In 2017, Consumer Affairs Australia and New Zealand provided the Australian Consumer Law Review Final Report to consumer affairs ministers. The report contains a package of reforms. Proposal 5 relates to clarifying the scope of the exemption for the transportation and storage of goods under section 63 of the Australian Consumer Law. An exposure draft of this amendment has been released. If passed, the amendment is likely to expand the scope of liability of transport operators under the Australian Consumer Law.

ACL exemption for transport and storage contracts

The Australian Consumer Law contains various guarantees for services provided to a ‘consumer’, including a guarantee that services will be provided with ‘due care and skill’. 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 purposes of carrying on a business. In that situation, even though the contract for transport or storage services may have been for under $40,000, the consumer guarantees will not apply.

Operation of section 63 – differing interpretations

The intended operation of the exemption was where the recipient of the goods being transported (i.e., the consignee) was operating a business. This is because ‘the buyer should have insurance or other contractual protections’. As a result of the High Court decision in Wallis v Downard-Pickford (North Queensland) Pty Ltd (1994) 179 CLR 388, the exemption may apply if either the consignor or the consignee enters into the transport or storage contract for business purposes. An individual consumer may arguably be precluded from relying on the ACL consumer guarantees against the transport operator where the consignor is operating a business.

The ACL report provides an example where an individual orders goods online and they have no choice of transport operator because the seller makes the delivery arrangements. In such a case, the individual consumer would be able to rely on the ACL consumer guarantees against the transport operator if the seller is a private individual not operating a business. However, if the seller is a business, such as an online retailer, the consumer would not be able to rely on the consumer guarantees against the transport operator.

Proposed amendments

The report proposes that section 63 should be amended so that it applies ‘only where the business is the buyer, rather than the seller or intermediary’. Therefore, the proposed amendments will clarify that the exemption does not apply if the ‘consumer for whose benefit the goods are transported or stored’ (i.e., the consignee) is not carrying on a business in relation to the goods. To put it another way, the exemption will apply ‘where the consumer is a business but not where the consumer is not a business’.

Implications for transport and warehouse operators

Under the proposed changes, if goods are being transported by a transport operator to a consumer who is not carrying on a business, the ACL exemption will not apply. This scenario presents problems for both operators and their insurers. The transport operator who is requested by a consignor to transport goods may not know, or have any way of knowing, whether the consignee 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.

Where to from here?

The legislation is currently in draft form and it is unclear when it will go before Parliament. Treasury is currently undertaking public consultation on the design of the legislation. It is expected that the amending legislation will go before Parliament after the consultation process has concluded.