Into the bin! Federal Court trashes unfair contract terms in waste collection contracts

In what must rank as one of the speedier capitulations to a regulator in recent Australian legal history, the ACCC has today announced that waste management company JJ Richards & Sons Pty Ltd has consented to court orders by which JJ Richards agreed that no fewer than 8 terms of the standard form contract used by JJ Richards with small business customers are unfair, and accordingly, void.

The proceedings, which were commenced in the Federal Court of Australia on 6 September 2017, were set to be the first major test of the provisions of the Australian Consumer Law which allow small business customers to challenge unfair contractual terms in standard form contracts.  Consumers have been able to challenge unfair terms since 2010, but the laws were extended to small business customers with effect from 12 November 2016.

The terms which were alleged by the ACCC to be unfair (and which, by the consent orders, JJ Richards has accepted that it cannot now enforce) are as follows:

  • binding customers to subsequent contracts unless they cancel the contract within 30 days before the end of the term;
  • allowing JJ Richards to unilaterally increase its prices;
  • removing any liability for JJ Richards where its performance is “prevented or hindered in any way”;
  • allowing JJ Richards to charge customers for services not rendered even when caused by reasons beyond the customer’s control;
  • granting JJ Richards exclusive rights to remove waste from a customer’s premises;
  • allowing JJ Richards to suspend its service but continue to charge the customer if payment is not made after seven days;
  • creating an unlimited indemnity in favour of JJ Richards; and
  • preventing customers from terminating their contracts if they have payments outstanding and entitling JJ Richards to continue charging customers equipment rental after the termination of the contract.

In addition to orders preventing JJ Richards from relying on any of the unfair terms in any contract entered into since 12 November 2016, JJ Richards has agreed to an injunction restraining it from entering into any contract containing similar terms for a period of 5 years.  JJ Richards has also agreed to corrective advertising, and an order that it implement an Australian Consumer Law compliance program for the next 3 years.  You can read te full orders made by the Federal Court by clicking on this link: JJ Richards – orders of Moshinsky J

The agreed facts indicated that since 12 November 2016, JJ Richards had entered into at least 26,000 contracts using the standard terms (although it should be noted that not all of those contracts will have involved small businesses).  The consequence is that JJ Richards will now have to deal with the contractual fall-out of sections of each of those contracts (to the extent that they are with small business customers) being unenforceable.  To describe the situation in technical legal language, it’s a mess; or if it ain’t, it will do ’til the mess gets here.

The lesson from these proceedings (and from the speed with which JJ Richards agreed to orders which will substantially remake a large number of contracts, and which are likely to have significant commercial effects) is that if you contract with small businesses (those employing less than 20 people) and you have not reviewed any standard form contracts which you use, there is no longer any time to, err, waste.

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October 19
Competition and consumer law