KEY TAKEWAYS

  • Three recent cases in establish that it is open to a contracting party to seek to limit (rather than to exclude altogether) their liability for misleading conduct under the TPA/ACL.
  • These cases suggest it is possible to fix a shorter period of time in which to bring any claim (ie by reducing the statutory period of 6 years) and also to agree a monetary limit.

OVERVIEW

Until recently, there has been a school of thought that the right to claim damages for misleading conduct under the Australian Consumer Law (ACL) (formerly the Trade Practices Act 1974 (Cth) (TPA)) cannot be modified or excluded because it is a right conferred by statute.

In three cases (see Lane Cove Council v Davies & Associates [2012] NSWSC 727; Firstmac Fiduciary Services Pty Limited & Anor v HSBC [2012] NSWSC 1122 and Owners SP 62930 v Kell & Rigby Pty Ltd [2009] NSWC 1342) ) the Court considered that a distinction needed to be made between a contractual term purporting to, for example, bar a statutory remedy altogether, and one that purports to impose a monetary or temporal limit on the extent of the remedy. 

In Firstmac, the clause in question imposed a time limit in which claims must be brought, ie 5 years.  The Judge noted that 5 years was “a significant period on any view”.  The imposition of a temporal limit on liability did not amount to a “contracting out” of the TPA but rather, reflected the intentions of the parties that any such claims must be brought promptly.

The Judge in Firstmac was following his earlier decision in Lane Cove Council where, in the context of a claim for misleading conduct under the TPA, he upheld the validity a contractual term (clause 17) which purported to exclude liability “under contract, in tort or otherwise” after 1 year.   Once again, the Judge did not consider this clause amounted to a contracting out of the TPA – “the clauses simply reflect the parties intentions to impose temporal and monetary limits on the damages that may be awarded under provisions such as s82 [of the TPA].”  The reference to “monetary limits” appears to be a reference to another clause (clause 16) in the relevant contract, the terms of which are not set out in the decision, but were said to be similar to the ‘monetary limit’ clause in the Owners SP 62930 decision referred to below.

In Owners SP 62930, the retainer letter contained a clause that “The maximum liability of the Consulting Engineer to the Client arising out of the performance or non-performance of the Services, whether under the law of contract, tort or otherwise, shall be the amount specified in Item 9 of the Schedule, or if no amount is specified, $300,000.00” (our emphasis).  The Court considered “looking at the matter objectively, what the parties sought to achieve was to specify precisely and exclusively, so far as the law allows, the monetary and temporal limits of any liability that [the defendant firm of engineers] might have with the developers under the contract between them”, which included claims under the TPA.  The Judge did however signal that the position might be different if the application of the clause in question would have the effect of denying substantially to one party the entire benefit of the contract eg where the services to be provided under a contract by one party have been performed so negligently as to deprive the other party of substantially the entire benefit of the contract.

IMPORTANCE OF THE CASES

It should be noted that these three cases are first instance decisions and have not been tested on appeal. However, subject only to that qualification, two important points arise from the cases:

  1. For vendors or service providers – they should be reviewing their existing standard form contracts to (a) ensure that any limitation of liability clauses are sufficiently broad to cover liability for misleading conduct under statute and (b) consider whether a temporal limitation for bringing any claim should be included.  Similarly, where commercial circumstances permit, vendors/service providers should seek to negotiate the inclusion of such clauses into their contracts.
  2. For purchasers of assets or services – they should be reviewing any limitation clauses which are sought to be included in their contracts in the negotiation stages to determine whether they purport to exclude liability for misleading conduct and consider whether a special carve out for this type of liability is required.