The 2010 amendments to the Consumer Protection Act 1999 introduced a new Part IIIA on “Unfair Contract Terms”. Where certain contractual terms were considered to be procedurally or substantively unfair, then such a contract or term would be at risk of being declared unenforceable or void.
There had been little case law to shed any light on how the newly introduced provisions would be interpreted by the courts until the recent case of Fairview International School v Tribunal Tuntutan Pengguna Malaysia. The action was brought by Fairview International School ("Fairview") against the Malaysian Consumer Claims Tribunal ("Tribunal") seeking a judicial review on the Tribunal's decision that the provisions concerned were unfair. Fairview further contended that the Tribunal acted ultra vires without jurisdiction; and even if it did have jurisdiction, the Tribunal had erred in law for wrongly construing the enrolment contract between Fairview and Sabheena.
The second respondents were the parents of a student at Fairview, whose enrollment was subject to provisions which required a student to submit a withdrawal notice of one full academic term before the actual withdrawal of the student, failing which the security deposit which was paid in advance will be forfeited in full (“First Provision”). There was also a general term that gave Fairview the right to amend, annul or add to the terms and conditions from time to time which shall be applicable to all students enrolled in Fairview (“Second Provision”).
The High Court granted the order sought by Fairview and quashed the decision of the Tribunal. In doing so, it held that the Second Provision empowered the school to unilaterally amend the terms itself and was neither objectionable nor unreasonable per se. In arriving at his decision, the judge considered that the purpose of the change could be for “the betterment of the system of student learning”, which would not be objectionable and would not cause an imbalance to the detriment of the parent or student; thus the change was neither procedurally nor substantively unfair.
Further, the High Court held that the First Provision was not substantively unfair. The High Court observed the competitive environment in which private schools operate in Malaysia and that clauses such as the First Provision were reasonable as it enabled Fairview to properly plan its intake of student population, and as a matter of public policy it will also instill commitment and discourage students from switching schools at their whim and fancy.
The decision in Fairview sheds some light on the approach which may be adopted by the Malaysian courts in construing such unfair terms and indicates that that the Malaysian courts may not be willing to interpret procedural and substantive unfairness broadly.
For more information, please contact Chew Kherk Ying, Chen Hong Sze or Adeline Lew.