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Unfair contract terms for small businesses: ACCC v JJ Richards

This time last year, the protections against unfair contract terms were extended under the Australian Consumer Law (ACL) to include standard form contracts involving small businesses.

A ‘standard form contract’ is generally a pre-prepared contract which offers the same or similar terms to all consumers, and is often utilised by larger businesses to improve efficiency.

In conjunction with the new laws surrounding standard form contracts, the ACCC has ramped up its efforts to investigate businesses relying upon unfair contract terms. This recently culminated in the commencement of proceedings against JJ Richards & Sons Pty Ltd (JJ Richards), in which the ACCC sought to enforce the extended provisions. In the proceedings, the ACCC alleged that many of JJ Richards’ clauses:

  • created a “significant imbalance” in the rights and obligations of JJ Richards and small businesses;
  • were not reasonably necessary to protect JJ Richards’ legitimate interests; and
  • would, if relied upon, cause significant financial detriment to small businesses.

The Federal Court of Australia recently delivered its judgment[1] and found that, of the eighteen terms contained within JJ Richards’ standard form contracts, the following eight terms were “unfair” and subsequently declared void:

1. Automatic renewal: this clause bound customers to subsequent contracts unless they called the contract within 30 days before the end of the term.

2. Price variation: allowing JJ Richards to unilaterally increase its prices.

3. Agreed Terms: removing any liability for JJ Richards where its performance is “prevented or hindered in any way”.

4. No credit without notification: allowing JJ Richards to charge customers for services not rendered for reasons that are beyond the customer’s control.

5. Exclusivity: granting JJ ...

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CREDITOR’S STATUTORY DEMANDS: 21 DAYS IS 21 DAYS, REGARDLESS OF CHRISTMAS & NEW YEARS PERIOD!

The Supreme Court of Queensland has reaffirmed the law that a debtor only has 21 days to file and serve an application to set aside a creditor's statutory demand, regardless of whether the Christmas/New Year period that falls within the 21 days.

Earlier this month, the Supreme Court handed down its decision1 in an application by J&K Homes Pty Ltd, who had been served with a creditor's statutory demand by the creditor, Evans Lawyers

  • The creditor's statutory demand was served on the debtor on 19 December 2016.
  • Under the Corporations Act 2001 (Cth), the 21 day deadline fell on 9 January 2017.
  • However, the debtor filed its application on 11 January 2017.

In essence, the applicant applied to the Supreme Court to set aside the statutory demand on a number of grounds (genuine dispute, defects, substantial injustice2); however, a threshold question for the Court was that the application was made outside the required 21 day period3, which the creditor argued was fatal.

The debtor argued that the period between Christmas and New Year's Day was not to be included in the 21 days, ensuring the deadline would not have expired until 17 January 2017. In doing so, the debtor referred to rule 1.9(4) of the Queensland Uniform Civil Procedure Rules which states that “in calculating a period of time for the purpose of these rules, the period beginning on 25 December in a year and ending at the end of 1 January in the next year is not to be counted.”

Unfortunately for the debtor, an argument referring to a Queensland Rule had no applicability in regards to the Federal Corporations Act 2001. The Court referred to numerous decisions that made clear that the 21 days says what it means, that is: 21 consecutive days which begin and end at midnight.3

As the debtor did not file and serve its application within the 21 day period (albeit two days late), the Court had no power to make an order ...

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If you’re gonna say it, you better mean it!

Image Via news.com.au

Janine Allis, founder of Boost Juice and Retail Zoo, delivered a punch to two gym owners and Shark Tank hopefuls this week. The guys were pitching a food product to the Sharks, and the packaging revealed it was ‘engineered to accelerate muscle growth and increase energy levels’.

When asked whether they had completed any clinical trials, or had any proof that their food product actually did what the packaging said, the answer was no.

‘Misleading!’, was Allis’ response.

‘At the moment, you’re making health claims that aren’t proven which means it’s against the law. I would seriously think about repackaging because there’s a number of things on here that are simply against the food standards codes. You need to get good legal advice...’

The Australian Consumer Law (the ACL) is pretty clear on what product packaging can’t say: packaging with statements that are incorrect, or likely to create a false impression, are not allowed.

The proof is in the prosecutions:

-       Nurofen maker, Reckitt Benckiser, was fined $1.7M for breaching the ACL with its ‘specific pain range’, where all products contained the same active ingredient, and did the same thing

-       Arnott’s was fined by the ACCC for claims on its ‘Light & Crispy’ packaging for adopting a false comparator to inflate a health claim

-       When Heinz’s US parent company acquired Australian product Golden Circle, Golden Circle packaging continued to represent that Golden Circle products were Australian owned. Heinz gave undertakings to the ACCC, and also donated more than 800,000 affected cans of fruit and vegetables to Australian welfare agencies

-       Goodman Fielder, maker of non-dairy spread Logicol, engaged in misleading or deceptive conduct claiming on ...

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“NO REFUNDS” CLAUSES UNFAIR

Businesses must take care to ensure that standard form contracts, such as terms and conditions or terms of trade, are not considered ‘unfair’ pursuant to the Australian Consumer Law (ACL).

The case of Ferme v Kimberley Discovery Cruises Pty Ltd involved a cruise ship operator and a category 4 tropical cyclone.

Shortly before the cruise was to depart, the cyclone struck and the operator was forced to cancel. It then attempted to enforce the following term in its standard form contract to avoid refunding the affected passengers:

The carrier will endeavour to follow the Cruise itinerary as described in the brochure and the passenger accepts that the carrier has the right to vary the itinerary or cancel the Cruise if the carrier considers that this is necessary as a result of some Unexpected Event or prevailing inclement weather conditions and the passenger accepts that the passenger will not be entitled to any compensation or a refund of the dare paid should this occur except as provided for in these terms and conditions.

Fortunately for the passengers, they were able to claim for the cancellation under their travel insurance. The insurers then exercised their right to recover against the cruise ship operator and brought an action on the passengers’ behalf.

The insurers argued that the clause refusing the refund was unfair, and relied upon the ACL. The ACL provides that a term in a standard form consumer contract is unfair if:

  1. it would cause a significant imbalance in the parties’ rights and obligations arising under a contract;
  2. it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
  3. it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

The insurer was successful in its claim against the cruise operator, establishing that there was a standard ...

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DOING THESE 3 THINGS WILL REDUCE YOUR LEGAL FEES

1.    Come prepared
Ideally, before a meeting, you will have discussed with your solicitor what you might need to bring. In addition to this, you should have in your mind a clear idea of the things that need to be addressed. For example, if your meeting is to discuss a dispute:

  • Prepare a timeline of the relevant facts and email it to your solicitor before the meeting
  • Bring with you any documents that might be relevant (such as contracts and emails)

Coming prepared with this information will mean less time after the meeting requesting information, and will avoid delay in progressing your matter.
2.    Be available & responsive
Countless calls and emails for instructions result in delay and increased costs. Regularly check your email and be available via phone (or arrange phone calls in advance to avoid phone tag).

Being thorough in your instructions and providing documents when they are requested quickly will mean your solicitor can focus their time on what is important – progressing your matter.
3.    Share the load
Organising hundreds of emails into chronological order and placing them into a folder does not necessarily require a lawyer’s set of skills. If you have the time or can delegate the job within your organisation, providing large volumes of material in an organised and logical manner will mean you are not paying someone else to do it for you.

Contact the team at Rouse Lawyers to discuss your legal needs today. ...

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Contracts in a leasing transaction

If you’re a prospective tenant or landlord entering into a leasing transaction then it’s likely that you will be asked to sign a number of different documents. It’s important to understand the differences between each document and how they interact in order to determine which is appropriate for your situation.

  1. Offer To Lease

The first document you’ll commonly be asked to sign is an Offer To Lease. This document is normally prepared by a property agent and sets out a few pages of key terms that will form the foundation of the Lease. These terms usually include the property address and size, rent and annual increases, proportion of outgoings, security bond, whether there will be personal guarantees and any sort of incentive or special conditions. Once the Offer To Lease is signed by the parties, the tenant will usually pay a deposit and the landlord will instruct its solicitors to proceed with preparing the formal Lease.

Whether the Offer To Lease is binding will depend on its terms. The document may expressly say that it is not binding, in which case either party can pull out of the negotiations and the deposit will be refunded. In some cases the document may be binding and entitle the landlord to keep the deposit if the tenant has a change of mind, and perhaps further recourse against the tenant.

  1. Lease

The Lease is the formal document containing all of the agreed terms and conditions for the transaction. It will become binding once it is signed by both parties. Once the Lease commences, a copy is normally lodged with the Land Titles Office to be registered on the property’s Title. The length of the Lease will determine whether registration is required. In a straightforward leasing transaction, the Lease will usually be the final document to be signed.

  1. Agreement For Lease

In some situations, the parties will be ...

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3 Ways to Effortlessly Reduce Risk

1. Put it in Writing.
We can’t say this enough. Put every deal in writing.

Why is this ‘effortless’? Think of the alternative. If everyone made sure their agreements (and any variations) were clear and in writing, our litigation team would be out of business.

Call us cynical, but handshake deals are a thing of the past. With constant access to technology like smart phones, there’s no reason not to make sure there’s a record of the deal that has been struck.
2. Know Your Vulnerabilities
Rouse Lawyers offers a no-obligation 360o Legal Review. You’ll sit down with a senior member of our team over coffee, and they’ll take you and your business through our exposure detection process to make sure you are on top of everything (or at least aware of where you need to tighten things up!).

Our 360o Legal Review is designed to give you at least one ‘aha moment.’

What we know from experience is that you’ll walk away with added peace of mind.
3. Source Free Resources Online
There are a number of fantastic online resources that often go untapped.
Here are just a few...

For employment: https://www.fairwork.gov.au/ and https://www.fwc.gov.au/
For intellectual property: http://www.ipaustralia.gov.au/
For cases, legislation and articles: www.austlii.edu.au
And of course, our web site: www.rouselawyers.com.au

If you’re interested in our 360o Legal Review, get in touch with us to arrange a date on 07 3648 9900 or via email admin@rouselawyers.com.au. ...

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Credit Card Fee Battle Hits High Court

A High Court challenge starting today in Canberra will determine whether bank customers should be reimbursed hundreds of millions of dollars in credit card late-payment fees.

Thousands of ANZ customers are part of a class action hoping to convince the High Court the fees are illegal.

At the crux of the challenge is the disparity between late fees charged by the bank, and the actual loss suffered when a customer pays a credit card late.

Customers say the late fees they were charged by the bank (up to $35) bear no relationship to the actual cost to the bank, which they say is about 50 cents.

The class action attack on the fees is that they are:

1. penalties at common law or equity; or

2. the result of unconscionable conduct by ANZ within the meaning of the Australian Securities and Investments Commission Act 2001 (Cth) or the Fair Trading Act 1999 (Vic); or

3. unjust under the National Consumer Creditor Protection Act 2009 (Cth); or

4. unfair contract terms.

Initially, the Federal Court ruled in favour of the customers, finding the late payment fees unlawful as they were extravagant, exorbitant and unconscionable. However, that judgment was overturned by a full bench of the Federal Court, which took into account a broader scope of items that could be considered costs to the bank. This has prompted the High Court action.

This case is one of several class actions against the big banks, including CBA, Westpac, NAB, Citibank, St George and Bank West – these cases are now waiting on the outcome of the High Court appeal.

If the High Court appeal succeeds, anyone forced to pay a late fee could benefit from the Court’s decision. ...

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10 Things You Need To Know About Creditors’ Statutory Demands

1. A Creditors’ Statutory Demand can be used by a creditor owed at least $2,000 by a company.

2. The debt must be due and payable – a common mistake is to issue a statutory demand for a debt (or part of a debt) which is not yet due. For example, the demand might include a number of outstanding invoices, but the most recent invoice issued to the debtor is not yet payable.

3. There must be no “genuine dispute” about the debt. If the parties are in dispute about the amount or existence of the debt, it may not be appropriate to issue a Creditors’ Statutory Demand.

4. The threshold to establish a “genuine dispute” can be easy to meet – often all that is required is “plausible contention requiring investigation”.

5. A mistake in a Creditors’ Statutory Demand, such as an incorrect address or misstatement of an amount, may be sufficient grounds to set aside the demand – care should be taken to ensure all information in the demand is correct.

6. The debtor has 21 days from the date of service, without exception, to either pay the debt or apply to the Court to set the demand aside.

7. Failure to pay the debt or set aside a Creditors’ Statutory Demand will result in the debtor company being presumed insolvent, and the creditor (or any 3rd party for that matter) may apply to wind the debtor company up due to insolvency.

8. To set aside a Creditors’ Statutory Demand, the debtor must satisfy the Court that a genuine dispute exists, the debtor has an offsetting claim, or there is a defect in the demand or some other good reason to set it aside.

9. Once the 21 days expires and the debtor company is presumed insolvent, the creditor must act upon the demand or it will expire and a new Creditors’ Statutory Demand must be issued.

10. NEVER ignore a Creditors’ Statutory Demand – if you receive a Creditors’ Statutory Demand you must act quickly; 21 days can be an extremely short time to settle a debt or prepare a Court application to apply to ...

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Creditor’s Statutory Demands: Friend & Foe

Where a creditor is owed at least $2,000 by a company, the Corporations Act 2001 (Cth) contains a powerful mechanism to recover that debt:  a Creditor’s Statutory Demand (statutory demand).

The Debt
A statutory demand is essentially a notice to a debtor company that it is required to pay the debt(s) set out in the statutory demand within 21 days of service, or a presumption of insolvency will arise. This presumption allows the creditor (or anyone else for that matter) to take immediate steps to wind-up the debtor company.

To issue a valid statutory demand, the Corporations Act requires:

  • the debt(s) to be at least $2,000;
  • the demand to be in the prescribed form;
  • the demand to be supported by an affidavit that verifies that the debt is due and payable (unless the debt is a judgment debt, i.e. Court ordered); and
  • there must be no “genuine dispute” about the debt.

The Action
Once a statutory demand has been served on the company, the debtor must either apply to the Court within 21 days of service (without exception) to set it aside or pay the debt.

If the debtor applies to the Court to set the statutory demand aside, the debtor has to satisfy the Court that:

  • a “genuine dispute” exists;
  • it has a counter-claim or some other claim that can be off-set against the debt;
  • a defect in the statutory demand would cause “substantial injustice” to the debtor; or
  • there is some other reason why the demand should be set aside.

All that is required for a “genuine dispute” is that the debtor has a “plausible contention requiring investigation”, but it cannot be “fanciful” or “far-fetched”.  The dispute must truly exist in fact and the grounds for the dispute must be real and not hypothetical or misconceived.

If the debtor company ignores the ...

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