Welcome to the second article in the Offloading the ACL series.

In our first article, we looked at how the consumer guarantees apply to trailer supply arrangements. We now shift gears to transport services, revisiting the changes to s63 of the ACL and exploring what they mean for providers, business customers and consignees (receivers of transported goods).

In December 2018, we published an article on the changes to the previous s63(a) of the Australian Consumer Law (ACL).¹ As noted in our previous article, these changes were intended to ensure that consumers receive the full protection of the ACL’s consumer guarantees regime where goods are delivered, transported or stored for personal use (for example, where personal effects are lost or damaged by a transport provider while in transit).

Our article highlighted, however, one of the potentially unintended consequences of the changes, which was that they may actually do more to protect business customers (such as retailers) than they do to protect the non-business receivers of those goods.

In this article, we revisit those changes and consider the broader implications for transport providers.

A recap on reforms to s63 of the ACL

Before the enactment of the new s63 of the ACL, s63(a) of the ACL stated that the consumer guarantees relating to services do not apply to:

“services that are, or are to be, supplied under a contract for or in relation to the transportation or storage of goods for the purposes of a business, trade, profession or occupation carried on or engaged in by the person for whom the goods are transported or stored” (the Exception).

The rationale for the Exception was that parties transporting or storing goods for a business purpose are likely to have other ways of protecting themselves in the transaction (such as insurance arrangements or an agreed liability regime with the service provider) and therefore should not need to rely on the consumer guarantees relating to services.

However, it was thought that the wording of the Exception was ambiguous, particularly the words “by the person for whom the goods are transported or stored“. It was unclear whether the word “person” was a reference to the consignee or the consignor. To address this, s63 was amended on 25 October 2018 by renumbering s 63(a) as s 63(1)(a) and adding the following clarification:²

“(2) To avoid doubt, subsection (1)(a) does not apply if the consignee of the goods is not carrying on or engaged in a business, trade, profession or occupation in relation to those goods.”

The Explanatory Memorandum to the Treasury Laws Amendment (Australian Consumer Law Review) Act 2018 (Cth) explained that the transport and storage exemption from the consumer guarantees regime was intended to apply only in a business to business context, and not where the recipient of the services (the consignee) is a consumer who was acquiring the transported goods for non-business use. For the purposes of this article, we will refer to such consignees as a “non-business consignee”.

Let’s consider an example to illustrate the impact, and the questions raised by, the 2018 changes to the ACL.

The $12 delivery that cost a fortune

Sam runs an eBay store selling delicate, Italian-made home décor. He sells a handcrafted Italian glass vase to Lucy for $2,000. Lucy loves all things Italian and couldn’t wait to place the vase on her mantlepiece. The vase cost Sam a measly $15 giving him an expected profit of $1,985.

Sam books Thrifty Transport (TT), a low budget courier company that exclusively services online retailers. TT charges Sam $12 to deliver the vase. During unloading, the driver drops the box and the vase shatters. When Lucy opens the box, she is heartbroken to see the shards. She contacts Sam and Sam immediately refunds her the full amount.

Sam then demands $1,997 from TT being $1,985 in lost profit and the $12 wasted delivery fee.

TT replies:

“You paid us $12, and you expect us to compensate you nearly two grand? Our terms cap liability at $100 and exclude loss of profits. You should have taken out insurance. It’s not our fault your vase is so delicate.” Sam argues the cap is unlawful because Lucy, the consignee, acquired the vase for a non-business use, so the consumer guarantees under the ACL apply to his contract with TT. TT insists the clause stands and points to a limitation that purports to confine its liability for consumer guarantee breaches to the cost of resupplying the services under s64A of the ACL.

Can Sam rely on the consumer guarantees?

The 2018 change means that TT can’t rely on the Exception in s63(1)(a) and Sam can rely on the consumer guarantees that the delivery service provided by TT must be carried out with due skill and care. This is because Lucy is a consignee who is not carrying on a business in relation to the goods, so the consumer guarantees apply to Sam’s contract with TT.

What about TT’s limitation clauses?

If the services provided by TT are of a kind ordinarily acquired for personal, domestic or household use or consumption (PDH), then a term that purports to limit TT’s liability to resupplying the services (or paying the cost of resupply) is not available under s 64A and will not be effective to restrict the consumer guarantees remedies. By contrast, where the services are not of a kind ordinarily acquired for PDH purposes, s64A permits a term limiting TT’s liability for a breach of consumer guarantees relating to services to the resupply (or the cost of the resupply) of the relevant services, provided the clause meets the statutory requirements. The assessment looks to the ordinary nature of the service, not merely the particular use in Sam’s transaction. One view is that last mile delivery to household recipients is a consumer facing service and therefore would support a PDH classification and preclude reliance on s64A. The competing view is that these services are a low cost logistics solution acquired by sellers to fulfil orders and therefore not of a PDH kind, making s64A more arguable. The position is therefore not clear cut and may depend on the particular features of the service offering and the market in which it operates.

Does Lucy also have consumer law rights against TT?

The CAANZ Report, which informed the reforms to the ACL implemented in 2018, recommended changes to ensure that individual consumers “do not have to rely on traders to raise issues with the shipper or transporter” but can instead “exercise rights and remedies directly against the third party” (ie the transport provider).³

Despite the stated intention of the 2018 amendments to strengthen consumers’ rights against transport providers, the changes arguably confer little additional protection on consumers like Lucy whose goods are lost or damaged in transit, except in limited circumstances. This is due to the earlier High Court decision in Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd [1986] HCA 72 (Castlemaine), which confirmed that where goods are purchased for delivery, the customer does not separately acquire delivery services. Rather, the customer acquires delivered goods from the seller. In this example, Lucy has been made whole by Sam and is therefore not asserting any claim against TT; however, had Lucy sought to pursue TT directly, TT could argue (relying on Castlemaine) that it did not supply services to Lucy for the purposes of the ACL.

Takeaways

The amended s63 of the ACL significantly narrows the circumstances in which transport and storage providers can avoid the consumer guarantees regime. Where goods are delivered to non business consignees, transport providers may be unable to rely on contractual exclusions or liability caps for consumer guarantee breaches, regardless of their terms. A limited exception may exist where the delivery services are properly characterised as non PDH, in which case a compliant s64A limitation may be available.

In light of this, transport providers should step back and consider at a strategic level how their business model, customer mix, and service offerings expose them to consumer guarantee risk. This may include reassessing the types of consignments they accept, the segments they service, and how operational practices and pricing structures manage the realities of this expanded liability. Where appropriate, providers should also evaluate whether reliance on s64A of the ACL is supportable for particular offerings and ensure that any limitation clauses align with that characterisation.

How can we help?

We have a dedicated contracting and consumer law team that can assist you with contract preparation and review and can provide you with advice on your rights and obligations under the ACL, particularly in the case of transport and logistics contracts. Please contact us if you would like more information about the services we provide.

This article was written by Teresa Torcasio, Partner.

¹ Competition and Consumer Act 2010 (Cth), Schedule 2 (‘Australian Consumer Law‘ or ‘ACL‘)
² See the Treasury Laws Amendment (Australian Consumer Law Review) Act 2018 (Cth).
³ final-report-australian-consumer-law-review-2017.docx