ACCC v JJ Richards & Sons Pty Ltd [2017] FCA 1224

In early 2016 we reported on the planned start of the new small business unfair contracts regime under the Australian Consumer Law click here.

The unfair business contracts regime started in November 2016. It has taken less than 12 months for a court to apply the new laws to declare that 2,600 garbage disposal contracts should be re-written. 

If you are in business and issue standard form contracts then you should read on, the case has important lessons for businesses large and small.

Background

JJ Richards & Sons is one of the largest privately-owned waste companies in Australia and it uses standard form contracts. Since the start of the new Small Business and Unfair Contract Terms laws on 12 November 2016, JJ Richards & Sons has made over 26,000 standard form contracts.

Facts

On 13 October 2017 the Federal Court declared that JJ Richards & Sons Pty Ltd standard term contracts should be cancelled because they contained 8 void clauses that were unfair to the small business contractors. This was the first case decided under the new unfair contracts provisions of the Australian Consumer Law.

The ACCC alleged and the court agreed that JJ Richard’s standard form small business contracts contained eight unfair contract terms:

1. Binding customers to subsequent contracts unless they cancel the contract within 30 days before the end of the term;
   

2. Allowing JJ Richards to unilaterally increase its prices;
   

3. Removing any liability for JJ Richards where its performance is “prevented or hindered in any way”;
   

4. Allowing JJ Richards to charge customers for services not rendered for reasons that are beyond the customer’s control;
   

5. Granting JJ Richards exclusive rights to remove waste from a customer’s premises;
   

6. Allowing JJ Richards to suspend its service but continue to charge the customer if payment is not made after seven days;
   

7. Creating an unlimited indemnity in favour of JJ Richards; and
   

8. Preventing customers from terminating their contracts if they have payments outstanding and entitles JJ Richards to continue charging customers equipment rental after the termination of the contract.
   

Outcome

The Federal Court declared by consent that the eight clauses in the standard form contract used to engage small businesses were unfair and therefore deemed as void.

Justice Moshinsky said that the contracts were not drafted in plain English and were overly "legal" in nature, were not presented clearly or in a manner readily accessible to a small business customer, presented in a font size which was difficult to read, and were "densely packed".

Orders

Orders against JJ Richards & Sons included that they were unable to rely on any of the contracts entered into or renewed after 12 November 2016. They were also restrained for a five-year period from entering into a standard form contract with small businesses containing an impugned term and were required to publish a corrective notice on their homepage, customer portal and any other website they used. A copy of the court orders was required to be given to each small business that was party to a standard form contract, and JJ Richards were also required to complete an Australian Consumer Law Compliance Program, and to maintain it for three years.

What should you do?

This case is a stringent reminder that businesses contracting with small businesses should immediately review their standard form contracts, or they might not be worth the paper (or electronic pdf) on which they are written.

Get in touch

Whether you are a Small Business, a Bigger Business, or an Independent Contractor, contact Peter McNamara at CML Lawyers would be delighted to review your existing agreements and negotiate your new agreements to comply with the new Small Business Unfair Contract Term laws.

For the full judgement and orders of ACCC v JJ Richards & Sons Pty Ltd [2017] FCA 1224 click here.