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
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
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 "
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Peter Sise explores how your contractual clause for recovery of legal costs might not do what you think it does.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).