NRM Corporation Pty Ltd v Australian Competition and Consumer Commission [2016] FCAFC 98
Undesirable business practices; consumer contracts; unfair terms
Facts: Advanced Medical Institute (AMI) offered treatments for premature ejaculation and erectile dysfunction, using nasal sprays and oral strips. Doctors were employed as ‘independent consultants’ to prescribe these treatments and were effectively directed to recommend treatment for 12 to 18 months. AMI’s contract with customers who purchased the treatment included a term which stated:
“Sexual dysfunction is a chronic condition and treatment can take some time. For this reason, we stipulate that your contract with us [is] for the period decided in the first consultation with the AMI doctor. You may cancel your treatment program with AMI at any time by giving AMI not less that 30 days notice. Cancelling your treatment program you will be entitled to a refund for the unexpired period of your treatment program less an administrative fee of 15% and less the cost of any medication already provided to or prepared for you. No refund will be provided for the expired period of the treatment program or the 30 day notice period. All cancellation must be communicated to AMI in writing signed by you. Oral cancellation will not be accepted in any circumstances.”
The NRM Corporation (NRM) purchased the AMI business. The ACCC brought an action against NRM, arguing that the term in question was an unfair term as defined in section 24 of the Australian Consumer Law (ACL).
Issue: Was the refund term an unfair contract term within the meaning of section 24 of the ACL?
Decision: Yes, the refund term was an unfair contract term, and was therefore void.
Reason: The term met all the requirements for unfair terms set out under section 24 of the ACL. It caused a significant imbalance in the parties’ rights and obligations and was detrimental to the patient if relied upon by AMI. This was ‘self-evident from the manner in which the term operated and was enforced’, including the fact (which was not disclosed to customers) that the 15% administrative fee was calculated on the basis of the entire program cost. The term also operated ‘irrespective of whether the reason for the termination was a change of mind, a severe adverse side effect, or where the medication proved ineffective.’ The term also appeared unfair when viewed in the context of the contract as a whole; the context in which patients entered into the agreements; and the manner in which the medications were prescribed. The term was not brought to patients’ attention in a way which practically informed them of its contents, being communicated by way of a lengthy recorded message being read softly, monotonously and at a rapid pace.