Unfair Contract Terms: Court Quashes JJ Richards Standard Form Contracts
Last October the Federal Court of Australia handed down their decision in the matter of Australian Competition and Consumer Commission v JJ Richards & Sons Pty Ltd. The case centered on JJ Richards standard form contracts, with the ACCC alleging the contracts contained unfair terms.
It followed a series of amendments to Australian Consumer Law, implemented in late 2016, which extended the ACL’s scope to protect small businesses from unfair terms in business-to-business standard form contracts.
Following the amendments, the ACCC notified JJ Richards that there appeared to be a number of unfair terms within its standard form contracts. However the company failed to address these concerns and so the ACCC commenced proceedings.
The amended legislation stipulates that a contract will be ‘unfair’ where it is one sided or excessive, creates a ‘significant imbalance’ between the parties and where its provisions are not reasonably necessary to protect the benefiting party’s legitimate interest. Moreover, it deems that a small business contract exists where, at the time of assent;
- the relevant business employs fewer than 20 people; and
- the upfront price payable under the contract is no more than $300 000 or $1million if the contract is for more than 12 months
At trial, JJ Richards was found to have included a total of 8 unfair clauses within its standard form small business contracts. The decision rendered all illegitimate clauses void and thus JJ Richards was unable able to rely on any provisions;
- allowing JJ Richards to unilaterally increase its prices;
- binding customers to subsequent contracts unless they cancel the contract within 30 days before the end of the term;
- 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 for reasons that are 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;
- preventing customers from terminating their contracts if they have payments outstanding and allowing JJ Richards to continue charging customers equipment rental after the termination of the contract.
Ultimately, the decision serves as a timely reminder to large businesses of the need to review small business standard form contracts. It upholds the Australia's commitment to protecting small businesses and highlights the importance of revising clauses that may otherwise be rendered void and unenforceable if challenged as unfair pursuant to the ACL.
The ACCC has since published a report addressing common terms of concern in small business contracts. It offers guidance on how best to manage contracts in light of the amendments and outlines a number of strategies implemented by other other companies across a broad range of industries.
Couple save home in battle against Macquarie Bank
In proceedings in the Supreme Court of Queensland in 2005, James Conomos Lawyers acted for a couple, Mr and Mrs Lin, who took on one of Australia's biggest banks and won.
In 1999 and 2000, Macquarie Bank lent money to a property developer for the construction of units and houses on land near Coolum Beach on the Sunshine Coast. Mr and Mrs Lin's son, Konrad, was introduced to the project by Macquarie and subsequently became a director of the property development company. A family trustee company, of which he and his parents were directors, took a 25% shareholding in the company.
Not long into the project the developer ran into financial difficulties and Macquarie went into possession of the site. Macquarie ended up completing the first stage of the project but the development company still owed the bank more than $9 million.
Konrad was the registered owner of the house Mr and Mrs Lin were living in at the time, and the bank relied on this when it accepted his personal guarantee and agreed to finance the development. Macquarie brought proceedings to enforce the guarantee.
James Conomos Lawyers instituted separate proceedings for Mr and Mrs Lin with a view to protecting their home from Macquarie's claim against their son. Mr Conomos successfully argued they were the beneficial owners of the property even though it was registered in Konrad's name. Further, Mr and Mrs Lin had provided all of the money used to purchase the house in 1994 and that Konrad in fact held the house on trust for them. James Conomos Lawyers sought a declaration from the Supreme Court to that effect.
Macquarie contested Mr and Mrs Lin's assertions, arguing they had not provided the purchase monies and that they had intended Konrad to be the beneficial owner, not a trustee.
The Supreme Court ordered Konrad pay Macquarie almost $9.5 million. However, in a victory for Mr and Mrs Lin, Justice McMurdo accepted their lawyer's submission and found they were the owners of the property, which Konrad held on trust for them. Again, James Conomos Lawyers was able to protect the rights of individuals in extraordinary circumstances.
$1M pay out for QLD farmers
by Elizabeth Tilley and AAP
A BUNDABERG cane farming couple achieved a near $1 million victory when a bank was ordered to pay compensation for the savings they lost to a swindling accountant.
All roads lead to High Court in landmark compulsory acquisition case
Marshall v Director General, Department of Transport, 205 CLR 603
It is well known that the government has the power to compulsorily acquire land. If a person's land is next to, for example, a road that needs to be widened, the government has the right to require that person to cede their land to the government.
The law, of course, provides for compensation for the landowner in such circumstances. This compensation can provide redress not only for the loss of the land, but also any resulting damage to land not resumed. This damage is known as "injurious affection".
In 2001, James Conomos Lawyers was involved in an important injurious affection case before the High Court of Australia. Our client, Mr Marshall, owned land next to the Bruce Highway in Queensland. Part of this land was resumed so the highway could be widened. Mr Marshall became concerned at increased flooding on his remaining land following the opening of the new carriageway. He brought a claim for compensation for injurious affection.
The claim failed both in the Land Court of Queensland and on appeal to the Queensland Court of Appeal. Both courts ruled that the claim could not succeed because the new highway was not actually located on the land acquired from Mr Marshall.
But before the High Court of Australia, James Conomos Lawyers successfully argued that it was not necessary for the new highway to be located on the resumed land in order for Mr Marshall to claim compensation for injurious affection. To establish an impact from the works was sufficient. The High Court agreed with this argument and ruled that Mr Marshall was entitled to compensation. This result flowed from the Court's construction of statute law and Justice Gaudron noted that the Court's approach was particularly appropriate where "to do otherwise would limit or impair individual rights, particularly property rights."
Mr Marshall's case has proven to be a key decision in the development of the law and the case continues to be cited as an important authority by courts all around Australia to this day. James Conomos Lawyers is proud of our involvement in this pivotal case.
