NatRoad CEO Warren Clark says unfair current laws are causing small trucking businesses to suffer financial hardship
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Warren Clark says extended payment terms means road freight businesses are expected to carry a greater amount of debt and risk. Photo courtesy of NatRoad
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Thirty-day minimum payment terms are a must for the road transport industry, which is characterised by tight margins and intense competition, says NatRoad CEO Warren Clark.
NatRoad has been lobbying the Federal Government for the introduction of an industry code that includes minimum 30-day payment terms.
Clark says the only gold among the dross of the abolished Road Safety Remuneratoin Tribunal (RSRT) system was the mandating of 30-day minimum payment terms.
“Having this provision returned to the law would significantly improve the viability of small trucking businesses,” he says.
“Treating trucking businesses like a bank by withholding payment for longer than 30 days has got to stop.”
Clark explains that NatRoad members have shared feedback that lengthy payment terms increase financial and administration costs, reduce the potential for growth and investment, and ultimately add to business uncertainty and failure.
“Because of the importance of a minimum 30-day payment provision for the industry, in December 2018 NatRoad tried a different tack to achieve this minimum standard.
“The Government is currently reviewing the unfair contract terms legislation.
“As part of the review, NatRoad asked the Government to deem any payment term related to a small business standard form contract that requires payment beyond a minimum of 30 days as unfair and therefore not able to be enforced.”
Late payments: ‘More must be done’
Under the current law to be unfair, Clark says a contract must cause a significant imbalance in the parties’ rights and obligations; not be reasonably necessary to protect the legitimate interests of the party advantaged by the term; and cause detriment (e.g. financial) to a small business if it were applied or relied upon.
“NatRoad considers that a contractual term requiring payment beyond 30 days has all of these characteristics and therefore the Government should make provisions in small businesses contracts that require payment beyond that period unfair under the legislation,” Clark continues.
“Under the present law, only a court or tribunal can decide that a term is unfair. If a court or tribunal finds that a term is ‘unfair’, the term will be void – this means it is not binding on the parties.
“The rest of the contract will continue to bind the parties to the extent it is capable of operating without the unfair term.”
Clark says NatRoad has suggested to the Government that there are terms which can be viewed as unfair from the outset, by their very nature.
“That consideration should mean payment terms beyond 30 days are automatically treated as unfair.”
He explains that where there are extended payment terms, road freight businesses are expected to carry a greater amount of debt and risk, with the consequences of a greater likelihood of business failure should the large customer default on the contract or further delay payment beyond the contracted date. “This has got to stop,” Clark says.
“Whether by way of introduction of an industry code or the deeming of extended payment terms as unfair, NatRoad wants the Government to legislate against this obnoxious business practice.”