Craig Kelly (Hughes, Liberal Party) Share this | Hansard source

I am pleased to speak on the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015. This bill amends the consumer unfair contract terms protection, currently in the Competition and Consumer Act and in the Australian Securities and Investment Commission Act to cover small business below a certain threshold as well as consumers.

I understand that the opposition is supporting this bill, but I have a bit of a long memory. I can remember that, when the Howard government was in power, the then Labor opposition went on about how important it was to have an unfair contract provision in the then Trade Practices Act and to extend it to small business. In fact, they were elected back in 2007 with the explicit promise that they would extend unfair contract terms and provisions to small business. We know what happened: after they broke so many promises, this is one that was perhaps forgotten—when they came to power they forgot all about that promise they made to small business. They excluded small business when they implemented those unfair contract provisions for consumers. Despite the promises before the election, small business did not get a look in. Under the rotisserie of five separate small business ministers in the previous Labor government, we saw 519,000 lost in small business—enough to fill the MCG five times over and still have change. The coalition is getting on with the job and extending those unfair contract provisions to small business.

There is an argument that there should be complete freedom of contract and that government has no place to interfere to amend contracts after they have been written, but that overlooks the fact that we already have many provisions, both in statutory and common law, that address contract terms. For many years we have had provisions in the old Trade Practices Act and now in the Competition and Consumer Act against misleading or deceptive conduct. Our courts can strike that out any contract or any term of a contract that has been entered into or has arisen through deceptive conduct. We also have the unconscionable conduct provisions in the Trade Practices Act and now the Competition and Consumer Act, where courts can strike out provisions that have been written into a contract through unconscionable conduct. In New South Wales there is the Contracts Review Act that enables courts to strike out unfair contract terms. There is also the old common law remedy of a liquidated damages provision which is inserted into a contract as a penalty clause. If those liquidated damages are not a genuine pre-estimate of a loss but rather are for revenue raising or are a threat or a deterrent, those provisions can also be struck out. That common law provision, unfortunately, in recent years has been undermined by several court decisions, where several smart lawyers have been able to come up with a concept that is not actually a breach of contract or a liquidated damage provision—but it clearly is and anyone in business understands that it is—and they have been able to convince several judges that it is not a penalty clause but merely a fee for service. Thankfully, the High Court has taken some action on this to clarify what is a penalty and what is genuine liquidated damages.

Recently the High Court determined that a penalty provision can be triggered even if it is not a breach of contract. That is a very important decision by the High Court that overrules decisions of the lower courts, where large businesses have been gouging their smaller customers. This provision will now hopefully prevent that. However, the High Court still did not clarify the provision where a penalty clause gives rise to an additional obligation. As an example of this, there was one case involving film distribution where the exhibitor was only allowed to show the film once. If he showed the film again, he had to pay a sum equivalent to four times the original hiring fee. The court did not characterise this as a penalty but as an option which the exhibitor could exercise and pay for because the stipulation gave rise to an additional obligation. This was deemed not to be a penalty clause, more a fee-for-service. But it is very important that there be a distinction between something a business actively does and something that happens beyond their control and they do through failure or force. That has not been recognised by the courts.

There are still some question marks at common law about what is a penalty clause and what is a genuine liquidated damages clause. Unfortunately, this has allowed some large businesses in our economy to simply gouge and rip off small business. But, by the provisions in this bill, that will occur no more. To those companies—they know who I am speaking about—who for decades have ripped off small business with penalty clauses by charging them upwards of 20 times above what the true fee should have been, when this bill goes through the Senate and when it achieves royal assent and the six-months period before it applies expires, they will no longer be allowed to gouge small business like they have for years. My warning to them is this: if they do not take the provisions in this bill seriously and amend their practices, they should be aware of a major class action against them.

There is one provision in this bill which puts the threshold where it applies. Firstly, the business can only have fewer than 20 persons by headcount, and the consideration that the contract has disclosed must not exceed $100,000, or $250,000 if the contract is more than one year in duration. These are debatable provisions. There is no limit where there is misleading or deceptive conduct. There is no limit on the number of employees or the amount of the contract where there is unconscionable conduct. There are no limits in the common law penalty provisions, but we put limits in this legislation. We need to see how that works, and if there are cases where those limits are shown to be inadequate we should not hesitate to come back into this chamber and amend them and lift them up.

It is all very well to have these provisions to give small business opportunities, but we need to make sure that small business has access to the law. Therefore I implore the ACCC, with the extra resources we have given them, to run test cases in this area. Currently there are many large businesses that simply laugh at their small-business customers and simply say that it does not matter what the law says, it does not matter what the facts are, they can bleed them dry with legal costs. That does not happen if the ACCC steps in. Six months after this bill receives royal assent and it becomes effective, I want to see the ACCC out there on the playing field taking action against those companies that are imposing these unfair contract terms on small business. We need to make sure that we have in this country an environment that encourages people to get out and have a go in small business. It is small business in this country that will drive our future jobs growth. It is small business, as it always has been, that creates innovation. It has done that throughout history. If we allow an economic aura to develop where small business is not given the opportunity to succeed, we will be less prosperous as a nation. The provisions in this bill are some of the many steps that this government is taking to give small business in this country a better chance and I commend it to the House.

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