JOHN DORAHY'S FITNESS CENTRE PTY LTD v BUCHANAN SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MAHONEY P, COLE JA and COHEN AJA 6 December 1996, 18 December 1996 [1996] NSWCA 278 CONTRACTS — Claim for personal injury — Whether exclusion clause should be enforced — Applicability of Contracts Review Act 1980 Respondent becomes member of appellant's gymnasium by signing contract called "Membership Agreement" - Respondent injured whilst using defective exercise machine in gymnasium - Respondent awarded damages in negligence for personal injury by District Court in the sum of $46,000 - Appeal by gymnasium owner on grounds that exclusion clause in "Membership Agreement" operated to prevent respondent recovering damages for personal injury in negligence and for breach of contract - Construction of exclusion clause - Intention of parties to contract - Operation of exclusion clause in the present case - Whether Contracts Review Act 1980 operated so as to make exclusion clause unenforceable. Held: appeal dismissed by majority (Mahoney P and Cohen AJA, Cole JA dissenting) (i) The appellant was liable to the respondent for breach of contract, that breach causing the personal injury suffered by the respondent. (ii) (per Mahoney P) On the proper construction of the "Membership Agreement", and having regard to the intention of the parties, the exclusion clause contained in the Conditions of Membership did not operate so as to release the respondent's claim in contract. Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500; Photo Production Ltd v Securicor Ltd [1980] AC 827; Metropolitan Gas Co v Federated Gas Employees Union (1925) 35 CLR 449; Baltic Shipping Company v Dillon (1993) 176 CLR 344, (1991) 22 NSWLR 1; applied. (iii) If the exclusion clause operated to release the claim in contract and in negligence, the contract was harsh and oppressive within the terms of the Contracts Review Act 1980, and the court should refuse to enforce the exclusion clause insofar as it would operate to prevent the respondent suing the appellant for damages for breach of contract and for negligence. Elders Rural Finance Ltd v Smith (NSW Court of Appeal, 29 November 1996, unreported); West v AGC (Advances) Ltd (1986) 5 NSWLR 610; applied. Calin v Greater Union Organisation (1991) 173 CLR 28; referred to. ORDER Appeal dismissed with costs. Mahoney P On 13 October 1986 the plaintiff Carol Anne Buchanan was injured in a gymnasium conducted by the defendant. The equipment that she was using in the gymnasium was, by reason of the negligence of the defendant company, not fit for the purpose for which it was being used. At the trial, the learned trial judge his Honour Judge Moore, gave judgment for the plaintiff for $46,000. The defendant has appealed to this Court against his Honour's judgment. 2 UNREPORTED JUDGMENTS Before this Court, Mr Rares SC, for the appellant company, has limited the issues to two: whether by reason of the terms of the contract signed by the plaintiff she was prevented from recovering damages from the defendant; and (if she was not) whether she should have relief from what she had signed pursuant to the Contracts Review Act 1980. 1. THE FACTS: At the trial, there was serious contest as to what had occurred. The plaintiff had laid her claim both in negligence and in contract. In the particulars of claim, her claim in contract was: "9. It was implied term of that contract that the premises and equipment therein would be as safe for use as reasonable care and skill could make them but the defendant failed to comply with this term of the contract whereby the plaintiff suffered the injury particularized above." (The District Court is not a court of pleading. That statement of the plaintiff's case was a sufficient indication of this version of her claim) The particulars of breach of contract alleged suggested that there was a failure securely to fasten the wire rope of the machine in question to the bar to be used by the plaintiff, there was a failure to inspect the equipment at regular intervals to ensure that it was securely fastened and there was a failure to pad the bar so as to avoid injury to the plaintiff in the use of it. The trial judge had first to determine how the plaintiff came to be associated with the gymnasium. His findings, which are of significance, were as follows: "The Plaintiff's Contract with the Defendant Some time in 1985 in response to the defendant's advertisement for 'members', the plaintiff went to the defendant's gymnasium with a friend and inspected it. A day or two later the plaintiff became a 'member' having paid a fee which entitled her to use the defendant's gymnasium. For that purpose she then signed a document ('the first form') although she has lost her copy and neither she nor the defendant sought to prove that document. The most the plaintiff can now remember of the first form is that it required her to abide by the defendant's rules and regulations. The defendant has not shown that it contained any other clauses and in particular has not shown that it contained any clause exempting the defendant from any form of liability for damages. I take into account the plaintiff's evidence that the first form was a larger form than a second one ('the second form') which she later signed and which went into evidence. She did not discuss the first form with any of the defendant's staff nor did she discuss membership rates. She believes that after she was given the first form she may have taken it home to read it before she signed it although it was probably that night that she signed it at the gymnasium. The only way a person could use the gymnasium facilities was by coming a member. The plaintiff used the facilities of the gymnasium for about twelve months. The term expressed in the first form had expired when she was handed the second form, being another 'membership agreement' form, by Mrs Ingrid Cardillo, an employee of the defendant. It is not clear whether that lady was an instructor or a manager at the time. The second form was different from the first form. The second was a small form in comparison to the first. There is no dispute that exhibit 1 which is annexed was the second form and the one which is particularly relevant to the present proceedings. It has printing on the front and the back. The plaintiff had thought that it was only one page. This is significant. I believe it is the case that the plaintiff's attention was never drawn to the conditions on the back of the document. The plaintiff said this expressly. Neither did she become URJ JOHN DORAHY'S FITNESS CENTRE PTY LTD v BUCHANAN (Mahoney P) 3 aware of those conditions. Although she was given a copy, she did not think it was of any great importance so she threw it away." It was cl6 of the second document on which the defendant has relied. It may be that there was, in addition to the two stages referred to in the judge's finding, a third stage in the relationship of the plaintiff to the gymnasium. In the "Conditions of Membership" on the second page of the second document referred to, there appears (at least in the appeal papers) a form of exclusion clause. It has been suggested from the bar table that perhaps the plaintiff, prior to becoming a member of the gymnasium, had been there as a temporary visitor using a "temporary card" and that the exclusion appearing in the appeal papers appeared on the back of the temporary card. That exclusion was not relied on and it is not necessary to pursue that aspect of the matter further. The accident occurred on 13 October 1986. The plaintiff was using an exercise machine in the gymnasium. The machine consisted, inter alia, of an arm on which was a pulley over which passed a wire rope at the end of which hung "a substantial horizontal metal bar'. The plaintiff sat on the floor under the metal bar and pulled the bar down. The bar "parted company with the wire in the course of the plaintiff's pulling it down against the weight of the weights and the bar struck her head a heavy blow". The judge's finding was that the wire had not been properly attached to the machine. It was attached with the aid of two clips. Mr Buckland, the consulting engineer called for the plaintiff, indicated that it was "an industry recommendation to use three grips of this nature and that to use fewer is unsafe". It was the judge's conclusion that it was this negligence which caused the plaintiff's injury. No appeal is pressed against that finding. The judge in his judgment concentrated in the main upon which there was a defect in the machine and whether the existence of that defect evidenced in the circumstances "negligence" on the part of the defendant. After a detailed review of the matter, his Honour's conclusion was that the method of attaching the rope or apparatus to the bar was defective, that there was not an adequate system for inspecting the safety of the equipment or that the system had not been properly carried out, and that these defects caused the plaintiff's injury. His Honour concluded that it was "negligent to provide a fastening in this position of a nature where imminent failure would not be apparent to" a relevant examination and it was, inter alia, this which "both breached that duty and caused the plaintiff's injury". For reasons to which I shall refer, it is necessary to consider the defendant's liability to the plaintiff for breach of contract. It has not been suggested that that claim was not pressed as an alternative at the trial. The plaintiff's claim was that there was an implied term in the contract "that the premises and equipment therein would be as safe for use as reasonable care and skill could make them...". His Honour did not consider in terms whether a warranty was to be implied in the precise terms used by the plaintiff, whether it had been breached, and whether that breach had caused the plaintiff's injury. His Honour, in relation to contractual matters, concentrated upon what he saw as the defendant's contractual obligations in respect of the safety of "the premises". His final conclusion was that the plaintiff was entitled to a verdict "in each remedy she calls in aid: (a) negligence by the defendant; (b) breach of the defendant's duty to her as a contractual entrant for reward (see Calin v Greater Union Organization (1991) 173 CLR 28)". His Honour, in finding in this way, said: 4 UNREPORTED JUDGMENTS "The way this case was presented, it could be said there is really no practical difference between (a) and (b). There might have been, for example, if the defendant had raised a defence that it had relied on the expertise of a reputable supplier from whom it had just purchased a new machine.... There was no such issue in the present case. However, the way to look at such an issue would be to say that the contractual duty of the defendant is a higher one, and breach of it is more readily inferred." The only portion of the "premises" of the club in issue was, of course, the equipment in question. His Honour's finding constitutes, I think, a finding that equipment was relevantly defective. No submission has been made that the implied term as pleaded was not a term to be implied in these circumstances. It is not necessary for me to pursue the precise form of the warranty which, in the circumstances, would be implied. Whatever be the form of it, it would in my opinion be held to have been breached by what here occurred. Accordingly, if and insofar as his Honour's precise findings do not constitute a finding in terms of the implied term, the breach and the damage, it would in my opinion be proper for this Court, as on a rehearing: Supreme Court Act 1970, s75A; to make such a finding. I would hold that the defendant was liable to the plaintiff for breach of contract, that breach causing the personal injury to the plaintiff of which she has complained. In this context I come to consider the provisions of cl6 of the "Conditions of Membership". It has not been argued that cl6 and the other conditions referred to in the document signed by the plaintiff do not bind the plaintiff contractually. There have been cases in which it has been held that, where a party has entered into a contract or arrangement for the supply of services, eg, by a railway or an airline or the like, the party is not bound by conditions, particularly conditions releasing or restrictive of rights where the conditions in question have not been brought to the attention of that party. In the present case, the plaintiff knew or (even if she be accepted as thinking that there was only one page to the document she signed) she ought to have realised that there were terms and conditions relevant to her membership of the Centre and her use of the gymnasium: cll on the first page of the document refers to "terms and conditions contained on both sides of this Agreement and the Club Regulations and Conditions of Membership...". In the light of authorities commencing at least from L'Estrange v Graucob [1934] 2 KB 394, signature of a document in these circumstances ordinarily results in the signing party being bound by the conditions in the document: see generally Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500; Photo Production Ltd v Securicor Ltd [1980] AC 827. The submissions in the present case were directed in the main to two things: the approach to be adopted to the construction and application of cl6; and the construction and application of it. The approach to be adopted to such clauses has been discussed by the High Court of Australia in the Darlington Futures case: at 507-11. Such clauses are to be given effect according to what, upon the proper construction of the document in its context, was the intention of the parties. This is the principle applicable to written documents generally: see Metropolitan Gas Co v Federated Gas Employees Union (1925) 35 CLR 449. But in the case of a clause restrictive of the rights which ordinarily a party would have, there is, I think, still a tendency of the courts to look carefully at the precise terms of a document which limit, URJ JOHN DORAHY'S FITNESS CENTRE PTY LTD v BUCHANAN (Mahoney P) 5 restrict or release rights (it is not necessary for present purposes to pursue the difference between them) and to give effect to such clauses only as far as and not beyond the limits of the clause. In some cases, comment has been made upon what have been described as contracts of adhesion". In many cases in modern life, where a party is dealing with, or expecting to deal with, many persons and to make many individual contracts, an attempt is made to state systematically and achieve adherence to a careful and limited complex of rights and obligations. With respect to those who may be of a different opinion, I see in this nothing requiring criticism. Where a party in commercial or similar circumstances envisages the making of a large number of contracts, the desire to have clear and to limit the extent of the rights and obligations undertaken should, in my opinion, be recognised as a legitimate desire. There are many reasons why this should be desired. In a medium sized or a large organisation, there may be legitimate reasons why rights and obligations and the extent of contingent liabilities need to be standardised. It may be necessary to achieve a quantification of possible liabilities in order that insurance may be obtained: the likelihood of obtaining insurance or the cost of it may be affected by uncertainties in this regard. For myself, I see no reason why a party in such a context should not, by the terms and conditions which it offers to parties dealing with it, achieve a standardisation of its rights and obligations in this way. See generally Baltic Shipping Company v Dillon (1991) 22 NSWLR 1; (1993) 176 CLR 344. But, in considering the effect to be given to contracts of adhesion, it is, in my opinion, proper to understand what in reality is the nature of the consensus achieved between the parties. Ordinarily, there will be no subjective agreement by one party to all of the terms and conditions offered to her. It is plain that, in a case such as the present, the plaintiff simply will, or may, not know what are the terms and conditions offered to her. Adapting the form of contract propounded by Anson in earlier times, there will not be an offer: "Do you contract on the following terms..."; and an acceptance: "I give my (subjective) agreement to those terms". The contract is rather in a form such as: "I do not know what are the terms offered to me but whatever they be I agree to be bound by them". There is, of course, nothing wrong in parties making a contract in that form. In many cases in commerce that will be the appropriate or only practical form. At least, it will be a form anticipated to be adopted in many of the multiple cases. But, in determining the context in which a clause of this kind is to be construed and given effect, it is relevant to recall that this is the nature of the consensus and the way in which it has been achieved. I refer to these matters not because they are not well known and appreciated but because they are, in my opinion, relevant in considering what effect the law should give in such a context to terms and conditions - particularly limitations, restrictions and releases of the present kind - of which a party has and is expected to have no subjective knowledge or understanding. I come now to the precise terms of the agreement made between the plaintiff and the defendant. I shall set out the main provisions of the agreement: "1. The Member is hereby granted upon the terms and conditions contained on both sides of this Agreement and the Club Regulations and Conditions of Membership. Membership of the JOHN DORAHY'S FITNESS CENTRE PTY LTD - for the Membership Period of...... CONDITIONS OF MEMBERSHIP 6 UNREPORTED JUDGMENTS John Dorahy's Fitness Centre Pty Ltd (hereinafter referred to as "the Company") grants for the membership period and subject to the conditions of membership hereinafter set forth the following rights and privileges: 1. The Member is entitled during the term of this agreement to make unrestricted use of the Club facilities subject only to these terms and conditions and any Club regulations now or hereafter made by the Company governing the use of Club facilities by Members. 5. The Member represents and warrants to the Company (as a fundamental condition of this agreement) that he is medically able to participate in and undertake physical exercise during the full term of the membership and to use gymnasium facilities and further represents and warrants that he is not aware of having any physical medical mental or health disability condition or disease which might or could be aggravated or worsened by physical exercise or which might or could result in deterioration of health if physical exercise is undertaken. The Member acknowledges that the Company and its employees and agents offer no guarantee or warranty whatsoever that the programmes advice or facilities afforded to the Member will have any beneficial medical effect or have been approved by any medical or other authority. 6. The Member hereby absolutely releases the Company its employees and agents from: (a) any claim howsoever arising either during the term of this agreement or at any time thereafter by reason of the Member suffering disease deterioration of health illness or aggravation of any condition of ill health as a result of participation in the programmes acceptance of the advice or use of the facilities afforded to the Member by the Company; and (b) any claim for personal injury sustained by the Member in on or about the Club premises including (without limiting the generality of the foregoing) any claims for personal injuries resulting from and arising out of the negligence of the Company its employees or agents or the negligence of any other Member or any other person using the Club premises and the Member hereby acknowledges that he uses the Club premises and all facilities entirely at his own risk." As I have said, the plaintiff's case was pleaded in contract and in the tort of negligence. I shall assume that cl6 operated to exclude liability in tort for negligence for the kind of personal injury which the plaintiff sustained. I do not think that cl6 operated to exclude the company's liability from breach of contract. Mr Rares SC submitted that such liability was excluded by both para(a) and para(b) of cl6. Cl6 in form purports to be a release by the member of "any claim" of the kinds referred to in para(a) and para(b). In relation to par (a) Mr Rares relied upon the words: "6. The Member hereby absolutely releases the Company... from: (a) any claim howsoever arising... by reason of the Member suffering... deterioration of health... as a result of... use of the facilities afforded to the Member by the Company:" In my opinion what occurred, when the metal bar fell on the plaintiffs head, does not fall within "deterioration of health" in para(a). The phrase "disease deterioration of health illness or aggravation of any condition of ill health" is not one which, on its ordinary construction, would convey that it was the intention of the parties that, eg, the loss of an arm or a leg was intended to be comprehended by it, even though, as a consequence of the loss of the arm or leg, there would be deterioration of health, illness or the like. URJ JOHN DORAHY'S FITNESS CENTRE PTY LTD v BUCHANAN (Mahoney P) 7 In addition, I think that a claim for breach of warranty that the equipment would be fit for the purpose for which it was to be used, in terms of the warranty pleaded, would not be a claim made "as a result of participation in the programmes acceptance of the advice or use of the facilities afforded to the Member by the Company". A claim made for breach of a contractual warranty is, in this context, not a claim for deterioration of health as the result of the use of the club's facilities. I am conscious that in para(a) and, indeed, in para(b), it may be that the craftsman of the release was using as the basis for the release and for the operation of it not a particular cause of action but a "claim" "howsoever arising" provided that claim is to be seen as "by reason of" deterioration of health and "as a result of" the use of the facilities in question. But in my opinion the words of para(a) are to be given effect according to their terms and no more; assumptions are not to be made as to what the parties intended beyond such an intention as may be gathered from the terms of the paragraph itself. I would not see cl6(a) as operating to release the contractual claim in question. I come now to the operation of cl6(b). The defendant relied upon two aspects of para(b): the release given from "any claim for personal injury sustained by the Member in or about the Club premises"; and the acknowledgment "that he uses the Club premises and all facilities entirely at his own risk". The defendant's submissions suggested, I think, that provided the loss for which the claim was made was one "for personal injury", the claim was to be seen to be within the paragraph whether it arose in tort or in contract or in some other way and however, for purposes of the law, the claim was to be phrased. There is, of course, force in such a submission. But in my opinion it should not be accepted. As I have indicated, clauses involving release from liability, or limitation or restriction of liability, though construed according to their terms, have been given no wider effect than the terms of them require or at least warrant. In case of ambiguity such a clause will, I think, ordinarily be construed against the proponent of it and so as to limit rather than to expand the extent of the release, limitation or restriction: see the Darlington Futures case: at 508. What is here in question is a claim for breach of contract in which the personal injuries suffered by the plaintiff and the costs associated with them constitute the main or sole loss caused by the breach and to be recovered as damages. The defendant's submission requires that such a claim be described or categorised as a "claim for personal injury". It may, of course, be so described. But the words used (a "claim for personal injury") are ambiguous in the sense that, in their ordinary sense, they may or may not carry that meaning. If they are to be read contre proferentum, I do not think that they comprehend what ordinarily would be described or categorised as a breach of contract. As the High Court has indicated in the Darlington Futures case, although clauses of the relevant kind are to be construed according to their ordinary and natural meaning, the purpose of the construction of them is to give effect to the intention of the parties as appearing from their terms. In principle, the relevant intention is of course the intention of both parties. It may be, as the company's submissions suggested, that it was the intention of the company to achieve as wide an exemption from liability as it was possible to obtain. But that is not conclusive. It is, I think, evident from the terms of the contract and the context of it - the use she was to make of the gymnasium and so on - that her intention would not have been that. If the company had, when the contract was being made, said to the plaintiff: "The machines we give you to use may be quite 8 UNREPORTED JUDGMENTS defective and dangerous but if you suffer injury from them, we are not liable in contract or in tort"; it is by no means clear that the plaintiff would have entered into the contract. Such would not have been her intention. The determination of the intention of the parties can give rise to difficult questions. I do not mean by this that in looking to intention in this way, the Court will have regard to the subjective intention of each or other of the parties. As I have said, what is here in question is the intention of the parties as evidenced by the terms of the contract considered in its context. The context includes the use which the plaintiff contemplated making of, inter alia, the equipment; that was her purpose in making the contract. It is therefore relevant, in deciding their mutual intention, to consider whether the plaintiff would have intended that the equipment she was to use might be defective and dangerous. To what extent it is legitimate, in the construction of a contract and in particular of a restrictive clause, to consider the intention of the parties in this way may require further consideration in an appropriate case. However, I believe that considerations of this kind provide a rational basis for arriving at what, in the sense in which the term is used in the law, was the intention of the parties. But, that aside, I am of opinion that the construction of the relevant part of para(b), as contended for by the company, should not be adopted. The company relied alternatively and cumulatively upon the concluding words of para(b): "... and the Member hereby acknowledges that he uses the Club premises and all facilities entirely at his own risk". Counsel referred the Court to cases in which, it was submitted, the decision has turned upon the operation of "at his own risk": see Neill v Fallon (1995) Aust Torts Rep 81-321 at 62,126. Each clause must be construed according to its own terms and contexts. There is, I think, no definitive construction of "at his own risk" clauses. For myself, I do not see this provision as excluding a right to sue for damages for breach of contract where an or the essential component of the damages arises from personal injury. The considerations to which I have referred in relation to the first part of para(b) support this conclusion. For these reasons I do not accept that para(b) operates to release the plaintiff's claim in contract in the present case. 2. THE CONTRACTS REVIEW ACT 1980: This question arises only if cl6 operates to release the claim, in contract and in tort, which otherwise the plaintiff would have against the defendant. I shall therefore assume that cl6 has the operation which Mr Rares SC submits it has. The question to be determined is, in substance, whether, considered at the time it was made, the contract was "unjust" in the sense referred to in that Act. The trial judge held the contract to be unjust in this sense. Mr Rares SC has accepted that his Honour's judgment was a discretionary judgment and this Court must approach it as such: see generally Elders Rural Finance Ltd v Smith (Court of Appeal, 29 November 1996, not yet reported) where the discretionary nature of such a decision was discussed. But, he submitted, the judge's discretion miscarried because he, inter alia, took into account factors which in the circumstances were not appropriate to be taken into account. He submitted that for that reason the judge's judgment should be set aside. Both parties invited this Court, upon the findings of fact which it is appropriate to make or act upon, to exercise the discretion which the judge was to exercise. URJ JOHN DORAHY'S FITNESS CENTRE PTY LTD v BUCHANAN (Mahoney P) 9 It is not necessary to detail the nature of the discretion. It has been reviewed by this Court in Baltic Shipping Company v Dillon (1991) 22 NSWLR 1 and more recently in the Elders case. Accordingly, I shall go directly to the question whether, in this case, the Court should conclude that the contract was relevantly unjust. The fact that a contract contains a clause providing for release, restriction or limitation of rights which otherwise a party would have upon a default does not as such warrant the conclusion that the contract is "unconscionable, harsh or oppressive": s4(1); or otherwise "unjust". I agree with the submission of Mr Rares SC that such clauses are not uncommon in commercial contracts and that there are legitimate commercial reasons why a party to a commercial contract may seek to have its obligations regulated by such a provision. To this I have referred. In considering the contract at the time it was made, I take into account in accordance with established principles: see West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 621; the factors to which Mr Rares SC pointed. He referred inter alia to the fact that the plaintiff could have found out that the contract contained such a clause: she could have taken the contract away and read it and, as it was suggested, the company's representative said that if asked she would have explained the contract to the plaintiff. But I have come to the conclusion that, taking into account the relevant matters within s7 and s9, the contract was harsh and oppressive in the sense referred to in the Act. I have had regard, inter alia, to two main considerations: the wide effect of cl6 in this regard; and the circumstances in which the contract was made. The contract was contained in a printed form prepared by the company. Its purpose was, on the company's construction of cl6, to exclude every possible claim for personal injury, however the claim arose. Mr Rares SC accepted that, on the construction he proposed, it would apply where there was a deliberate assault upon the plaintiff, where the machines provided for her use were knowingly faulty and dangerous and even if she had been misled into using them by statements as to their reliability, condition or the like. At least, I understand Mr Rares' submissions to extend so far. Whatever be the limits upon the operation of cl6 in this regard, they are wide. The limitations were not merely "lawyer's limitations"; they were such as could have a wide - indeed, a shattering - effect upon the plaintiff. The possibility of injury from equipment used in gymnasia is real. I do not mean by this that injury is an everyday occurrence. But, to take the present machine as an illustration, if it was defective, heavy weights could fall from a height upon the body, the limbs or the head of a person using it. The personal injury which foreseeably could result could be very serious. Accordingly, the existence of cl6 in the contract could, as a real possibility, have a serious effect upon the plaintiff. The rights to be "absolutely released" by cl6, were not peripheral to the contract but near the centre of it. One of the essential purposes of the contract was to provide for the plaintiff's use "facilities" of various gymnastic kinds. Accordingly, the fitness of those facilities for the use for which they were intended to be used by the plaintiff was central to the contract. It was a matter which was apt to be of significance whenever the plaintiff exercised the rights of membership for which she had paid. The circumstances in which the contract is made may be of relevance in determining whether it is unjust: the terms of s9(2) make this clear. In this regard, the Court is to take into account whether and to what extent a clause restrictive 10 UNREPORTED JUDGMENTS of rights otherwise available is known by the plaintiff party to exist and to have the effect that it has. Plainly, it is relevant to whether the contract is unjust that the defendant party knew that the other party did not realise the effect of the contract in that regard or probably would not find it out at the time the contract was made: cf s9(1). Thus, if the defendant party knows that the plaintiff party did not know of the provision or was unlikely to have recognised its effect, that may be relevant. In considering the effect of factors of this kind, it is of course important to have regard to the circumstances of the plaintiff party and the circumstances in which she contracted. If that party is, eg, a person experienced in commerce with readily available legal advice, the significance of provisions of the present kind may be limited, if the plaintiff party is known to be inexperienced in commerce and without assistance in reading legal documents, the position may be otherwise. It is not necessary to attempt to describe fully the plaintiff's position. But it was not suggested she had particular skill in reading legal documents. She was "a sales assistant" who had "had more responsible duties than that title would indicate... the ordering and receipt of goods and the inspection of invoices and the like". I infer she would not have known of the effect of cl6 unless she read and understood the document. The defendant proffered the document to her. She had the opportunity to read it but it is not cynical to infer that the defendant saw it as a possibility at least that she would not do so. The defendant's representative would have explained it if asked but not if not asked. In the event, the plaintiff signed the contract without reading it and that she would do so was, in my opinion, at the least, a likelihood which must have been apparent to the mind of the defendant when, in accordance with its procedures, it tendered the written document to her. One further matter may be referred to. The plaintiff had been a member of the defendant's Centre for some time before she signed the present contract. The judge found she had used the facilities of the gymnasium for about twelve months. She had signed a form on originally becoming a member. That form was not produced. It did not appear in terms whether, in the contract constituted by that form and regulating her first period of membership, there was a clause equivalent to cl6. The judge, having seen the witnesses, concluded that "the second form was different from the first form. The second was a small form in comparison to the first". She may have read the first form but she did not read the second. His Honour said: "The defendant had not shown that it [the first form] contained any other clauses and in particular had not shown that it contained any clause exempting the defendant from any form of liability for damages." The plaintiff conceded that she had, she thought, taken the first form home and read it before she signed it. Notwithstanding this the defendant did not attempt to show that the first form contained a clause relevantly similar to cl6. It would plainly have been in the interest of the defendant to show that the first form included such a clause. It did not attempt to prove that. No satisfactory reason was given for its failure to do so. In these circumstances, I am inclined to the view that, as an inference of fact, the first form did not contain an exempting clause. If this be so, then, at the time when the second clause was proffered to the plaintiff, she was invited to sign a contract which contained an important exempting clause which had not been contained in the first contract, the one which she believed she had read. If that was so, it was, in my opinion, a matter URJ = JOHN DORAHY'S FITNESS CENTRE PTY LTD v BUCHANAN (Cole JA) 11 significantly of relevance in determining whether the second contract, that here in question, was unjust. However, for purposes of determination of this appeal, I shall put that matter aside. Was the contract unjust because the defendant did not draw the attention of the plaintiff to the effect of cl6? In the circumstances of this case, I think it was. I do not mean by this that in all circumstances it is the duty of a person propounding a form of contract which contains a clause releasing, limiting or restricting liability to draw that clause specifically to the attention of the other party. Each case must be determined according to its own circumstances. Nor do I mean that, under the general law of contract, the omission to draw attention to the clause would affect the operation otherwise to be given to it. In relation to some forms of contract, Lord Denning expressed the view that they should not be given effect unless they were printed in red and marked by a pointing finger. I do not think that that is a view applicable to a clause such as the present. But the effect of the Contracts Review Act is to extend the circumstances in which relief may be given against the terms of a contract beyond the circumstances in which relief is available under the general law. As T indicated in the Elders case, it is not every case in which a contract, at the time it was made, is abrasive or potentially abrasive to one or other party in which relief is to be given. As I there suggested, to describe a contract as "unjust" is no small thing and a finding of it should not be made unless the contract is not merely burdensome but fairly to be described in a manner analogous to "unconscionable, harsh or oppressive". But, however that be, the considerations referred to in s7 and s9 are to be given effect according to their terms. In the present case, serious personal loss could occur to the plaintiff party in the ordinary course of the intended operation of the contract and the plaintiffs remedy in relation to that loss is released without attention being drawn to it other than by the inclusion of the clause in the general conditions of the contract. The contract was to be made, and was made, in circumstances where that fact might well not be recognised by a plaintiff party acting in the ordinary way in which a person seeking membership of the gymnasium might be expected to act. That, in my opinion, falls within the operation of the Act. In my opinion the Court should refuse to enforce cl6 of the contract insofar as it would operate to prevent the plaintiff suing the defendant to recover damages for breach of contract and for the tort of negligence in the present case: see s7(1)(a). Therefore I would, for the reasons I have given, affirm the judgment for the plaintiff. I would dismiss the appeal with costs. Cole JA The appellant John Dorahy's Fitness Centre Pty Ltd conducts a gymnasium. To use that gymnasium a person must sign a contract called a "Membership Agreement", here of twelve months duration. The respondent Carol Anne Buchanan did so on 4 August 1986, she previously having signed a prior agreement in terms which were not established in 1985. When she signed the agreement she was thirty-nine years of age, had been married and divorced, and worked as a sales assistant with the more onerous duties of ordering and receiving goods and checking of invoices. Although she had read the contract with the appellant which she signed in 1985, she said she did not read the document she signed in August 1986. The Membership Agreement had certain terms on the front of the document and on the back terms described as "Conditions of Membership". Moore DCJ found that the respondent thought the Membership Agreement was "only one 12 UNREPORTED JUDGMENTS page", presumably meaning that she thought there was nothing on the back of the document. Had she read the document she would have seen that the first clause of it stated that: "The member is hereby granted upon the terms and conditions contained on both sides of this Agreement membership for twelve months." The respondent paid $169 for her twelve month's membership. Having received a copy of the "Membership Agreement" which she signed, she threw it away without reading it. Some two months later on 13 October 1986 the respondent suffered injury at the fitness centre when the handle of a weights machine which she was pulling down towards her separated from a cable. The metal handle struck her head and neck. She suffered concussion and modest neck and back injury. Moore DCJ found that the appellant had been guilty of negligence, that it had breached "the higher duty owed by an occupier to a person entering premises for a reward to the occupier", and awarded damages in the sum of $46,000 including interest. His Honour held that condition 6 of the conditions of membership found on the back of the Membership Agreement did not as a matter of construction negate liability for the injuries suffered, but if it did, his Honour granted relief under the Contracts Review Act by declaring void cl6(b). Cl6 provides: "The Member hereby absolutely releases the Company its employees and agents from:- (a) any claim howsoever arising either during the term of this agreement or at any time thereafter by reason of the member suffering disease deterioration of health illness or aggravation of any condition of ill health as a result of participation in the programmes acceptance of the advice of use or the facilities afforded to the Member by the Company, and (b) any claim for personal injury sustained by the Member in on or about the Club premises including (without limiting the generality of the foregoing) any claims for personal injuries resulting from and arising out of the negligence of the Company its employees or agents or the negligence of any other Member or any other person using the Club premises and the Member hereby acknowledges that he uses the Club premises and all facilities entirely at his own risk " On appeal the appellant does not challenge the trial judge's finding regarding the manner in which the accident occurred, the negligence found or the quantum of damages. It does challenge, by multitudinous grounds of appeal to which it is not necessary to refer individually, the trial judge's construction of cl6, the applicability of the Contracts Review Act relief in the circumstances of this case, and the trial judge's decision to grant relief. The appellant contended that cl6(a) applied because the injuries suffered by respondent constituted "'a deterioration of health" suffered by her "as a result of... use of the facilities afforded to the Member by the Company". In my opinion that is not so. Cl6(a) deals with the advent of "disease deterioration of health illness or aggravation of any condition of ill health". It does not in terms purport to deal with personal injury which is addressed in cl6(b). Accordingly, the appellant's contention that as relief under the Contracts Review Act was neither sought nor granted in respect of cl6(a), the appeal should be upheld, fails. However cl6(b) does apply to the present circumstances. The respondent's claim was for personal injury sustained by her on the club premises. That is sufficient to trigger the operation of the clause. Further the claim arises out of the established negligence of the company or its employees. That operates as a URJ = JOHN DORAHY'S FITNESS CENTRE PTY LTD v BUCHANAN (Cole JA) 13 second trigger. In my view Moore DCJ was not correct in holding that whilst cl6(b) excluded a claim in negligence it did not exclude a claim for breach of duty owed to the respondent as a fee paying entrant by the occupier of the premises.1 However the duty be framed, or from whatever circumstances it emerged, the claim was for personal injury sustained by her as a member on the Club premises. That the exclusion is wider than simply claims in negligence flows not simply from the width of the words used by way of exclusion, but by use of the words "including (without limiting the generality of the foregoing) any claim for personal injuries resulting from and arising out the negligence...". Accordingly cl6(b) operates to exclude liability of the appellant,2 unless the relief granted under the Contracts Review Act by Moore DCJ is upheld. The proper approach to the Contracts Review Act was described by McHugh JA in West v AGC (Advances) Ltd.3 His Honour said: "Tt is important to bear in mind that it is the contract or its provisions which must be unjust As Professor Lang has pointed out "it is not the transaction but the contract which must be initially examined" (Macquarie University Continuing Legal Education Programme "Contracts Review Act" 1980 - in practice... (22 May 1980) at 32. The Contracts Review Act regulates contracts not investments. During the Second Reading debate the Minister, who introduced the Bill, quoted a statement of Professor Peden who said that the legislation was: "... intended to confer on the Courts a new and wide discretion to determine the existence and extent of harshness in a contract, and thereby develop a doctrine of unconscionability suitable to present and future business and community needs and standards" (my emphasis): New South Wales Parliamentary Debates (1980) at 5858." If a defendant has not been engaged in conduct depriving the claimant of a real or informed choice to enter into a contract and the terms of the contract are reasonable as between the parties, I do not see how that contract can be considered unjust simply because it was not in the interest of the claimant to make the contract or because she had no independent legal advice." As was recently pointed out by Meagher JA in Elders Rural Finance Ltd v Smith and Ors,4 the above statement of approach was approved by Hope JA in West's case, by Mahoney JA in Baltic Shipping Company v Dillon ("Mikhail Lermontov"),5 by Samuels JA in Beneficial Finance Corporation Ltd v Caravas¢ and by Meagher JA in Caravas7 In Elders Rural Finance Ltd Mahoney P wrote: "The central question to be addressed in any application under the Act is whether the contract or a provision of it... was, at the relevant time, unjust. The Act does not define 'unjust*. It indicates that it 'includes unconscionable, harsh and oppressive": S4(1). It provides in addition for matters which are to be considered by the court. In considering the central question, "... the Court shall 1. See Calin v Greater Union Organisation Pty Ltd (1991) 173 CLR 33 at 38. However it is now well established there exists only one duty arising in negligence not a separate duty arising from fee paying arrangements. See Australia Safeway Stores Pty Ltd v Zaluzna (1987) 162 CLR 479 at 484-488; Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520 at 548. See Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 at 510. (1986) 5 NSWLR 610 at 621. (Unreported), Court of Appeal, 29 November 1996. (1991) 22 NSWLR 1 at 51. (1991) 23 NSWLR 256 at 269. (1991) 23 NSWLR 256 at 277. NAWRYWN 14 UNREPORTED JUDGMENTS have regard to the public interest and to all the circumstances of the case, including such circumstances or results as those arising in the event of..." compliance with the contract or non-compliance with it: S9(1). The matters to which the Court shall have regard shall include the matters referred to in s9(2)(a) - (1). Each of these matters is of assistance. They together give some insight into what "unjust" is intended to mean and, perhaps, the extent of the burden, which, in the legislature's opinion, it was unjust that the applicant bear. *Unconscionable, harsh or oppressive' may perhaps evidence the legislative intention that "unjust" is no small thing and that a finding of it should not be made unless the contract was not merely burdensome but fairly to be described in a manner analogous to "unconscionable harsh or oppressive". But, in the end, the meaning of unjust is not to be determined by reference to such matters The court must determine what was meant by the term having regard to its use in the context of the Act as a whole and against the background of the mischief with which it was intended to deal." After referring to the passage in the judgment of McHugh JA in West's case, and its frequent adoption, his Honour said: "Tn the end, the meaning of injustice lies in the reaction of the individual judge, informed by what has been said to those to whom he should pay regard." and later: "But the Act requires that the Court is to look at the justice of the contract which results from its conduct. In determining what is just, it is in my opinion proper to have regard to what one person knew and the other did not of the potential consequences of the contract" I do not understand Mahoney P to be departing from the oft adopted approach of McHugh JA in West's case. The starting point when considering whether the terms of a contract are to be enforced is that enunciated by Gleeson CJ in Baltic Shipping Company v Dillon ("Mikhail Lermontov'):8 "The general policy of law is that people should honour their contracts. That policy forms part of our idea of what is just." It is a qualification to that basic principle that, pursuant to the Contracts Review Act 1980 as explained by McHugh JA in West's case, the Court has a discretion to grant relief of appropriate types if the court finds "a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made".9 In my judgment there is nothing unjust in the terms of cl6(b): it merely reasonably protects the proper interests of one party to it. Before Moore DCJ the respondent contended, in accordance with a letter of particulars, that the contract was unjust at the time it was made for three reasons only, namely: (a) The exclusion clause was not drawn to plaintiff's attention; (b) the plaintiff was not afforded the opportunity of reading the document prior to signing it; and (c) there was relative inequality of bargaining position between the plaintiff and the defendant. 8. (1991) 22 NSWLR 1 at 9. 9. S7(1) Contracts Review Act 1980. URJ = JOHN DORAHY'S FITNESS CENTRE PTY LTD v BUCHANAN (Cole JA) 15 Those three matters are factors referred to in s9(2)(a),(b),(c) and (1) of the Act. However Moore DCJ based his decision upon much wider grounds than those litigated before him. His Honour relied in reaching his decision upon the matters in s9(2)(d), (g), (h) and (j). His Honour concluded his reasons on this point by stating: "When I consider all of those matters I find that the plaintiff was entitled to relief under s7 of the Contracts Review Act." Relying upon matters not litigated necessarily infects the judgment with error because the appellant did not have the opportunity to call evidence upon or investigate by cross-examination or address in submissions matters relied upon by the trial judge in reaching his decision. It follows that the appeal must be upheld. The question remains whether this Court is in a position to deal with the claim for relief under the Contracts Review Act upon the three bases advanced by the plaintiff below. In my opinion it is because the evidence touching upon the three matters was not in dispute. Accordingly no question of credibility arises and this Court should adopt the trial judge's findings of fact where they are supported by evidence. Regarding particular (a), it was common ground that Mrs Cardillo, the appellant's employee, did not draw cl6 to the respondent's attention. However there was no evidence that, had cl6 been drawn to her attention, the respondent would have acted in any different manner, for instance by refusing to sign the document or seeking to have cl6 struck out. Further, had the respondent troubled to read the agreement, as she had the earlier one she had signed, she would have seen cl6. Regarding particular (b) the trial judge found: "At Mrs Cardillo's request the plaintiff filled in her name and address, signed it and handed it back to Mrs Cardillo for Mrs Cardillo to complete the other details. The plaintiff did not read the front of the document. The plaintiff agreed that if she had wanted to, she could have taken the document home to read it before signing it but this was never suggested to her by Mrs Cardillo and certainly she was not advised that she should do so nor was she required to do so before she signed it." The evidence upon which his Honour based that finding was the following: Q. "If you wanted to, Mrs Buchanan, you could have taken this agreement home and read it before signing it, couldn't you?" A. "I could have, yes." Having given that unqualified evidence, I do not see how the respondent could sustain an allegation that she was not afforded the opportunity of reading the document before signing it. Regarding particular (c), Moore DCJ held that: "Tn this case there was a form of material inequality on a realistic view. It is subjective in character. The plaintiff arrived on one occasion intending the use the gymnasium and eager to continue into the future. In the normal course of human nature people who can be described as buyers in her situation, are keen to get on with things at once and often to an extent that they will disregard their normal prudence. The law has recognised this for example in providing for cooling off periods for contracts for purchase of real estate. Those are contracts of extraordinary magnitude in the lifetime of most people and have called for special legislations. Cooling off periods are not law in contracts of lesser magnitude but human nature is the same in all contracts. The Contracts Review Act recognises that. The defendant, the seller, had the advantage of carefully 16 UNREPORTED JUDGMENTS considering its position long in advance, getting legal advice, and printing an attractive form, to be signed on the front, with conditions on the back. It has presented an alluring gymnasium to a buyer. It asks her without real warning, to sign a form on the premises, before it will continue to admit her or at least before it will continue to admit her for an extended term. In that buyer's frame of mind she or he does not really have the same subjective capability to consider carefully every term which the layperson normally dismisses as "fine print". Even if he or she is given time to think about it, but not REQUIRED to spend time thinking about it, his or her impetus of being there ready to exercise and with the allure of the surroundings still affects his or her thinking. This is particularly so in relation to the subject cl6. As I mentioned elsewhere, it reads in such way that I hold it to govern only negligence in the activities of the Club and not in the maintenance of the equipment. Leaving aside the question of whether my forensic interpretation is correct, the eager plaintiff was not in the same circumstances or frame of mind or with the same advantages, to consider her position as was the defendant or to nicely analyse the clause. This amounts to material inequality of bargaining power. The defendant's conduct in imposing cl6 in those circumstances, makes that clause unjust." The factors referred to by the learned trial judge do not really touch upon "any material inequality in bargaining power between the parties to the contract". Rather they are a subjective view of the manner in which his Honour thinks commercial transactions should proceed. The undisputed reality was that the respondent had had a membership to the gymnasium for the past twelve months, that her membership had expired, that she wished to renew it for a further twelve months, and that in those circumstances, having read the original membership agreement which she thought may have been different to the one presented to her, chose to sign that document without reading it. She could have taken it home to read before signing it. There was no evidence she would have been excluded from the gymnasium had she not signed on that particular occasion but asked to take the document away to read. In reality no question of bargaining power in fact arose, even if it is possible to say that theoretically the concept has some application to a contract for $169 for twelve months use of a gymnasium. The references by the trial judge to "cooling off periods" have no application in present circumstances particularly where the respondent had been a member of the gymnasium for twelve months. Similarly suggesting that she was asked "without real warning" to sign the agreement in circumstances where her prior twelve months membership had expired is equally unrealistic. Further, to suggest that a gymnasium proprietor is "required" to ensure that an intending user "spend time thinking about" the form of contract for a $169 annual subscription seems to me to be quite unrealistic in a commercial sense. Nor in my opinion is there any notion of "subjective material inequality". Parties are in an unequal bargaining position or they are not. Here the question simply did not arise because the question of bargaining the terms of the contract did not arise. It follows, in my view, that there was no basis established by the undisputed evidence on the grounds alleged by the respondent plaintiff for the grant of relief under the Contracts Review Act. Accordingly she was bound by the terms of cl6 and there ought to have been a verdict for the defendant in the court below. I would propose that the appeal be upheld and the judgment entered 3 June 1994 be set aside. The respondent should pay the appellant's costs of the proceedings below and of this appeal but should have in respect of the appeal, if qualified, a certificate under the Suitors Fund Act. URJ JOHN DORAHY'S FITNESS CENTRE PTY LTD v BUCHANAN (Cohen J) 17 Cohen J I agree with Mahoney P, for the reasons given by him, that this Court should exercise its discretion under the provisions of the Contracts Review Act and hold that cl6 of the contract should not be enforced. As Cole JA has shown. Moore DCJ based his decision on grounds, some of which had not been the subject of particulars or submissions. This Court can therefore consider the matter, taking into account admitted facts or facts found by the Judge. One of the paragraphs in s9(2) upon which the respondent relied was (i) which states: "Q(2)(i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect". In West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 620, McHugh JA said: "Under s7(1) a contract may be unjust in the circumstances existing when it was made because of the way it operates in relation to the claimant or because of the way in which it was made or both. Thus a contractual provision may be unjust simply because it imposes an unreasonable burden on the claimant when it was not reasonably necessary for the protection of the legitimate interests of the party seeking to enforce the provision: cf s9(2)(d). In other cases the contract may not be unjust per se but may be unjust because in the circumstances the claimant did not have the capacity or opportunity to make an informed or real choice as to whether he should enter into the contract: cf s9(2)(a), s9(2)(e), s9(2)(g), s9(2)(1), s9(2)(j). More often, it will be a combination of the operation of the contract and the manner in which it was made that renders the contract or one of its provisions unjust in the circumstances. Thus a contract may be unjust under the Act because its terms, consequences or effects are unjust. This is substantive injustice. Or a contract may be unjust because of the unfairness of the methods used to make it. This is procedural injustice. Most unjust contracts will be the product of both procedural and substantive injustice." A contractual term such as cl6 may not in some circumstances be harsh, unconscionable or oppressive. The clause here was in what seems to be quite small print in the middle of a number of clauses on the back of the form. In the circumstances as described by Mahoney P, where no warning of or specific reference to a provision taking away substantial legal rights was given, I consider that the clause has the effect of being unjust. I agree that the appeal should be dismissed with costs. Appeal dismissed with costs. Counsel for the appellant: SD Rares SC/RS Sheldon Solicitors for the appellant: Barrie Fudge and Co Counsel for the respondent: WD Dalley Solicitors for the respondent: Atkins Jones