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Sanctuary Cove Golf and Country Club Pty Ltd (ACN 120 308 410) v Machon[2019] QCATA 1

Sanctuary Cove Golf and Country Club Pty Ltd (ACN 120 308 410) v Machon[2019] QCATA 1

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL

CITATION:

Sanctuary Cove Golf and Country Club Pty Ltd (ACN 120 308 410) v Machon [2019] QCATA 1

PARTIES:

SANCTUARY COVE GOLF AND COUNTRY CLUB PTY LTD (ACN 120 308 410)

(appellant)

 

v

 

ROBERT BRUCE MACHON

(respondent)

APPLICATION NO/S:

APL299-17; APL301-17

ORIGINATING APPLICATION NO/S:

MCDO418-16 (Brisbane)

MATTER TYPE:

Appeals

DELIVERED ON:

6 February 2019

HEARING DATE:

9 August 2018

HEARD AT:

Brisbane

DECISION OF:

Justice Daubney

Member Traves

ORDERS:

  1. In APL301-17, it is ordered:
  1. (a)
    There be leave to appeal;
  2. (b)
    The application to adduce further evidence is refused;
  3. (c)
    The appeal is dismissed;
  4. (d)
    Each party shall bear its own costs.
  1. In APL299-17, it is ordered:
  1. (a)
    There be leave to appeal;
  2. (b)
    The appeal is allowed;
  3. (c)
    The order of the Tribunal dated 14 August 2017 is set aside;
  4. (d)
    Within 28 days from the date of this Order, Robert Bruce Machon must pay Sanctuary Cove Golf and Country Club Pty Ltd (ACN 120 308 410) $ 11, 496.90 plus interest thereon from 16 January 2016 to 16 January 2019 of $6,898.14, being a total of $18,395.04;
  5. (e)
    Each party shall bear its own costs.

CATCHWORDS:

APPEAL AND NEW TRIAL – NEW TRIAL – IN GENERAL AND PARTICULAR GROUNDS –  where minor civil dispute between trader and consumer – where respondent was an equity member in Golf Club – whether term in Club’s by-laws that prevented Equity Members resigning until transfer of share was an unfair term –  whether term caused a significant imbalance in parties’ rights and obligations under the contract – whether term reasonably necessary to protect legitimate interests of the appellant – whether error in not considering whether term was transparent within s 24(2)(a) and s 24(3) – whether error in not making the assessment as to whether term unfair at date contract entered into – whether term defines the main subject matter of the contract within the exemption in  s 26 – whether Tribunal has jurisdiction to make a finding that part of a term was an unfair term within s 23 and therefore void – whether variation to by-laws constituted a renewal of the by-laws – whether by-laws pre-dated the introduction of the ACL(Qld)

Australian Consumer Law (Qld), s 23, s 24, s 26, s 250

Fair Trading Act 1989 (Qld) s 16, s 50, s 51

Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 6, s 9, s 12, s 15, Schedule 3

Australian Competition and Consumer Commission v Chrisco Hampers Australia Ltd [2015] FCA 1204

Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384

Lauer & Ng v Comer [2015] NSWCATCD 114

Lee v Aerial Taxi Cabs Co-operative Society Ltd [1999] FCA 1727

OFT v Ashbourne [2011] EWHC 1237

APPEARANCES & REPRESENTATION:

 

Appellant:

Mr PD Hay of counsel, instructed by Clayton Utz

Respondent:

Self-represented

REASONS FOR DECISION

  1. [1]
    Sanctuary Cove Golf and Country Club Pty Ltd (“the Club”) commenced a minor civil dispute (“MCD”) in the Tribunal against Robert Bruce Machon seeking recovery of overdue membership fees of $11,496.90 for 2015 and 2016, legal costs for debt collection of $123.75 and interest at 20% incurred prior to the date of the application of $1,460.32. An amendment to the claim to include the 2017 membership fees of $6,565 (plus interest) was refused at the MCD hearing. The claim for the costs of debt collection was not pursued.
  2. [2]
    Mr Machon is an Equity Member of the Club and sought in the MCD to be refunded the amount of approximately $23,000, being the price he paid to become an Equity Member in 2006. He also disputed that he owed the membership fees which he argued were claimed “contrary to good conscience”.
  3. [3]
    The Tribunal made the following Order:

The Respondent pay the Applicant the sum of $5,332.90 for claim plus interest of $2,624.08 plus costs of $174.25 within 14 days of the date hereof.

  1. [4]
    The Tribunal made that Order essentially because it found clause 7.4 of the Club’s by-laws, which did not permit an Equity Member to resign in the same way as Access Members, to be an unfair term and void in part.  Whether it was an unfair term and whether the Tribunal had jurisdiction to apply the unfair terms provisions in Part 2-3 of the Australian Consumer Law (Qld) (“ACL (Qld)”) is at the heart of this appeal.
  2. [5]
    Both parties have applied for leave to appeal the decision as required by s 142(3)(a)(i) of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (“QCAT Act”).
  3. [6]
    In file number APL301-17, Mr Machon sought leave to appeal the decision arguing he should not be liable to pay the 2015 membership fees on the basis he had attempted to resign from the Club in 2013 and 2014.[1] In support of his argument, Mr Machon filed an application to adduce fresh evidence. The evidence he wished to adduce included a letter by him to the Club dated 6 July 2013 and a diary note by his wife which, he said, proved the letter had been delivered to the Club.
  4. [7]
    In file number APL299-17, the Club sought leave to appeal the decision arguing it was wrong in fact and in law and gave rise to a substantial injustice, including because it allowed Equity Members of the Club to avoid their obligations as members while nonetheless retaining share ownership in the holding company which owns the assets operated by the Club.[2] The Club also argued that substantial questions were raised as to the application of the ACL (Qld) to a contract that was entered into prior to the commencement of the ACL and as to the Tribunal’s jurisdiction to hear and determine questions under Part 2-3 of the ACL (Qld). The Club also argues, in the alternative, that assuming the Tribunal had jurisdiction, the relevant term was not unfair.
  5. [8]
    Both the Club and Mr Machon applied to lead fresh evidence in the Club’s appeal. The evidence related to the impact of the Tribunal decision on the Club, in particular, the consequences of lost revenue and early resignation by Equity Members. We accepted the evidence was relevant as it related to whether the term was “reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term” within the meaning of s 24(1)(b) of the ACL (Qld). We also accepted the evidence was not available at trial. Accordingly, in the course of the hearing before us, we ordered that both the Club and Mr Machon have leave to adduce further evidence on the Club’s appeal.
  6. [9]
    The Club’s grounds of appeal can be summarised as follows:
    1. (a)
      the jurisdiction of the Tribunal;
    2. (b)
      the application of the ACL (Qld) to the by-laws;
    3. (c)
      whether the term was unfair;
    4. (d)
      whether the evidence established Mr Machon would have resigned in December 2015; and
    5. (e)
      whether there was an error in finding only the fees from that time were payable. 
  7. [10]
    A direction was made that the appeals be heard together. For the reasons which follow, it is convenient to focus initially on the Club’s appeal.

Background

  1. [11]
    The Club opened in 1987 as part of the Sanctuary Cove Resort development. A restructure of the Club occurred under new ownership in 2006. Sanctuary Cove Golf and Country Club Holdings Limited (“Holdings”) owned the land and assets and the Club was the new trading entity that occupied and operated the business. The restructure involved the issue of a prospectus by which subscribers could apply for a convertible note in Holdings (that could be converted into a share in Holdings) and to become an Equity Member of the Club.[3]
  2. [12]
    Mr Machon completed the application form in the prospectus and thereby agreed to be bound by the Club’s by-laws as a contract between him and the Club. He paid the purchase price of $23,554.93 and became a convertible noteholder in Holdings and an Equity Member of the Club. The convertible notes were converted to shares in Holdings on or about 31 January 2010.
  3. [13]
    The by-laws in conjunction with Holdings’ constitution set out the rights and obligations of Equity Members. Importantly, it is not possible to become an Equity Member without owning a share in Holdings or vice versa. The by-laws provide, relevantly, for two categories of membership: Access Members and Equity Members. Equity Members own a share in Holdings but Access Members do not. Equity membership continues for the time a share in Holdings is held and as such offers secure access to the Club (subject to compliance with the by-laws) and is transferable. Equity Members have the following rights not available to Access Members: nomination of ‘alternates’ in their place, “family status” rebates and entitlement for children to become Junior Access Members.  Access membership is not transferable, open only to a limited class of people, and in some sub-categories, must be applied for annually.
  4. [14]
    The obligations of Equity Members are more onerous than that of Access Members. Relevantly for this matter, resignation is only available to Access Members (by-law 7.4). Termination of Equity Membership is conditional on divestiture of the member’s share in Holdings. As the Club explains, Equity Members must find a replacement owner for their share in Holdings to bring their Club membership to an end. The new share holder also becomes the replacement Equity Member of the Club.
  5. [15]
    The relevant by-laws are as follows:

7.4  Resignation of Access Members

Any Member (other than an Equity Member) may terminate their membership in the Club at any time by voluntary resignation in writing, addressed, and actually delivered to and received by the Company.

7.5  Equity Member’s Membership Termination upon ceasing to be an Equity Member

Upon the transfer of an Equity Member’s ordinary share in Holdings Limited being approved by Holdings Limited and recorded by Holdings Limited in its members’ register, the Equity Member’s membership in the Club shall automatically terminate with effect from the close of that day. (emphasis added)

7.7  Effect of Termination or Resignation

Resignation [Access Members] or termination shall mean a Member’s rights and the rights attaching to membership…and licence to use the Site is forthwith terminated. The Person is not relieved or released from his, her or its obligation to pay any fees or charges, debt or indebtedness owed by such Member whilst a Member of the Club (whether for fees or charges incurred or otherwise due and payable by the person prior or subsequent to the date of resignation [Access Members] or termination.

  1. [16]
    It is apparent from by-law 7.5 that a share transfer must occur before membership can be terminated. The by-laws do not regulate the transfer of shares in Holdings. That is left to occur in accordance with market rules applicable to an ASIC approved “low Volume Market” and Holdings’ constitution. The sale price has varied over the years from $40,000 on 18 February 2010 to an average negative price of $5,529 as at January 2017.
  2. [17]
    Mr Machon has not paid his Club membership fees and minimum dining charge since October 2015. He says that he would, if he could, resign but that he is prevented from doing that until he transfers his equity share. At this point in time, shares in the Club are at a negative value, meaning Mr Machon would have to pay someone to take over his share and his equity membership in the Club.
  3. [18]
    We turn to consider the Club’s grounds of appeal.

The jurisdiction of the Tribunal in respect of the unfair term provisions

  1. [19]
    The Member found that by-law 7.4 was an unfair term within the meaning of ss 23 and 24 of the ACL (Qld) and was, in part, void. In short, by-law 7.4 allowed Access Members to resign but did not apply to Equity Members. Equity Members were required by by-law 7.5 to sell their share before they could terminate their membership. The Member, having found by-law 7.4 unfair, proceeded to find that the words “other than an Equity Member” in by-law 7.4 could not be relied upon by the Club. The effect of this, the Member found, was that Equity Members could resign in the same way as Access Members. This in turn meant that the Club was prevented from claiming membership fees owed by Mr Machon from the time he had tendered his resignation.
  2. [20]
    The Club submits that this was jurisdictional error and that only a court can determine whether a term in a standard form contract is unfair within the meaning of the ACL.
  3. [21]
    In broad terms, jurisdiction arises where:
    1. (a)
      there is an entitlement to make an application to the Tribunal;
    2. (b)
      in respect of defined disputes; and
    3. (c)
      the tribunal has power to make orders relevant and/or necessary to the adjudication and disposition of the dispute (whether by monetary award or otherwise).[4]
  4. [22]
    Jurisdiction has been held by the High Court to mean:

The authority which a court has to decide matters that are litigated before it or to take cognisance of matters presented in a formal way for its decision. In the exercise of its jurisdiction, a court has powers expressly or impliedly conferred by the legislation governing it…[5] 

  1. [23]
    The Tribunal has jurisdiction to deal with matters it is empowered to deal with under the QCAT Act or by an enabling Act.[6]
  2. [24]
    Section 9 (3) of the QCAT Act provides:

Without limiting the Acts Interpretation Act 1954, section 49A, an enabling Act confers jurisdiction on the tribunal to deal with a matter if the enabling Act provides for an application, referral or appeal to be made to the tribunal in relation to the matter.

  1. [25]
    Section 9 is the key provision in terms of defining the extent of the Tribunal’s jurisdiction. As a statutory tribunal, QCAT’s jurisdiction depends on the jurisdiction conferred upon the Tribunal by the terms either of the QCAT Act or by an enabling Act. By s 9(3) an enabling Act only confers jurisdiction if that Act provides for an application, referral or appeal to be made to the Tribunal. Schedule 3 defines “application” to mean an application to the Tribunal under this Act or an enabling Act.
  2. [26]
    An “enabling Act” is defined in Schedule 3 to mean –
  1. (a)
     generally – see section 6 (2); or
  1. (b)
     for chapter 7 – see section 244.
  1. [27]
    An enabling Act is defined in s 6(2) to be, relevantly, an Act, other than the QCAT Act, that confers original, review or appeal jurisdiction on the Tribunal.
  2. [28]
    Section 6 then deals with the relationship between the QCAT Act and an enabling Act and provides relevantly in respect of original jurisdiction:
  1. An enabling Act conferring original jurisdiction on the tribunal will generally state the tribunal’s functions in the jurisdiction, which may add to, otherwise vary, or exclude functions stated in this Act.

  1. An enabling Act that is an Act may also include provisions about the following matters, which may add to, otherwise vary, or exclude provisions of this Act about the matters –
  1. requirements about applications, referrals or appeals for jurisdiction conferred by the enabling Act;

Examples:

 the period within which an application, referral or appeal must be made

 documents required to accompany an application, referral or appeal

  1. the conduct of proceedings for jurisdiction conferred by the enabling Act, including practices and procedures, and the tribunal’s powers, for the proceedings;

Examples:

 the availability or non-availability of stays of the operation of a decision the subject of a proceeding

 persons who must be notified of a proceeding, a hearing of a proceeding or the tribunal’s decision in a proceeding

 additional persons who are a party to a proceeding

 persons who may be represented in a proceeding without the tribunal’s leave

 hearings that must be held in private

  1. the enforcement of the tribunal’s decisions in a proceeding for jurisdiction conferred by the enabling Act.
  1. This section does not limit another provision of this Act authorising an enabling Act to provide for a particular matter.

  1. [29]
    Pursuant to s 15 of the QCAT Act, the Tribunal may exercise its original jurisdiction conferred by an enabling Act if a person has, under that Act, applied to the Tribunal to exercise its original jurisdiction. In exercising that jurisdiction the Tribunal may perform the functions conferred on the Tribunal by the QCAT Act or the enabling Act.[7]
  2. [30]
    The Australian Consumer Law has been adopted as a law of Queensland by the Fair Trading Act 1989 (Qld) (“FTA”) and is to be referred to as the ACL (Qld).[8] Division 4 of the FTA confers jurisdiction to deal with particular matters arising under the ACL (Qld).[9] Section 50 of the FTA confers original jurisdiction on the Tribunal in respect of proceedings for the purposes of the provisions listed in the table contained within s 50 where the subject of the proceeding would be a minor civil dispute within the meaning of the QCAT Act.               Section 51 of the FTA provides that a proceeding for the purposes of a provision of the ACL (Qld) listed in the table to the section must be heard in the court provided for in the table. Section 250(1) (Declarations relating to consumer contracts) ACL (Qld) is listed there. The proceedings are described in the table as an “Application by party to consumer contract or by regulator for declaration that a term of a contract is an unfair term”. The table provides that the court with that jurisdiction is the District Court.
  3. [31]
    The FTA is, therefore, an enabling Act for the purposes of s 9 of the QCAT Act. The extent of the Tribunal’s jurisdiction in respect of the ACL is to be determined by construing the provisions of the FTA, remembering that the Tribunal does not have jurisdiction for a matter under an enabling Act unless the FTA provides for an application to be made under that Act in respect of the matter.[10]
  4. [32]
    The issue therefore becomes whether the FTA “provides for an application, referral or appeal to be made to the Tribunal in relation to the matter”. This case does not concern a referral or an appeal.
  5. [33]
    The use of the word “application” is important. The Tribunal will have jurisdiction in relation to a matter before it if an enabling Act authorises the bringing of an application in relation to a matter. This would, in our view, include an application by an applicant or by a respondent in the context of a cross-claim. But, in our view, if an applicant or a respondent is not entitled to make an application for relief under the enabling Act then jurisdiction is not conferred.
  6. [34]
    The FTA does not, in our view, provide relevantly for an application to be made to the Tribunal in relation to the matter. Section 51 of the FTA confers the power to make declarations relating to consumer contracts on the District Court. Once a declaration has been made that a term is unfair, other remedies may be applied for.[11] The right to apply for a declaration and the remedies which can be applied for once an unfair term declaration is made, is the relief provided by the FTA in relation to an unfair term. There is no jurisdiction conferred on the Tribunal to grant relief under the unfair term provisions of the ACL (Qld) by the FTA. In our view, the use of the word “application” means that jurisdiction is not conferred on the Tribunal where the defendant relies upon unfair term provisions as a defence.
  7. [35]
    The proceedings brought by the Club to recover fees it claimed were owed by Mr Machon were not proceedings for the purposes of any of the provisions listed in s 50 or s 51 of the FTA.[12] Nor was any application brought by Mr Machon.
  8. [36]
    The Member below raised the issue of whether the unfair term provisions applied and dealt with the issue of jurisdiction by making a finding rather than a declaration that by-law 7.4 was unfair. In his view, the conferral of jurisdiction to make a declaration that a term was unfair on the District Court did not oust the jurisdiction of the Tribunal to otherwise apply s 23 by finding a term was unfair, and therefore void.
  9. [37]
    In this respect the Tribunal held:

In the matter before me there is no application to the Tribunal for any declaration. Unfair contract terms fall for consideration before the Tribunal, if at all, as a shield rather than a sword. That is, is the claim by the Club unenforceable because the claim turns on an unfair term of a contract made void by s 23 of the ACL? That is an entirely different matter to a party seeking declaratory relief and does not impinge on the jurisdiction granted the District Court to make such declarations[13] (emphasis added).

  1. [38]
    The Club submits that this was jurisdictional error and that only a court can determine whether a term in a standard form contract is unfair. It says a finding that a term is unfair within the meaning of the ACL is a finding of law. Further, that the error in the Member’s approach is that the ACL is not, save in respect of those matters enumerated in s 51 of the FTA, an enabling Act for the purposes of the Tribunal.
  2. [39]
    We agree and would summarise the position as follows:
  1. The Tribunal has the jurisdiction conferred on it by the QCAT Act and enabling Acts: s 9(1) QCAT Act.
  2. An enabling Act confers jurisdiction if, in the case of original jurisdiction, it confers the power to make an application to the Tribunal in respect of a matter arising under that Act: s 9(3) QCAT Act.
  3. The Australian Consumer Law (schedule 2 to the Competition and Consumer Act 2010 (Cth)) is applied as a law of Queensland by the FTA: s 16 FTA.
  4. The FTA is an enabling Act as far as the ACL (Qld) is concerned: s 6(2) QCAT Act.
  5. The FTA confers jurisdiction to make an application in respect of certain provisions in the ACL (Qld): ss 50 and 51 of the FTA.
  6. There is no conferral by s 50 or s 51 of the right to make an application in respect of the unfair term provisions in the ACL (Qld).
  7. There is no jurisdiction to apply the unfair term provisions by way of a defence to a claim for moneys owed in the minor civil dispute jurisdiction. This “residual” jurisdiction is not contemplated by s 9 of the QCAT Act, nor open under the FTA. Further, in our view, a term is void only once it has been declared to be an unfair term.
  1. [40]
    For these reasons, in our view, the Member erred in applying the unfair term provisions. The Tribunal does not have jurisdiction with respect to the unfair term provisions, irrespective of whether a formal declaration is made.
  2. [41]
    The jurisdiction of QCAT in respect of the unfair term provisions is narrower than for tribunals in other States where express legislative provisions have been enacted. In Victoria, VCAT has jurisdiction to hear and determine any cause of action arising under any provision under the Australian Consumer Law by operation of s 224 of the Australian Consumer Law and Fair Trading Act 2012 (Vic). In New South Wales, s 30(1) of the Fair Trading Act 1987 (NSW) provides that a declaration that a term is unfair can only be made by the Supreme Court. However s 30(4) provides that, for the purposes of Part 2-3 of the ACL (NSW) (which comprises ss 23 - 28), “court” includes the Tribunal. Further, s 74(3) permits NCAT to decide the matter of whether a person has suffered loss or damage because of the conduct of a person that contravenes Chapter 2 or 3 of the ACL “if that matter arises in connection with another matter the subject of proceedings in the Tribunal”. The provisions in NSW appear to have the effect that parties can apply the unfair term provisions in NCAT provided that matter arises in connection with other proceedings in NCAT.
  3. [42]
    This is not the case in Queensland.
  4. [43]
    We conclude, therefore that the Member made an error of law in applying the unfair term provisions in circumstances where the Tribunal had no jurisdiction.

The application of the ACL to the by-laws

  1. [44]
    Part 2-3 of the ACL applies to contracts entered into or renewed after 1 July 2010 or to terms varied after that date.[14] Section 23 provides that a term of a “consumer contract” is void if the term is unfair, as defined in s 24, and the contract is a “standard form contract”.
  2. [45]
    A “consumer contract” is defined to mean, relevantly, a supply of goods or services to an individual whose acquisition is wholly or predominately for personal use.[15]
  3. [46]
    Part 2-3 does not apply to:
    1. (a)
      a contract formed by the constitution of a company;[16]
    2. (b)
      a “financial product”, which includes a facility through which a person makes a financial investment (such as buying a convertible note or share in a company);[17] and
    3. (c)
      to a term of a consumer contract to the extent the term “defines the main subject matter of the contract”.
  4. [47]
    It is necessary to outline the contractual arrangements between the parties. Mr Machon became an Equity Member of the Club in 2006. This came about as follows:
    1. (a)
      In July 2006 the Club’s parent company, Holdings, issued a prospectus;
    2. (b)
      The prospectus contained an application form which could be used to apply to Holdings and the Club to obtain respectively the issue of a convertible note in Holdings (convertible to a share) and equity membership in the Club. The application form provided, relevantly:

I hereby apply for a Convertible Note to be issued by [Holdings] and to become an Equity Member of the Club upon the terms and conditions described in the Prospectus, [Holdings’] Constitution and the Club’s Constitution, By-laws and rules.

In consideration of [Holdings] issuing a Convertible Note to the Applicant at the request of the Applicant, and upon issuance of a Convertible Note, the Applicant agrees to be bound by the By-laws and rules of the Club and acknowledges and accepts such By-laws and rules form a binding contract between the Club and the Applicant.

  1. (c)
    Mr Machon signed and completed an application form on 23 August 2006; and
  2. (d)
    Mr Machon’s application was accepted. He paid $23,554.93 and became a convertible noteholder in Holdings and an equity member of the Club.
  1. [48]
    Mr Machon’s convertible note was converted to a share in Holdings on 31 January 2010.
  2. [49]
    In our view, the relevant contract is that created by the by-laws between each Equity Member and the Club. It was a consumer contract, being a contract for the supply of services and the parties conceded it was a standard form contract. It is this contract, as constituted by the by-laws, that dictates that an Equity Member cannot resign without first finding a replacement owner for their share in Holdings.
  3. [50]
    The contract was formed in August 2006 and has not been renewed. Although there have been changes to the by-laws these do not disclose an intention to discharge and renew the entire contract. By-laws, by their nature, are a set of “working rules’ which are intended to be adaptable and to operate continuously throughout the life of a Club, despite variation. The payment of annual membership fees do not constitute a renewal of the contract.
  4. [51]
    The relevant by-laws have not been varied. To constitute a variation, the rights and obligations of parties must have been modified.  The capitalisation of the headings to the by-laws in 2015 did not constitute a variation. Neither did the insertion of “(Access Members)” into by-law 7.7 to confirm resignation was an option only for Access Members which clarified rather than modified the operation of the term.
  5. [52]
    This contract was therefore entered into prior to the commencement of the unfair contract terms provisions, and is, for that reason outside their application. We do not consider it necessary, in view of that conclusion, to decide whether the other exclusions are relevant. Having said that, if in truth the nub of Mr Machon’s complaint is that the operation of market forces worked unfairly against him, then that is a matter governed by the Holdings’ Constitution and clearly excluded from the operation of Part 2-3 of the ACL (Qld).[18] Further, we would consider that a term which linked Equity Membership to the ownership of a share in Holdings by requiring divestiture of that shareholding before resignation could occur is fundamental to the contract between the Club and its Equity Members and so within the exclusion in s 26. We have considered these arguments further below.
  6. [53]
    We turn now to consider, notwithstanding our findings with respect to jurisdiction and the application of the unfair term provisions, whether the Member made an error in finding by-law 7.4 was unfair.

Whether the Member made an error in the application of the unfair term provisions

  1. [54]
    The background and the terms of by-laws 7.4, 7.5 and 7.7 are set out above at [11] – [16].
  2. [55]
    Section 23 of the ACL (Qld) provides:
    1. (1)
      [Void term]

A term of a consumer contract or small business contract is void if:

  1. (a)
    the term is unfair; and
  2. (b)
    the contract is a standard form contract.
  1. [56]
    Under s 24 a term of a consumer contract is unfair if it:
    1. (a)
      would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and
    2. (b)
      it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
    3. (c)
      it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.
  2. [57]
    In deciding whether a term is unfair, s 24(2) provides that a court may take into account such matters that it considers relevant, but must take into account:
    1. (a)
      the extent to which the term is transparent; 
    2. (b)
      the contract as a whole.

Significant imbalance caused by term

  1. [58]
    In our view, for the reasons which follow, the Member erred in finding there was a significant imbalance in the parties’ rights and obligations under the contract caused by by-law 7.4.
  2. [59]
    The Member was required to make this assessment at the date of entry into the contract.[19] It is apparent from the Reasons that what concerned the Member the most was that Mr Machon would have to sell his share at a loss before he could resign.[20] The analysis was flawed in the sense that the question was not whether the market would result in a loss to Mr Machon but whether, at the time he entered the contract, the term which required that he transfer the share before his membership was terminated was fair. This needed to be assessed regardless of any future market price, a matter extrinsic to by-law 7.4. The reasons for this are obvious. If the share price was favourable, the term would then, on the Member’s reasoning, not be unfair. This is not the approach required by ss 23 and 24.
  3. [60]
    This limb requires an assessment be made of the detriment caused by the relevant term and of any corresponding rights given by the contract.[21] It also requires that an assessment be made as to the balance of rights and obligations between the parties, having regard to the contract as a whole.  It is not apparent that any such assessment of the contract as a whole was undertaken by the Member. The Member instead confined his approach to the obligations of Mr Machon in the event he wanted to sell his share and terminate his membership. [22] There was no regard to the corresponding rights of an Equity Member, namely, the licence to use and enjoy the site, programmes and activities of the Club; use of other Clubs with reciprocal arrangements; the right to nominate an ‘alternate’; eligibility to apply for ‘family status’ and to allow children be ‘junior access members’; right to have guests attend the Club and the right to seek leave of absence on compassionate grounds. We find that the Member erred in not weighing in the balance Mr Machon’s obligation regarding share transfer with the corresponding rights identified above.
  4. [61]
    The Member also considered that imbalance arose due to Holdings being able to refuse to register a transfer of Mr Machon’s share while he owed money to the Club. Holdings is entitled to do this by Article 4.4 of its constitution. In our view the constitution is not subject to the unfair term provisions.[23] Moreover, the article which required outstanding accounts be paid prior to share transfer is, in our view, a reasonable requirement given the connection between share ownership and Equity Membership.[24] The Member erred in considering that this right of Holdings created an imbalance.
  5. [62]
    Further, in our view, the Member erred by focussing on by-law 7.4 if he was in fact concerned about the requirement of transferring a share before termination of membership. By-law 7.4 is a clause that only applied to Access Members and gave them a right of resignation. This is clear from reading the contract as a whole. Altering by-law 7.4 so that it no longer excluded Equity Members[25] does not deal with by-law 7.5 which provides that termination of equity membership only occurs upon transfer of the member’s share. It also cannot affect article 4.4 of Holdings’ constitution. Deleting the words “other than an Equity Member” does not, in fact, have the effect contemplated by the Member. This is because those words were surplusage in the sense that by-law 7.4, on a reading of the contract as a whole, will continue to apply only to Access Members. Equity Members would still have to comply with by-law 7.5.
  6. [63]
    By-law 7.7 makes clear the distinction between Access Members (who have the right to resign) and Equity Members (who must terminate in accordance with 7.4). This construction is also supported by the prospectus which provided:

Equity Members may not resign from the Club (and thereby avoid Annual Membership Subscriptions), however, upon transfer of a Share in Holdings…the former holder of the Share shall cease to be an Equity Member and the transferee of the Share will (automatically) be an Equity Member holding Membership of the Club.

  1. [64]
    Accordingly, the deletion of the words from by-law 7.4 was misconceived and could not achieve the result intended by the Member in any event.

Term reasonably necessary to protect legitimate interest

  1. [65]
    Under s 24(1)(b) a term is only unfair if it is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term, here the Club. A term is presumed not to be reasonably necessary unless the party who would be advantaged proves otherwise.[26]
  2. [66]
    The Club submits that by-law 7.4, as well as 7.5 and 7.7, were reasonably necessary to protect its legitimate business interests and therefore not unfair. The Member found there was no evidence to support the assertion the Club might fail if equity members could resign voluntarily. In this respect the Member stated:

The Club has not come up to proof on that, merely asserting that 40 per cent of the Club’s turnover is based on equity membership. There is no evidence that if equity members were entitled to voluntarily resign the Club would lose 40 per cent of its turnover or any other significant amount.[27]

  1. [67]
    With respect, this reasoning demonstrates a number of errors. The Member applied the wrong test in that the question is not whether the Club has proved it might fail but whether the term was reasonably necessary to protect its legitimate interests. This does not require the Club to prove it would suffer harm if the term was omitted.
  2. [68]
    We are satisfied that the Club could suffer harm if the term was removed. We accept the submissions of the Club in this respect:

The Club was intended to, and does, operate with a limited base of Equity Members that provide the most significant source of revenue. In any such club of limited members, fee revenue from membership will be an important source of funds to enable the club to operate. The Club and its members, therefore, have a legitimate interest in maintaining its membership and revenue base. The terms of cll 7.4 and 7.5 are designed to ensure that that membership and revenue base is not eroded. It follows from this very structure that the membership and revenue base could be diminished if Equity Members were able to leave without there being a new members(s) arranged to replace them.[28]

  1. [69]
    The evidence of Mr Bastion, the Finance Director of the Club, was that revenue of the Club is predominantly comprised of annual membership subscriptions and that these are required to cover operating costs and capital expenditure.[29] Mr Bastion also gave evidence that for the year ending 31 December 2016, the Club’s turnover was about $11.7 million, of which $4.7 million was revenue from Equity Membership fees. This equates to approximately 40% of the turnover. Without this revenue stream Mr Bastion’s evidence was that the Club would not be able to maintain its golfing and clubhouse facilities to world-class standard, employ its current level of staff and provide the broad range of services it does for its members.[30]
  2. [70]
    The Club’s further evidence, admitted on the appeal by leave, demonstrated the effect of the term having been found to be unfair. The evidence showed that the Club had been inundated with letters of resignation from equity members. We accept the evidence, including of Mr Bastion, shows that by-laws 7.4 and 7.5 were reasonably necessary to protect the legitimate interests of the Club and its members. The Member erred in finding otherwise given the evidence of the financial consequences for the Club if equity members were able to resign without first transferring their share.

Court must consider whether term transparent

  1. [71]
    Finally, in our view, the Member erred in not taking into account the transparency of the term. This is a factor which must be taken into account in assessing whether a term is unfair.[31] A term is transparent if it is:
    1. (a)
      expressed in plain language; and
    2. (b)
      legible; and
    3. (c)
      presented clearly; and
    4. (d)
      readily available to any party affected.[32]
  2. [72]
    Mr Machon argues, in effect, that the term was not transparent. His argument appears to rest on the unlikelihood that someone with his business background and financial position would agree to “such an extraordinary future inestimable commitment” or would “make such a judgment to commit to this Equity Share that might develop into a privilege [he] could not afford”.[33] Mr Machon says that he was not given a copy of the Holdings’ constitution nor the Club’s by-laws when he made the decision to purchase the share in Holdings.[34] Mr Machon says that he understood that he was signing up for a Club run on terms similar to any traditional golf membership.[35]
  3. [73]
    The Club submits that the application form for a share in Holdings (which Mr Machon signed) states that “the Applicant acknowledges and agrees that he/she has read the prospectus to which this Application Form relates”. Further, that the prospectus was in plain English, summarises the key provisions of the Club’s by-laws (including that Equity Members may not resign and thereby avoid annual membership subscriptions unless they transfer their share)[36] and that the Holdings’ constitution and by-laws were available for inspection at the clubhouse.[37]
  4. [74]
    In our view, the term is transparent. By-law 7.4 is expressed in plain language, legible and presented clearly in the by-laws. It was also available having been accurately summarised in the prospectus[38] and available in full in the by-laws which, we accept, were available at the relevant time for inspection at the clubhouse. The Member found that Mr Machon had fair opportunity to consider the prospectus and terms of membership (by-laws) before he joined the Club.[39] It was also clear from the evidence that Mr Machon understood the term once he read it.[40] It is noted that after Mr Machon claims to have read and understood the term, his correspondence with the Club indicated that he intended to continue his equity membership.
  5. [75]
    Although the Member found the by-laws were available for inspection, he did not appear to take transparency into account in arriving at his finding that by-law 7.4 was unfair.
  6. [76]
    Mr Machon, having signed the application form incorporating by reference the by-laws was taken to have read and understood the by-laws.[41] The Club was under no obligation to make sure Mr Machon read or understood what he was signing or that joining the Club as an Equity Member was a sensible thing for Mr Machon to do. Mr Machon’s motivation for becoming an Equity Member and the prudence of doing so given his financial position and the health concerns of his wife were not the business of the Club.
  7. [77]
    We find that the Member erred in not taking the transparency of the term into account and in finding that 7.4 was unfair notwithstanding the transparency of the term.

Term defines main subject matter of the contract

  1. [78]
    Finally, the Club submits that the Member erred in not considering s 26, which provides that s 23 does not apply to a term of a consumer contract to the extent that the term defines the main subject matter of the contract. Some guidance as to the application of s 26 is provided by the Trade Practices Amendment (Australian Consumer Law) Bill 2009 (Cth):

2.64    The exclusion of terms that define the main subject matter of a consumer contract ensures that a party cannot challenge a term concerning the basis for the existence of the contract.

2.65    Where a party has decided to purchase the goods, services, land, financial services or financial product that is the subject of the contract, that party cannot then challenge the fairness of a term relating to the main subject matter of the contract at a later stage, given that the party had a choice of whether or not to make the purchase on the basis of what was offered.

  1. [79]
    The Club made submissions about the application of s 26.
  2. [80]
    We accept the submissions of the Club that terms that define the main subject matter of the contract are referring to terms which define the critical aspects of the parties’ relationship.[42] In our view this would extend to terms which connect Club membership with share ownership. This is an important term at the core of the bargain between the Club and Mr Machon and 7.4 and 7.5 are therefore terms to which s 26 applies.
  3. [81]
    We find that the Member erred in failing to find that s 26 applied to 7.4 or in failing to consider the matter.
  4. [82]
    Given our findings we would grant Mr Machon leave to appeal but would dismiss what is effectively his cross-appeal. Whatever Mr Machon might have done by way of purported resignation patently did not and, for the reasons we have given, could not operate to terminate his obligations as an Equity Member. In that context it is not necessary to consider Mr Machon’s application to admit fresh evidence as to when he would have resigned, had he been entitled to. Accordingly, we dismiss that application.

Conclusion

  1. [83]
    The Club’s appeal is allowed on the basis the Tribunal lacks jurisdiction with respect to the unfair term provisions in the ACL (Qld). Further, the relevant contract entered into by Mr Machon and the Club pre-dates the commencement of the ACL (Qld). In any event, for the reasons above, we find that by-law 7.4 is not an unfair term when viewed at the date of the contract, in view of the contract as a whole and after taking into account whether the term was reasonably necessary to protect the legitimate interests of the Club and its transparency.
  2. [84]
    Accordingly, the Club is entitled to its full claim in the proceeding. It will be ordered that the order of the Tribunal be set aside and substituted with an order that Mr Machon pay the Club the sum of $11,496.90. In its original submissions the Club sought interest at the agreed rate of 20% from and including 16 January 2016, the day after the due date of the last invoice. We will allow interest at that rate from 16 January 2016 to 16 January 2019 on the sum of $11,496.90, being the amount of $6,898.14.
  3. [85]
    Each party shall bear its own costs in each appeal.

Footnotes

[1]  Application for Leave to Appeal (APL301-17) filed 15 September 2017.

[2]  Application for Leave to Appeal (APL299-17) filed 21 September 2017.

[3]  Prospectus, Annexure 2 to Club’s primary submissions filed 27 February 2017.

[4] Lauer & Ng v Comer [2015] NSWCATCD 114, [47].

[5]Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514, 561.

[6]  QCAT Act, s 9(1).

[7]  QCAT Act, s 16.

[8] Fair Trading Act 1989 (Qld), s 16.

[9]  FTA, s 48.

[10]  QCAT Act, s 9(3).

[11] ACL (Qld), s 237(1)(a)(ii) (compensation); s 232(3) (injunction); s 239(1)(a)(ii) (redress for non-party consumers).

[12]  These provisions include, for example, a claim for loss or damage pursuant to s 236(1) of the ACL (Qld) which is available for a contravention of the consumer guarantee provisions.

[13]  Reasons, [53].

[14] Trade Practices Amendment (Australian Consumer Law) Act (No 2 ) 2010 (Cth), s 3, Schedule 7 where 1 July 2010 is the date of assent of the Part, as enacted by that Act.

[15]  ACL (Qld), s 23(3).

[16]  ACL, s 28(3).

[17] Australian Securities and Investments Commission Act 2001 (Cth), s 12BAA; incorporated by ACL, s 2; Competition and Consumer Act (Cth), s 131.

[18] ACL (Qld), s 28(3).

[19] Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384, [58]; Jetstar Airways Pty Ltd v Free [2008] VSC 539, [119].

[20]  Reasons, [11]; [20]; [39] and [79].

[21]Australian Competition and Consumer Commission v Chrisco Hampers Australia Limited [2015] FCA 1204.

[22]  Reasons, [79].

[23]ACL (Qld), s 28(3).

[24] Lee v Aerial Taxi Cabs Co-operative Society Ltd [1999] FCA 1727, [41].

[25]  By excising the words “other than an Equity Member”.

[26] ACL (Qld), s 24(4).

[27]  Reasons, [88].

[28]  Club submissions filed 18 May 2018, [51].

[29]  Affidavit of Bastion, 24 February 2017, [21].

[30]  Ibid, [26], [29].

[31] ACL(Qld), s 24(2)(a).

[32] ACL(Qld), s 24(3).

[33]  Response [3].

[34]  Ibid, [5].

[35]  Ibid, [7].

[36]  Prospectus, [49] extracted in Applicant’s Submissions and Evidence, 8 December 2016, [20].

[37]  Club’s submissions, 18 May 2018, [63].

[38]  Prospectus, p 79 (Exhibit WJB-3 to the Bastion Affidavit, 152).

[39]  Reasons, [18].

[40]  Club’s Submissions, 18 May 2018, [64] referring to the Transcript of the Hearing on 9 February 2017, T1-47.

[41]Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, [42]-[48].

[42]OFT v Ashbourne [2011] EWHC 1237, [152].

Close

Editorial Notes

  • Published Case Name:

    Sanctuary Cove Golf and Country Club Pty Ltd (ACN 120 308 410) v Machon

  • Shortened Case Name:

    Sanctuary Cove Golf and Country Club Pty Ltd (ACN 120 308 410) v Machon

  • MNC:

    [2019] QCATA 1

  • Court:

    QCATA

  • Judge(s):

    Justice Daubney, Member Traves

  • Date:

    06 Feb 2019

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

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