High Court finds certain Bachcare terms unfair following Commerce Commission act…

The case is one of few in New Zealand that has considered unfair contract terms in contracts imposed by digital platforms.

The Commission, which filed proceedings after an investigation, sought declarations that certain terms used by Bachcare were unfair contract terms under the Fair Trading Act 1986. Bachcare has since changed the terms and conditions in question.

Commerce Commission Chair Dr John Small says this included terms that meant if a guest cancelled their booking, regardless of how far away their holiday was, they would lose up to 100% of the amount paid.

It also included terms that meant Bachcare would keep its service fee even when the accommodation was cancelled by Bachcare or the owner.

“Our action was prompted by a number of complaints to the Commission and Bachcare from ordinary Kiwis who had booked a place to stay through the online platform,” Dr Small says.

“For example, multiple complaints concerned cancellations due to Cyclone Hale and Cyclone Gabrielle, with guests unable to cancel bookings and obtain a refund when travel to the accommodation was unsafe, not recommended or not possible.

“A number of complaints also related to guests losing deposits when they had made an administrative error, which they then tried to correct.”

Dr Small says Bachcare does not provide the accommodation booked on its platform, but like many trading platforms it does set the terms of trade so this decision should serve as a reminder to platform operators to review the terms used on their sites.

Justice McQueen’s judgment traversed several other examples of the type of detriment to guests.

She found, when viewed together, the complaints gave clear examples of how the terms "created a significant imbalance that was ultimately detrimental to consumers if applied, enforced or relied on”.

Justice McQueen was satisfied the terms would cause detriment, financial or otherwise, to guests.

The declarations were agreed by Bachcare and the Commission prior to Justice McQueen’s judgment.

Dr Small urges businesses to review their standard terms to ensure they are transparent and fair.

“The judgment identified a range of unfair cancellation clauses, reinforcing the need for businesses to assess the fairness of their cancellation terms and the remedies available to consumers when contracts are cancelled – whether by the supplier, the consumer, or circumstances beyond their control.”

A full copy of Justice McQueen’s judgment will shortly be available on the case register, which also contains previous media releases related to this case.

Background

Bachcare is a New Zealand business that owns and operates a digital platform that lets guests book holiday accommodation. People who want to book accommodation can access information about accommodation via the website and make a booking through Bachcare’s digital platform.

Bachcare lists properties on behalf of owners. Bachcare itself does not provide accommodation.

Unfair Contract Terms

When deciding whether a term in a standard form consumer and small trade contract is unfair, the court will look at whether the term will cause a significant imbalance in the parties’ rights and obligations, whether the term is reasonably necessary to protect the interests of the party relying on the term, and whether the term causes detriment to the party against which the term is applied.

The court will also look at the extent to which the term is transparent, and the contract as a whole, e.g. whether there are other provisions in the contract that can balance the term.

There are videos and guidance to help businesses understand unfair contract terms.