Back To The Future: Speed Vs Enforceability

22 JUN 2018

 

Given the ease and speed of signing online contracts we can sometimes do so without the care and diligence we might have applied had we signed old school (with a pen on paper). So technology affords us great speed and convenience which can lull us into a false sense of security.

PAUSE, think and measure 3 times and cut once whether it’s an online or hard copy contract.

In the recent case of Benson v Rational Entertainment Enterprises Ltd [2018] NSWCA 111, the Court’s decision shed light on the realities of the online world we now live in and its consequences.

Snapshot

Online contracts may not include express terms but the Court decided that it can imply terms into online contracts to give proper effect and fairness to the parties involved.

The Take Away 

Although it may seem tedious, it always important to read any legal document such as a contract before you sign and agree to it, even if it is in an electronic form.

If this issue arises in your business and you think an initial short discussion with us might assist, please call Grant Butterfield on 0414 394 077 or Aaran Johnson on (02) 9233 1133. It is always better to look before you jump.

What happened?

Mr Gary Benson had an online poker account on the website www.fulltiltpoker.com operated by a group of companies called the FTP Companies. When players win money, put money in their account, or have other players transfer money to their account, it amounts to giving credit to the FTP Companies.

Mr Benson also had a business through a company called Intercash Pty Ltd, whereby a player who wanted to cash out their account would transfer the balance in their account to Mr Benson’s account and Mr Benson would then withdraw that amount and pay it to Intercash. Intercash would then pay the player the amount less a commission.

In June 2011, a promoter of the website called iBus Media Pty Ltd (who also had an account) transferred $285,000 to Mr Bensons account to cash out the amount. However, before Mr Benson had withdrawn that sum from his account to pay it to Intercash, his account was frozen by the FTP Companies because of court proceedings between the FTP Companies and the US Government. 

Ultimately the court proceedings with the US Government were settled and it was agreed that the FTP Companies pay all non-US players (including Mr Benson) their account balances.

In late 2012, Mr Benson regained access to his account on the same website by agreeing to an online contract with Rational FT Enterprises Ltd, which had taken over operation of the website.

Mr Benson was permitted to withdraw $521,744.17 from his account but was told that the $285,000 had been deducted from his account because the new operators of the website were not liable to pay amounts coming from promoters. 

Mr Benson sued Rational FT Enterprises Ltd and the FTP Companies to recover that amount.

What the Court decided

1st Court Case 

The court initially decided against Mr Benson and said that that the online contract with Rational FT Enterprises Ltd was clear that Mr Benson would not be entitled to the $285,000 because it came from a promoter of the website rather than another player or winnings. 

The Judge also found that because Intercash had previously entered into a settlement with iBus Media in relation to the $285,000, Mr Benson had not suffered any loss and is therefore not entitled to that amount. Mr Benson appealed that decision.

2nd Court Case on Appeal 

The Appeal Court considered three issues:

  1. Whether Mr Benson suffered any loss;

    The Court found that Mr Benson was not required to establish that he had suffered damage because he was suing for the payment of a debt, being the $285,000 that was in his account and therefore the rules of establishing loss or damage do not apply.

  2. Whether the online contract meant that Rational FT Enterprises Ltd, as the new operator of the website, was obligated to honour the amount in Mr Benson’s account; and

    The court then found that it was implied from the terms of the agreement with the US Government that when Rational FT Enterprises Ltd took over the operation of the website, it would take over the obligation to pay players the money in their accounts. This obligation continued through the online contract entered into with Mr Benson.

  3. Whether Mr Benson was a third party to the US Government agreement with the FTP Companies such that they had received a benefit when they failed to comply with their promise to the US Government to transfer the US$285,000 to Mr Benson (also known as third party unjust enrichment).

    The Court agreed that Mr Benson was a third party to the agreement with the US Government, but said that the principle of third party unjust enrichment did not apply in Australian law. This is because the principle, when first decided by the High Court in 1988, has since had no other support by the High Court and therefore it does not have good legal standing.

Ultimately, the Court allowed the appeal only against Rational FT Enterprises Ltd, as it was the operator of the website and invited the parties to propose the form of judgment against Rational FT Enterprises Ltd. The Court also ordered that Rational FT Enterprises Ltd and the FTP Companies pay Mr Bensons’ costs of the appeal.

Note: The contents of this publication are for reference and observations purposes to be read only as a guide. This publication does not constitute legal advice and should not be relied upon as legal advice. Every circumstance is different hence discrete and specific legal advice should always be sought separately before taking any action based on this publication.

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