Review of the Carriers and Innkeepers Act 1958

3.6 In short, the implied warranties in the TPA apply where the carrier is a corporation and the customer is a consumer within the meaning of the TPA. A consumer is a person who acquires services for less than $40,000 or, if more than $40,000, where the services are for personal or domestic purposes, as defined by the TPA.[70]

GOODS ACT 1958 (Vic.)

3.7 Section 91 of the GA implies two conditions in a sale of services. The first is an implied condition that the services will be rendered with due care and skill. The other is an implied condition, in the case of a sale of services by a person who sells services in the course of a business, that the services will be fit for the purpose for which services of that kind are commonly bought, having regard to the price, the terms of sale and other relevant factors. Section 91 GA, with some minor differences, mirrors section 74 of the TPA.

3.8 The definition of "services" in the GA is more limited than that in the TPA, and means services by way of (amongst other things):

(c) the transportation of goods otherwise than for the purposes of a business, trade, profession or occupation carried on or engaged in by the person for whom the goods are transported.[71]

As with the TPA, therefore, the warranties in the GA do not apply to the transportation of goods for commercial purposes.

3.9 The implied conditions in the GA apply only where the buyer acquires services from a person for less than $15,000 or, if more than $15,000, where the services are for personal or domestic purposes.[72] This is similar to the position under the TPA, except that the threshold (in dollar terms) is lower under the GA. Again, the application of the Act is thereby restricted to people who may be regarded as consumers. As indicated above, these provisions of the TPA and GA are designed to protect individual consumers, rather than business interests. Contracts entered into for a commercial purpose are therefore governed by conditions and terms negotiated between the parties.

3.10 The existence of these fair trading provisions may complement the obligations of carriers imposed by State legislation. The real problem arises when there is a suggestion that the fair trading provisions conflict with the provisions of State legislation limiting the liability of carriers.

HIGH COURT DECISION IN WALLIS V DOWNARD-PICKFORD

Overview

3.11 In Wallis v Downard-Pickford (North Queensland) Pty Ltd[73] the High Court considered the impact of sections 68 and 74 of the TPA on the Queensland carriers legislation. The Court held that section 6(1) of the Carriage of Goods by Land (Carriers Liability) Act 1967 (Qld) ("Queensland Act"), which limited the liability of the carrier for damage to goods entrusted under a contract of carriage, was inconsistent with the TPA and was therefore invalid by reason of s. 109 of the Constitution.[74]

Facts

3.12 Wallis was a member of the Queensland Police Force, and was transferred to another town in the course of his employment. The Commissioner of Police entered into a contract with Downard-Pickford (North Queensland) Pty Ltd ("Downard-Pickford") for the carriage of Wallis’ goods to the town where Wallis was to be stationed.[75] Wallis’ goods were damaged in transit as a result of the company’s failure to use due care and skill. The damage was quantified at $1,663.47.

3.13 Downard-Pickford argued that its liability was limited to $200 as provided in the Queensland Act, as no notice of value had been delivered and accepted by it as required to increase liability. The Supreme Court of Queensland was asked to determine whether Wallis could rely on sections 68 and 74 of the TPA to avoid the limitation of liability in the Queensland Act. The decision of Cooper J, that there was a conflict between the Queensland Act and the TPA, was overturned on appeal to the Queensland Court of Appeal. The matter then came before the High Court of Australia.

Queensland Act

3.14 Section 6(1) of the Queensland Act purported to limit the liability of a carrier in respect of loss of or injury to goods entrusted to it under a contract of carriage to the amount of $20 in the case of an individual item or $200 per consignment, unless:

at or before the time such goods are delivered to the carrier, the consignor has given to him a statement in writing declaring the nature and value of such goods and has received from the carrier his acceptance of the consignment[76]

3.15 Section 9(1) of that Act deemed the provisions of section 6(1) to be incorporated in every contract of carriage. Section 9(2) purported to invalidate any contract that sought to exclude, modify, alter or avoid any provision of the Queensland Act. Section 5 of the Queensland Act further provided that the liability of a carrier would be determined under the Act, and not otherwise.

Relevant provisions of Trade Practices Act

3.16 As outlined above, section 74(1) of the TPA implies into contracts for the supply of services a warranty that the services will be provided with due care and skill. Section 68(1) of the TPA renders void any term of a contract that purports to exclude, restrict or modify the application of any of the provisions of Part V Division 2. Both sections 68 and 74 appear in that Division of the TPA.

Judgment

3.17 Justices Toohey and Gaudron delivered the joint leading judgment on behalf of the High Court. Their Honours summarised the submission made on behalf of Wallis (the appellant):

The essence of the submission was that the statutory creation of a contractual obligation is inherently accompanied by a full contractual remedy. Section 74, it was submitted, implies into relevant contracts a term which contains the primary obligation to take due care and skill and a secondary obligation to provide compensation for breach.

In support of this submission, the appellant pointed to s. 68(1)(c) which renders void any term of a contract that purports to modify a warranty imposed by, among other provisions, s. 74. This provision was said to demonstrate the Trade Practices Act’s concern with liability as well as the creation of rights.[77]

3.18 On this point, their Honours concluded:

It follows that the warranty created by s. 74 carries with it full contractual liability for breach. Section 6(1) of the Queensland Act purports to limit that liability. The consequence is that there is a conflict between the two statutes, a conflict which amounts to a direct inconsistency in the sense that the Queensland Act detracts from the full operation of a right granted by the Trade Practices Act. The limitation is therefore, to that extent, invalid by reason of s. 109 of the Constitution.

3.19 The effect of the TPA on sections 5 and 9 of the Queensland Act was also considered. As section 9 incorporated 6(1) into each relevant contract so as to constitute a term of that contract within the meaning of "any term of the contract" in section 68 TPA, the limit of liability therefore attached to each contract of carriage. Their Honours outlined what followed from this:

Because s. 6 is a term of relevant contracts of carriage, that term is rendered void in each case by the operation of s. 68(1)(c). Further, s. 9 itself is impugned in that it purports to imply into contracts exactly those terms that s. 68 forbids. It can therefore be seen as inconsistent with s. 68 for the purposes of s. 109 of the Constitution. It is also the case that s. 5 of the Queensland Act, which provides that the liability of a carrier is on "the bases prescribed by this Act and not otherwise", is invalid under s. 109 of the Constitution to the extent that it purports to exclude the operation of ss. 68 and 74 of the Trade Practices Act.

Effect of decision on Victorian legislation

3.20 At first sight, the decision of the High Court suggests that any legislation placing caps on the liability of carriers (or, by analogy, innkeepers) will be void as being inconsistent with the TPA. The Office of the Parliamentary Counsel of Victoria ("OPC") submitted to the Committee that:

In view of the decision in Wallis, it appears that ss. 3-5 of the C&I Act conflict with the provisions in section 74 of the TPA and may, therefore, be invalid to the extent that those sections purport to limit the liability of carriers in respect of goods listed in s. 3.[78]

3.21 The OPC also identified a similar situation of conflict between the Victorian carriers legislation and the GA:

[Sections] 3-5 of the C&I Act and the provisions in Part IV of the Goods Act cannot stand together …. A term in a contract of sale of services to which the Goods Act applies and which limits or purports to limit the liability of the carrier pursuant to ss. 3-5 of the C&I Act would be void under s. 95 or s. 97 of the Goods Act.[79]

3.22 The Law Institute of Victoria ("LIV") took a similar view of the effect of Wallis on the Victorian Act:

The Law Institute considers that the High Court decision [in Wallis] is likely to have a direct effect on section 3 of the [Act]…. A court would be likely to find that section 3 is inconsistent with section 74(1) of the TPA where the contract for the carriage of goods was not of a kind referred to in section 74(3)(a) of the TPA. To that extent section 3 of the [Act] would likely be held invalid by section 109 of the Commonwealth Constitution. The High Court decision has the effect that the States and Territories are unable to place effective statutory caps on liability arising from breach of section 74 of the TPA.[80]

3.23 There is, however, an argument that there was no inconsistency between the Queensland Act and section 74 of the TPA. Wallis was brought before the Supreme Court of Queensland by way of originating summons, which was asked to determine as a question of law whether the plaintiff could rely on sections 68 and 74 of the TPA to avoid the limitation of liability contained in section 6(1) of the Queensland Act. The leading judgment by Toohey and Gaudron JJ noted:

Because the proceedings took this form it is not possible to say whether the appellant [the plaintiff in the original action] intended to sue the respondent in negligence, for breach of an implied term in the contract of carriage, for breach of the warranty implied by the [TPA], or to rely upon all these causes of action. The reason for the preliminary proceedings no doubt lies in s. 5 of the Queensland Act which limits the liability of a carrier to "the bases prescribed by this Act and not otherwise".[81]

3.24 Despite this comment by the judges, it is not entirely clear why the plaintiff first brought an action based on inconsistency with the TPA. Even with the existence of the provision in section 5 of the Queensland Act mentioned above, there appears to have been another way in which the plaintiff could have proceeded.

3.25 Toohey and Gaudron JJ stated that the appellant’s goods had been damaged as a result of the respondent’s "failure to use due care and skill" (the term used in section 74 of the TPA). This appears to be merely another way of indicating that the respondent had been negligent.

3.26 The second paragraph of section 5 of the Queensland Act provides:

A carrier to whom goods have been so entrusted shall be liable for loss of or injury to such goods occasioned by the unlawful act or the negligence of the carrier or any of his agents. [Emphasis added].

3.27 This part of section 5 suggests that, despite the limitation of liability in section 6 of the Queensland Act, the carrier remains liable for damage to or loss of goods caused by his or her negligent acts. If this is so, it is difficult to understand why the case came before the Court, as the plaintiff would have been entitled to compensation despite section 6 of the Queensland Act. And if the Queensland Act did not purport to limit liability for negligent acts, it is difficult to see how it was directly inconsistent with section 74 of the TPA.

3.28 Alternatively, the second paragraph of section 5 may itself have been subject to the limitation of liability in section 6. In this case, section 6 of the Act would indeed limit liability for a corporation’s negligent acts, and would be directly inconsistent with sections 68 and 74 of the TPA. The first issue, therefore, was whether section 5 of the Queensland Act was subject to section 6 or vice versa.

3.29 The Queensland Act may be contrasted with the Victorian legislation. Section 10 of the Victorian Act makes it clear that the limit on liability imposed by section 3 of the Victorian Act does not apply in the cases referred to in section 10. The application of section 10 appears to have two distinct results:

(a) it makes a carrier fully liable (that is, the liability is not subject to the limit in section 3) for his or her criminal acts, and those of his or her servants; and

(b) it makes the employees of a carrier fully liable for their "personal neglect or misconduct".

3.30 The provision does not, therefore, impose full liability directly on the carrier for his or her own negligent acts, or for the negligent acts of its employees. However, a carrier may be fully liable indirectly for the negligence of its employees. If a carrier’s employee was found liable under section 10 for his or her "personal neglect", the carrier could perhaps then be found vicariously liable for these acts, in which case the end result may be that the carrier is found liable in negligence.

3.31 However, the better view may be that section 10 implicitly negates the possibility of carriers being held fully liable in negligence, for their own acts and those of their servants. That is, the limit of liability in section 3 will apply in these situations. In which case, section 3 of the Victorian Act would almost certainly be directly inconsistent with section 74 of the TPA. The same analysis applies in relation to inconsistency between the Carriers and Innkeepers Act 1958 and the Goods Act 1958.

3.32 Given the doubt surrounding the matter[82], the Committee sought the advice of counsel. In relation to the issue of the Queensland Act, Peter Hanks, barrister-at-law, advised the Committee that while section 5 rendered a carrier liable for failure to take reasonable care of goods entrusted to the carrier, the extent of that liability was limited by section 6(1) of the Queensland Act. In other words, the limitation of liability in section 6 prevailed over the liability for negligent acts in section 5.[83]

3.33 In relation to any inconsistency between the Victorian Act and the TPA, counsel advised that there is:

a direct inconsistency [between the Victorian Act and the TPA] in the sense that the Victorian Act detracts from the full operation of a right granted by the [TPA]. To the extent that s. 3 purports to limit the liability of carriers, it is invalid by reason of s. 109 of the Constitution.[84]

In short, section 3 of the Victorian Act is invalid due to inconsistency with the TPA. Of course, the TPA applies only to carriers who are corporations. Section 3 therefore continues to apply to carriers that are not incorporated. It is worth noting that the application of the reasoning in Wallis to the provisions in the Act dealing with innkeepers achieves a rather different result.[85]

3.34 A further argument may be made that section 74(1) of the TPA is not inconsistent with section 3 of the Victorian Act, on the basis that section 68(1) of the TPA renders void any term of a contract that purports to exclude, restrict or modify any of the provisions of Part V, Division 2. While section 3 of the Victorian Act places a statutory cap on liability, the Act does not include another provision which deems section 3 to be a term of every contract of carriage, as was provided by section 9(1) of the Queensland legislation. However, in Wallis, Toohey and Gaudron JJ considered that the inconsistency existed by means of section 74 which carried with it full contractual liability for breach. Therefore, the inconsistency existed without direct reliance on the operation of section 68(1).[86]