Australian Competition and Consumer Commission v Mitolo Group Pty Ltd

Australian Competition and Consumer Commission v Mitolo Group Pty Ltd - [2019] FCA 1257 - FCA 2019 case summary — Zoe

[11]

Pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth) (FCA) and s 250 of the Australian Consumer Law (ACL) the following terms, being those set out in Annexure A to these orders, of the contracts listed in Annexure B to these orders, are unfair contract terms within the meaning of s 24 of the ACL and are void by operation of s 23 of the ACL: (a) Price determination and variation clause; (b) Unilateral variation of terms clause; (c) Exclusivity clause; (d) Unilateral determination of wastage clause; (e) Sale of grower's land clause; (f) Non-disparagement clause; and (g) Support clause, (Impugned Clauses).
Pursuant to s 21 of the FCA, in trade or commerce, the First Respondent during the period 25 July 2017 to June 2018 engaged in conduct in contravention of clause 12 of the Horticulture Code (the Code) and s 51ACB of the Competition and Consumer Act 2010 (CCA) by trading with growers pursuant to the terms of the contracts listed in Part 2 of Annexure A to the Concise Statement in these proceedings (Part 2 Contracts) which did not comply with clause 18 of the Code in that they did not specify either: (a) a method or formula to determine the price paid to the grower; or (b) whether the price was to be agreed in writing between the First Respondent and the grower before or upon delivery.
Pursuant to s 21 of the FCA, in trade or commerce, the First Respondent during the period 25 July 2017 to June 2018 engaged in conduct in contravention of clause 32 of the Code and s 51ACB of the CCA by trading with growers pursuant to the terms of the Part 2 Contracts in circumstances where the price paid by the Respondents for the purchase of the growers' horticulture produce was not: (a) an amount agreed in writing between the merchant and the growers either before, or immediately upon, delivery of the produce to the Respondents; or (b) an amount calculated by a method or formula specified in those contracts. THE COURT ORDERS BY CONSENT THAT:
Pursuant to s 76 of the CCA, the First Respondent pay to the Commonwealth of Australia a pecuniary penalty in the sum of $240,000 in respect of its contraventions of clause 12 of the Code referred to in Order 2 above within 30 days of the date of these orders.
Pursuant to s 232 of Schedule 2 to the CCA, the Respondents are restrained for a period of five years from the date of these orders, whether by themselves, their servants, agents or otherwise howsoever, from: (a) applying or relying on, or purporting to apply or rely on any Impugned Clause contained in any of the contracts listed in Annexure B to these orders; and (b) entering into a small business contract if it is a standard form contract and contains an Impugned Clause.
Pursuant to s 80 of the CCA, the First Respondent is restrained for a period of five years from the date of these orders, whether by itself, its servants, agents or otherwise howsoever, from: (a) trading with growers of horticulture produce as a trader pursuant to contracts which do not specify either: (i) a method or formula to determine the price to be paid to the grower; or (ii) that the price is to be agreed in writing between the First Respondent and the grower before or upon delivery; and (b) as a trader paying a price for the purchase of horticulture produce from a grower of horticulture produce that is not an amount: (i) agreed in writing between the First Respondent and the grower either prior to, or immediately upon, delivery of the produce; or (ii) calculated by a method or formula specified in a horticulture produce agreement between the First Respondent and the grower.
Pursuant to s 80 of the CCA and s 232 of the ACL and s 23 of the FCA the Respondents, at their own expense, within 14 days of the date of this order, provide a copy of these orders to each of the growers referred to in Orders 1 and 2 above.
Pursuant to s 86C of the CCA, s 232 and s 246 of the ACL and s 23 of the FCA, the Respondents within 90 days of this order, establish and implement a compliance program in in the terms specified in Annexure C to these orders.
Within 30 days of the date of these orders, the First Respondent pay a contribution to the Applicant's costs of and incidental to this proceeding, fixed in the sum of $50,000. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. Annexure A Part 1 - Original contract terms Price determination and variation clause Mitolo will Purchase the Commercial Ware Potatoes agreed to be purchased from the Grower on Mitolo's standard terms and conditions of trade current at the time of supply. Clause 6(b) There were no standard terms of trade that set or notified the grower of price at the time of contracting, or before the time for supply Unilateral variation of terms clause Mitolo will purchase the Commercial Ware Potatoes agreed to be purchased from the Grower on Mitolo's standard terms and conditions of trade current at the time of supply Clause 6(b) Exclusivity clause Either: Clauses 5(d) and 5(e), or clauses 5(d) and 5(f) The Grower will on an exclusive basis to Mitolo: (d) Supply to Mitolo the volume of Commercial Ware Potatoes set out in the Season Plan. [In the event that the volume of Commercial Ware Potatoes produced by the Grower exceeds the volume set out in the Season Plan, then the Grower may, if Mitolo advises the Grower in writing that Mitolo does not wish to purchase the excess volume, sell the excess volume, so long as it is not sold to the direct competitors of Mitolo.] (e) [save as provided in (d) above,] not supply Commercial Ware Potatoes to anyone other than Mitolo. The Grower may retain any unused Seed Potatoes in a subsequent season with Mitolo's prior written consent and in accordance with clause 9 of this Agreement Or: The Grower will on an exclusive basis to Mitolo: (d) Supply to Mitolo (or as Mitolo directs in writing) the volume of Commercial Ware Potatoes set out in the Season Plan (f) Subject to paragraph (d) above, not supply Commercial Ware Potatoes to anyone other than Mitolo. The Grower may retain any unused Seed Potatoes in a subsequent season with Mitolo's prior written consent and in accordance with clause 9 of this Agreement Unilateral determination of wastage clause The Grower will on an exclusive basis to Mitolo Supply the Commercial Ware Potatoes to Mitolo in accordance with the Specifications for each of the Licensed Varieties and destroy any Commercial Ware Potatoes that fail to meet the Specifications, or at Mitolo's request supply such Commercial Ware Potatoes to Mitolo for sale, but under no circumstances may the Grower supply Commercial Ware Potatoes or any other Propagation Material of the Licensed Varieties to a third party without the prior written consent of Mitolo. Clause 5(f) or 5(g) Sale of Growers' land clause The Grower may not part with ownership, possession or management of the location at which the Licensed Varieties are planted unless the Grower first: Clause 14(b) (iii) include in the agreement for sale, lease or management a requirement that the party enter into a Commercial Ware Potato Grower Agreement with Mitolo. Non-disparagement clause The Grower will on an exclusive basis to Mitolo refrain from doing any act, matter or thing or make any statement or give any impression that directly or indirectly has or is likely to have a negative effect on the reputation of the Licensed Variety and/or or Mitolo's businesses Clause 5(o) or 5(p) Support clause The Grower agrees to support the Owner and/or Mitolo in all proper ways in any action which they may adopt to maintain or protect their intellectual property rights. Clause 12(d)

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Part 2 - Revised contract terms Price determination and variation clause Clause 6.2 Clause 6.2 Mitolo will pay the Grower the fee for the Commercial Ware Potatoes on the Mitolo's standard terms and conditions set out in Schedule 7 which may be added to or varied by Mitolo on 4 weeks' notice. Clause 9 of Schedule 6 Clause 9 of Schedule 6 Mitolo will pay the Grower the agreed fee for the supply of the Commercial Ware Potatoes within 45 days from the date of the Invoice, subject to the satisfactory performance of the Grower's obligations under this Agreement and acceptance of the Commercial Ware Potatoes by Mitolo. The fee payable for the Commercial Ware Potatoes will be the fee notified by Mitolo and includes all costs, taxes and duties (including GST) and expenses incurred by the Grower. The Grower will pay all transportation costs. The fee will not vary except with prior approval of Mitolo. Unilateral variation of terms clause Mitolo will pay the Grower the fee for the Commercial Ware Potatoes on the Mitolo's standard terms and conditions set out in Schedule 7 which may be added to or varied by Mitolo on 4 weeks' notice. Clause 6.2 Exclusivity clause The Grower must not supply Commercial Ware Potatoes to anyone other than Mitolo Clause 4.1(e) Unilateral determination of wastage clause Clause 4.2 Clause 4.2 (a) Mitolo may reject any Commercial Ware Potatoes delivered by the Grower that fail to meet the Specifications. Clause 5 of Schedule 6 (d) Mitolo may either require the Grower to destroy any Commercial Ware Potatoes that fail to meet the Specifications, or alternatively supply such Commercial Ware Potatoes to Mitolo on such terms and conditions as agreed between Mitolo and the Grower. Clause 5 of Schedule 6 Mitolo will not be deemed to have accepted the Commercial Ware Potatoes until it has had a reasonable time to inspect the potatoes. If, on inspection, Mitolo finds that any Commercial Ware Potatoes are unsafe, defective or do not meet Mitolo's specifications, Mitolo may reject those Commercial Ware Potatoes by returning them to the Grower at the Grower's cost. At Mitolo's option and request, the Grower must refund to Mitolo any payments made by Mitolo in respect of any such Commercial Ware Potatoes, or replace free of charge any such Commercial Ware Potatoes. Sale of Growers' land clause The Grower may not part with ownership, possession or management of the location at which the Licensed Varieties are planted unless the Grower first: (iii) include in the agreement for sale, lease or management a requirement that the party enter into a Seed Potato Grower Agreement with Mitolo. Clause 16.1(c) Non-disparagement clause The Grower must refrain from doing any act, matter or thing or make any statement that directly or indirectly has or is likely to have a negative effect on the reputation of the Licensed Variety or Mitolo's business Clause 3(g) Support clause The Grower agrees to support the Owner and/or Mitolo in all proper ways in any action which they may adopt to maintain or protect their intellectual property rights. Clause 8.2(d)

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Annexure C (CCA Compliance Program) The Respondents will establish a Competition and Consumer Law Compliance Program (Compliance Program) that complies with each of the following requirements: Appointments

Within 45 days of the date of the orders to which this document is annexed (Orders) the Respondents will appoint a director or a senior manager of the business to be responsible for the development, implementation and maintenance of the Compliance Program (the Compliance Officer). Compliance Officer Training
Within 90 days of the date of the Orders the Respondents will ensure that the Compliance Officer attends practical training on: 2.1 compliance with the Competition and Consumer (Industry Codes - Horticulture) Regulations 2017 (Horticulture Code); and 2.2 compliance with Part 2-3 of the Australian Consumer Law (ACL) as it relates to small business standard form contracts.
The Respondents will ensure that the training is administered by a suitably qualified compliance professional or legal practitioner with expertise in competition and consumer law. Compliance Policy
The Respondents will, within 45 days of the date of the Orders issue a policy statement outlining their commitment to compliance with the Horticulture Code and Part 2-3 of the ACL as it relates to small business standard form contracts (the Compliance Policy).
The Respondents will ensure that the Compliance Policy: 5.1 is written in plain language; 5.2 contains a statement of commitment to compliance with the Horticulture Code and Part 2-3 of the ACL as it relates to small business standard form contracts; 5.3 contains a requirement for all staff to report any Compliance Program related issues and Horticulture Code or Part 2-3 ACL compliance concerns to the Compliance Officer; 5.4 contains a clear statement that the Respondents will take action internally against any persons who are knowingly or recklessly concerned in a contravention of the Horticulture Code or Part 2-3 of the ACL and will not indemnify them. Staff Training
The Respondents will within 120 days of the date of the Orders cause all employees of the Respondents whose duties are likely to result in them being concerned with conduct that is regulated by the Horticulture Code or Part 2-3 of the ACL as it relates to small business standard form contracts to undertake training administered by the Compliance Officer (once trained) or a qualified compliance professional or legal practitioner with expertise in competition and consumer law on compliance with: 6.1 the Horticulture Code; and 6.2 Part 2-3 of the ACL as it relates to small business standard form contracts. Complaints Handling System
Within 90 days of the date of the Orders the Respondents will develop procedures for recording, storing and responding to competition and consumer law complaints (Complaints Handling System). Reports to Board/Senior Management
The Respondents will ensure that the Compliance Officer reports to the Board and/or senior management at least every 12 months on the continuing effectiveness of the Compliance Program. Provision of Compliance Program documents to the ACCC
The Respondents will maintain a record of and store all documents relating to and constituting the Compliance Program for a period not less than three years.
If requested by the ACCC during the period of three years, the Respondents will, at their own expense, cause to be produced and provided to the ACCC copies of all documents constituting the Compliance Program, including: 10.1 the Compliance Policy; 10.2 an outline of the Complaints Handling System; 10.3 Staff Training materials; 10.4 copies of the reports to the Board and/or senior management referred to in paragraph 8. ACCC Recommendations
The Respondents will implement promptly and with due diligence any recommendations that the ACCC may make that are reasonably necessary to ensure that the Respondents maintain and continue to implement the Compliance Program in accordance with the requirements of the Orders.

[15]

MURPHY J: 1 The first and second respondents, Mitolo Group Pty Ltd (Mitolo) and Maranello Trading Pty Ltd carried on business in the relevant period as growers and suppliers of potatoes to retail and wholesale markets, and they also bought potatoes from other growers to supplement their potato supply in order to meet their customers' demands. Mitolo is Australia's largest fresh potato wholesaler and packer. In this proceeding the applicant, the Australian Competition and Consumer Commission (ACCC), alleged that: (a) certain terms of contracts that the respondents had entered into with 25 small potato growers for the supply of potatoes were unfair terms within the meaning of s 24 of the Australian Consumer Law (ACL) in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (CCA); and (b) Mitolo had, in connection with contracts with 19 small potato growers entered into after 25 July 2017, and the supply of potatoes under those contracts, contravened cll 12 and 32 of the Competition and Consumer (Industry Codes - Horticulture) Regulations 2017 (the Code). 2 The respondents now admit the alleged contraventions on the basis of a Statement of Agreed Facts and Admissions (SOAF). The parties rely on joint submissions and jointly seek orders for: (a) declarations of contravention against both respondents in relation to unfair contract terms; (b) declarations of contravention against Mitolo in relation to breaches of the Code; (c) the imposition of a pecuniary penalty against Mitolo in the sum of $240,000; (d) an injunction for five years to restrain the respondents from applying or relying, or purporting to apply or rely, on the impugned unfair contract terms in any of the contracts listed and from entering into a small business contract if it is a standard form contract and contains an impugned unfair contract term; (e) an injunction for five years to restrain Mitolo from: (i) trading with growers of horticulture produce as a trader pursuant to contracts which do not specify either a method or formula to determine the price to be paid to the grower or that the price is to be agreed in writing before or upon delivery; and (ii) as a trader paying a price for the purchase of horticulture produce from a grower of horticulture produce that is not an amount agreed in writing either prior to or immediately upon delivery of the produce or calculated by method or formula specified in a horticulture produce agreement; (f) the respondents to provide copies of the orders to each of the growers referred to in the orders; (g) the respondents to establish and implement a compliance program in the terms specified; and (h) Mitolo to pay a contribution of $50,000 to the ACCC's costs. 3 For the reasons I explain I am satisfied that it is appropriate to make the declarations and orders the parties seek, except that I am not prepared to order that the list of affected growers be confidential.

[16]

Unfair contract terms 4 Section 23(1) of the ACL relevantly provides that a term of a small business contract is void if the term is unfair and the contract is a standard form contract. 5 Section 23(4) relevantly provides that a contract is a "small business contract" if the contract is: (a) for the supply of goods or services; and (b) at the time of entering into the contract, at least one party to the contract is a business that employs fewer than 20 people; and (c) either the upfront price payable under the contract does not exceed $300,000, or the contract has a duration of more than 12 months and the upfront price payable under the contract does not exceed $1 million. 6 The upfront price payable under a contract is the consideration that is provided, or is to be provided, for the supply, sale or grant under the contract, and is disclosed at or before the time the contract is entered into, but does not include any other consideration that is contingent on the occurrence or non-occurrence of a particular event (s 26(2)). 7 Section 27(1) creates a rebuttable presumption that a contract which is alleged to be a standard form contract is presumed to be a standard form contract unless another party to the proceeding proves otherwise. Section 27(2) provides that in determining whether a contract is a standard form contract a court may take into account such matters that it thinks relevant, but must take into account the following: (a) whether one of the parties has all or most of the bargaining power relating to the transaction; (b) whether the contract was prepared by one party before any discussion relating to the transaction occurred between the parties; (c) whether another party was, in effect, required either to accept or reject the terms of the contract (other than the terms referred to in section 26(1)) in the form in which they were presented; (d) whether another party was given an effective opportunity to negotiate the terms of the contract that were not the terms referred to in section 26(1); (e) whether the terms of the contract (other than the terms referred to in section 26(1)) take into account the specific characteristics of another party or the particular transaction; (f) any other matter prescribed by the regulations. 8 Under s 24(1), a term of a consumer contract or small business contract is unfair if: (a) it would cause a significant imbalance of the parties' rights and obligations arising under the contract; and (b) it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and (c) it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on. Under s 24(2), in assessing whether a term is unfair, the Court must also take into account the contract as a whole and the extent to which the term is transparent. 9 Section 24(4) creates a rebuttable presumption that a term of the contract is presumed not to be reasonably necessary to protect the legitimate interests of the party who would be advantaged by it, unless that party proves otherwise. 10 Section 25 provides a list of examples of the kinds of terms which may be considered unfair. 11 In Australian Competition and Consumer Commission v CLA Trading Pty Ltd [2016] FCA 377 at [54], Gilmour J summarised the authorities on unfair contract terms (in the context of unfair consumer contracts) as follows: (a) the underlying policy of unfair contract terms legislation respects true freedom of contract and seeks to prevent the abuse of standard form consumer contracts which, by definition, will not have been individually negotiated: Jetstar Airways Pty Ltd v Free (2008) 30 VAR 295; [2008] VSC 539 at [112]; (b) the requirement of a "significant imbalance" directs attention to the substantive unfairness of the contract: Director-General of Fair Trading v First National Bank plc [2002] 1 AC 481; [2001] UKHL 52 at [37]; (c) it is useful to assess the impact of an impugned term on the parties' rights and obligations by comparing the effect of the contract with the term and the effect it would have without it: Director-General of Fair Trading v First National Bank plc at [54]; (d) the "significant imbalance" requirement is met if a term is so weighted in favour of the supplier as to tilt the parties' rights and obligations under the contract significantly in its favour - this may be by the granting to the supplier of a beneficial option or discretion or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty: Director-General of Fair Trading v First National Bank plc at [17] per Lord Bingham, applied in Australian Competition and Consumer Commission v ACN 117 372 915 Pty Limited (in liq) (formerly Advanced Medical Institute Pty Limited) [2015] FCA 368 at [950]; (e) significant in this context means "significant in magnitude", or "sufficiently large to be important", "being a meaning not too distant from substantial": Jetstar Airways Pty Ltd v Free at [104]-[105] per Cavanough J; cf Director of Consumer Affairs Victoria v AAPT Limited [2006] VCAT 1493 at [32]-[33]; (f) the legislation proceeds on the assumption that some terms in consumer contracts, especially in standard form consumer contracts, may be inherently unfair, regardless of how comprehensively they might be drawn to the consumer's attention: Jetstar Airways Pty Ltd v Free at [115]; and (g) in considering "the contract as a whole", not each and every term of the contract is equally relevant, or necessarily relevant at all. The main requirement is to consider terms that might reasonably be seen as tending to counterbalance the term in question: Jetstar Airways Pty Ltd v Free at [128]. 12 The Court's assessment of whether a term is unfair within the meaning of s 24 is guided by consideration of that concept as discussed in both the ACL and other contexts. In Australian Competition and Consumer Commission v Chrisco Hampers Australia Ltd [2015] FCA 1204; (2015) 239 FCR 33 at [39] Edelman J noted that s 24 is an example of a legislative technique which creates broad evaluative criteria to be developed incrementally and that it is not possible to state a precise or universal test for its application. In relation to the former Victorian equivalent of the unfair contract terms provisions, in Paciocco v Australia and New Zealand Banking Group Ltd (2015) [2015] FCAFC 50; 236 FCR 199 at [363]-[364], Allsop CJ (with whom Besanko and Middleton JJ agreed) emphasised the evaluative nature of the assessment of unfairness, which is to be carried out with a close attendance to the statutory terms. His Honour observed (at [363]) that "unjustness and unfairness are of a lower moral or ethical standard than unconscionability".

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The Code and related provisions 13 Part IVB of the CCA provides for the creation and enforcement of "industry codes". The purpose of an industry code is to regulate the conduct of participants in an industry toward other participants or consumers in the industry. 14 The Code in its current form came into operation on 1 April 2017 and replaced the Trade Practices (Horticulture Code of Conduct) Regulations 2006. It is an approved mandatory industry code for the purposes of s 51AE of the CCA. Section 51ACB provides that a corporation must not, in trade or commerce, contravene an applicable industry code. 15 Under Part IVB of the CCA, the ACCC has regulatory powers in relation to applicable industry codes which, since 1 January 2015, has included the power to issue infringement notices and to seek civil penalties for a breach of a civil penalty provision of an applicable industry code under s 76(1) of the CCA. 16 The purpose of the Code is to ensure transparency and clarity of transactions between growers and traders, and to provide for a fair and equitable dispute resolution procedure. The Explanatory Statement to the Code provides, amongst other things, that the Code requires growers and traders to deal with each other lawfully and in good faith, and is designed to permit flexibility in relation to the type of arrangements entered into between traders and growers. 17 Pursuant to the Code, 'horticulture produce' is unprocessed fruit, vegetables (including mushrooms and other edible fungi), nuts, herbs or any other unprocessed edible plant but it does not include nursery products, such as trees, shrubs, plants, seeds, bulbs, corns and tubers (other than edible tubers). A horticulture produce agreement is an agreement between a grower and a trader pursuant to Part 3 of the Code, which Part includes certain requirements for horticulture produce agreements and other matters to be specified in such an agreement. 18 Clause 12 of the Code requires that a trader and grower must not trade in horticulture produce (where the trader is trading with the grower as a merchant) unless they have entered into an agreement which complies with Part 3. 19 Clause 18 of the Code provides that a horticulture produce agreement must specify: (a) if the merchant and the grower agree that the price of horticulture produce will be determined by a method or formula - the method or formula to be used to determine the price; and (b) if the merchant and the grower agree that the price of horticulture produce is to be determined before or upon delivery of the produce to the merchant - whether the price will be determined before or upon delivery. 20 Clause 12 is a civil penalty provision for the purposes of s 76(1) of the CCA. A contravention of cl 12 arising from trading in horticulture produce with a grower without a horticulture produce agreement which complies with cl 18 carries a maximum civil penalty of 300 penalty units. 21 Clause 32 of the Code provides that the price that is to be paid by a merchant for the purchase of a grower's horticulture produce is: (a) an amount agreed in writing between the merchant and the grower either before, or immediately upon, delivery of the produce to the merchant; or (b) an amount calculated by a method or formula specified in the horticulture produce agreement.

[19]

The unfair contract terms 26 Each of the contracts was subject to Part 2-3 of Chapter 2 of the ACL in that it was, within the meaning of s 23 of the ACL: (a) a standard form contract within the meaning of s 23(1)(b) of the ACL; and (b) a small business contract because: (i) each of the growers employed less than 20 persons within the meaning of s 23(4) of the ACL; and (ii) the term of the contracts did not exceed 12 months and the upfront price payable for supply under the contracts did not exceed $300,000. 27 Each of the relevant contracts contained the following proforma terms: (a) the price determination and variation clause: the relevant contracts did not specify any predetermined price or basis for calculating the price of potatoes to be supplied. This clause permitted the respondents to: (i) unilaterally set and to vary for any reason, the price that it paid to the grower for the supply of potatoes by the grower to the respondents; (ii) set the price at the time of supply, curtailing the grower's ability to manage risk; (iii) set the price at any level including an amount that may have been less than the grower's cost of production, for any reason; and (iv) set the price without any obligation upon the respondents to negotiate with the growers and without any corresponding benefit to the grower. There was no corresponding right given to the grower to obtain a change in the scope or scale of the supply of potatoes to the respondents, to permit the grower to sell the potatoes to any other potential purchaser or to terminate the contract; (b) the unilateral variation of terms clause: this clause permitted the respondents to unilaterally vary terms described as its "standard terms and conditions". The clause was relevant to the determination of price but not confined in its operation to price-related terms. The clause permitted the respondents to alter terms of the contract without the consent of, or reference to, the grower. There was no corresponding right given to the grower. Growers did not have the right, in response to a variation by the respondents, to terminate the contract or to obtain a change in the scope or scale of the supply of potatoes to the respondents or to enable the grower to sell the potatoes to any other potential purchaser. In the case of the Original Contracts the respondents were not obliged to provide any prior notice of any variation to its standard terms and conditions and in the case of the Revised Contracts it was obliged to provide at least four weeks' notice; (c) the exclusivity clause: this clause prevented growers from selling potatoes to any alternative purchaser, even where the alternative purchaser could have been willing to buy potatoes that the respondents rejected as not meeting its specifications. That was so, notwithstanding that the terms of the contracts did not oblige the respondents to take or pay for all potatoes which met the contract requirements and there was no specified price or method of calculating price provided for in the contracts which conferred any corresponding benefit on the grower; (d) the rejection for not meeting specifications clause: this clause, except in one case where it was struck out, permitted the respondents to: (i) reject potatoes if they failed to meet specifications, without any mechanism for a review or challenge to that determination by the grower; (ii) unilaterally change the specifications at any time; and (iii) request to purchase the rejected potatoes. In the case of the Original Contracts the clause did not address the price of such a purchase. In the case of the Revised Contracts the clause referred to a price to be agreed. Under the terms of the contracts the grower was prevented from selling the rejected potatoes to any other potential purchaser without the consent of the respondents. There was no corresponding obligation on the respondents not to unreasonably withhold consent. Nor was there any obligation on the respondents to determine any failure to meet specifications within a specified or reasonable period of time; (e) the sale of grower's land clause: this clause prevented the grower from selling or otherwise disposing of the land on which the Licensed Varieties of potatoes supplied by the respondents were grown, or management rights over that land, unless the grower required the prospective purchaser to enter into a Commercial Ware Potato Grower Agreement with the respondents. The clause did not place any obligation on the respondents not to unreasonably withhold consent; (f) the non-disparagement clause: this clause may have had the effect of: (i) preventing the grower from raising with or disclosing to third parties legitimate issues or concerns that may have indirectly had a negative effect on the reputation of the respondents' business or Licensed Varieties of seed potatoes, including where that may have been justified. There was no corresponding clause for the benefit of the grower; (ii) limiting the steps that a grower could take in seeking to enforce its contractual rights against the respondents and limiting the evidence that the grower could adduce in any proceeding in which it sought to enforce such rights; and (iii) exacerbating detriment caused by other unfair terms by limiting the growers' ability to challenge the validity of those terms insofar as that may have had a negative effect on the reputation of the Licensed Varieties or the respondents' business; and (g) the support clause: this clause required the grower to provide support to the respondents or the owner of the intellectual property rights in the Licensed Varieties in any action to maintain or protect their intellectual property rights, whether or not that course may have benefitted the grower and whether or not the matter concerned the grower or arose because of the fault of the grower. It allowed the respondents to obtain, at no cost to it, the benefit of the grower's assistance. The grower may have been required to incur costs or be inconvenienced with no benefit to it and with no corresponding right or entitlement to payment or compensation; (collectively the Impugned Terms).

[21]

The ACCC becomes involved 29 Between April 2017 and June 2018: (a) the ACCC requested, and the respondents provided, copies of and information concerning small business standard form contracts that the respondents had entered into with growers on a voluntary basis; (b) having reviewed the contracts the ACCC asserted that a number of the contract terms may be unfair terms in small business standard form contracts within the meaning of Part 2-3 of Chapter 2 of the ACL; (c) the respondents agreed, without admission, to make amendments to the terms of their template contracts; (d) the amendments resolved the ACCC's concerns with respect to some contract terms but not the terms relevant to this proceeding; (e) after reviewing the Revised Contracts the ACCC asserted that the revised contract terms may constitute unfair terms in small business standard form contracts. The ACCC also raised concerns that the Revised Contracts may not have complied with cll 18 and 32 of the Code; (f) on 25 June 2018, after considering the respondents' responses regarding the terms of the Revised Contracts, the ACCC commenced the proceedings herein. 30 It is significant that the relevant contracts were in a form prepared by solicitors engaged by the respondents. The solicitors had been instructed to prepare template contracts that were compliant with the law including, in the case of the Revised Contracts, the requirements of the Code. 31 Upon commencement of the proceedings, at the first case management hearing the respondents agreed to a mediation. The matter resolved that the mediation. The respondents promptly sought further legal advice and having regard to that advice made further changes to their contracts to address each of the matters raised by the ACCC. 32 The respondents also agreed to give the ACCC an enforceable undertaking under s 87B of the CCA that they will not for a period of three years, whether by themselves, their servants or agents, enter into, or offer to enter into any standard form small business contract with a grower of commercial ware potatoes for the supply of commercial ware potatoes on terms which are less favourable overall than those set out in an agreed form of template contract.

[22]

Principles relevant to Orders and declarations by consent 33 The principles relevant to making declarations and orders by consent in a civil penalty proceeding are settled. They were summarised by Gordon J in Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 (Coles Supermarkets) at [70]-[79] as follows: 2.3.1 Orders sought by agreement … 70 The applicable principles are well established. First, there is a well-recognised public interest in the settlement of cases under the Act: NW Frozen Foods Pty Ltd v Australian Competition & Consumer Commission (1996) 71 FCR 285 at 291. Second, the orders proposed by agreement of the parties must be not contrary to the public interest and at least consistent with it: Australian Competition & Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79 at [18]. 71 Third, when deciding whether to make orders that are consented to by the parties, the Court must be satisfied that it has the power to make the orders proposed and that the orders are appropriate: Real Estate Institute at [17] and [20] and Australian Competition & Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 at [1]. Parties cannot by consent confer power to make orders that the Court otherwise lacks the power to make: Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 at 163. 72 Fourth, once the Court is satisfied that orders are within power and appropriate, it should exercise a degree of restraint when scrutinising the proposed settlement terms, particularly where both parties are legally represented and able to understand and evaluate the desirability of the settlement: Australian Competition & Consumer Commission v Woolworths (South Australia) Pty Ltd (Trading as Mac's Liquor) [2003] FCA 530 at [21]; Australian Competition & Consumer Commission v Target Australia Pty Ltd [2001] FCA 1326 at [24]; Real Estate Institute at [20]-[21]; Australian Competition & Consumer Commission v Econovite Pty Ltd [2003] FCA 964 at [11] and [22] and Australian Competition & Consumer Commission v The Construction, Forestry, Mining and Energy Union [2007] FCA 1370 at [4]. 73 Finally, in deciding whether agreed orders conform with legal principle, the Court is entitled to treat the consent of Coles as an admission of all facts necessary or appropriate to the granting of the relief sought against it: Thomson Australian Holdings at 164. 2.3.2 Declarations 74 The Court has a wide discretionary power to make declarations under s 21 of the Federal Court Act: Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437-8; Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581-2 and Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 at 99. 75 Where a declaration is sought with the consent of the parties, the Court's discretion is not supplanted, but nor will the Court refuse to give effect to terms of settlement by refusing to make orders where they are within the Court's jurisdiction and are otherwise unobjectionable: see, for example, Econovite at [11]. 76 However, before making declarations, three requirements should be satisfied: (1) The question must be a real and not a hypothetical or theoretical one; (2) The applicant must have a real interest in raising it; and (3) There must be a proper contradictor: Forster v Jododex at 437-8. 77 In this proceeding, these requirements are satisfied. The proposed declarations relate to conduct that contravenes the ACL and the matters in issue have been identified and particularised by the parties with precision: Australian Competition & Consumer Commission v MSY Technology Pty Ltd (2012) 201 FCR 378 at [35]. The proposed declarations contain sufficient indication of how and why the relevant conduct is a contravention of the ACL: BMW Australia Ltd v Australian Competition & Consumer Commission [2004] FCAFC 167 at [35]. 78 It is in the public interest for the ACCC to seek to have the declarations made and for the declarations to be made (see the factors outlined in ACCC v CFMEU at [6]). There is a significant legal controversy in this case which is being resolved. The ACCC, as a public regulator under the ACL, has a genuine interest in seeking the declaratory relief and Coles is a proper contradictor because it has contravened the ACL and is the subject of the declarations. Coles has an interest in opposing the making of them: MSY Technology at [30]. No less importantly, the declarations sought are appropriate because they serve to record the Court's disapproval of the contravening conduct, vindicate the ACCC's claim that Coles contravened the ACL, assist the ACCC to carry out the duties conferred upon it by the Act (including the ACL) in relation to other similar conduct, inform the public of the harm arising from Coles' contravening conduct and deter other corporations from contravening the ACL. 79 Finally, the facts and admissions in Annexure 1 provide a sufficient factual foundation for the making of the declarations: s 191 of the Evidence Act; Australian Competition & Consumer Commission v Dataline.Net.Au Pty Ltd (2006) 236 ALR 665 at [57]-[59] endorsed by the Full Court in Australian Competition & Consumer Commission v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513 at [92]; Hadgkiss v Aldin (No 2) [2007] FCA 2069 at [21]-[22]; Secretary, Department of Health & Ageing v Pagasa Australia Pty Ltd [2008] FCA 1545 at [77]-[79] and Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543. 34 The public interest in parties resolving civil penalty proceedings brought by regulators such as the ACCC was reaffirmed by the High Court in Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 258 CLR 482 (Fair Work Building Industry Inspectorate) where French CJ, Kiefel, Bell, Nettle and Gordon JJ said at [46]. Their Honours said at [57] that: … in civil proceedings there is generally very considerable scope for the parties to agree on the facts and upon consequences. There is also very considerable scope for them to agree upon the appropriate remedy and for the court to be persuaded that it is an appropriate remedy. At [58] their Honours said: Subject to the court being sufficiently persuaded of the accuracy of the parties' agreement as to facts and consequences, and that the penalty which the parties propose is an appropriate remedy in the circumstances thus revealed, it is consistent with principle, and, for the reasons identified in Allied Mills, highly desirable in practice for the court to accept the parties' proposal and therefore impose the proposed penalty.

[23]

findings as to contravention 35 The Court is entitled to treat the respondents' consent as an admission of all facts necessary or appropriate to the granting of the relief sought against it. 36 The agreed facts and admissions in the SOAF establish each of the elements for findings of contravention of s 23(1) of the ACL. The respondents admit that: (a) the relevant contracts were for the supply of goods by the growers to the respondents; and (b) entered into after the commencement of the relevant provisions; and (c) standard form contracts within the meaning of s 23(1)(b); and (d) small business contracts because: (i) each of the growers employed less than 20 persons within the meaning of s 23(4) of the ACL; and (ii) the term of the contracts did not exceed 12 months and the upfront price payable for supply under the contracts did not exceed $300,000; and (e) the Impugned Clauses in the contracts were unfair by reason of the fact that they: (i) caused a significant imbalance in the parties' rights and obligations in favour of the respondents; (ii) would have caused detriment to the grower if applied or relied upon by the respondents; and (iii) were not reasonably necessary in order to protect the legitimate interests of the respondents. 37 The agreed facts and admissions in the SOAF also establish each of the elements for findings of Mitolo's contravention of the Code. Mitolo admits that: (a) the Revised Contracts are contracts for the sale of horticulture produce by the relevant growers to the first respondent within the meaning of the Code, which were entered into after the commencement of the Code, in the period between 25 July 2017 and June 2018; (b) the Revised Contracts did not, as required by cl 18: (i) specify a method or formula to determine the price paid to the grower as required by the Code; or (ii) specify whether the price would be determined before or upon the delivery of the produce; and (iii) consequently, Mitolo contravened cl 12 by trading with the growers under each of the Revised Contracts without a written agreement which complied with cl 18; (c) the price paid for the potatoes supplied under each of the Revised Contracts was not (as required by cl 32): (i) an amount agreed in writing between Mitolo and the grower either before, or immediately upon, delivery of the produce; or (ii) an amount calculated by a method or formula specified in those contracts.

[24]

Declarations 38 The Court has power to make declarations under s 21 of the Federal Court of Australia Act 1976 (Cth) (FCA). Section 250 of the ACL also empowers the Court to make declarations in circumstances where Part 2-3 of the ACL (which includes the provisions relating to unfair contract terms) applies to a contract. The Court may declare that a term of a small business contract is an unfair term on the application of a party to the contract or the ACCC. 39 Having regard to the principles enunciated in Coles Supermarkets, it is appropriate to make the declarations of contravention the parties seek because: (a) there is a proper basis for the findings. The terms of the declarations accurately reflect and are confined to the admitted contravening conduct. The declarations identify the contract clauses which are admitted to be unfair contract terms, and identify the nature of the contraventions of the Code; (b) the questions in the proceeding are real and not theoretical; (c) as the regulator under the ACL, the ACCC has a real interest in seeking the declarations; (d) the declarations will serve to support the ACCC's regulatory functions in relation to promoting compliance with recently introduced provisions of the Code and the application of the unfair contract regime; and (e) the respondents are contradictors, notwithstanding that they consent to the declarations. 40 It is in the public interest for the declarations and orders to be made as they operate to quell a real legal controversy, record the Court's disapproval of the respondents' conduct, vindicate the ACCC's claim that the respondents have contravened the ACL and the relevant contractual terms are void, assist the ACCC to carry out the duties conferred upon in under the ACL, inform the public of the harm arising from the respondents' contravening conduct and deter other corporations from contravening the ACL. The making of injunctions is also a prerequisite to the granting of injunctions under s 232 of the ACL in respect of unfair contract terms; see s 232(3). 41 Accordingly, I have made declarations in the terms proposed by the parties. 42 However, I declined to order that the list of growers with whom the respondents entered into contracts with unfair terms (set out in Annexure B to the orders) be treated as confidential. Section 37AG of the FCA sets out the available grounds for a suppression or non-publication order. The only possible ground is s 37AG(1)(a) which requires that the order be "necessary to prevent prejudice to the proper administration of justice" (emphasis added). Section 37AE provides that in deciding whether to make a suppression or non-publication order the Court "must take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice." The Court is obliged by s 37AE to treat the public interest in open justice as a primary consideration: Australian Competition and Consumer Commission v Cascade Coal Pty Ltd (No 4) [2018] FCA 1243 at [44]. 43 The use of the word "necessary" in s 37AG(1)(a) denotes a reasonably strict test; necessary is a "strong word": Hogan v Australian Crime Commission [2010] HCA 21; (2010) 240 CLR 651 (Hogan) at [30]. The High Court distinguished the test of "necessity" from less demanding standards such as whether a suppression or non-publication order would be "convenient, reasonable or sensible": Hogan at [31]. To establish that a suppression or non-publication order is necessary to prevent prejudice to the administration of justice requires a party to show more than that it is desirable that an order be made: Australian Competition and Consumer Commission v Valve Corporation (No 5) [2016] FCA 741 at [8]. Embarrassment or reputational damage is not enough to justify a suppression order, as such results are the price of open justice: Bianca Hope Rinehart v Georgina Hope Rinehart [2014] FCA 1241 at [28]. 44 Neither party advanced argument as to how disclosure of the names of the potato growers who had entered into contracts with the respondents with unfair terms would cause prejudice to the administration of justice. I am not persuaded that it would.

[25]

Injunctions 45 The Court has power under s 232 of the ACL to grant injunctive relief in connection with unfair contract terms, and under s 80 of the CCA in connection with contraventions of the Code. The Court may grant an injunction on such terms as it considers appropriate if it is satisfied that a person has engaged, or is proposing to engage, in conduct which constitutes or would constitute, a contravention of, inter alia, Chapter 2 of the ACL. The Court may exercise its power to grant an injunction restraining a person from engaging in conduct or requiring a person to do an act or thing whether or not it appears the person intends to engage again (or continue to engage) in that conduct; whether or not the person has previously engaged in conduct of that kind; or whether or not there is an imminent danger of substantial damage to any other person if the person engages in conduct of that kind. The Court may also grant an injunction by consent, as in the present case. 46 The power of the Court to grant an injunction is broad but it is subject to at least three limitations: (a) the relief is designed to prevent a repetition of the conduct for which relief is sought. This requirement will be met where the person to be enjoined continues to conduct business of the kind which gave rise to the contraventions: Australian Competition and Consumer Commission v Artorios Ink Co Pty Ltd (No 2) [2013] FCA 1292 at [55]; (b) there is a sufficient nexus or relationship between the contravention and the injunction; and (c) the injunction must relate to the case or controversy: Australian Competition and Consumer Commission v Yellow Page Marketing BV (No 2) [2011] FCA 352; (2011) 195 FCR 1 at [72]. 47 I am satisfied that the proposed injunctions are of a kind that are necessary and appropriate. They are designed to prevent repetition of the respondents' contravening conduct, there is a sufficient nexus between the contraventions and the injunctions, and they are necessary and appropriate. 48 The proposed injunctions are drafted in precise terms specifically referable to the impugned and admitted conduct in circumstances where the respondents continue to undertake business of the kind which gave rise to the admitted conduct, and they presumably continue to interact with potato growers. Mitolo is a large company with significant market power and the growers are all small businesses. 49 It is appropriate that the respondents be restrained for five years from applying or relying on, or purporting to apply or rely on, any Impugned Clause contained in any of the contracts listed, and also restrained from entering into a small business contract if it is a standard form contract and contains an Impugned Clause, as provided under Order 5. It is appropriate that Mitolo be restrained for five years from repeating the conduct which gave rise to its admitted contravention of cl 12 of the Code (by virtue of non-compliance with the requirements of cll 18 and 32 of the Code), and as provided under Order 6. 50 Order 7 requires the respondents to provide a copy of the orders to each of the growers, which also operates to prevent a repetition of the admitted conduct because it makes the growers aware of the legal limitations placed on the respondents' conduct.

[31]

The course of conduct principle 58 Separate contraventions arising from separate acts should ordinarily attract separate penalties. However, where there is sufficient interrelationship in the legal and factual elements of the acts or omissions that constitute a contravention, the Court may in its discretion penalise the acts or omissions as a single course of conduct. This provides one way of avoiding double punishment for those parts of the legally distinct contraventions which involve overlap in wrongdoing. 59 The principle was explained in CFMEU v Cahill at [39] and [41] as follows: The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality. … In other words, where two offences arise as a result of the same or related conduct that is not a disentitling factor to the application of the single course of conduct principle but a reason why a Court may have regard to that principle, as one of the applicable sentencing principles, to guide it in the exercise of the sentencing discretion. It is a tool of analysis which a Court is not compelled to utilise. (Citations omitted, emphasis in original.) 60 The question whether certain contraventions should be treated as being truly a single course of conduct is a factual enquiry to be made having regard to all of the circumstances of the case. It is a 'tool of analysis' which can, but need not, be used in any given case: CFMEU v Cahill at [39]-[42]; Australian Competition and Consumer Commission v Cement Australia Pty Ltd [2017] FCAFC 159; (2017) 258 FCR 312 at [421]-[424]. The statutory maximum for one contravention is not converted into a maximum for the entire course of conduct; the maximum continues to apply to each contravention which forms part of the course of conduct. However, the maximum penalty for a single contravention, while not binding, can be used as a guide against which to consider the whole of the (overlapping) wrongdoing in a course of conduct: Australian Energy Regulator v Snowy Hydro Limited (No 2) [2015] FCA 58 at [119].

[43]

Whether the contravener has shown a disposition to cooperate with the ACCC 78 Mitolo has shown a high level of cooperation with the ACCC. It voluntarily produced requested documents, answered questions and sought to resolve the ACCC's concerns. It took steps to modify its practices in response to the ACCC's correspondence and after commencement of the proceedings. Upon commencement of the proceeding the respondents sought, and were able, to reach a settlement an early stage. 79 The respondents also agreed to give the enforceable undertaking under s 87B of the CCA to which I earlier referred. This too shows a disposition to cooperate with the ACCC. The size of the contravening company/ Deterrence 80 The parties did not adduce any specific information about Mitolo's size or financial capacity, except that the joint submissions state that Mitolo is Australia's largest fresh potato wholesaler and packer and that the amount paid to the growers under the Revised Contracts was in excess of $11 million. 81 The absence of specific information in this regard caused me concern because the principal object of the penalties under s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the Act. I considered directing Mitolo to put on such material but, in the finish, my concern was addressed through a concession by Senior Counsel for Mitolo that having regard to its size, $240,000 was not a large sum for it to be required to pay. 82 The parties jointly submit that the Court can be satisfied that a total penalty of $240,000 for 19 courses of conduct will operate as a significant and sufficient deterrent to any future contravening conduct. They contend that the penalty is significant enough to ensure that it cannot simply be absorbed as a mere cost of doing business and sends a strong deterrent message. They also submit that the overall sum and the amount that this represents for each relevant contract will operate as an effective general deterrent to other businesses operating under the Code, particularly having regard to the fact that this will be the first court-ordered pecuniary penalty for a contravention of cl 12 of the Code (which commenced operation on 1 April 2017). 83 I broadly accept this submission. The Code is new; the first penalty for trading in contravention of cl 12 of the Code was imposed in August 2018 through an infringement notice with a penalty of $10,500 dollars, and this penalty is a substantial step up. I accept that, when it is broken down, the penalty is only $12,631 for each course of conduct, which might not be seen as sufficient to deter either Mitolo or others. But that would ignore the overall total and ignore the reality of the circumstances behind the contraventions. In my view, when it is understood that a $240,000 penalty is to be imposed in circumstances where: (a) the Code was only recently introduced; (b) Mitolo engaged experienced solicitors to prepare template contracts which were compliant with the Code and the solicitors failed to do so; (c) Mitolo went on to use the template contracts drafted by solicitors with 19 growers, doing so over one season; (d) the only contravention of the Code was that the contracts did not specify whether the price of the potatoes was to be determined before or upon delivery of the potatoes; (e) Mitolo has not previously been found by any court or tribunal to have contravened any provision of the Code or its predecessors, the ACL or the CCA; (f) Mitolo has shown a high level of cooperation with the ACCC; and (g) Mitolo has entered into an enforceable undertaking with the ACCC that in the future contracts with growers will be on terms which are no less favourable overall than those set out in an agreed form of template contract; the penalty should have a significant deterrent effect on Mitolo and others in the industry. I am persuaded that the agreed amount is an appropriate penalty in the circumstances of the case.

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