Top Stories

Product Liability in Australia

By Greg Williams and Richard Abraham
Posted: 9th January 2015 09:06
Under Australian law, a person who claims to have been injured as a result of a product can bring an action for compensation on a number of grounds.  The causes of action most commonly plead are the common law tort of negligence, a breach of a statutory duty or a breach of the Australian Consumer Law (ACL) (formerly the Trade Practices Act 1974 (Cth) (TPA)), which forms part of a federal statute called the Competition & Consumer Act 2010 (Cth) (CCA).  The Australian Competition and Consumer Commission (ACCC) is responsible for the investigation, and prosecution, of breaches of the CCA.
This article focuses on the bases of liability contained in the ACL, as well as the mandatory reporting obligation in section 131 of the ACL pursuant to which suppliers must report products which have been associated with serious injury or death.
Part 3 of the ACL provides a range of specific protections aimed at regulating unfair practices, consumer transactions, safety of consumer goods and product-related services, information standards and the liability of manufacturers for goods with safety defects –from a product liability perspective, Parts 3-2 and 3-5 are of the most interest.
Consumer Guarantees
Part 3-2 Division 1 of the ACL establishes a number of ‘consumer guarantees’ relating to the supply of goods to consumers.  These guarantees (which cannot be excluded) include guarantees:
 - that goods are reasonably fit for any disclosed purpose, and for any purpose for which the supplier represents that they are reasonably fit; and
 - that goods are of acceptable quality.
Goods will be considered to be of acceptable quality (previously 'merchantable quality' under the TPA) if they are:
 - fit for all purposes for which goods of that kind are commonly supplied;
 - acceptable in appearance and finish;
 - free from defects;
 - safe; and
 - durable
As a reasonable consumer fully acquainted with the state and condition of the goods (including any ‘hidden defects’ of the goods), would regard as acceptable having regard to the nature of the goods, the price of the goods, any statements made on any packaging or label, any representation made by the supplier or manufacturer or any other relevant circumstance relating to supply.
Part 5-4 of the ACL provides a range of remedies against suppliers and manufacturers of goods in relation to the consumer guarantees.  The ACL permits a consumer to proceed directly against a manufacturer for a breach of the guarantee of acceptable quality, although in such cases a consumer’s remedy is limited to damages.  For actions against suppliers, an affected person may seek a broader range of remedies, including rejecting goods or terminating contracts.  The nature of the breach will also affect the remedy available. 
Strict Liability for Defective Products
The liability of manufacturers for safety defects is covered by Part 3-5 of the ACL.  It is a ‘no fault’ regime of strict liability based on the European Product Liability Directive.  Specifically, goods are said to have a ‘safety defect’ if their safety is ‘not such as persons generally are entitled to expect’.  Section 9 of the ACL provides that when determining the extent of the safety of goods, the Court is to have regard to "all relevant circumstances", which may include warnings and directions for use provided in relation to goods.
Part 3-5 provides that an individual may recover, by action against a manufacturer, the amount of the loss or damage (which includes injury) suffered by the individual because of a safety defect.  In addition to damages for personal injury, an individual may recover compensation for other types of loss or damage caused by goods with safety defects, including loss resulting from injuries to third parties, destruction or damage of goods, and destruction or damage of buildings or fixtures.
If a product is found to be defective under the ACL, the manufacturer or supplier can rely on what is commonly referred to as the ‘state of the art defence’ or ‘development risk defence’.  The manufacturer or supplier must establish that the state of scientific or technical knowledge at the time when the product was supplied by its actual manufacturer was not such as to enable the defect to be discovered.  The defence must be established on the balance of probabilities.
Deemed Manufacturer
For the purposes of each of the causes of action under the ACL discussed above, a "manufacturer" is broadly defined to include, for example, an importer of goods if the actual manufacturer is not present in Australia, or persons who holds themselves out in public as a manufacturer of goods or who allow their brand or mark to be affixed to or used in relation to the goods in question. 
As a result, it is possible to have multiple 'manufacturers' of the same good.  And persons who purchase goods overseas and import them into Australia or who apply their own badge or brand to goods sold in Australia must be aware that they will be treated for the purposes of product liability law as if they were the manufacturer of those goods.
Mandatory Reporting Requirement
Australia introduced mandatory reporting requirements for suppliers of consumer goods on 1 January 2011.  Pursuant to section 131 of the ACL, if a supplier becomes aware of the death, serious injury or illness of any person and considers that this incident was caused, or may have been caused, by the use or foreseeable misuse of the consumer goods, or becomes aware that a person other than the supplier considers that the incident was caused by the use or foreseeable misuse of the consumer goods, the supplier must provide written notification of the incident to the minister. 
The time limit for mandatory notification under section 131 of the ACL is within two days (not business days) of awareness.  Failure or refusal to provide notice in accordance with section 131 is an offence of strict liability, and the ACCC has recently commenced proceedings against an Australian retailer alleging a breach of the mandatory reporting provision.     
The precise metes and bounds of the mandatory reporting requirements continue to remain unclear, raising concerns for manufacturers and suppliers of consumer products.  In those instances where the facts are unclear or where there are contradictory accounts, it can be difficult to decide whether the reporting requirements have been triggered much less within the prescribed time limits.
Subsection 131(6) provides that the provision of a mandatory report is not to be taken for any purpose to be an admission by the supplier of any liability in relation to the consumer goods, or the death or serious injury or illness of any person. 
Greg Williams is a member of Clayton Utz's Commercial Litigation group.  He has nearly fifteen years of experience at Clayton Utz advising and conducting complex product liability litigation and managing product recalls.
Greg has acted on some of Australia's largest and most significant medical product liability cases, including the Copper 7 and the VIOXX litigation He is listed in theInternational Who's Who of Product Liability Defence Lawyers.
Tel: +61 2 9353 4798
Fax: +61 2 8220 6700

Richard Abraham is a Senior Associate in Clayton Utz's Commercial Litigation group and has assisted in the defence of product liability claims, including class action proceedings, for clients across a number of industries.    
Richard has advised on the product safety provisions of the Australian Consumer Law, and in particular the issues of product recall and mandatory reporting obligations.
Tel:  +61 2 9353 5729
Fax: +61 2 8220 6700

Related articles