Looking at the Facts on Changes to the LPO Agreement

Changes made to the LPO Agreement in Nov 2016

There has been quite a bit of hype delivered to Licensees recently, calling for proforma letters to be sent to a variety of people, laying charges against  Australia Post of bullying tactics by making these necessary changes to the LPO Agreement to suit itself, instead of the ACCC and every current, and potential Licensee, looking to hold a license after the 15th November 2015.

You may have also been made aware of a podcast on the issue, which is equally concerning as there is very little substance in the 15 or so minutes.

In an attempt to clarify the issue, and provide substance so that Licensees can at least make informed decisions on the changes, before recklessly signing proforma letters that also have very little substance, we provide the following information about the changes, as well as the marked up agreement so you can see how these changes have been made to the clauses of our agreement.

The most vital point to this debate is that the changes were necessary, absolutely had to happen to comply with the Franchising Code of Conduct, due to the Unfair Contracts legislation which is the new standard for contracts such as our, as from 15 November 2015. Without the necessary changes, no licensees would have been able to sell their LPO, because the LPO Agreement, drafted in 1993, would not comply from the 15 November onwards. It did not comply with the new legislation, so no new LPO Agreements (as was current at the time) could be entered into after that date. So no sales, and no purchases. No happy licensees, new or old. The ACCC worked with Australia Post to suggest the changes needed which were then shared with representative bodies for review. Discussions, and redrafts were undertaken over a few weeks, and finally a consultative meeting was held with all interested parties, and contributors to the drafts, invited to attend, to establish a working agreement that satisfied all parties and could be ready for the deadline of the 15th Nov 2016. Only 1 party failed to attend that meeting and that was any representative member of POOAL or their legal people. Everyone else turned up! 

Many of the changes were basic housekeeping issues such as deletions of redundant clauses that were no longer relevant, or insertions of more detailed information, or wording, that more suits the current needs. For example:

The definition of Postpoint License Agreement was added, and an addition to the wording of the defination of the Postpoint operator as below in italics:

Postpoint Licence Agreement” means an agreement between Australia Post and the Licensee granting the Licensee the right to hold, use and operate a Postpoint Merchandising Unit’ in the Business. “Postpoint Merchandising Unit” means the distinctive postal item merchandising and display unit, identified by number in the relevant Postpoint Licence Agreement.

"Postpoint Operator" means a person licensed by Australia Post to sell a limited range of Products from a Postpoint Merchandising Unit. 

All of Clause 4 - Pre Conditions, was eliminated because under the Franchising Code of Conduct and Australia Post requirements pre conditions are now required to be met long before any agreement is signed, as most of us know. There is no longer any need to have this clause as it is irrelevant to the Agreement.

4. Not used    Pre-Conditions to Operation a) The operation of this Agreement (other than Clauses 1, 2, this Clause 4 and Clauses 29- 32 inclusive) is suspended until and is conditional upon: i) the due execution by the Licensee of this Agreement and, if the Licensee is a corporation, a guarantee in the form set out in Annexure C by a person or persons acceptable to Australia Post; ii) the Licensee providing to Australia Post proof of the insurance required by Clause 18; iii) the Licensee paying to Australia Post the license fee as agreed between the parties; and iv) the Licensee completing the necessary specified training requirements to a standard acceptable to Australia Post. Where the Licensee has already received such training, the Licensee shall be exempt. b) If the conditions set out in this Clause are not satisfied within a reasonable period , Australia Post may terminate this Agreement by written notice to the Licensee without any liability to Australia Post. 

Moving onto Clause 8 - Premises, we see the inclusion of more modern terminology, which is rather more licensee friendly, which is shown below in italics. Also added is a time frame and the need for Australia Post to provide details for any rejected proposals. That would have been welcomed by many Licensees over the last 20 years when their relocation was rejected with no discussion or reason given.

8. Premises

a) The Licensee may upon obtaining the written consent of Australia Post, relocate the Premises to a location acceptable to Australia Post. Australia Post will, within 30 days of the application from the Licensee to relocate the Premises, provide either written acceptance of the proposal or detailed reasons why the proposed relocation is rejected. The Licensee shall be liable for all costs and expenses associated with such relocation, unless otherwise agreed with Australia Post.

b) Where the Licensee's lease, sub-lease or licence to occupy a Premises is terminated other than in consequence of a breach of such lease, sub-lease or licence by the Licensee, or by a failure by the Licensee to exercise an available option for renewal of such lease, sub-lease or licence the provisions of Clause 8a) shall apply.

c) Any decision by Australia Post to relocate the Licensed Post Office shall be made after consultation and Agreement with the Licensee. Australia Post shall pay for all reasonable removal costs and expenses associated with such relocation of the Licensed Post Office including any in-conjunction business. 

d) Where Australia Post is the registered proprietor or lessee of the land where the Premises are located, Australia Post shall lease, sub-lease or licence the Premises to the Licensee on such terms and conditions as may be agreed between the parties.

e) Where Australia Post is the lessee of the land where the Premises are located, Australia Post's obligation to sublease or license the Premises is conditional upon the head-lessor (and any other persons having the right to do so) consenting to such sub-lease or licence. If this condition is not satisfied within one (1) month from the date of this Agreement, Australia Post may, (deleted-- at its discretion without liability to the Licensee) after consultation and agreement with the Licensee, determine an alternative site for the Premises.  Australia Post shall pay for all reasonable removal costs and expenses associated with such relocation of the Licensed Post Office including any in-conjunction business.

f) Any other business conducted from the Premises must not be detrimental to the operation of the Licensed Post Office or the Image and must not adversely affect the goodwill or reputation of Australia Post. 

Clause 9 - Fees and Commissions, and Clause 34 seem to be causing grief out in the field for POOAL, so it would be beneficial for Licensees to see the marked up version so that you can judge for yourselves how these changes sit in our agreement.

FINAL MARKED UP LPO Agreement.pdf

LPOG has no issue with the wording changes to Clause 34 - especially the removal of the Without Prejudice, bit, because we retain a most eminent Franchise Legal Expert, and his opinion is our opinion. In his opinion, the commercial world of Franchising is now covered very well by the Good Faith provisions, which is far more powerful as a argument than any written disclaimer that Without Prejudice might provide. In his opinion the amended wording has added clarity and simplicity to the Clause, which makes it easier to understand. Less legal gobbledygook! 

Comments

Clause 9 shows that the obligation to review fees annually has been removed and replaced with the phrase that AP may review once a year. My understanding reading this is that AP is no longer committed to an annual review of fees. This suggests that we are a little less protected than under the old wording. CAn you clarify.

WLK