Do your contracts contain a time restriction that might breach an ACL claim?

Corrs Chambers Westgarth (“CCW”) recently advised of a Supreme Court of Victoria’s decision (Brighton Australia Pty Ltd (“Brighton”) v Multiplex Constructions Pty Ltd (Multiplex”) [2018] VSC 246) that affects contracting parties seeking to exclude or limit liability under section 18 of the Australian Consumer Law (“ACL”). Whilst this case is all about a commercial contract, it’s likely to have far wider effects that include lenders providing any linked (commercial or consumer) credit contracts.

Firstly, let’s look at what this case was all about.

Background
The background to the case was Brighton entered into two subcontracts with Multiplex relating to the construction of a building in Melbourne. Brighton claimed Multiplex’s representations were misleading or deceptive and contravened s.18 of the ACL (“ACL Claim”). The matter was referred to a Special Referee, Richard Manly, QC, by the Court who found in favour of Multiplex with one of the reasons being Brighton was precluded from bringing the ACL Claim because of its failure to give notice of the claim within the short time period contained in the subcontracts clauses. Brighton wasn’t satisfied with this decision and asked the Supreme Court not to adopt the Special Referee’s reports and findings with respect to the ACL Claim.

The Court’s Decision
The Court was asked to determine whether a contractual clause which “purported to impose a time limitation on bringing a claim pursuant to section 18 of the ACL was enforceable”. In this case, Brighton was required to give notice to Multiplex under the subcontract provisions of any claim within 7 days of the earlier of:

  • Brighton becoming aware of any act on which a claim would be based; or
  • Brighton being reasonably aware of its entitlement to make a claim.

Multiplex argued that the relevant contractual provisions of the subcontracts didn’t exclude the operation of the ACL, it “merely regulated it”.

It should be noted that the Courts have long held that liability under s.52 of the Trade Practices Act (being the precursor to section 18 of the ACL) cannot be excluded by contract – the `no exclusion principle` – and so the same would apply to s.18 of the ACL. The Court decided that the time limits enshrined in the legislation cannot be reduced by contract as they are a matter of public policy. On that basis, s. 236 and s.239 of the ACL allows for claims for damages to be made within 6 years “after the day on which the cause of action that relates to the conduct accrued” and Multiplex couldn’t reduce those time limits to suit its own ends in the subcontracts it had with Brighton.

Justice Riordan held that:

  1. it would be absurd if a contractual provision, to the effect that any claim under s. 18 of the ACL must be brought in (for example) one hour of the cause of action arising, would be enforceable;
  2. extreme provisions, of which the one under consideration is an example, could effectively preclude any claim under s. 18 of the ACL except by the most punctilious of claimants; and
  3. 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.

Justice Riordan further went on to say it’s not consistent with the public purpose of the ACL to leave claimants uncertain about whether courts, on a case by case basis, will determine contracted time limits to be so unreasonable as to be unenforceable.

It its conclusions, the Court found:

  • that it is reasonably arguable the parties cannot contract out of the six year limitation period; and
  • as a general proposition, parties may by contract fix a shorter limitation period that may exclude some statutory rights unless such a contract is contrary to public policy.

CCW note in their article that “many commercial contracts contain clauses that seek to impose time restrictions on when certain claims can be brought. These contractual provisions cannot be interpreted so as to deprive a claimant from bringing a claim under section 18 of the ACL in a period less than the applicable six-year limitation period.”

The law firm suggests that “[c]ommercial contracts for future transactions ought to be carefully drafted so that provisions such as the one at the centre of the Brighton decision are avoided. Where time bars or exclusion clauses are to be included in a commercial contract, the relevant provisions need to be drafted to carve out claims under the ACL (ie to ensure that claims under the ACL are not covered by the exclusion clause or time bars for periods less than the applicable six-year limitation period). Except in the case of claims for misleading or deceptive conduct pursuant to section 18 of the ACL that are brought outside the applicable six-year limitation period, any such claims ought to be assessed on their merits, rather than on whether contractual notices were issued within the timeframe prescribed under the commercial contract.”

Why might this case affect you?
Whilst this case was brought about under s.18 of the ACL for misleading and deceptive trading as part of a commercial contract, you need to be aware the ACL legislation contains other specified time limits. For example, s.143 covers the time for commencing defective goods actions (which is at any time within 3 years after the time the person became aware, or ought reasonably to have become aware of the defect but no more than 10 years of the supply by the manufacturer of the goods to which the action relates). As a result of this ‘public policy time limit’ (i.e., those mentioned in the ACL Act), as a linked credit provider, you may have some liability up to the end of the public policy time limit specified in which to remedy a claim for a breach under the ACL.

Under s.279(2) of the ACL, where a consumer brings an action against both you and the supplier to recover loss or damage because of what’s been supplied under the linked credit contract, even if been it’s been fully paid out, you could still be caught by these ‘public policy time limits’ and you cannot contract out of them. It’s worth noting that if you provide goods by way of a lease, hire or hire purchase that under s.278(2) of the ACL, these contracts are also defined as being a linked credit contract.

That said, under s.280, there are provisions that might exclude you as a linked credit provider from liability so if you’re concerned or have a question, it’s worth discussing this with your lawyer or compliance advisor.

In the past 6 months, I’ve seen a couple of credit contracts that have contained similar clausal time limit provisions. They were designed to restrict any claim for damages under the ACL to be made only within the lesser of the term of the contract or such time as the contract is deemed paid in full. Those contracts would now appear to be caught by this ruling.

Whilst the contracts we supply don’t have anything in them like this, if you use your own contract and are a linked credit provider, regardless of whether you’re providing credit under a consumer or commercial (e.g., a chattel mortgage) loan contract or lease, you should look to see if your contract or that of the supplier with whom you link seeks in its contract with the consumer to reduce the time period allowed for making claims under the ACL. You can be sure ASIC will now be looking for these types of clauses in linked credit contracts and claiming they are unfair if either or both contain subclauses that breach the public policy time limits the ACL contains. If they do, we suggest you seek legal advice from your solicitor or compliance advisor as soon as possible.

Note that under s.287(1) of the ACL, non-linked credit providers are unaffected by the above clauses but you may be caught with a liability under s.12ED of the Australian Securities and Investments Commission Act 2001 if the consumer suffers loss or damage arising from a breach of the financial services you’ve supplied.