By Michael Mabbett - 17 May 2024
Since 1988, New Zealand consumers have been able to use
the Disputes Tribunal ( Tribunal) to
resolve disputes of less than $30,000, if those disputes are based
(in summary) on contract, quasi-contract or tort (with some
exceptions). Most disputes relating to misrepresentation about the
quality of goods or services are within the Tribunal's
jurisdiction.
E-commerce has made access to the Tribunal less certain. Various
internet sellers are located outside New Zealand. Some have
terms which provide for dispute resolution in particular forums
outside New Zealand.
On 28 March 2024, the High Court delivered its judgment in
Commerce Commission v Viagogo SA
(Judgment). [i] The Judgment is useful for both
consumers and those drafting consumer-facing contracts with a
cross-border element.
Viagogo is an online ticket reselling agent based in
Switzerland. The Judgment addresses various statements on
Viagogo's website, which were found to be misleading. It also
addresses whether governing law and jurisdiction clauses may be
"unfair contract terms" under the Fair Trading Act 1986
(FTA). If so, the Court can declare them
unenforceable.
The clause in question was:
This Agreement shall be governed
by and interpreted in accordance with the Swiss laws, with the
exclusion of its conflict of laws rules and the provisions of the
United Nations Convention on Contracts for the International Sale
of Goods (CISG). All disputes arising out of or in connection with
this Agreement, including disputes on conclusion, binding effect,
amendment and termination, shall be resolved exclusively by the
competent Courts of Geneva, Switzerland. We also have the option of
taking legal action against You at Your domicile.
This is a combined governing law clause (first
sentence) and jurisdiction clause (second and
third sentences).
As to governing law, Her Honour found (at
[219]-[244]) that the clause was not unfair, for
two main reasons: (i) there is nothing materially different about
Swiss Law so as to give rise to an imbalance between the parties;
and (ii) in any event, if Viagogo relied on a particular point of
Swiss law, it would need to prove it (otherwise the parties would
simply apply New Zealand law).
As to jurisdiction:
- The Court found that the jurisdiction clause was
unfair. There were two main reasons: (i) the
asymmetry within the clause; and (ii) the unfairness of the clause,
compared to Viagogo's alleged 'legitimate interest' in having
claims heard in Switzerland.
- The Court held that there was an asymmetry within the clause,
without which the customer could commence proceedings in the
Tribunal. In a ticket re-selling transaction, the purchaser
of the ticket from Viagogo will be the only party likely to have a
claim (and therefore want to sue in their home jurisdiction).
Yet under Viagogo's terms, the purchaser has to sue in
Switzerland. (In other contexts, asymmetric jurisdiction
clauses are less problematic. For example, in lending
contracts, they give flexibility to lenders seeking repayment.
[ii] An asymmetry in that context might be said to restore
balance, rather than create an "imbalance".)
- The more important issue, therefore, in terms of relevant
"imbalance", is not the asymmetry per se, but the
exclusive jurisdiction given to the Swiss Courts in respect of
customer claims. The Court found that this "tilts the
parties rights and obligations markedly in Viagogo's
favour".
- The Court distinguished a number of Australian cases which have
held that exclusive jurisdiction clauses are not unfair
because they protect a legitimate interest (defending claims in a
home jurisdiction). This was on the basis that the damages to
which the clause might apply were likely to be "modest" - the cost
of tickets refused at the gate.
[iii]
The Judgment does not support a blanket proposition that all
exclusive jurisdiction clauses are unfair contract terms.
Only those in respect of consumer contracts under which claims are
likely to be "modest".
The decision is useful (noting that it is under appeal):
- For consumers: It should give confidence to
online shoppers. Even if there is an exclusive jurisdiction
clause in the 'fine print', it may be susceptible to being set
aside. Against that, however, it should be noted that only
the Commerce Commission can seek a declaration as to "unfair
contract terms" (which can take several years). The FTA
does not render the terms automatically void or ineffective.
- For lawyers: It suggests that exclusive
jurisdiction clauses in consumer contracts cannot (effectively)
contract out of the Tribunal's jurisdiction. Similarly,
arbitration clauses in consumer contracts are ineffective unless
the consumer 'opts in' to arbitration after a dispute has
arisen.
[iv] Given the Court's logic, it may still be possible to
include 'choice of jurisdiction' clauses in standard terms, so long
as they are said to be subject to the Disputes Tribunal's (or other
small claims courts') jurisdiction.
[i] Commerce Commission v Viagogo SA [2024] NZHC
713
[ii] 'Asymmetric' jurisdiction clauses are most common in
financing agreements (particularly those governed by
English-law). The purpose of such clauses is to "ensure
that creditors can always litigate in a debtor's home court, or
where its assets are located. They also contribute to the readiness
of banks to provide finance, and reduce the cost of such finance to
debtors, by minimising the risk that a debtor's obligations will be
unenforceable" (Mauritius Commercial Bank Ltd v Hestia
Holdings Limited & Anor [2013] EWHC (Comm) at [42]).
[iii] We would add: possibly also damages for wasted costs -
flights, accommodation etc - but, in any event, still well within
the Tribunal's jurisdiction.
[iv] Arbitration Act 1996, s 11(1); Disputes Tribunal Act 1988,
s 16(2).