Australia: Tribunal Finds Container Detention Fees Unenforceable

Customs Trade and Transport Law E-Alert
Last Updated: 7 May 2010
Article by Andrew Hudson

Also by Kim Lean, Graduate

A decision of the Consumer, Trader and Tenancy Tribunal of New South Wales ("Tribunal") which was published on 5 May 2010 includes a finding that certain container detention fees charged by the Australian agent of an international shipping company were a penalty rather than a genuine pre-estimate of damages and ordered the refund of those fees by the Australian agent (China Shipping (Australia) Agency Co Pty Ltd) to an importer (DV Kelly Pty Ltd).

The case was a claim brought by an importer of furniture from Vietnam who had been levied container detention fees of $8,514 for the late return of a container by the Australian agent of an international shipping company.

The reported decision covers a variety of issues including the jurisdiction of the Tribunal, whether the claim was a "Consumer Claim" and the fact that neither party forcefully argued the provision in the bill of lading that the proper law to be applied was the law of the People's Republic of China and that any relevant action needed to be brought before the Shanghai Maritime Court.

Ultimately, on the question of the detention fees, the Tribunal held that such fees in this case were a penalty not a genuine pre-estimate of damages which made those fees void and unenforceable. As a result, the Tribunal ordered the fees which had been paid by the agent of the importer to be refunded to the importer. In doing so, the Tribunal applied the classic formulation as to the principles covered in the identification, proof and consequences of penalties in contractual situations as appearing in the Dunlop Pneumatic Tyre Co Ltd case (a decision of the English House of Lords in 1914). Having identified the formulation, the Tribunal held:

"In my opinion, there is simply no doubt that the amount claimed by the respondent in the contract as a container detention fee is 'extravagant and unconscionable in amount and comparison with the greatest loss that conceivably be proved to have flowed from the breach' to use the words of Lord Dunedin. The evidence provided by the applicant in support of this claim really leaves no room for argument. As the applicant points out, indeed, the respondent's own submissions suggest a possible genuine estimate of damages is no more than $720, meaning that container detention fee exceeds the amount of damages by almost 1,200%."

Clearly, the wider application of a decision of the Tribunal is open to debate and there would appear to be a strong likelihood of an appeal from the decision. However, the findings of the Tribunal will be welcomed by those who regularly face claims for such significant container detention fees. A number of other aspects of the decision of the Tribunal are relevant and worth considering:

  • The Australian agent of the shipping company, in its own submissions, suggested that " the genuine pre-estimate of damages was $10 per day. However, the Tribunal made " no finding on that issue, leaving open the possibility that the real amount could be less " than that.
  • A number of shipping companies and their Australian agents raise significant levels " of revenue from such container detention fees. If the decision of the Tribunal is applied " more widely, then the revenue stream from such container detention fees could be " severely curtailed.
  • The decision of the Tribunal may leave open the possibility of additional applications " for refunds by other importers who can bring themselves within the jurisdiction of the " Tribunal.
  • The reference in the decision of the Tribunal to the quantum of the container detention " fees being considered as "unconscionable" may well raise the attention of the ACCC, " especially given that the relevant provisions of the Trade Practices Act 1974 which " prohibit "unconscionable" conduct define "unconscionability" as being those acts which " the common law considered as unconscionable.
  • The ACCC may also take interest in the argument by the agent of the shipping " company that the container detention fees were enforceable as they are "general " in the industry" and "all companies do the same thing". The ACCC may find cause " to question shipping companies and their Australian agents as to the basis on which " they are all charging similar fees in the same general manner.
  • It appears that the quantum of detention fees charged in Australia far exceed the " quantum claimed elsewhere in the world (which seems odd given the huge number " of empty containers stored here and exported at any one time).
  • The decision will cause others to question other charges levied by those in the supply " chain (and their quantum) to determine if they are all reasonable.

The decision of the Tribunal follows the general principles which we have raised with our clients in defence of container detention fees charged by shipping companies and their Australian agents. However, the issue is rarely (if ever) litigated to the point of a decision and, accordingly, the decision of the Tribunal affords some real advantages to importers and carriers facing such container detention fees.

As always, we would be pleased to discuss the decision of the Tribunal and its wider ramifications (including potential applications for refunds) at your convenience.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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