Unfair contract costs Riteway Transport $124k

Riteway forced to pay owner-drivers more than $120,000 for trying to force them to upgrade to B-doubles

Unfair contract costs Riteway Transport $124k
Unfair contract costs Riteway Transport $124k
By Brad Gardner | June 28, 2010

Riteway Transport will be forced to pay a combined $124,066.67 to three owner-drivers for imposing an unfair contract.

Following court proceedings lasting more than two years, the Federal Magistrates Court has ordered the TNT-owned Riteway to pay damages to L&D Lowe Transport, Keldote and Tambo Waters.

The companies lost their contract with Riteway in August 2007 after they refused to upgrade their single trailers to B-doubles because the freight rate offered was unviable.

Federal Magistrate Robert Cameron found the contract was unfair because Riteway had the power to require upgrades without being obligated to compensate Keldote, L&D Lowe and Tambo Waters for increased operating costs.

Riteway will need to pay Keldote $30,800 plus $8,272.12 interest for lost earnings.

Cameron awarded L&D Lowe $29,000 plus $7,788.68 interest, while Riteway will also pay Tambo Waters $38,000 and $10,205.87 interest.

The sub-contractors relied heavily on Riteway for their income and told the court they suffered financially once the contracts were terminated.

The drivers requested $1500 for a Sydney to Melbourne run, but Riteway offered $1412.

Truck driver and owner of Tambo Waters, Lindsay Stewart, told the court he would have converted to a B-double if Riteway increased the freight rate.

"He thought that the rate for the work would be negotiable although $1500 was his last position and he could not go lower as he did not think it was viable," Cameron says.

"Following the termination of the contract, Tambo Waters’ income decreased substantially in comparison with its earnings from the Riteway contract."

Lenny Lowe of L&D Lowe Transport initially proposed a $1550 rate but lowered it to $1500 to show Riteway he was keen to stay with the company.

"He said that he did not believe that he would still be operating his business had he stayed with Riteway as he would not have been able to afford to run his equipment at the rate that was offered," Cameron says.

Riteway General Manager Peter Mann defended the company’s actions, saying the rate proposed by the sub-contractors was excessive.

Mann told the court Riteway believed the $1500 rate reflected the high capital and financing costs of the prime movers the sub-contractors used.

"Each applicant chose to use Kenworth prime movers whereas, in his view, alternatives such as Volvos would have been acceptable and much less costly to buy than Kenworths," Cameron says.

"Mr Mann always disagreed with the equipment the applicants provided, stating that what they used was up to $100,000 dearer than what was needed to do the Sydney-Melbourne run."

According to court documents, Keldote owner Paul Mansweto wrote to Riteway saying he needed a higher rate due to the extra fuel and maintenance costs required to run a B-double configuration.

Lowe says the heavier load of a B-double causes greater wear and tear and consumes more fuel.

"In his affidavit sworn on 5 May 2008 Mr Stewart referred to the additional fuel costs likely to be incurred when running in a B-double configuration as well as to the extra wear and tear suffered by the prime mover," Cameron says.

In his affidavit, Riteway National Operations Manager Kelvin Kent wrote that he understood the extra costs of running a B-double and the company’s proposed rate accounted for increased fuel use and wear and tear.

While accepting the owner-drivers may have been able to use cheaper prime movers, Cameron says Riteway did not prove that a switch to alternative vehicles would have avoided an increase in operating expenses.

The court was told the shift to B-doubles was designed to improve Riteway’s bottom line.

"By 2007 Riteway had determined that it would be more economical to run B-double trailers and that doing so would make it more competitive in its market," court documents say.

Riteway began as a privately-owned business in 1981. The company’s website says McPhee Transport bought a majority share in the company in 1988 before being acquired by TNT.

According to Riteway, it employs more than 240 staff and operates a fleet of 100 vehicles.

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