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HIGHEST ACL PENALTY FOR CORPORATION AND INDIVIDUAL
UNFAIR CONTRACT TERMS IN INSURANCE CONTRACTS
In Australian Competition and Consumer Commission v We Buy Houses Pty Ltd (No 2) [2018] FCA 1748, the Federal Court of Australia imposed the highest ACL penalty to date against We Buy Houses (AUD 12 million) and its sole director Mr Otton (AUD 6 million) for making false or misleading representations. We Buy Houses and Mr Otton were found to have targeted disadvantaged and vulnerable consumers who hoped to enter the housing market or invest money in real estate. Free seminars, paid ‘boot camps’, and mentoring programs advised consumers that they would be able to buy a house for AUD 1 without a deposit, quit their jobs, and start making profits immediately. Between 2011 and 2014, We Buy Houses had generated significant revenue from these training programs. The focus on enforcement of the ACL by the ACCC will no doubt result in greater consumer awareness of this legislative framework. Consumers are asserting their rights with reference to the ACL more frequently and are gaining a greater awareness of circumstances when they may be able to claim a replacement, refund or consequential damages.
Currently, section 15 of the Insurance Contracts Act 1984 (Cth) provides an exemption from the unfair contract terms ( UCT ) regime in the ACL and the ASIC Act for insurance contracts. However, both the 2017 Australian Consumer Law Review and the 2018 Parliamentary Inquiry into Life Insurance found that this exemption was inconsistent with the intention of the UCT regime and consumer law. The Government released a proposal paper in June 2018 that recommended that the UCT regime be extended to insurance contracts. The Financial Services Royal Commission also recommended that this change be introduced. The extension would void unfair terms in standard form insurance contracts with consumers and small businesses. Unfair terms include those which create a significant imbalance in the parties’ rights which are not reasonably necessary to protect the interests of the advantaged party and would cause detriment or disadvantage to the other party. Under the exposure draft legislation, exemptions are provided under: –– define the main subject matter of the contract; –– relate to the upfront price payable under the contract; and/or –– are required or permitted under law.
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