Transport operators and storage facilities face increased liability under recent Australian Consumer Law Amendments

Amendments to the Australian Consumer Law (“ACL”), which is a schedule to the Commonwealth Competition and Consumer Act 2010, passed by the Commonwealth Parliament on 18 October 2018 are likely to increase the exposure of domestic land transport and storage facility operators for goods damaged during transportation or storage.
 
The legal background
 
Section 60 of the ACL provides that if a person supplies in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due care and skill.  Generally goods are supplied to a consumer if the total consideration does not exceed $40,000 or the goods are ordinarily supplied for personal, household or domestic use or consumption.
 
Until these amendments were implemented, section 63 of the ACL provided a carve out to the s.60 guarantee so that those guarantees did not apply to “… services supplied under a contract for the transportation or storage of goods for the purpose of a business, trade, profession or occupation carried on by a person for whom the goods are transported or stored …”.  This provision was very similar to the original provision in section 74 of the Commonwealth Trade Practices Act 1974 which implied terms concerning the suitability of services into consumer contracts.  Historically the courts have interpreted sections 74/63 as providing transportation and storage providers with an exception to the operation of the statutory implied term/guarantee provisions where the consignor/shipper/sender of the goods was carrying on a business, trade etc. and was not a consumer.  The purpose for which the consignee acquired the goods was irrelevant to the operation of the s.74/63 exception.
 
Commercial ramifications of the exception to liability
 
As a consequence of this carve out, many transport operators (and especially small operators who were often family owned companies) provided their services on an “all care but no responsibility” basis, that is to say they purported a contract out of any liability to the consignor for damage to the goods even though the contract would be regarded as a consumer contract were it not for the applicability of the sections 74/67.  Those operators insured their liabilities on this basis often in the domestic marine insurance market on the basis that they had very little, if any, legal exposure for goods damaged during transit or storage.  This encouraged consignors and consignees to obtain their own insurance for loss of or damage to their goods.  The commercial argument was that this kept freight rates and transport and storage liability insurance premiums low.
 
The changes
 
All this has now changed with the recent amendments to the ACL which have narrowed the carve-out exception to situations where both the consignor and consignee are operating as businesses.   The s.63 exception will no longer apply where the goods are being transported to or stored for a consumer consignee who is not carrying on business in relation to the goods; even if the consignor is carrying on business in relation to the goods.  In many cases the transport operator (and its liability insurer) will not know whether the consignee is operating a business or is a consumer.  In numerous instances the consignee will be a consumer as opposed to a person operating as a business, trade or profession.
 
 
Commercial ramification of the change
 
The consequence of the amendments to the ACL is that transport operators and their liability insurers will need to pay much closer attention to whether or not the consignee is carrying on a business trade or profession in relation to the goods.  Enquiries will need to be made by the transport or storage operator to the consignor (their contractual counterparty) and appropriate details of the purpose of which the goods are being supplied to the consignee obtained prior to making the transport or storage contract or obtaining insurance cover (or making a declaration under say an annual cover).  While this should not affect those many operations where both consignor and consignee are operating as businesses and the exception provided in section 63 still applies, it is likely that a large number of land transportations and storage operations in respect of goods (in number if not in value) will be impacted by these recent ACL amendments.  Transport and logistics operators and storage/warehouse facility operators will need to pay close attention to whether the intended consignee is operating as a business or consumer as will their insurance brokers and insurers. 
 
A new legal landscape
 
These most recent ACL amendments coming hard on the heels of the 2016 amendments to the ACL introducing the unfair contract term provisions represent significant changes to the legal landscape facing participants in the domestic transport and storage of goods market.

Post by Derek Luxford