Federal Court finds waste management giant’s contracts with small businesses were unfair

Waste management

Eight terms in the standard form contract used by JJ Richards & Sons to engage small businesses have been deemed unfair, and therefore void under Australian Consumer Law (ACL), by the Federal Court, this week.  

The Australian Competition and Consumer Commission (ACCC) instituted Federal Court proceedings against waste management giant, last month. It alleged that until at least April, this year, JJ Richards entered into standard form contracts that created “a significant imbalance” in the rights and obligations of JJ Richards and small businesses, were “not reasonably necessary” to protect the company’s interests, and would, if relied on, cause “significant financial detriment” to small businesses.

It marked the first time the ACCC had taken court action against a company to enforce provisions, which were introduced into the ACL on 12 November 2016, to protect small businesses from unfair standard form contracts.

According to the ACCC, the Federal Court declared by consent that eight terms in JJ Richards’ standard form contracts with small businesses, which were entered into or renewed after 12 November 2016, were unfair and consequently void.  These terms had the effect of:

  • 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
  • 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 finding that each of the terms was unfair, Justice MOSHINSKY also 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.”

In resolving these proceedings, JJ Richards consented to orders restraining it from relying on the unfair terms in existing small business contracts and from using the terms in future contracts with small businesses. JJ Richards also consented to orders that it publish a corrective notice and provide a copy of the Court’s orders to all its small business customers which are parties to an affected contract.

Commenting on the Federal Court’s ruling, ACCC Deputy Chair Dr Michael Schaper said it “serves as a reminder to large businesses to review their standard form contracts and make sure they don’t include any unfair terms.

He added, “The ACCC will not hesitate to take appropriate action to ensure large businesses are complying with the unfair contract terms provisions.”