There have been a number of legal developments in the small business sector which should be welcomed as wins for small business operators. This alert provides a summary of three of those developments that are particularly relevant following the Australian Competition and Consumer Commission’s release of its Small Business in Focus report for the six months to June 2015. The report states that the ACCC received in excess of 5,000 small business complaints in the first half of 2015. These developments should go some way to alleviating some of the concerns express by small business and are consistent with the Federal Government’s mandate to protect the interests of small business operators.
1. UNFAIR CONTRACT TERMS TO EXTEND TO SMALL BUSINESSES
On 24 June 2015, the Minister for Small Business, the Hon. Bruce Billson MP, introduced the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015 into parliament.
The Bill proposes to reform the Australian Consumer Law so as to extend the “unfair contract term” protections to small businesses. Currently, the protections are only available to consumers. The reform will prohibit the inclusion of unfair terms in Standard Form Contracts with a small business and will allow a court to strike a term from a Standard Form Contract if that term is deemed to be unfair.
The reform is more evidence of the Federal Government election commitment to protect small businesses. Accordingly, any business that deals with small business should ensure that their Standard Form Contracts are reviewed and revised so that the terms of their contracts are not at risk of being deemed unfair. Businesses should also consider whether they need two sets of Standard Form Contracts – one that applies to small businesses and consumers, and another, with terms more favourable to them, to be used when dealing with larger businesses.
Application of the Reform – Key Points to Note
Standard Form Contracts
Only “Standard Form Contracts” will be subject to the reformed law. While there is no definition of what a Standard Form Contract is, it is generally understood to be a contract that is applied in a “one-size-fits-all” or “take-it-or-leave-it” manner, with no ability to amend the terms.
A contract is presumed to be a Standard Form Contract, with the onus being on the business that has produced the contract to prove otherwise.
Size and Length of Contracts
The reformed law will apply to contracts where the upfront price payable under the contract is:
1. if the contract is for less than 12 months, less than $100,000; or
2. if the contract is for greater than 12 months, less than $250,000.
Pre-existing Standard Form Contracts
From the time the reformed law comes into operation, there will be a six month transitional period to allow for businesses to revise their Standard Form Contracts so as to ensure compliance with the reformed law.
Businesses that have entered into contracts with small businesses before the end of the transitional period will not be required to renew or vary those contracts simply because the transitional period has come to an end. Accordingly, so far as pre-existing Standard Form Contracts are concerned, small businesses will only be afforded the protection of the reformed law upon those contracts being renewed or varied after the end of the transitional period.
Changes in Business Sizes
Following the transitional period, the reformed law will apply to Standard Form Contracts where at least one of the parties to the contract employs less than 20 people.
If a business enters into a Standard Form Contract while it employs less than 20 people but subsequently expands to have more than 20 employees, the unfair contract terms protections afforded under the reformed law will still apply to that contract. The protection of the reformed law will not apply to it in relation to any Standard Form Contracts it enters into after its expansion.
It is very likely that the Bill will become law. Accordingly, businesses now have a window of opportunity to revisit and revise their terms of trade so as to be ready for the operation of the reform.
2. A FAIRER GO FOR RURAL AND REGIONAL INDUSTRIES AND SMALL BUSINESS
The Federal Government has released its Agricultural Competitiveness White Paper and it includes significant news for rural and regional industries, and small businesses alike.
The White Paper lists five priority areas that the Government intends to focus on to help farmers, regional consumers and small businesses in their day-to-day operations. The first priority area, entitled “A fairer go for farm businesses” includes an allocation of $11.4 million over four years to establish an Agricultural Enforcement and Engagement Unit.
This Unit, operating under the auspice of the Australian Competition and Consumer Commission, is specifically designed to conduct investigations and increase engagement in rural and regional areas. This focus on rural and regional Australia will help to ensure that farmer, regional consumers generally and small businesses are being properly protected by the provisions of the Competition and Consumer Act (2010).
Notably, the ACCC will not actually obtain any new powers under the terms of the White Paper. What the funding does allow though, is a specific unit within the industry regulator, devoted to ensuring that rural and regional Australia gets the attention that it deserves. Further, the Government is likely to appoint a new ACCC commissioner with specific responsibility for agricultural issues.
As a regionally focused firm, Harwood Andrews takes a keen interest in ensuring that rural and regional clients are not being taken advantage of in breach of the Australian Consumer Law.
3. SIMPLIFICATION OF PPSA LAWS RELATING TO SERIALISED GOODS
Since the inception of the Personal Property Securities Act 2009 (PPSA), leases or bailments of serialised goods for a period of more than 90 days were deemed to give rise to a PPS Lease, thereby creating a registrable security interest in the goods in favour of the lessor or the bailor. This meant that if a lessor or bailor wanted to properly protect their interest in their serialised goods, they would be required to register that interest on the Personal Property Securities Register (Register).
On 25 June 2015, the Personal Property Securities Amendment (Deregulatory Measures) Act (Act) was passed. The Act will come into effect by the end of 2015 at the latest.
The amendments introduced under the Act remove the deeming provisions under the PPSA in relation to 90 day or more leases or bailments of serialised goods. A PPS Lease will no longer automatically arise in these circumstances. As a consequence, it will not be necessary to register an interest in any leased or bailed goods (whether serialised or not) on the Register unless the term of lease or bailment is, or could be, for a period of more than 12 months.
The amendments are intended to reduce the operation costs incurred by small to medium equipment hire businesses.
The amendments will not operate retrospectively, meaning that any lease or bailment of serialised goods for more than 90 days that is entered into before the amendments take effect will be a deemed PPS Lease and will need to be registered on the Register in order to properly protect the security interest created.