Contract term that restricts time for making claim under ACL, unenforceable

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August 2018

Contract term that restricts time for making claim under ACL, unenforceable

Overview

In a recent decision in the Victorian Supreme Court Justice Riordan, held that it is contrary to public policy to restrict the statutory remedy provided in s 236 of the Australian Consumer Law (ACL) by limiting the time in which a claim can be made – Brighton Australia Pty Ltd v Multiplex Constructions Pty Ltd [2018] VSC 246 (‘Brighton v Multiplex’).

This decision is a departure from the New South Wales cases which allowed limitation of the period in which a claim for misleading deceptive conduct under s 18 of the ACL could be made.  The Court said that “In my opinion, any attempt to restrict the remedy by limiting the time in which an action can be brought is an unacceptable interference with the public policy underpinning the provisions [of the ACL]”.

Summary of keys points

  • If your business contracts with your customer seek to limit the customers rights under ACL there is a risk that these clauses will be unenforceable and open to challenge;
  • If you are a consumer with a claim don’t be deterred by a contractual provision that seeks to limit the time period within which you are required to make a claim;
  • There remains uncertainty in this area of law because NSW Courts have adopted a different approach to the recent Victorian decision. It is now up to the High court to clarify this area of the law in an appropriate case.

Background of the Brighton v Multiplex case

Multiplex Constructions Pty Ltd (‘Multiplex’) engaged Brighton Australia Pty Ltd (‘Brighton’) under subcontracts to perform the base build and fitout works for the construction of a building at 700 Bourke Street, Docklands, Victoria (‘NAB Project’).  Brighton claimed, among other things, that Multiplex were misleading or deceptive in contravention of s 18 of the ACL.  The Multiplex, in response, argued that the Brighton was precluded from bringing the claim because the notice was not given within 7-day period as prescribed under the subcontracts.

Section 18 in Chapter 2 of the ACL provides that “a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”.  The remedy for a contravention of a provision in Chapter 2 of the ACL (including s 18) is provided in s 236, that:

  • the claimant may recover the amount of loss or damage by action against the other person, or against any person involved in the contravention; and
  • an action may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued.

The Court refused to enforce the contractual term limiting claims made outside the 7 day notice period under the contract.  The Court held that it would be against public policy to enforce such clauses.

The Court indicated that by way of analogy, similarly to the clear principle of law that parties cannot contract out of statutory rights because that would be against public policy, so too it would be against public policy to allow contractual terms to limit the time for a party to exercise or bring a claim based on rights granted to a party under a statute.  The Court indicated that public policy will demand the protection of public rights against limitations sought to be imposed under a contract.

His Honour gave an example that it would be absurd if a contractual provision stating that any claim under s 18 of the ACL must be brought within one hour from the cause of action arising, would be enforceable.  Extreme provisions such as this could effectively preclude any claim under s 18 of the ACL except by the most punctilious of claimants.

Therefore, it was concluded in Brighton v Multiplex case that the contractual limitation of the period in which an action may be brought is contrary to the public policy of the Act.  To permit misleading and deceptive conduct claims under the ACL to be defeated by contractual provisions would be inconsistent with public policy of protection of public rights and the remedies provided in the Trade Practices Act.

Implication of the Decision

The conclusion in Brighton v Multiplex case differs from the previous decisions in NSW Supreme Court where it was held permissible by contract to fix a shorter period of time than provided by in the relevant statutory limitation period.  In particular, Justice Sackar said in Firstmac Fiduciary Services Pty Ltd v HSBC Bank of Australia Ltd [2012] NSWSC 1122 that “If provisions can be seen as procedural rather than substantive in nature, this would suggest they can be waived”.

Unless these conflicting decisions are addressed by the High Court of Australia, the issue of contractual limitation in bringing claims for misleading and deceptive conduct would have significant ramification trade and commerce transactions.

Parties need to be mindful that any limitation clauses contained in the contract could be now challenged in the court as they were in Brighton v Multiplex. 

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If you need further information or assistance, contact us on 1300 88 33 92.

Craig Higginbotham and Richen Mojica

3 August 2018

By | 2018-08-03T17:11:18+00:00 August 3rd, 2018|Business, Consumer Law, Contract Law|Comments Off on Contract term that restricts time for making claim under ACL, unenforceable