Australia: Supreme Court shuts the door on excluding liability for misleading or deceptive conduct claims

A recent decision by the Supreme Court of Victoria is likely to have a series of practical implications for contracting parties when it comes to excluding liability for misleading or deceptive conduct claims. Brighton Australia Pty Ltd v Multiplex Constructions Pty Ltd [2018] VSC 246 has confirmed that liability pursuant to section 18 of the Australian Consumer Law (ACL) cannot be excluded by contract. The Court also determined that contractual provisions - seeking to impose time restrictions on when such claims can be brought - cannot be interpreted so as to require a claim to be brought in a period less than the applicable 6-year limitation period.

Let's now examine the effect of the decision and the likely implications for contracting parties.

BACKGROUND

Brighton entered into two subcontracts with Multiplex relating to the construction of a building at 700 Bourke Street, Docklands (commonly known as the NAB Project at Docklands). Brighton relied on representations allegedly made by Multiplex that were said to be misleading or deceptive in contravention of section 18 of the ACL (ACL Claim).1

All questions of liability and quantum had been referred to Mr Richard Manly, QC who had been appointed as a special referee by the Court (Special Referee). The Special Referee found that the ACL Claim should fail for several reasons, one of which being Brighton was precluded from bringing the ACL Claim because of its failure to give notice of the claim within the seven-day period prescribed under the Subcontracts.2 Brighton sought to convince the Supreme Court that the Special Referee's reports and findings with respect to the ACL Claim ought not be adopted by the Court.

THE DECISION

No contracting out of the ACL

One of the principal issues for determination by the Court was whether a contractual clause which purported to impose a time limitation on bringing a claim pursuant to section 18 of the ACL was enforceable.

The relevant provision of the Subcontracts required Brighton to give a notice of any claim within seven days of the earlier of:

  1. Brighton becoming aware of any act on which the claim would be based; and
  2. when Brighton could reasonably have been aware of the entitlement to make the claim.3

Multiplex argued that the relevant provision of the Subcontracts did not exclude the operation of the ACL and that it merely regulated it.4

It was common ground between the parties that a clause in the Subcontracts attempting to exclude all liability in respect of claims for misleading or deceptive conduct under section 18 of the ACL would not be effective. This is because the Courts have long held that liability under section 52 of the Trade Practices Act (the precursor to section 18 of the ACL) cannot be excluded by contract. This is commonly referred to as the "no exclusion principle". The no exclusion principle has been held to apply equally to section 18 of the ACL.5

Time limitation on bringing a claim under the ACL

Multiplex sought to rely on the contractual provision in the Subcontracts in order to reject the ACL Claim on the basis that the ACL Claim was time barred.

The Court held that the no exclusion principle is an application of the policy of the common law that where a statute embraces public rather than private rights and the legislative purpose will not be fulfilled if the Court enforces private contractual arrangements, then the court will refuse to enforce the private contractual arrangements on the grounds of public policy.6

The Court also referred to the Explanatory Memorandum to the Trade Practices Amendments Bill (No. 1) 2000 (Cth) and the Second Reading Speech to demonstrate the public purpose of the remedy available under section 236(2) of the ACL. These documents were considered by the Court to underline the public purpose of the compensation remedy and the availability of that remedy for six years under the ACL.7

Further, the Court held that:

  1. it would be absurd for a contractual provision to be enforceable if it requires a claim under section 18 of the ACL to be brought within a relatively short period of the cause of action arising (for example, within an hour);
  2. extreme provisions, of which the relevant provision in the Subcontracts in the present case was an example, could effectively preclude any claim under section 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.8

The Court observed that its conclusions in the present case were consistent with the findings made in previous cases, namely:

  • 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 any may exclude some statutory rights unless such a contract is contrary to public policy.

In the present case, the Court determined that the time restriction on a claimant's right to bring a claim for damages pursuant to section 236(2) of the ACL is contrary to the public policy of protecting people in trade and commerce from being misled.9

The Court therefore held that the Special Referee made an error in finding that Brighton was precluded from bringing the ACL Claim because of its failure to give notice of the claim within the seven-day period prescribed under the Subcontracts.10

PRACTICAL IMPLICATIONS

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.

For commercial contracts that contain clauses seeking to impose a shorter time limitation on bringing a claim under the ACL, those clauses will not be effective in denying or disposing of a claim that may subsequently be brought by a claimant. Contracting parties therefore ought to exercise caution when assessing claims made under the ACL to ensure that time bars are only applied in respect of claims that are brought more than six years from the date on which a cause of action accrued.

Commercial 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.

Footnotes

1 [2018] VSC 246 at [1].

2 Ibid at [2].

3 Ibid at [112].

4 Ibid at [109(a)].

5 Ibid at [113].

6 Ibid at [116].

7 Ibid at [125].

8 Ibid at [129].

9 Ibid at [133] and [137].

10 Ibid at [4].

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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