Recovering Unpaid School Fees

The relevant term was set out in the school’s enrolment contract as follows:

One full College term’s notice in writing to the Principal is required for the intended withdrawal of the child, otherwise a full term’s fees will be charged. The written notice must be received at the College by the first day of term. Any notice received after the first day of term will render parents/carers liable for the fees for that term and the subsequent term in lieu of notice.

The arguments raised by the parents were that, whilst it was accepted that the withdrawal of the parent’s children was not made with a full term’s notice, the contract was allegedly unfair by imposing a penalty on the parents for services they neither requested nor accessed.

ACAT found that the notice term in the enrolment contract was void pursuant to section 23 (1) of the Australian Consumer Law (ACL). In making this decision, ACAT considered several factors namely:

1. That the contract was a standard form consumer contract (not individually negotiated) for the provision of educational services in trade or commerce – meaning that the provisions under the ACL to determine whether a term is ‘unfair’ apply;
2. That the notice term, in the context of the contract, would cause significant imbalance in the parties’ rights and obligations arising under the contract because it has the effect of permitting the school, but not the parents, to vary the terms of the contract;
3. Perhaps most importantly, whether the claim was a genuine pre-estimate of the school’s loss or a penalty. In the current circumstances, ACAT determined it was a penalty. ACAT considered at what stage of the school year the child was withdrawn, and whether new students can be quickly enrolled at the same year level to mitigate the school’s loss.

Ultimately, ACAT determined that since the children were withdrawn at the end of the school year, the school would have sufficient time to plan and allocate teaching resources for the following year and could thus mitigate any loss occasioned by the termination of the contract.  The parents were therefore successful in setting aside the term of the contract.