Hutchison Ports Australia agrees to remove unfair terms from its T&Cs with carrier customers

Hutchison Ports Australia Pty Limited (Hutchison) and two other large stevedoring companies have agreed to amend their standard form agreements with their carrier customers after the ACCC raised concerns that these agreements contained terms that contravened the Business to Business Unfair Contract Terms regime (B2B UCT regime) under the Australian Consumer Law (ACL)¹. The standard form agreements in question operated to allow land transport providers access to the stevedoring facilities operated by these companies.

Each of the stevedoring companies cooperated with the Australian Competition and Consumer Commission’s (ACCC) investigation and agreed to remove or amend the offending terms. Hutchison’s commitments were made in a court enforceable undertaking under Section 87B of the Competition and Consumer Act 2010 (Cth) (Undertaking).

This article examines the Undertaking and in turn, the ACCC’s position on clauses that are likely to be prevalent in supply chain contracts.

Unfair contract terms regime

The consumer unfair contract terms regime is set out in the ACL (and in the Australian Securities and Investments Commission Act 2001 (ASIC Act) with respect to contracts for financial products and services) and has been in effect since 1 July 2010.

The regime was extended to cover “standard form”, “small business contracts” entered into, renewed or varied on or after 12 November 2016 (B2B UCT regime) where:

1. The contract is for a supply of goods or services, or a sale or grant of an interest in land;
2. At the time the contract is entered into, at least one party to the contract is a business that employs fewer than 20 persons; and
3. Either of the following applies:
   (a) the upfront price payable under the contract does not exceed $300,000; or
   (b) the contract has a term of more than 12 months and the upfront price payable under the contract does not exceed $1,000,000.

As discussed in our previous article, the Morrison Government has announced its intention to strengthen protections to small businesses from unfair contract terms and the Labor government has expressed similar intentions.

Background

According to the Undertaking, there were 300 truck carriers registered on Hutchison’s Truck Appointment System that were small businesses, being businesses with 20 or fewer full time employees (as stated in the Undertaking, however note that even casual employees are counted in this test if they are employed on a regular and systematic basis).² In order to gain access to Hutchison’s terminals the relevant carrier customers were required to enter into standard form Terminal Carrier Access Terms and Conditions. Some of these were entered into after the date that the B2B UCT regime came into force.

Unfair terms identified by ACCC

Hutchison had contract terms in its standard form agreement with customer carriers (Hutchison Terms and Conditions) that:

1. Allowed Hutchison to unilaterally vary terms in the agreements, including in relation to the fees paid by the carriers (Variation Clause); and
2. Limited Hutchison’s liability for loss or damage suffered by the carriers, while not offering the carriers the same protections (Limitation of Liability Clause).

The ACCC’s specific concerns with the Variation Clause and the Limitation of Liability Clause in the Hutchison Terms and Conditions were described in the Undertaking as follows:

1. “…the Variation Clause enables Hutchison to unilaterally vary the provisions of the 2016 TCA, including the fees payable by Hutchison’s small business customers to access and use Hutchison’s terminals in circumstances where there is no requirement to give notice to small business customers of the variation”;³ and
2. “The ACCC is concerned that the Liability Clause enables Hutchison to restrict its liability to small business customers in circumstances where small business customers’ liability to Hutchison is not similarly limited”.⁴

The ACCC also stated in the Undertaking that the Variation Clause and the Liability Clause were not reasonably necessary to protect Hutchison’s legitimate interests, that these clauses created a significant imbalance between the rights of Hutchison and the rights of its small business customers and would cause detriment if either were to be applied or relied upon.⁵

Significantly, the Variation Clause provided that any variations to the Hutchison Terms and Conditions would be effected by placing a notice on its portal, and that a customer would be deemed to have accepted the revised Terms and Conditions by continuing to use any login or the Truck Appointment System area of the portal after that time. The ACCC’s position on this practice appears to be that a positive action must be taken in notifying customers of revised terms and conditions to constitute effective notice such as giving 30 days’ prior notice of a change, rather than just making the revised terms available on-line.

Key takeaways for businesses

1. The use of unilateral variation clauses in a party’s terms and conditions may need to be considered in light of this decision. As noted above, the ACCC’s position on this practice appears to be that a positive action must be taken in notifying customers of revised terms and conditions, such as given the other party advance written notice, before effecting any changes;
2. Given the risk of one sided limitation of liability or indemnity clauses being deemed unfair under the unfair contract terms regime, businesses should consider whether clauses of this nature are in fact necessary. If the organisation is procuring goods or services then it may not necessarily need a limitation of liability clause if its only obligation is to pay for the goods and or services acquired. This will of course depend on the characteristics of the transaction, for example, an indemnity may be reasonably necessary if an organisation is procuring goods that are subject to recall risk. Similarly, if a party is supplying goods and services, it may be unnecessary for the party to insist on an indemnity from their customer, if the customer’s only obligation under the agreement is to pay for the goods and/or services provided; and
3. If a party has a good reason for requiring a contractual indemnity or for limiting its liability it should ensure that such clauses do not go beyond what is reasonably necessary to protect its legitimate interests and consider making these obligations and rights reciprocal, to the extent this is practicable, so that the contract remains balanced.

This article was written by Teresa Torcasio, Partner, Marian Ngo, Senior Associate and Basimah Memon, Solicitor.

¹Schedule 2 of the Competition and Consumer Act 2010 (Cth).
²Undertaking at 2.4, page 1.
³Undertaking at 2.5, page 1.
⁴Undertaking at 2.6, page 1.
⁵Undertaking at 2.7, page 1.