In brief - Contractual terms can place temporal and monetary
limits on ACL claims
The Supreme Court of NSW has recently confirmed that limitation
clauses in a professional's retainer can be effective in
placing limits upon a claim made under section 82 of the
Trade Practices Act (TPA) , now section 236 of the Australian Consumer Law, both as to when the claim can
be made and the limit of liability.
Parties cannot "contract out" of the application of
It has long been accepted that parties could not "contract
out" of the application of the TPA (now the ACL). That is,
parties to a contract could not exclude the TPA from applying, or
prohibit a claim from being made under the TPA.
This has often been understood also to mean that the provisions
of the TPA must be given full effect. For example, the TPA stated
that a claim for damages may be commenced within six years after
the day on which the cause of action accrued.
It was often understood that parties to a contract could not
place boundaries on the effect of the TPA, eg by reducing the six
year limitation period or placing a limit on the amount of damages
that could be awarded.
Engineer's contract limits liability to two years and $5
That retainer stated that George Floth's maximum liability
"whether under the law of contract, tort or otherwise"
would be limited to $5 million. It also stated that George Floth
would be deemed to have been discharged from all liability, again
"whether under the law of contract, tort or otherwise"
once two years had passed after the firm had completed its
services. The client would not be entitled to commence "any
action or claim" after that time.
Supreme Court finds that retainer's monetary and temporal
limits are valid
Clause 4.5 of the retainer also specifically stated that the
provisions of the TPA, or of any other statute, were not excluded,
restricted or modified as a result of the retainer.
Notwithstanding clause 4.5, McDougall J found that the parties
had effectively specified the monetary and temporal limits of any
liability that George Floth may have. As a result, the claim
against George Floth could not be brought.
Architect's retainer with council limits liability to one
year and $300,000
[Declaration of interest: Colin Biggers & Paisley (CBP)
acted for Michael Davies Associates Pty Ltd (MDA)]
Architectural firm Michael Davies Associates Pty Ltd had a
retainer with Lane Cove Council which limited its liability to
$300,000. Clause 17 of the retainer also stated that MDA's
liability "whether under [the] law of contract, in tort or
otherwise" would cease once one year had expired following
whichever was the earliest of a final invoice from MDA, the
termination of MDA's services, or the date of practical
Supreme Court finds that limitation period does not
"contract out" of ACL/TPA
It was held by a referee's report, which Sackar J adopted in
full, that the one year limitation defeated council's claims in
contract and in tort, because they were made over a year after
Sackar J went on to state that the ordinary meaning of the words
in clause 17 would include liability under a statute such as a
claim for misleading and deceptive conduct under the TPA.
Sackar J found that such a clause did not amount to
"contracting out" of the TPA. His Honour affirmed
McDougall J's finding in Kell & Rigby that such
clauses reflected the parties' intention to impose temporal and
monetary limits on claims under the TPA.
For this reason (and others), the council's claim against
MDA under the TPA also failed.
Professional insureds should include limitation clauses in
their standard retainers
Whilst these cases were determined on the specific contract
wordings that applied in each case, the significance of the
Lane Cove Council decision and its affirmation of Kell
& Rigby is twofold.
Firstly, in providing contract review or risk management advice,
insurers should strongly recommend to professional insureds that
they include carefully-worded monetary and temporal limitation
clauses in their standard retainers, that will apply to claims
brought in contract, in tort, or under the ACL.
Secondly, when claims are brought against insureds - often in
each of contract, tort and the TPA or ACL - insurers and their
solicitors would be well advised to review the insured's
retainer agreement carefully to look for any monetary or temporal
limitation clauses which may apply.
The recently enacted National Consumer Credit Protection Act 2009 (National Credit Act) establishes a new national licensing regime for the regulation of consumer credit in Australia. The new regime includes a licensing requirement. If you currently engage in a credit activity, such as providing credit or advice in relation to credit, you may need to register with ASIC before 30 June 2010. Failure to register in time will result in you being required to cease the credit activities as of 1 July 2
Clients should note amendments to the National Credit Code and the National Credit Act taking effect from 1 March 2013.
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