discontinuous rage as another ‘foreign’ company withdraws ‘hurt’ when the going gets tough but after profiteering for years on uneven playing fields at the expense of our country?

When do politicians stop trying to assure the yet to be unemployed that they are trying to create new jobs through all sorts of ill-thought-through initiatives to make themselves look important and to be seen as doing something? 

Instead  …..  why don’t we bite the bullet and produce our own cars and other vehicles?

We will soon have 3 newly vacated plants which do and can produce cars.  Why don’t we produce our own world leading new-design taxis, government cars, town cars, military vehicles, scram jets, super tractors, planes, farm bikes, fun cars [Moke-a-like] or any other vehicle which is useful for us as a country and can be sold elsewhere?  And no, don’t call any the Kangaroo or the Wallaby or the bloody Dingo!!

I am really sick of the prevailing oh-woe-is-me attitude where we import expertise [because we are so backward, stupid and don’t have any talent] only to find the imports are wanting [EG. The Mexican triumvirate at Telstra or multiple managers at Coles Myer or several Australian icons currently in trouble with imported management].

We have sold our soul to foreign manufacturers who can’t manage a decent profit other than the ‘incentive fees’ we pay them [Ford worldwide a couple of years ago].  And, we accept foreign management just because they are foreign and must therefore be much better than us.

This is utter bullshit!

Abbot and Shorten – how about working together with an Australian collective spirit and foster/create/allow the creation of something special?

We are really that good!!

Yes?

How about starting by immediately enforcing Australian only isles at supermarkets?

ANZ and Corporate Governance

Yesterday in the Federal court ANZ was found guilty for illegally charging customers late payment fees. [All FSP’s and utilities will probably be in the same boat]

These extravagant, exorbitant and unconscionable fees will have to be paid back to all their customers with no time limit going backwards.  It’s not only the late payment fees which have to be refunded but most probably daily interest on each illegal fee going forward from the time of the illegal removal of the fee and any other effects that the fee may have forced such as dishonouring some other payment which should have never been dishonoured. 

Last night a spokesman for ANZ said on ABC radio [paraphrased] that the $15m this was going to cost ANZ is irrelevant to an organisation turning over billions. This rather smarmy comment seemed to sum up the bank’s attitude.  He said in effect that the $15m in paybacks meant nothing to a company the size of ANZ.  That arrogance is outstanding because it doesn't apologise for illegal acts or the effect on customers; he just said that they can afford to pay the fines.  This is appalling.

He didn't care.  He didn't care the bank acted illegally, he didn't care that it was costing the bank some $15m and he didn't care about shareholder losses.  I will also back it in that the $15m is just fees to be refunded and that the bank hasn't included the full cost to the bank for this issue including legal fees, staff fees, the cost of software to work through millions of transactions and the cost of lost customers and their costs including future ramifications from illegal charging. 

How did he know the fee quantum so quickly?  Could it be ANZ were well aware they were breaking the law? 

Remember it was just last week that ANZ had to refund $70m in overcharged fees to home loan customers!  Even ANZ’s own past CEO, John McFarlane said ANZ’s fees were unsustainable.  Greed seems to endemic and it’s getting worse.

Where is ANZ’s Corporate Governance on the rights of shareholders, responsibilities of the board, integrity and ethical behaviour?  Where is its fiduciary duty?

The questions are, ‘Is this the sort of culture we, as Australians, want to portray to the world and are these the sorts of people we want running our public companies? 

Santorini

Gods and Troglodytae muse within slingshot on beautiful Santorini.  Gods languish on the caldera whilst cogitating cave dwellers peer out of their carved doors on the, far far side.   However the third, and often overlooked, species is the humanoid identified by their unique method of encasing dangly bits.  These interlopers in the realm of the Gods maintain their omnipresent force by threatening and indeed scaring the cleaner than clean Gods and their somewhat scruffier and hairy nemesis, the Troglodytes , by displaying their bodily armour for all to revere.

Everyone watches the sunset, including the undies, in Santorini.

Photo and original words by Jon Langevad

FINANCIAL CONTRACTS WITH THE BANKS

Does anyone know why the banks seem to be able to vary standard financial contracts at their absolute discretion yet deny borrowers the same rights? This includes the ability to cancel any contract at will - for no given reason.

I always thought that a contract was a binding agreement on both parties to continue with that agreement until the terms of the contract naturally expired either through time or some other form of completion - a mutual obligation. In this way each party could rely on whatever benefit they subsumed from the contract and each other.

For example, Mr and Mrs Bloggs bought a home with a 20 year mortgage calculated to enable them to pay off the house and live comfortably.  The bank benefited from fees and interest - as clearly defined within the contract. At some point the bank arbitrarily changed its lending policy and decided to call the Blogg’s loan without reason.  Nothing to do with the Bloggs and their loan performance - just a new policy by the bank.  The Bloggs couldn’t  refinance and had to sell their home in a depressed market and lost a great deal of money whilst the bank got all its interest and termination fees.  Perhaps unjust enrichment?

Justice?  I don’t think so and it brings up a number of questions.

If a party to a contract has the ability to cancel a contract at will, was there a contract in the first place? I thought a contract was something which both parties could rely on for some mutual benefit for the natural life of that contract. If one party can vary the terms of the contract or ‘change the agreement’ at will then surely there was no ‘agreement’ in the first place?

This is obviously a nonsense yet all banks include ‘terminate at will’ clauses into their standard form contracts whilst ignoring the whole concept of expectation damages or damages wrought by breach of contract in that the injured party I thought had a right to ‘expect’ a contract to go full term and if that is truncated by the other party then they are entitled to expect damages equivalent to the benefit they would have received if the contract had gone the agreed distance?

Secondly, as far as I understand it, there are many provisions in many acts which specifically preclude the alleged rights of banks to unilaterally and unconscionably vary contracted terms including S12BH (1)b of the ASIC Act. It seems the law is clear so how come the banks can and do ignore those legislated provisions?

Thirdly, why do the banks include such terms and indeed rely on them when pursuing innocent borrowers?  The only reason I can think of is that banks feel the need to misrepresent their actual ability to breach a contract through a form of unconscionable coercion. It seems they ‘coerced’ Mr and Mrs Bloggs into believing that they had to sell their home even though the bank knew full well that they did not have the right and that the Bloggs had little financial or legal knowledge and that they could not deal with a gaggle of lawyers from a multinational telling them through ‘official’ legal letters that they had to sell their home.  The Bloggs were not capable of dealing with the banks self adduced phalanx of power and the banks knew it and indeed depended on it!  Surly this is misrepresentative and unconscionable coercion at its worst?

Recently we have been in a situation where we have had to take three different banks to the Financial Ombudsman Service [FOS] for what I considered legal and contractual breaches even though each bank incorporated within the standard terms and conditions their ability to ignore the law and basically do whatever they liked.  We have won all three with each bank found guilty of breaching the code of banking practice.  They were forced to rectify their actions and pay damages.

 

But key is that for FOS to make this determination it must have read down the bank’s own published terms which stated that the bank could in effect do what it likes.  That term and its implied power was read down and discounted by FOS as a legal body using the intent and practice of the law.

Yet, those sorts of clauses are still very much a part of standard form contracts.

My question and dilemma is – ‘How can banks publish terms and conditions with impunity which obviously breach the law knowing that those terms are indeed ‘unfair’ and will confuse the average borrower to the advantage of the bank?’  Surely, this is ‘unjust enrichment’?  The banks know that 99.99% of people will just accept the banks terms without question just because they are a bank with lots of lawyers and as a consequence must be right.

Perhaps they aren't right?

Opera [house] in Melbourne ..

I wish to thank the Sydney Opera House Trust from a Melbournian’s perspective for their decision to downgrade and make Bennelong restaurant more 'accessible'. 

That pesky Frenchman created a beautiful multi-hat restaurant called Bennelong within our national icon.  A first class affair befitting its status.  Guillaume Brahimi, being  that pesky Frenchman, sought to create something special in the space as has Ducasse who leads the restaurant Jules Verne within Paris’s Eiffel tower.  Little compromise in either ‘wonders of the world’.

However, Australians it seems, according to the opera house trust, want an ‘accessible’ venue similar to the dozens of cafes and restaurants in the immediate vicinity. 

The Utzon hating Ryan Committee of yesteryear seems reborn – ‘don’t bother to create something really special because us Australian’s just want pub tucker – no need for that smancy stuff – just give us another café/bar’.

Nothing special or world leading, just average so us average people can go there and feel, well, average.

As Sydney does not seem to appreciate how to deal with ‘first class’ I wonder if we could shift the opera house to Melbourne where we would indeed laud the brilliance of Utzon and create a world class experience decidedly away from average.

This is not a slight on the successful van Haandels and we wish them well but my question remains, ‘Do we want yet another café / bar and importantly, do we want it in our one-off wonder of the world?’

My thanks, as a Melbournian, to the trust for downgrading Sydney.

Mr Tony Jones and the producers of Q&A …

I have said for some time that Q&A should be required viewing for anyone over 15.  However, it seems that the power of the 'lowest common denominator' talk show is starting to take over from intelligence.  Tony, on Lateline I thought you were a trifle arrogant and self serving but you positively shined on Q&A.  No joke.  As a host and moderator you were great.  But now it seems that your personal biases and perhaps Q&A's producers are letting the side down. 

You have an opportunity to delve into and debate real issues of national strategic importance yet you succumb to drivel such as the $1k Prime Minister Abbot repaid.  Unfortunately, it took an international guest to tell you the story was and is unimportant.

Tony, you and Australia are better than this.

It is up to you to steer the discussion away from minutia and curb most of your guests predication to talk forever, but in a manner showing respect and one which befits a moderator in Australia’s most important ‘discussion’ show [as distinct from talk].

Tony, please remove your personal labour predilection and indeed the labour parties mandate to focus on simple minded issues AND remove both parties desire to air 5 second cheap shots.  Last Monday you were rude to MP Hunt accusing him of ‘political diatribe’ yet when Ms Ellis and Ms Benjamin rattled on about very little and without focusing on the point you said nothing.  Why?  It also was indeed obvious that Mr Sheridan had lost it with both you and Ms Ellis because she was virtually out of control and you did nothing.  His was the voice of reason where, as moderator, you should have stopped Ms Ellis.

Indeed, Mr Shorten was also the voice of reason a couple of weeks ago.  He had to put you in your place when you tried to involve his mother in law.  I have a lot of respect for Mr Shorten and his ability to focus on important issues without distraction on minutia.

Mr Jones I am a liberal voter who worries about Prime Minister Abbot as our representative on the world stage but as a country we must support both him to move into his ‘statesman’ role and his /our government to succeed.  It IS NOT your role to either try to create news or to give voice to stupidity or to create sedition through unrest and biased coverage.

It IS your role to bring Q&A back to THE pre-eminent ‘discussion’ show focusing on matters of national importance rather than ‘talk show’ minutia.   Sure, address the current issues but leave the unimportant to commercial channels. 

You decide the questions which will be asked and answered - so please let’s raise the bar.

Good discussions,

Jon Langevad.

Virgin Vs People - Read down to Virgin's response

We returned from Bali to Melbourne last Wednesday night on the Virgin ‘red eye’ leaving Bali around 10pm and arriving around 5am on Thursday.

We flew what is euphemistically known as ‘cattle class’.  Virgin unfortunately took this description as a mandate to treat people as just that – cattle.

I am just over six foot and I had ‘zero’ leg room with my knees pressed hard against the seat in front.  Surly this is against health and safety regulations because the only way I could get into or out of my seat was to drop in sideways using the seat in front as support.  No leg room means no movement, cramps and the increased possibility of deep vein thrombosis and swollen ankles.  The gent next to me tried to put on support socks but the only way he could achieve this was to literally stand on the seat.  He was well into his sixties.

The chocolate mousse and the pasta on the way over were inedible as was the chicken casserole and the ‘sweet’ bread roll on the return flight.  Why do Virgin proffer this rubbish when there is so much cooking talent in Australia capable of producing great ‘airline’ food?

For a night sleeping flight there were no blankets, no entertainment and seats which reclined all of about two inches and being literally jammed in.  Unable to move, the bloke next to me farted all flight, the one in front was constantly and loudly cleared his sinuses and a woman two people away threw up several times during the flight. Cattle.

When the ‘fasten seat belt’ sign came on staff locked down the cabin and allowed no-one to move from their seats including going to the toilet.  Strange that this lockdown occurred just prior to meal service on both flights and was rescinded just after service.  Could it be that staff are using the seat belt sign to make their job easier?

Attitude by staff was appalling.  When the meal or drinks trolley was pulled and pushed up the isle there was no thought for tired jammed in people with an elbow in the way remembering as the cart came from behind one cannot see the approach.  Twice I was hit by the cart with no apology.  It seems staff think they have a mandate to treat people as cattle.

But, by far the worst example of Virgin’s systemic attitude towards clients was when my partner went to join the toilet queue prior to landing.  After 10 minutes creeping up the line she was about to enter the toilet when the male staff member told her that there was no time for her to go to the toilet and to return to her seat.  The fasten seat belt sign did not come on for another 5 minutes.  This is insane and shows quite clearly what Virgin staff think of their customers – cattle.

Facilities, service and importantly, staff attitude was and is appalling.

Virgin should be paying us to suffer this sort of treatment.

Virgin’s response from Katharine Molloy  with my comments in red …

Dear Mr Langevad,

Firstly, thank you for your feedback and taking the time to let us know of your recent experience.

After reading through your feedback, I would like to take this opportunity to offer my sincere apology for any disappointment you felt with our Economy class and In Flight experience on your flight from Denpasar to Bali. May I suggest that the disappointment I felt was caused by Virgin – there is a direct cause and effect. Do not try and distance yourself from blame.

Firstly, our cabin crew are trained to provide outstanding customer care on board at all times and as we take great pride in our team members, it is concerning to read of your dissatisfaction with the level of service provided. As such please rest assured  your individual comments have been distributed to the relevant Cabin Crew managers, this will enable them to provide further training and coaching where necessary. It is not enough to blandly say that your staff are trained when it is very obvious that they are not.  You cannot take pride in rubbish.  Telling the managers has nothing to do with the service I was provided – it may affect future customers but I still suffered at the hands of incompetent staff and as I paid for and expected reasonable care and attention, Virgin failed and did not provide the product for which I paid.  If I may make a suggestion, never use the phrase ‘rest assured’.

It is also with regret to learn of your disappointment regarding the lack of In-Flight Entertainment (IFE), poor quality meals and restrictive seat dimensions. We strive to ensure all of our guests have an enjoyable and pleasant experience with us so it is with concern to learn this was not the case for you on this occasion. Once again, my disappointment was caused through Virgin providing rubbish food and not providing even barely adequate leg space.  This is a failure to provide a product for which I paid and I believe dangerous.

Mr Langevad, to clarifying, regrettably IFE is not always guaranteed on our aircrafts, is stated in our terms and conditions on the Virgin Australia website and is also noted and agreed to at the time of booking. Fine.

I can also advise that we are constantly reviewing our product offering in order to improve our services. Your feedback in regards to seat dimensions and unsatisfactory meals has given us key areas of focus in order to enhance our guest's experience and your comments will be taken into consideration when developing further enhancements to our product offering.  I am sorry to say this Katharine but this is banal crap.  I am not trying to enhance your guests experience, I am telling you that the experience I received was well below par and I believe dangerous.

I do hope you give us the opportunity to welcome you back on board one of our flights in the near future, and provide you with the high standards of service we pride ourselves on. Katharine, I paid for and expected a level of service and amenity consistent with advertised parameters.  I did not receive that and hence expect a refund.  I have already published my complaint on Trip Advisor and my blog.  To even say that you have high standards which you pride yourselves on is insulting to us and does indeed show a lack of care or indeed even an intelligent response.

As I said, Virgin has failed to deliver a merchantable product which I paid for.  For this I expect a refund.  Secondly, I expect Virgin to offer more than banalities.  I find your supercilious attitude insulting and appalling given the seriousness of the complaint.

I am publishing my continuing findings and involving the relevant authorities.

Kind regards,

Katharine Molloy [Virgin]