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ACL unfair contract terms provisions start to bite: JJ Richards contract terms declared unfair and void

The Federal Court of Australia has made orders by consent declaring unfair and void eight terms in JJ Richards & Sons’ standard form contract.

Published by Suzanne Rieschieck and Isobelle Pepe. 

In September this year Russell Kennedy published an alert about the ACCC’s first Court proceedings under the November 2016 Australian Consumer Law unfair contracts provisions relating to small businesses. 

The terms under challenge included terms which caused contract periods to automatically renew, entitled JJ Richards to unilaterally vary its prices and which prevented its customers from terminating their contract if they owed any money to JJ Richards.   Click here to view the alert and to see a list of the terms the subject of the proceeding.

The proceeding was brought to an end on 13 October 2017 when the parties asked His Honour Justice Moshinsky of the Federal Court to make Orders by consent to have the eight terms the subject of the proceeding declared unfair and of no effect. 

JJ Richards consented to Orders:

  1. restraining it from relying on the unfair terms in existing small business contracts and from using the terms in future contracts with small businesses for a period of five years;
  2. requiring it to publish a corrective notice online and on its customer portal in a form approved by the Court;
  3. requiring it to provide a copy of the Court’s Orders to its small business customers who had entered into one of its standard form contracts on or after 12 November 2016, being when the new laws took effect; and
  4. requiring it to establish an ACL Compliance Program to be undertaken by each of its employees or other people involved in its business and who deal with JJ Richards’ Australian customers in relation to their contracts. 

In deciding to make the Orders sought by the parties, His Honour Justice Moshinsky looked at the combined impact of the impugned terms.  His Honour found that “the Impugned Terms tend to exacerbate each other, increasing the overall imbalance between the parties and the risk of detriment to JJR Customers.”  He stated that he considered it to be in the public interest for the Orders be made as the declarations sought, amongst other things, served to record the Court’s disapproval of JJ Richards’ conduct and deter other companies from entering into relevant contracts with such terms. 

The case stands as a precedent as to the kind of contract terms which may be considered unfair and void.  However, because the proceeding was ultimately dealt with by consent, future cases still have an important role to play. 

The ACCC is currently focusing on seven specific sectors known to commonly use standard form contracts; Advertising, Telecommunications, Retail Leasing, Independent Contracting, Franchising, Waste Management and Agriculture.  It has commenced proceedings against serviced office provider Servcorp Limited and two of its subsidiaries.  Under challenge again are terms relating to automatic renewal of contract periods.  Servcorp is defending the proceeding.

Businesses should contact Suzanne Rieschieck from Russell Kennedy Lawyers on 03 9609 1544 or srieschieck@rk.com.au  to seek advice about whether their standard terms may be contrary to the Australian Consumer Law.  Suzanne Rieschieck is a Senior Associate in our Dispute Resolution team with extensive experience acting for traders, small businesses and consumers in VCAT and the Courts regarding Australian Consumer Law disputes.

 


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