On 18 October 2018, Parliament passed a suite of changes to the Australian Consumer Law. For transport/warehouse operators, the most significant change means that operators cannot contract out of the guarantee to provide transportation/storage services with ‘due care and skill’ unless the both the consignor and consignee are each operating a business. This change is likely to result in increased claims against transport/warehouse operators under the Australian Consumer Law.
The Australian Consumer Law contains various guarantees that apply to services provided to a ‘consumer’, including guarantees that services will be provided with ‘due care and skill’ and will be ‘fit for purpose’. In general terms, a person is considered to have acquired services as a ‘consumer’ if they paid no more than $40,000, or acquired the services for ‘personal, domestic or household use or consumption’.
Section 63 provides an exemption from these guarantees for services supplied under transport or storage contracts where ‘the person for whom the goods are transported or stored’ entered into the contract for the purpose of carrying on a business. In such a situation, even though the contract for transport or storage services may be for less than $40,000, the consumer guarantees will not apply.
Until the recent reforms, transport and warehouse operators could rely on section 63 to enter into contracts of ‘all care but no responsibility’ in their dealings with business operators.
What has changed?
The effect of the reforms is that the exemption in section 63 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 the goods’.
Therefore, if goods are being transported by a transport operator to a consumer who is not carrying on a business, the exemption in section 63 will not apply. The Australian Consumer Law guarantees will therefore take effect and the transport operator will be liable for any failure to provide the services with due care and skill, regardless of any contractual terms that provide otherwise.
Implications for transport operators
This amendment presents problems for both transport operators and their insurers. A transport operator providing services to a consignor who is operating a business may not know, or have any way of knowing, whether the consignee of those goods is operating a business. It may therefore be impossible for the transport operator to establish the contractual risk it is taking on when agreeing to provide transport services. There is no longer any comfort to be had for the transport operator in knowing that all of its contracts are on a ‘business to business’ basis.
Transport and warehouse operators should discuss the effect of this amendment with their insurance brokers and ensure they have appropriate insurance cover for goods in transit and storage.