ACCAN Informed Consent Project (21 August 2009)

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4.1. Capacity

In the Project Survey, caseworker organisations and regulators reported a low to moderate volume of complaints regarding capacity.

The common law includes a capacity test for contract formation, that requires each party to have the capacity to provide their consent. In the communications sector capacity issues arise in a number of ways:

• The organisation attempts to gain consent from the wrong party:
  • A child rather than the parent;
  • A spouse / flat mate / employee rather than the account holder; or
  • An individual (with an intellectual disability) rather than their guardian.
• The organisation seeks consent from a party who clearly does not have the capacity to provide it (e.g. a child); and
• Organisations obtain consent from a party who does not have the capacity to provide it, but there is some doubt as to whether the organisation knew or should have known about the lack of capacity (typically in cases where the person has an intellectual disability, but no guardian is present).

The 2008 annual report of the Telecommunications Information Ombudsman (TIO) notes that 55.7% of potential Customer Transfer Code issues relate to claims from end users that their service was transferred without their consent.[14]

The TIO notes that in complaints of this nature, consumers commonly claim the person who arranged the transfer was not the authorised account holder. For example, the supplier proceeded to transfer the service after obtaining the consent of the consumer’s spouse or child or employee.

Increasingly, the capacity of individuals will be difficult to determine in the communications sector, as consent can be provided by electronic means.

Where capacity is not present, the contract may be void. Also, a lack of capacity can lead to a claim of unconscionable conduct, if the organisation is thought to be exploiting a vulnerability of the consumer of which they were (or should have been) aware.

In Australia, however, very few capacity cases are raised in formal legal action. This is because organisations have a discretion to ‘make good’ any problems when they discover that a person did not have the capacity to enter into a contract (whether or not they knew or should have known about the capacity issue earlier). Consumer caseworkers reported that many organisations will void contracts or waive / reduce bills once they become aware of a capacity issue, without requiring legal action.

The TIO also takes an informal approach to capacity issues, stating that they may compensate consumers based on fairness and the position of the parties, rather than relying on a strict test of whether the organisation knew or should have known that capacity was an issue.[15]

This discretionary approach has had both positive and negative impacts. On the positive side, many consumers have received quick and easy redress without the need for a detailed legal debate on capacity. On the negative side, complaints have been resolved at the individual level, without necessarily leading to any systemic changes in approach by the organisation.

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[14] Telecommunications Industry Ombudsman, 2008 annual report, Melbourne, 2008, <http://www.tio.com.au/publications/annual_reports/ar2008/PDFs/AnnualReport2008.pdf>.

[15] Telecommunications Information Ombudsman, Disadvantaged and vulnerable consumers, Melbourne, August 2008, <http://www.tio.com.au/POLICIES/Contracts/DisadvantagedVulnerable.htm>.

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