21. Unconscionable conduct during negotiations
In its application to forestry contractors, paragraph (b) of the additional guidance notes in section 4 is to be read as including the following example –
EXAMPLE 4.6
There is only one forestry manager engaging harvesting contractors in a particular region of Victoria, and it is not practicable for the contractors to travel to other regions or to work for anyone else. If the forest management company was to use its strong market position to extract an unduly harsh and one-sided deal from harvesting contractors (having regard to all relevant factors including international market conditions) this is likely to constitute unconscionable conduct under section 31 of the Act. Conversely, if the harvesting contractors were to join together and threaten to boycott the hirer unless the hirer agreed to a harsh or one-sided deal in the harvesting contractors’ favour, this is likely to constitute unconscionable conduct by the contractors under section 32 of the Act. The affected party could notify a dispute to the Small Business Commission.
22. Best practice during negotiations
- This section applies in relation to contract negotiations between a hirer and a forestry contractor.
- In addition to the matters set out in section 5, the parties to the proposed contract should, prior to finalising the terms of the contract, jointly view –
- the locations or indicative locations for the performance of the contract; and
- relevant harvesting and haulage management plans.
23. Disclosure of information
In its application to forestry contractors, paragraph (b) of the additional guidance notes in section 4 is to be read as including the following example –
EXAMPLE 7.3
Nathan is negotiating with a forest management company to perform harvesting work and rates to be paid. His hirer is aware that the coupe being considered has some terrain outside that defined in the agreement that could make the harvesting more complex and possibly damage equipment, with extra costs and risks and delays. There is no way for Nathan to do his own checks unless the company facilitates this. The hirer should tell Nathan about the unusual terrain and invite him to inspect the site to allow for further negotiations.
24. Best practice in dispute resolution
In relation to the matters set out in section 8 as best practice in dispute resolution, an example of an unforeseen event beyond the parties’ control in the context of the forestry industry is an environmental protest or blockade.
25. Misleading advertising
For the purposes of section 9, an example of a representation by a hirer that is likely to mislead or deceive a forestry contractor is an inaccurate guarantee or representation regarding the volume of forest products available to the forestry contractor.
26. General principles for setting & reviewing rates
In its application to forestry contractors, paragraph (a) of the guidance notes in section 11 is to be read as including the following example –
EXAMPLE 11.2
Based on his or her experience, a forest manager has calculated benchmark cost rates per hour for a bulldozer and a skidder. These benchmarks are based on the cost to an experienced and efficient harvesting contractor who is using reasonably modern and well-maintained equipment.
The forest manager can use this benchmark, and need not calculate the particular individual costs of a contractor who is using older, less efficient equipment.
In its application to forestry contractors, paragraph (b) of the guidance notes in section 11 is to be read as including the following–
For a haulage contractor, this is a fair amount for the haulage contractor’s labour in driving, loading and unloading the vehicle and associated activities such as administration.
For a harvesting contractor, this is a fair amount for the harvesting contractor’s labour in managing their harvesting business.
27. Review of rates on a regular and systematic basis
Section 31(2)(k) of the Act provides that a matter to be considered in determining whether a hirer’s conduct is unconscionable is whether or not the contract allows for the payment of any increases in fixed and variable overhead costs on a regular and systematic basis. This means that a contract which locks up a forestry contractor’s rates for long periods of time without regard to increases in overheads (particularly fuel prices) will be susceptible to a claim of unconscionable conduct.
GUIDANCE
Set out below are certain practices that, while not being mandatory, constitute a review of rates for increases in overhead costs in respect of forestry contractors on a “regular and systematic basis”, and which are therefore unlikely to constitute unconscionable conduct within the meaning of section 31(2)(k) of the Act.
The component of a forestry contractor’s remuneration that relates to the cost of fuel is determined by direct reference to the actual cost of the fuel required to perform the services and is adjusted –
- at least every six months; or
- if there is an increase in the price of fuel of ten per cent (or a lesser percentage amount) since the last rate adjustment; or
- if there is an increase in the cost of fuel of such an amount that it causes an increase of more than one per cent (or a lesser percentage amount) of the forestry contractor’s operating costs since the last rate adjustment.
In addition –
- the determination of any increases or decreases in the cost of fuel is by reference to a legitimate and accurate fuel price monitoring source; and
- the rates paid to the forestry contractor are reviewed regularly and systematically in respect of operating costs other than fuel.
While this section sets out practices that are unlikely to be unconscionable, other arrangements may be commercially appropriate and legitimate in all the circumstances and comply with the requirements of section 31(2)(k) of the Act.
EXAMPLE 27
Ron is a harvesting contractor and has the benefit of turnover of $350,000 a year. His hirer is in turn subject to a five year contract with a timber processor, and has the benefit of a six-monthly fuel review clause. Ron’s rates are similarly reviewed for fuel increases under his contract every six months, and an additional lump sum is paid as compensation for the average increases over the previous six month period. Given Ron’s level of contract security and turnover, and the commercial arrangements between the hirer and the processor, a six month review is unlikely to be unconscionable conduct within the meaning of section 31(2)(k) the Act.
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