By Su-Ann Loh
On 23 June 2017, Justice Beach of the Federal Court of Australia found the company Get Qualified Australia Pty Ltd (In Liq) liable for multiple breaches of the Australian Consumer Law (“ACL”). His Honour’s lengthy 102-page judgment makes for interesting reading because of his detailed analysis of the marketing strategies and business practices of the company. For the purpose of this article however, we wanted to zoom in on His Honour’s reasoning behind the finding that there was a contravention of the unfair contract obligations in the ACL. This will give our readership an idea of how a contract in the service industry can be characterised as a standard form contract, which means that its terms must be fair and comply with the ACL obligations.
Prior to its liquidation, the company was in the business of assisting candidates in obtaining formal qualifications from relevant registered training organisations by collating information from their candidates and passing it on to the assessors for the training organisations. His Honour referred to their role as that of an intermediary between the candidate and the registered training organisation; a role that was largely administrative. This descriptor is important because it gives framework around whether the sales and marketing representations made by the company were compliant with the ACL, especially since the company was not itself a registered training organisation and could not give qualifications through the process of Recognition of Prior Learning (“RPL”).
The company represented, in its advertising and marketing, that the candidate would be given a qualification or else they would be given a 100% money back guarantee. The exception is if the candidate was not actually eligible for an RPL qualification.
In layperson’s terms, consumers were led to believe, through the representations, that the company itself determined eligibility for qualification and if the candidate themselves was not eligible for qualification, then they would not receive the refund.
In reality, at the time that the fee was paid for enrolment by the candidate the required documentation was incomplete and the RPL process was unexplained. Further, the sales representatives for the company were never qualified to assess eligibility for qualifications and often provided incorrect information and advice about the RPL process. In short, the candidate was lulled into a false belief that they would be eligible for the qualification when at the time they paid the enrolment fee no one at Get Qualified was capable of assessing whether they were in fact eligible to obtain any qualification.
His Honour found that the contract was a standard form contract and that the terms of the refund was an unfair contract term and void under sections 24 and 23 of the ACL. The ACL presumes that the contract is a standard form contract unless proved otherwise, especially where there is a significant imbalance of power because one party has a more dominant and favourable bargaining position over the other.
The money back guarantee term was found to be an unfair term because it caused a significant imbalance in the rights and obligation of the parties and it was not necessary for the protection of the company’s interest i.e. the company would not be out of pocket any cost if the refund was provided. This is compounded by the fact that the terms of the refund policy were not explained to the candidate at the time of enrolment. From the perspective of the candidate as consumer, the term was unfair because it caused them financial detriment having not received the benefit of any service.
In his judgment, His Honour was not just talking about written contract terms. His decision that the terms were unfair flowed from several representations made through various mediums and it was not referrable to a single written document signed by the candidate. In fact, most of the representations in question came from what the sales representatives said to the candidates over the phone.
Implications for your business
As a business, be careful about what you say about your product or service to consumers. It may help to flip sides and consider what a reasonable consumer would believe based on what you are saying about your product or service. This case is an example of the presumption of the standard form contract being applied to a scenario, thus inviting the Court to scrutinise the terms of your contract.
If you would like to have a discussion with one of our lawyers about your contracts to ensure they comply with the ACL, please contact Peter North (Head of Business Practice Group, Corporate Practice Group) or Su-Ann Loh (Director, Dispute Resolution Practice Group) on 03 9629 9629.