ACCC v CLA Trading Pty Ltd [2016] FCA 377: Federal Court Finds Europcar’s Rental Terms to be Unfair

Thursday 28 April 2016 @ 10.23 a.m. | Legal Research | Trade & Commerce

In a recent decision handed down by Justice Gilmour, the Federal Court has declared that a number of terms in Europcar Australia’s 2013 Standard Rental Agreement to be unfair, and therefore void, in proceedings brought by the Australian Competition and Consumer Commission (ACCC) in ACCC v CLA Trading Pty Ltd [2016] FCA 377. Europcar was also ordered to pay a penalty of $100,000 for making false or misleading representations about consumers’ liability in the event of vehicle damage.

Background to the Case

As revealed in an ACCC Media Release, the Court found that various terms in Europcar’s Standard Rental Agreement were unfair because they held consumers liable for vehicle loss or damage regardless of whether the consumer was at fault. Other terms were also found to be unfair because consumers were liable for vehicle loss or damage when they breached the rental agreement, no matter how trivial the breach or whether it had any connection to the loss or damage caused.

The Australian Consumer Law (ACL) [the ACL is contained in Sch 2 to the Competition and Consumer Act 2010 (Cth)] provides that a court may determine that a term of a standard form consumer contract is unfair and therefore void, meaning that the contract is treated as if the term never existed. A term is considered unfair if:

  • it would cause significant imbalance in the parties’ rights and obligations under the contract;
  • it is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term; and
  • it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied upon.

If a term is declared void, the remainder of the contract continues to bind the parties to the extent that it can operate without the unfair term.

From 12 November 2016, the unfair contract term law will also apply to unfair terms in standard form contracts with small business.

Findings by the Court

The Court also found that, from December 2013 to July 2014, Europcar made false or misleading representations on its website that consumers’ liability for vehicle accident damage would be limited to a “Damage Liability Fee” of $3650, or less if the consumer purchased Europcar’s “extra cover” products. In fact, under Europcar’s Standard Rental Agreement, consumers’ liability was not limited to these amounts in cases of overhead, underbody or water damage, even when “extra cover” products were purchased.

The ACCC’s Response

ACCC Deputy Chair Dr Michael Schaper said:

“This decision is an important one, as it makes it clear to car rental companies that they cannot simply rely on contractual terms to hold consumers liable for any and all damage that may occur during a rental period, regardless of the circumstances. Terms in standard form rental agreements must be fair.”

Corrective Action taken by Europcar

When advised of Justice Gilmour’s findings, Europcar amended its Standard Rental Agreement to remove the unfair terms as well and the misleading statements have also been removed from Europcar’s website.

In resolving these proceedings, Europcar agreed to facts and joint submissions to be put to the Court and consented to orders for corrective advertising and costs.

Europcar Managing Director, Australia and New Zealand, Ron Santiago, said:

“Europcar has always and continues to cooperate fully with the ACCC and has been proactive in discussions and correspondence with the ACCC in relation to the issues raised. In fact, the judgement makes reference to the, ‘open and responsive engagement with the ACCC’s concerns, from the moment they were first raised through to and including the ultimate resolution of these proceedings’. At Europcar we have invested significantly in reviewing and updating our own policies, processes and documentation so that these are as user-friendly and transparent as possible. We’re extremely confident that our Terms and Conditions are now industry leading and we are always looking for ways to raise the bar and improve the experience for our customers. We know our customers want transparency, they want certainty and they want the best products and the best service delivered efficiently. We are committed to delivering a safe quality experience for all our customers because we want them to keep coming back.”

Recently, as reported by TimeBase, Hertz Australia provided a court enforceable undertaking following an ACCC investigation into Hertz’s rental vehicle damage charging processes. The ACCC is continuing its vehicle rental review with broad engagement with the industry to address industry practices that raise consumer protection issues.

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products.

Sources:

ACCC v CLA Trading Pty Ltd [2016] FCA 377 (19 April 2016)
Euoropcar Media Statement
Court finds Europcar's standard rental terms unfair – ACCC Release MR 54/16

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