Recent changes to the Australian Consumer Law will impact transport and storage services providers, but do consumers really stand to benefit?

The Australian Consumer Law (ACL) provides a statutory guarantee that services must be provided with due care and skill. For many years, section 63(a) of the ACL has exempted providers of transportation services from this guarantee if their services are being supplied under a contact for transportation of goods for the purposes of a business carried on by the person ‘for whom the goods are transported’.

There has been a recent change to section 63(a) of the ACL^I (new law), the main aim of which was to give consumers the full protection of the consumer guarantees where they receive delivery of, transport or store goods for personal use, such as when their personal effects are lost or damaged by transport providers while in transit.

In this article we examine whether the new law achieves this aim, particularly in consideration of the High Court decision in Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd [1986] HCA 72 (Castlemaine).

Recap on the consumer guarantees

The ACL gives “consumers” certain statutory rights against suppliers of goods and services. These are commonly known as statutory consumer guarantees. There are 9 consumer guarantees that apply to goods and 3 consumer guarantees that apply to services.

If a person acquires goods or services as a “consumer” and the supplier breaches a relevant consumer guarantee, the consumer has certain rights under the ACL which can, depending on the circumstances, include repair or replacement of the goods, obtaining a refund, cancelling a service and/or obtaining compensation for damage and loss.

A person acquires goods or services as a “consumer” under the ACL if:

1. The price of the goods or services is $40,000 or less; or
2. The goods or services are of a kind ordinarily acquired for personal, domestic or household use or consumption; or
3. The goods comprise a vehicle or trailer for use principally in the transport of goods on public roads.

Goods will not be acquired by a “consumer” if they are acquired for the purpose of resupply or for the purpose of using them up or transforming them in the process of production or manufacture or in the course of repairing or treating other goods or fixtures on land.

The Exception

Prior to the enactment of the new law, section 63(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 is 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, 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 reference to “the person” was intended to mean the person sending the goods (consignor) or the person receiving the goods (consignee). This question was answered by the High Court in Wallis v Downard-Pickford (North Queensland) 14 Pty Ltd [1994] HCA 17 (Wallis).

In Wallis, the Commissioner of Police entered into a contract with a transport service provider for the carriage of one of their police officer’s (Mr Wallis’) personal goods from one destination to another as part of Mr Wallis’ employment relocation. The Commissioner of Police, being the sender of the goods, was therefore the consignor and Mr Wallis, the receiver of the goods, was therefore the consignee.

Mr Wallis’ goods were damaged in transit as a result of the transport service provider’s failure to use due care and skill. Although Mr Wallis was not a party to the contract between the Commissioner of Police and the transport provider, he relied on s. 55(1) of the Property Law Act (Qld) which enabled him to seek remedies against the transport provider as a beneficiary to the contract.^II

The High Court analysed the exception (being the equivalent provision in the Trade Practices Act which was in force at the time) and considered, for the purpose of determining whether the transport provider could rely on it to void the consumer guarantees, who is “the person for whom the goods are transported or stored”?

Although the court was divided in terms of how they reached their conclusion, they ultimately concluded that “the person” could be either the consignor (the Commissioner of Police) or the consignee (Mr Wallis). In other words, provided that the transport or storage of goods was for the purpose of either the consignor or the consignee’s “business, trade, profession or occupation”, the transport provider could rely on the exception to avoid the application of the consumer guarantees relating to services. In the decision of McHugh J, reference to “the person” in the exception was a reference to the consignor (Commissioner of Police) and not the consignee (Mr Wallis).

The decision in Wallis had the (arguably unintended) effect of preventing a consignee for whom goods are being transported or stored for a personal purpose from relying on the consumer guarantees for services, where the goods were also transported or stored for the purposes of the consignor’s “business, trade, profession or occupation”.

CAANZ Review

The exception and the effect of the decision in Wallis were critiqued by the Consumer Affairs Australian and New Zealand report on the ACL released in March 2017 (CAANZ Report).

The CAANZ Report recommended a number of changes to the ACL, including a proposal that the exception be amended to ‘clarify’ that it cannot be relied on where the consignee is not carrying on or engaged in a business, trade, profession or occupation in relation to the goods being transported or stored.

The CAANZ Report recommended the clarification so that individual consumers “do not have to rely on traders to raise issues with the shipper or transporter” but, rather, can “employ rights and remedies directly against the third party“. In making the recommendation, the CAANZ Report noted:

“Goods damaged in storage or in transit attract costs for shippers and storage companies in providing remedies to consumers. However, the risks (and associated costs) of poorly-performed shipping and transportation are currently borne by either the trader or the consumer. This proposal transfers some of that risk to the providers of the service. There may be costs for shippers and transporters to review their practices to ensure they meet the consumer guarantee of due care and skill. Many shippers and transporters already undertake quality control measures to meet contractual obligations”.

The new law

The recommendation from the CAANZ Report was adopted in the new law. The new law came into effect on 25 October 2018 and amended the exception by adding the following clarification:

“(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.

Note: This subsection was inserted as a response to the decision of the High Court of Australia in Wallis v Downard-Pickford (North Queensland) Pty Ltd [1994] HCA 17.”

The Explanatory Memorandum for the new law explains that the exception should only apply “where both the consignor and consignee are a business”, not where “the consignee is a consumer” and gives the following example:

Nik is an artist who works from home.

Nik purchases a set of paint brushes which he will use to paint art for sale. Nik also purchases a tracksuit to wear when exercising. Nik pays to have both items delivered to his home.

As Nik purchased the paint brushes to use in his occupation as an artist he will not be able to rely on the consumer guarantees if the paintbrushes are damaged in transit and he wishes to pursue a complaint against the courier.

However, as Nik purchased the tracksuit for personal use he will be able to rely on the consumer protections if the tracksuit is damaged in transit and he pursues a complaint against the courier.

Does the new law protect consumers?

Does the new law provide consumers with the protection of the consumer guarantees where they transport or store goods for personal use?

The Explanatory Memorandum would appear to suggest that Nik should be able to make a claim against the courier regarding the tracksuit because the courier has breached the consumer guarantee that services will be provided with due care and skill and Nik is acquiring the tracksuit for a personal purpose. Applying the new law, it does not matter that the seller of the tracksuit sold the tracksuit in the course of its business because the exception cannot be relied on where Nik, as the consignee, is acquiring the tracksuit for personal use.

However, while the decision in Wallis dealt with the transport of goods which were at all times owned by Wallis, the example given in the Explanatory Memorandum relates to a scenario where goods are purchased by a consumer from a vendor. This raises a complicating factor because the vendor appears to be supplying Nik with both goods (a tracksuit) and services (delivery of the tracksuit).

In Castlemaine, a brewery engaged a third party transport provider to deliver the brewery’s beer to a purchaser. The High Court had to consider whether the delivery of beer to the purchaser was a supply of goods (the beer) and separately a supply of services (the delivery of the beer). The High Court concluded that when the brewery delivered the beer it supplied both goods and services, however as the definition of services in the ACL excludes any rights connected with the supply of goods, this rendered the supply as wholly a supply of goods. In Castlemaine, Wilson J stated:

“The Act clearly contemplates that services may accompany the supply of goods in such a way as to constitute a single transaction properly described as a supply of goods. It follows that an act or series of acts, once characterized for the purposes of the Act as a supply of goods, cannot also be a supply of services.”

and

“Here the transactions under scrutiny encompassed no more than the supply of goods. The beer was to be supplied at the premises of the retailer [who was in this case the consignee]. Each supply was a single transaction which could not be broken up into its several elements of sale and delivery without doing violence to the reality…In different circumstances it might well be appropriate to characterize the delivery of the goods as the supply of a service. But not here. No question of supplying a service arises.”

In essence, the High Court concluded in Castlemaine that, despite the transport provider delivering the beer to the purchaser, the purchaser only received a supply of a good, being “delivered beer”.

Returning to Nik’s scenario described in the Explanatory Memorandum and applying the decision in Castlemaine to those facts, Nik would not be able to rely on the consumer guarantees relating to services because Nik has not been supplied with services, only goods, being the delivered tracksuit. Nik would need to demonstrate that Castlemaine does not apply in order for him to be able to make a claim against the courier.

So, who can make a claim against the courier in this scenario? The answer seems to be only the tracksuit seller. The tracksuit seller has received delivery services from the courier. Prior to the enactment of the new law, the courier could have relied on the exception by arguing that it does not owe consumer guarantees relating to services to the seller, because the seller was transporting the tracksuit for the purposes of the seller’s business. However, under the new law, the courier can no longer rely on the exception because the consignee (Nik) was not acquiring the tracksuit for a business purpose.

The take aways for transport and storage service providers

Companies and insurers that previously relied on the High Court’s interpretation of the exception in Wallis may find themselves potentially liable for claims for which they were previously not liable. Notably, providers of transport services to large business customers (such as department stores) may find that they are liable to those businesses under the consumer guarantees for those transport services, where the consignee (the department store’s customer) is acquiring goods for personal use. In this scenario, the transport service provider’s terms and conditions purporting to limit their liability would be of no effect and worse, potentially misleading or deceptive.

Further, as discussed in the CAANZ Report and the Explanatory Memorandum, the new law is intended to give consignees of the goods the right to enforce the consumer guarantees directly against the transport or storage service provider (where they do not acquire goods for a business purpose), even in the absence of a contract between the consignee and the service provider. In the authors’ view, the Castlemaine decision casts doubt on this proposition. However, time will tell when it is tested before a court or tribunal.

This article was written by Teresa Torcasio, Partner, Richard Westmoreland, Partner, Marian Ngo, Senior Associate, and Basimah Memon, Law Graduate.

^I See the Treasury Laws Amendment (Australian Consumer Law Review) Bill 2018, which became law on 25 October 2018.
^II Under the Trade Practices Act the precursor to the consumer guarantees were rights that were implied under a contract and therefore a contract between the parties was required in order for the protections offered by the implied terms to apply. Under the ACL, the consumer guarantees apply in respect of a “supply” even if the supply is not under a direct contract between the supplier and the recipient of the supply.