7.3.2 Alternative option – oppression
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The definition of “oppressive” in the Credit Contracts and Consumer Finance Act 2003 (CCCFA) is one of the few provisions in New Zealand legislation which refers to unconscionability. Section 118 of the CCCFA says,
“In this Act, oppressive means oppressive, harsh, unjustly burdensome, unconscionable, or in breach of reasonable standards of commercial practice.”
These words were in the earlier Credit Contracts Act 1981. The Credit Contracts Act and the more recent CCCFA provide that if a court decides a credit contract is “oppressive”, the credit contract can be “reopened”, and the court may make any orders it thinks necessary to remedy the oppressiveness. The “reopening” remedy applies to all credit contracts; not just consumer credit contracts.
Although unconscionability is included as one of the grounds of oppression, oppression is a wider test than unconscionability because the definition of oppression also includes other criteria or tests. One difference is that oppression clearly covers conduct under a contract, while unconscionability is usually limited to the circumstances on entering into a contract.
New Zealand has a body of case law on what the test for oppressiveness is for the purposes of section 118 of the CCCFA. The courts have been reluctant to intervene in commercial transactions in particular47, but generally the concept of oppression is wider than the case law concept of unconscionability. The courts have decided that none of the elements of the definition of oppression are particularly meaningful in the abstract, and that the “reasonable standards of commercial practice” is the touchstone for the “harsh” and “unjustly burdensome” elements of the definition48. The courts will either apply their own view of what the reasonable standards of commercial practice are (which is not without its risks), or they will require evidence on which to base their decisions49.
The doctrine of unconscionability, with its inherent uncertainties and limitations, is an important part of “oppression” under the CCCFA, but the wider definition of oppression broadens the test and creates the opportunity for remedies to be available in a wider range of circumstances.
The possibility therefore exists to insert a prohibition on oppressive conduct in the Fair Trading Act, rather than following the Australian example of referring to unconscionability. The Australian legislation has attempted over time to stretch the concept of unconscionability by a series of amendments. For example, the Trade Practices Act lists the factors the courts may consider in determining whether conduct has been unconscionable. However the Australian courts have so far tended to remain anchored to the conventional understanding of what might constitute unconscionability, and the efforts of the legislature to extend the meaning of unconscionability in Australia have only achieved limited success. The latest extension to include reference to the “terms and progress” of contracts may make a difference in extending the scope of unconscionability in Australia.
Adopting the wider definition of oppression, which includes unconscionability, may be a more effective and reliable basis for providing remedies for consumers and small businesses which are dealt with unjustly by suppliers or customers with the power to prevent them from acting in their own best interests.
Apart from the extension in scope, another significant difference between using oppression as a basis for remedies under the Fair Trading Act and the current use of the term under the CCCFA is that the remedies potentially available under the Fair Trading Act would be wider than those under the CCCFA. The only consequences of a finding that a credit contract is oppressive under the CCCFA are that the credit contract is unenforceable, and the court may make orders remedying the effect of the oppression. The amount of a loan, for example, is likely to remain owing.
Unconscionability has a higher threshold, and potentially more far reaching consequences. Unconscionable contracts are completely unenforceable in equity, so the courts would not make an order remedying the objectionable effects of the unconscionability, while leaving the underlying transaction in place. The inclusion of oppression (or unconscionability) in the Fair Trading Act would also extend the availability of civil and pecuniary penalties where they are not currently available.
Questions
| 17. Is it appropriate to include a prohibition on unconscionable conduct in the Fair Trading Act, along the lines of the Australian Trade Practices Act and the proposed Australian Consumer Law? 18. Should any remedies for unconscionable conduct be restricted to consumers or also available to businesses, and for what reasons? 19. Would it be more effective to amend the Fair Trading Act by applying the broader concept of “oppression” from the Credit Contracts and Consumer Finance Act to the supply of goods and services generally, rather than amending the Fair Trading Act to extend the application of the case law concept of unconscionability? |
Footnotes
46 Other examples include the Disputes Tribunal Act 1988 (giving the Disputes Tribunal jurisdiction to make orders), Employment Relations Act 2000 (unconscionable terms of employment agreements), Minors’ Contracts Act 1969, Sale of Liquor Act 1962 (terms of tied houses), Crown acknowledgements and apologies in various Treaty Settlement legislation, and the current Unit Titles Bill.
47 Prudential Building and Investment Society of Canterbury v Hankins [1997] 1NZLR 114, at 123.
48 Greenback New Zealand Limited v Haas [2000] 3NZLR 341 (Court of Appeal).
49 Greenback, and Raptorial Holdings Limited (in rec) v Elders Pastoral Holdings Limited [2001] 1 NZLR 178 (Court of Appeal).
