Sixteen months ago I irritated some banks with a post predicting they would lose in the New Zealand class action promoted by Australian lawyers in June last year. If iPredict had a contract on that issue, the price should have rewarded me this week.
The AFR last Friday reported on a paper delivered to the Australasian Mining and Petroleum Law Association. It warned of the wide-ranging implications of the High Court of Australia’s decision that late fees were penalties. As such they are likely to be unlawful. The AFR reports mining and other businesses worrying about a need to redraft thousands of contracts.
It is highly unlikely that our courts will reach different conclusions. Business New Zealand, the Bankers’ Association, and other peak bodies should be getting suitable amendments on the work programme of MBIE. It would be cheaper and probably result in better law to use statute pre-emptively to modify contract law, than to excite contract lawyers with thousands of amendments, and enrich litigators with opportunistic reopening of past conduct.
As I said last year the cost of good research and informative lobbying would be a fraction of the cost of just one of the cases business could have to fight. If they choose to wait there could be many cases exploiting the current legal uncertainty (a euphemism for centuries old hostility) toward rational penalty provisions.
Reportedly my comments on this last year annoyed some business leaders. Singing the team song when in the cross-hairs is obviously preferred over realistic bad news and advice. I can’t believe their own lawyers would have had markedly different conclusions unless they too were victims of pressure for group-think, so either the irritated business leaders were head in the sand, or the lawyers were muffling their advice.
Perhaps the leaders thought I was enjoying their predicament. I was not, as should have been clear from the stated view that a victory would not be in consumers’ best interests long term. Invalidating penalty provisions will make it harder for large businesses to control costs with effective incentives on the parties in the least cost position to to minimise default.
And business peak bodies should have been doing some stitch-in-time spending too, to mitigate the impact of the pending Supreme Court decision in the case I posted on in August last year. The case involves liquidators’ rights to claw back payments made to innocent creditors while a company is insolvent, unbeknown to the creditor (and perhaps the debtor company). I offered some free advice on minimising exposure in September 2013
The Supreme Court is in the unenviable position that whichever way it goes will produce an absurd result, from some-one’s perspective. The Court is confronted by law that is simply badly drafted. Officials responded in 2007 to advocacy with what they apparently thought was something close to Australia’s law. It left confusion not only in the provisions, but also in the explanatory memorandum which courts can use to aid in working out what Parliament thought it was doing.
Perhaps business peak bodies have been doing some homework, but quietly? They should be stepping it up in both areas.