Consumers Legal Studies HSC Study Day Dr. Charles Chew Senior Lecturer, School of Law

Transcription

1 Consumers Legal Studies HSC Study Day Dr. Charles Chew Senior Lecturer, School of Law

2 The developing need for consumer protection (1) The rise and rise of consumer law In centuries past, there was no organised advertising in local communities. The needs of most people, were supplied from the direct labour of their communities and families. From the time of the Industrial Revolution, agrarian societies evolved into modern industrialised nations, and moved to urbanised societies where simple wants and needs have been replaced with mass marketing and consumption. 2

3 The developing need for consumer protection (2) Consumer law has developed over the years with the technological revolution as reflected in the production of highly complex consumable products and services. Consider for a moment the harm caused by such consumable products, eg contaminated food and drinks that are toxic to humans; children s toys snapping, and causing injury; brakes in cars failing causing injury and death. 3

4 The developing need for consumer protection (3) 4 In Australia, people die or are severely maimed by defective products. Thus measures to prevent defective products getting onto the market are critical in achieving adequate protection for the Australian consumer. In 2014, the Productivity Commission estimated that Australians spend some $70 billion each year on general consumer products so safety of such products has become a vital component our consumer-based economy. There is estimated over 400 deaths and over 6000 serious injuries each year due to manufacturing faults alone, more than 600 deaths and more than 30,000 serious injuries caused by defective products. See Productivity Commission, 2014, Review of the Australian Consumer Product Safety System Research Report, Canberra. There are overlapping laws at common law (eg negligence and contract law) and in legislation-especially under the Australian Consumer Law-which regulate retailers (suppliers) and manufacturers in different situations. Examples of recall and withdrawal of defective products : Recall of millions of run-away Toyota cars, resulting in deaths; General Motors cars, with ignition problems causing deaths; withdrawal of Vioxx, a medication for arthritis, which contributed to the onset of various kinds of cardiovascular disease (eg heart attacks) and manufactured by Merck Sharpe & Dohme (3rd largest pharmaceutical company in the world) and the horsemeat scandal in Europe.

5 The Introduction of the Australian Consumer Law On January 2011, following extensive consultations between the Commonwealth, the states, territories and the public, a single national consumer law, the Australian Consumer Law was established. The Trade Practices Act 1974 (Cth) (TPA) was replaced by the Competition and Consumer Act 2010 (Cth) (CCA). The Australian Consumer Law (ACL) which is set out in Schedule 2 of CCA restates the consumer protection provisions of the TPA and establishes a national product safety system. 5

6 Australian Consumer Law : Overview The ACL replaces the consumer protection provisions of the former TPA. The provisions of the ACL are broadly similar to those of the former TPA. However, there are numerous differences in detail, for example, the replacement of the implied conditions of quality and fitness in consumer sales with statutory guarantees to similar effect. All courts and tribunals in Australia have jurisdiction to hear matters arising under the ACL. Administration of the ACL is by the Australian Competition and Consumer Commission (ACCC) and the State and Territory consumer agencies such as Fair Trading (NSW); Consumer Affairs (Vic); Consumer Affairs (NT) 6

7 Policy Objectives of the ACL The policy objectives of the ACL are to enhance the welfare of Australians through the provisions for consumer protection. For example, ACL s18 is directed towards various forms of misrepresentation and other practices that mislead or in other ways, take unfair advantage of consumers. Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83 Butcher v Lachlan Elder Realty Pty Ltd [2004]

8 Advertising (1) Advertising was left largely unregulated until the introduction of the TPA (replaced now by the CCA) which has shown itself to be capable of dealing with the false, misleading or deceptive elements of advertising conduct by corporations. The statutory provision that governs the determination of whether an advertisement is misleading or deceptive is s 18 of the ACL (CCA Schedule 2). Some degree of puffery is to be expected, but conduct which exceeds this description may contravene s 18: Stuart Alexander & Co Interstate Pty Ltd v Blenders Pty Ltd (1981) 53 FCR 307. An advertisement must be read in context and the meaning of critical words and phrases should not be ascertained in isolation. There must be regard paid to the overall impression the advertisement creates and not just to the literal meaning of the words: Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1 at 3, In deciding whether an advertisement contravenes s 18, an important step should always be to determine the nature of the audience to whom it is directed: Campomar Sociedad, Limitada v Nike [5.15]; Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR Document title

9 Advertising (2) Some products and services receive specific attention The promotion of tobacco products, for example, was at one time becoming increasingly more restricted and had moved from the requirement that cigarette and tobacco packages carry warnings to the situation where advertising has approached total prohibition. The Tobacco Advertising Prohibition Act 1992 (Cth), for example, prohibits tobacco advertisements from being broadcast, and regulates indirect promotion through sports sponsorship and advertising in connection with sporting or cultural events. Labelling and warning requirements on tobacco products were mandated by the Trade Practices Act (Consumer Product Information Standards) (Tobacco) Regulations 1994 (Cth) which impose a national set of standards. ***Australia was the first country to mandate plain tobacco packaging, as a result of laws that came into force in Document title

10 Advertising (3) Specific controls in advertising In the electronic and digital age, computer games, movie material available via the Internet are increasingly attracting the attention of regulators. Advertising which is embodied within these products is subject to general rules applicable to the media. The regulation of advertising in games and films was dealt with a long time ago by, eg, the Classification (Publications, Films and Computer Games Act 1995 (Cth) as part of a Commonwealth scheme for classification of certain publications, films, and on-line services, and regulation of advertising in and of the classified material. 10 Document title

11 Section 18 v Common Law Negligence (1) The following is a summary of some of the advantages of pursuing a claim on misleading or deceptive conduct under s 18 of the ACL instead of under common law negligence (eg in negligent misstatements): Section 18 applies to a wide variety of circumstances in which misleading or deceptive conduct has been alleged, whereas the common law of negligence only applies where there is a need to establish a contractual relationship between the parties-where there has to be shown a duty of care. All that is required in s 18 is to establish that there has been conduct that is, or likely to be misleading or deceptive (leading to error). Exclusion or exemption clauses that attempt to contract out of liability are not effective under s 18 whereas these clauses are considered favourably under the common law. 11 Document title

12 Section 18 v Common Law Negligence (2) There are far more remedies available under the ACL (s18 being a provision of the ACL) than under the common law of negligence. Damages under s 232 of the ACL are not limited as they are under the common law of damages for economic loss from negligence which are limited or capped. Section 232 even gives the court flexibility to grant an injunction for contravention of the ACL. ***The main disadvantage in pursuing a claim for misleading or deceptive conduct under s 18 of the ACL is that there a requirement for the conduct to be in trade or commerce whereas there is no such requirement under the common law. 12 Document title

13 Definition of a Consumer The word consumer is defined in s 3 of the ACL as a person who is taken to have acquired goods if and only if: the amount paid or payable for the goods did not exceed $40,000; the goods were of a kind ordinarily acquired for personal, domestic or household (PDH) use or consumption; (So if the goods were of a kind ordinarily acquired for personal, domestic or household use, they can be of any value, eg, even exceeding $40.000) the goods consisted of a commercial road vehicle (of any value) acquired for use principally in the transport of goods on public roads; the goods were not acquired for resupply, or for use or transformation in trade or commerce (for the purpose of using them in the course of production) 13

14 Acquiring Services as a Consumer Under s 3 (3) of the ACL a person is taken to have acquired particular services as a consumer if, and only if: (a) (b) the amount paid or payable for the services did not exceed $40,000; or the services were of a kind ordinarily acquired for personal, domestic or household use or consumption 14

15 Protective Provisions for Consumers: Statutory Prohibitions under the ACL For discussion purposes, the provisions of the ACL can be considered under the following headings: prohibition of misleading and deceptive conduct; prohibition of unconscionable conduct; prohibition of unfair contract terms; the specific false representation provisions; consumer guarantees; safety of consumer goods and product related services; product liability (or manufacturers liability) for defective goods. 15

16 Prohibition of Misleading & Deceptive Conduct (1) To catch what might be loosely termed unfair business practices which may not strictly fall within the scope of other specific prohibitions, s 18 (1) provides in general terms that: A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead and deceive. ACCC v Homeopathy Plus! Australia Pty Ltd [2014] FCA 1412 A representation was made on the respondent s website to the effect that the whooping cough vaccine is short-lived, unreliable and no longer effective in protecting against whooping cough. It was also suggested that homeopathic treatments were a viable alternative. The Federal Count held that these representations were misleading or deceptive and false under s 29 (1) (a) about a particular quality and (b) about a particular standard or value. There was no reasonable basis in medical science on which the respondent could make the claims that homeopathic treatments are safe and effective as an alternative to the vaccine. 16

17 Prohibition of Misleading & Deceptive Conduct (2) Conduct that simply creates confusion or causes uncertainty will not be misleading or deceptive since it will not lead a person into error. In McWilliams Wines v McDonald s System [1980] 49 FLR 455 McDonalds advertised a hamburger under the name Big Mac. McWilliams Wines in its advertising campaign for its 2-litre casks of wine, described them as Big Mac. McDonalds claimed that the conduct of McWilliams Wines was misleading or deceptive. The court held that while the use of the words Big Mac might cause confusion in the minds of some consumers as to the possibility of a connection between the 2 companies, such a person would not be misled by the advertisements into error in believing that there was a connection. It is highly unlikely that anyone would be misled into thinking that a McDonald s store was a bottle shop. 17

18 Prohibition of Misleading & Deceptive Conduct (3) In Taco Bell of Australia Inc v Taco Bell Pty Ltd [1982] ATPR , a restaurant had been operating in Bondi under the name Taco Bell for several years when an American fast-food chain opened restaurants with the same name. The Australian company sought an injunction to stop the American company from using the name on the basis that it was misleading or deceptive. The Federal Court decided in favour of the Australian company Taco Bell Pty Ltd. The court found that the name Taco Bell had become associated with the Bondi restaurant some considerable time before the American company had commenced operations in Bondi under the same name. The cause of actual or likely misconception was the use (passing off) of the name by the American company which had come after the Bondi restaurant had established its reputation, and accordingly it should be restrained. 18

19 Section 21: Unconscionable Conduct in the Supply of Goods or Services Section 21(1) of the ACL prohibits a person from engaging in unconscionable conduct when supplying goods or services. It provides: A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services to another person, engage in conduct that is, in all circumstances, unconscionable. The term unconscionable conduct is not defined. 19

20 Section 22: Matters the Court May Have Regard to for the Purpose of s 21 Section 22 (1) [Relevant matters in determining whether supplier has contravened s 21] Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier) has contravened section 21 in connection with the supply or possible supply of goods or services to a person (the customer), the court may have regard to : (a) the relative strengths of the bargaining positions of the supplier and the consumer; and (b) whether, as a result of conduct engaged in by the person, the consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and (c) whether the consumer was able to understand any documents relating to the supply of the goods or services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the consumer by the supplier in relation to the supply or possible supply of the goods or services; and (e) the amount for which, and the circumstances under which, the consumer could have acquired identical or equivalent goods or services from a person other than the supplier. 20

21 Unconscionable Conduct: Cases ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) 140 FCR 253 SNK was the owner of a business trading under the name Simply No-Knead which supplied training and materials for bread-making at home. It was held that as a result of disputes between the franchisor and franchisees, the franchisor s refusal to deliver franchise system products to franchisees, exclusion of them from advertising, refusal to negotiate and competing within their territories disclosed an overwhelming case of unreasonable, unfair bullying and thuggish behaviour in relation to each franchisee that amounts to unconscionable conduct by SNK. ACCC v Keshaw [2005] FCA 558 Mr Keshaw sold children s educational materials to the residents of indigenous communities in the Northern Territory. In a substantial number of instances, the educational materials were not needed or useful, having regard to the age of the child or children of the consumer. The products that Keshaw contracted to provide were commonly not supplied, or not supplied in full. Mansfield J found that Keshaw took advantage of the lack of educational and commercial experience of those in the indigenous communities, and his conduct was unconscionable., 21

22 Prerequisites of Unconscionable Conduct (1) There appears to be 3 prerequisites for unconscionable conduct. (a) The weaker party was in a position of special disability or special disadvantage (b) The stronger party knew about (or should have known about) the weaker party s special disability or special disadvantage. (c) The stronger party took unfair advantage of the weaker party s special disability or special disadvantage. 22

23 Prerequisites of Unconscionable Conduct: Case Law (1) Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Mr and Mrs Amadio, with little formal education and understanding of English, signed a guarantee as security for the payment of the debts of one of their son s companies, mistakenly believing their liability was limited to $50,000 over 6 months and that the company was in a good financial position. The parents liability turned out to be $240,000 because the guarantee was a continuing all monies guarantee which was not limited in time. Mr and Mrs Amadio were able to have the guarantee set aside as unconscionable on the basis that they would not have signed if they had known the true (deleterious) position of the company s accounts and that it was insolvent. The bank should have disclosed the true position of the son s company. Its conduct was unconscionable when it got the guarantee from the parents-it should have been obvious to the bank that they were under a special disability because of their age and their limited English. Other adverse circumstances which constitute a special disability, as per Deane J included poverty, or need of any kind, sickness, sex, infirmity of body and mind, and drunkeness which have the effect of placing one party at a serious disadvantage vis-à-vis the other. 23

24 Prerequisites of Unconscionable Conduct: Case Law (2) Kavakas v Crown Melbourne Ltd [2013] HCA 25 Kavakas had lost 2.5 million playing baccarat at Crown Casino in Melbourne and claimed that Crown has engaged in conduct that was unconscionable. The action failed-the High Court did not accept that Kavakas s pathological interest in gambling was a special disadvantage or disability that made him susceptible to exploitation by Crown. It was found that Kavakas was able to make rational decisions to refrain from gambling altogether had he chosen to do so. He was certainly able to choose to refrain from gambling with Crown. The High Court accordingly found that Kavakas did not show that his gambling losses was the product of an exploitation of a special disability. ACCC v Lux Distributors Pty Ltd [2013] FCAFC The ACCC instituted proceedings alleging that Lux had engaged in unconscionable conduct when selling vacuum cleaners to 3 elderly women. The sales occurred after a Lux sales representative called on the women in their homes under the premise of a free vacuum cleaner maintenance check, but with the purpose of selling an expensive vacuum cleaner. The women were subjected to unfair sales tactics, and pressured into purchasing the vacuum cleaner. The context here is consumer protection directed at the requirements of honest and fair conduct, freedom from deception (as is present here) and exploitation of vulnerability and special disability. 24

25 Unfair Terms (1) The ACL contains new provisions (long awaited) prohibiting unfair terms in standard form consumer contracts. An unfair term of a standard form consumer contract is void: s 23 (1) However, the contract as a whole will not be void if the contract can operate without the unfair term: s 23 (2). A consumer contract is one for the supply of goods or services to an individual who acquires them wholly or predominantly for personal, domestic, or household (PDH) use or consumption: s 23 (3). 25

26 Unfair Terms (2) Examples of unfair terms Listed below are some examples of potentially unfair terms, namely, a term that: permits only 1 party to avoid performing the contract; penalises only 1 party to terminate the contract; permits only 1 party to vary the terms of the contract; permits only 1 party to renew the contract; permits only 1 party to unilaterally vary the characteristics of the goods or services to be supplied; limits only 1 party s rights to sue another party 26

27 Unfair Terms: in Standard Form Contracts (3) For the provisions as to unfair terms in consumer contracts to apply, the contract must be a standard form contract : ACL s 23 (1). In deciding this issue, a court may take into account such matters as it thinks relevant but must consider, for example whether : One of the parties has all or most of the bargaining power; the contract was prepared by one party before any discussion relating to the transaction occurred; another party was required, in effect, either to accept or reject the terms of the contract in the form in which they are presented; another party was given an effective opportunity to negotiate the terms of the contract. Australian Competition and Consumer Commission (ACCC) v Bytecard Pty Ltd FCA Here the Federal Court pointed out that a number of clauses in the Bytecard Pty Ltd s standard form contract were unfair, and so void. The clauses allowed Bytecard to unilaterally vary the price under its contract without providing the customer with a right to terminate the contract. They also allowed Bytecard to unilaterally terminate the contract at any time with or without cause or reason (very one sided) 27

28 Prohibition of False or Misleading Representations (1) Section 29 (1) of the ACL provides a person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services make a false or misleading representation: (a) that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use; (b) that services are of a particular standard, quality, value or grade; (c) that goods are new; (d) (e) that a particular person has agreed to acquire goods or services; that purports to be a testimonial (acknowledgement) by any person relating to goods or services ; (cont d next slide) 28

29 Prohibition of False or Misleading Representations (2) f) concerning a testimonial by a testimonial by any person; or (i) that purports to be such a testimonial; relating to goods or services; g) that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits; h) that the person making the representation has a sponsorship, approval or affiliation; i) with respect to the price of goods or services j) concerning the availability of facilities for the repair of goods or of spare parts for goods; k) concerning the place of origin of goods; l) concerning the need for any goods or services; m) concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy; (n) concerning a requirement to pay for a contractual right: (i) that is wholly or partly equivalent to any condition, warranty, guarantee, right or remedy; and (ii) that a person has under a law of the Commonwealth, a State or a Territory. 29

30 Prohibition of False or Misleading Representations (3) Hartnell v SharpofAustralia (1975) 5 ALR 493 Sharp advertised its microwave ovens as having been tested by the Standards Association of Australia when in fact the claim was false. It was held that Sharp in advertising its products were of a particular standard when they were not so was in breach of TPA s 53 (a) (now ACL s 29 (1) (a). Given v CV Holland Pty Ltd (1977) 29 FLR 212 A used car showed it had done 23,000 miles on its odometer when in fact its odometer showed 69,000 miles when it was traded. It was held that the number of miles (or kilometres) a vehicle has done describes a particular attribute or quality of the vehicle and the vendor was in breach of ACL s 21 (1) (a) ACCC v Coles Supermarkets Pty Ltd [2015] FCA 330 Coles advertised that its bakery bread was Baked Today, Sold Today whereas in fact the bread was produced from frozen dough which was sometimes already part baked and snap frozen before it was delivered to Coles. A penalty of $2.5 million was imposed for breaches of ss 18 and 29 (1) (a) in the penalty hearing. 30

31 Protecting the Consumer: Prohibiting Other Unfair Practices The ACL also prohibits other kinds of business conduct in relation to the supply of goods and services. These are as follows: Misleading conduct as to employment. A person must not engage in conduct that is liable to mislead persons as to the availability, nature, terms or conditions, or any other matter relating to employment offered by the person or another person: ACL s 31. Offering rebates, gifts, prizes, or other free items with the intention of not providing them as offered: ACL s 32 (1) 31

32 Bait Advertising and Assertion of Right of Payment for Unsolicited Goods Bait advertising. This type of advertising essentially takes the form of attracting customers by the offer of goods at special prices, only for the customer to be told on following up the advertisement that the special price goods had all been sold but that another product at a higher price is available for sale: ACL s 35. Payment for unsolicited goods. The recipient of unsolicited goods is not liable to pay for them, nor for the loss of or damage to the goods other than loss or damage resulting from some wilful (deliberate) and unlawful act by the recipient: ACL, s 41 (1). 32

33 Standards Implied by Statute: Consumer Guarantees The ACL provides for statutory guarantees in contracts for the supply of goods and services to consumers. They include guarantees as to title, correspondence with description, acceptable quality and fitness for purpose: Pt 3-2, ss Certain guarantees as to quality also apply in contracts for the supply of services to a consumer: ss The guarantees apply only to contracts for the supply of goods and services to a consumer. 33

34 Standards Implied by Statute: Consumer Guarantee that Goods are of Acceptable Quality For example, where a person supplies goods to a consumer in trade or commerce there is a guarantee that the goods are of acceptable quality: ACL s 54 (1). Goods are of acceptable quality if they are as fit for all the purposes for which they are commonly supplied, free from defects, of acceptable appearance and finish, safe and durable: ACL s 54 (2). Zhang v United Auctions (Homes Building) [2013] NSWCTT (9 January 2013) New South Wales Consumer Trader and Tenancy Tribunal United Auctions, the respondent, operated a business of retailing and installing kitchens and other improvements to residential premises. In October 2011, the applicant Zhang visited the respondent s show rooms and ordered a kitchen which was to be installed by the respondent. On completion, there was an unattractive and raised joint line on the granite bench top in the kitchen. The Tribunal found that notwithstanding the respondent s efforts, the colour of the joint did not match the bench top. Also the joint Line appeared jagged as if hand cut. The Tribunal found that the materials or Workmanship were not of acceptable quality, not free from defects, not of acceptable Appearance and there was a contravention of s 54 (1) and (2). 34

35 Standards Implied by Statute: Consumer Guarantee that Goods are of fit for Their Disclosed Purpose If a person supplies goods to a consumer in trade or commerce there is a guarantee that the goods are reasonably fit for any disclosed purpose: s 55 (1). There is no such guarantee where the circumstances show that the consumer did not rely, or that it was unreasonable for the consumer to rely, on the skill or judgment of the supplier: s 55 (3). Carpet Call Pty Ltd v Chan [1987] ATPR (Digest) The defendant had purchased $69,000 of carpet for his nightclub to cater for young upmarket patrons. After about a year, the carpet was unsightly because of cigarette burns, stains, chewing gum ground in and heavy wear and tear. Chan refused to pay the balance owing of $20,000. The plaintiff company knew of Chan s purpose, but Chan did not sufficiently disclose the purpose to show that he was relying on the plaintiff s skill so as to imply a consumer guarantee of fitness for disclosed purpose (for heavy use of carpet). Also Chan knew more about nightclub wear and tear than the plaintiff did. Accordingly, Chan was not able to establish that the plaintiff company owed him a duty of fitness for disclosed purpose. 35

36 Standards Implied by Statute: Consumer Guarantee that the Goods Match Their Description Section 56 provides that If a person supplies goods, in trade or commerce, goods by description to a consumer, there is a guarantee that the goods correspond with the description. Reynolds v Turner (1989) ASC-922 The plaintiff bought a 5 year old van from the defendant s car yard in reliance on the words low kilometres written across the windscreen and its low odometer reading of 42,000 km on a five figure odometer. When the plaintiff discovered that the van s real odometer reading was much higher, he was entitled to rescind the contract because of the defendant s breach of the consumer guarantee (implied condition under the TPA) that goods must comply with description under s

37 Standards Implied by Statute: Other Consumer Guarantees If a person supplies goods to a consumer by reference to a sample or demonstration model in trade or commerce (other than by auction) there are the following guarantees: a) that the goods correspond with the sample or demonstration model in quality, state or condition: s 57 b) that if the goods are supplied by reference to a sample or demonstration model, the consumer will have a reasonable opportunity to compare the goods with the sample or demonstration: s 57 (1) 37

38 Standards Implied by Statute: Guarantees and the Supply of Services The ACL provides for certain guarantees in relation to contracts for the provision of services. If a person supplies services to a consumer in trade or commerce there is a guarantee that the services will be rendered with due care and skill: s 60. Further, if a person supplies services to a consumer in trade or commerce, and the consumer, expressly or by implication, makes known to the person any particular purpose for which the services are being acquired, there is a guarantee that the services and any product resulting from the services, will be reasonably fit for that purpose: s 61 (1). 38

39 Introduction: Manufacture s Liability for Goods with Safety Defects: ACL Pt 3-5 The main issues relating to rights of compensation for loss damage caused by defective products are to be found in Pt 3-5 of the ACL (based on former Pt VA of the TPA (Liability of manufacturers and importers for defective goods). Part 3-5 of the ACL, makes a manufacturer, who supplies the goods in trade or commerce, liable for goods with safety defects if: an individual is injured because of the safety defect (s 138) a person has suffered loss or damage because another person has been injured as a result of the safety defect (s 139) a person has suffered loss or damage because other goods of a kind ordinarily acquired for personal, domestic or household use or consumption have been destroyed or damaged because of the safety defect (s 140) a person has suffered loss or damage because private use land, building or fixture have been destroyed or damaged because of the safety defect (s 141) Note: ACL Pt 3-5 of the ACL imposes upon manufacturers and importers of goods a statutory liability to compensate those who suffer injury or damage of certain kinds to their person or property as a consequence of a defect in the goods. This statutory duty removes some of the problems that arise because of privity of contract issues and the difficulty of establishing the existence of a duty of care and breach of that duty under tort law. In this respect it is a significant change in Australian law and makes the rules relating to compensation for loss or damage caused by a defect in goods very similar to the rules operating in Europe under the EU Directive on product liability. * Privity of contract means the relation between the parties in a contract which entitles them to sue each other but prevents a third party from doing so. **A directive is a legal act of the European Union which requires member states to achieve a particular result without dictating the means of achieving that result. 39

40 Background to ACL Pt 3-5 The provisions of Pt 3-5 of the ACL (formerly Pt VA of the TPA) resemble, in important respects, those of the Consumer Protection Act 1987 (UK) which implements the 1985 Directive on Product Liability of the European Union. The Directive resulted from prolonged study and negotiations, beginning in the 1960s, when European countries realised that their laws did not provide adequate compensation for injured consumers or adequate incentives for the production of safe goods. The European provisions impose on the manufacturer of goods a liability to pay compensation without any need for the injured person to prove negligence: however, the injured must prove that the loss or damage suffered resulted from a defect in the goods. To this extent the rules resemble the strict liability rules of the United States, where the plaintiff must only prove that the goods were in a defective condition which was unreasonably dangerous". See Restatement on Torts 2d, s 402A). This pattern is followed in ACL Pt 3-5 *Strict liability is liability for damage without the need to prove negligence or fault. **Again, a directive is a legal act of the European Union which requires member states to achieve a particular result without dictating the means of achieving that result. 40

41 Requirements Under Pt 3-5 The main requirement for manufacturers liability for goods with safety defects (safety defective goods) under Pt 3-5 of the ACL (formerly TPA Pt VA) is the same as other parts of the ACL-that the goods must be supplied in trade or commerce. This excludes goods supplied in a private or personal capacity. 41

42 Definition of Manufacturer Again, not Just a Maker of Goods Under ACL s 7 a manufacturer is not just the traditional maker of goods. The manufacturer includes businesses which grow, extract, produce, process and assemble goods. Also, a business is deemed (considered) to be the manufacturer of the goods if it is an own brander and: holds itself out to the public as the manufacturer allows ( causes or permits ) its name, business name, brand or mark to be applied to the goods; allows another person to hold it out as the manufacturer (s 7(1) (b)) An importer is deemed to be the manufacturer if at the time of import the manufacturer does not have a place of business in Australia (s7 (1) (e)) (formerly TPA s 74 A (4)). The definition of a consumer is quite broad. For instance, oysters are manufactured for he purpose of the ACL. See Ryan v Great Lakes Council [1990] FCA 177. Manufactured goods include ships, animals, minerals, gas and electricity, and computer software (ALC s 2). Such goods include component parts-this means that manufacturers of component parts which are incorporated into finished products may be liable to compensate injured claimants if the component parts contribute to or cause a defect in the finished goods. 42

43 Safety Defect in Goods Goods have a safety defect when the safety is not such as persons generally are entitled to expect : ACL s 9 (formerly TPA s 75AC). The expectations of the product s safety may be reflected in its retail price- more expensive goods may have additional safety features not available with cheaper goods. The tests of whether goods have a safety defect is objective (an external standard), not subjective. Potential safety defects in the goods include: (1) design defects- relating to matters such as the form, structure and composition of the goods; (2) manufacturing defects-relating to the process of construction and assembly and (3) instruction defects-defects caused by incorrect or inadequate warnings or instructions In Gliderol International Pty Ltd v Skerbic (2009) 170 ACTR 1, Skerbic was injured when a garage door, manufactured by the appellant, fell and stuck on the head. She subsequently sued the manufacturer in negligence and under the TPA s 75 AD (now ACL s 38). The court found that although the door was not defectively manufactured, the instructions were defective as they did not indicate that a metal, as opposed to a plastic bolt should be used in the door s installation. 43

44 Tests-Whether Other Goods are Safe (1) The ACL provides that in determining the extent of the safety of goods, regard is to be given to all relevant circumstances. These include: the manner in which, and the purposes for which, they have been marketed (s 9 (2) (a)); their packaging (s9 (2) (b)) ; the use of any mark in relation to them (s9 (2) (c)); any instructions for, or warnings with respect to, doing, or refraining from doing, anything with or in relation to them (s 9 (2) (d)); what might reasonably be expected to be done with or in relation to them (s 9 (2) (e); and the time when they were supplied by their manufacturer (s 9 (2) (f)) (and not after) 44

45 Tests- Whether Goods are Safe (2) Illustration: safety defective goods: expected use of goods In determining the extent of the safety of goods, regard is to be given to all the relevant circumstances including: ACL s 9 (2) (e) (formerly TPA s 75AC (2) (e)) which refers to what might reasonably be expected to be done with or in relation to them This use includes all reasonably expected uses and likely potential misuse. A manufacturer must warn consumers of the potential consequences of misuse which the manufacturer can anticipate, and the manufacturer may have to detail the specific consequences of such misuse. In Glendale Chemical Products Pty Ltd v Australian Competition and Consumer Commission (1998) 90 FCR 40 Barnes bought caustic soda which (on the advice of his friend) he poured boiling water into a blocked shower drain hole followed by the product. A column of hot water emerged from the drain and caused injury to his face and eyes. Safety directions on the package instructed users of the product with cold water to wear rubber gloves and safety glasses and to avoid contact with eyes and skin. It was found that Glendale which had only packed, but not manufactured the product was liable. They were deemed to be the manufacturer as they had applied their name to the product and there was no warning on the container about the dangers of using the product with hot water. 45

46 Terms Excluding Manufacturer Liability Provisions are Void ACL Part 3-5 (formerly Pt VA) cannot be restricted, excluded or modified by contract, and any term of a contract which attempts to do so is void: s150 (formerly s 75 AP). 46

47 Compulsory Recall of Consumer Goods Besides allowing ministers to create safety standards and to issue banning notices, the ACL also permits ministers to issue a notice compulsorily recalling non-compliant consumer goods or product related services. The principal power is found in ACL s 122 (1) which provides: A responsible Minister may, by written notice, published on the internet, issue a recall notice for consumers goods of a particular kind if, for example, it appears to the responsible Minister that such goods will or may cause injury to any person; or if it appears to the responsible Minister that a reasonably foreseeable use (including a misuse) of such goods will or may cause injury to any person. In such a situation, there may be an interim ban, or a permanent ban, on the goods. 47

48 The Defective Goods Actions The scheme of ACL Pt 3-5 involves a person instituting a defective goods action in relation to injury, loss, or damage suffered as a result of a product that has a safety defect. Part 3-5 establishes defective goods actions that we will consider in the next slides 48

49 Liability of Defective Goods Causing Loss by Injured Individual ACL s 138 (formerly TPA s75 AD) deals with the most direct situation, a claim for compensation by an injured individual. The ingredients of the individual s action are that the individual has suffered injury because of a defect in goods (as defined in ACL s9). The manufacturer is liable to compensate the injured individual for the amount of loss suffered as a result of the injuries. In order to establish liability under s 138 the consumer must prove the existence of a defect in the goods, the fact that the injury has been suffered and the causal connection between the defect and the injury: Petersen v Merck Sharpe & Dohme (2010) 184 FCR 1 (the Vioxx case -where Mr Petersen had heart problem after taking Vioxx for his arthritis. The court was not certain if taking Vioxx was the direct cause (the causal link) because he had pre-existing heart problems, high blood pressure, obesity, hypertension, and was a ex-smoker court not sure if Vioxx is the cause (only a conjecture, which is not good enough as far as the courts in Australia are concerned) It is possible that the manufacturer may try and say that the consumer s own conduct contributed to the injury, loss or damage suffered (contributory negligence) and that the amount of compensation should be reduced accordingly: Competition and Consumer Act 2010 (Cth): s 137A: Glendale Chemical Products Pty Ltd v ACCC (1998) 90 FCR

50 Loss or Damage Suffered by Person Other Than an Injured Individual Under s 139 (1) Under s 139 (1) of the ACL (formerly, TPA s AE) the manufacturer who supplies the goods, and the goods have a safety defect, and the individual (other than the person) suffers injuries, loss or damage, the manufacturer is liable to pay compensation. The liability of the manufacturer may be reduced (as alluded to earlier) by the amount of any contributory negligence: CCA s 137A 50

51 Liability for Loss or Damage Suffered by a Person if Other Goods are Destroyed or Damaged ACL s140 (formerly TPA s 75F) imposes liability on the manufacturer of goods which have a safety defect if, because of the defect, other goods are destroyed or damaged, and the person who used or intended to use the goods suffers loss or damage as a result. See Carpet Call Pty Ltd v Chan [1987] ATPR (Digest ) In this sense, s 140 deals with another flow-on effect to goods other than the goods that have a defect. This section only applies in relation to destroyed or damaged goods that are of a kind ordinarily acquired for personal, household or domestic use or consumption. Thus, s 140 includes consequential damage-damage to other goodsbut only when the plaintiff comes within the above traditional consumer category. (This is because it is considered that commercial users are usually in a better position to protect themselves from such risks through their commercial arrangements. 51

52 Liability for Loss or Damage Suffered by a Person if Land, Building or Fixtures are Destroyed or Damaged Section 141 (1) (formerly TPA s 75 AG) provides that a manufacturer of goods is liable to compensate a person if the manufacturer supplies the goods in trade or commerce; and the goods have a safety defect; and land, buildings or fixtures are destroyed or damaged because of the safety defect. Section 141 imposes liability on the manufacturer of goods which have a defect if, because of the safety defect, land, buildings or fixtures (something securely, and usually permanently, attached or appended, as to a house, apartment building, etc.: light fixtures, kitchen fixtures) are destroyed or damaged and the person who used or intended to use them suffers loss or damage as a result. This section only applies in relation to destroyed or damaged land, buildings and fixtures ordinarily acquired for private use. There has been little litigation on this topic in Australia. 52

53 Defences Available to Manufacturers Under s 142 of the ACL (formerly TPA s 75 AK) sets out the defences available to manufacturers. They are, for example, that: the defect did not exist when the goods were supplied, or, (i) in the case of electricity, at the time at which the electricity was generated, being the time before it was transmitted or distributed, (ii) in any other case-at the time when the goods were supplied by their actual manufacturer ; the goods only had the defect because they were complying with a mandatory standard; and the state of scientific knowledge when the goods were supplied by the actual manufacturer was not such that the defect could be discovered. 53

54 State of Scientific or Technical Knowledge-or State of the Art Defence It is defence under s 142 (see last slide) to a claim that defective goods have been supplied that the state of scientific or technical knowledge at the time the goods were supplied was not such as to enable the defect to be discovered. This is the so-called state of the art or the development risks defence. The defect in the goods could not have been discovered in the light of current scientific and technical knowledge at the time the goods were supplied (s 142 (c)). The test is the objective state of scientific and technical knowledge and not the subjective knowledge of the individual manufacturer. To come within this defence, the manufacturer must keep up to date with advances in knowledge after it has first put the product into circulation. 54

55 The Rise and Rise of Consumerism Since the introduction of the ACL on 1 January 2011, consumer protection has become a particularly significant issue for Australian consumers and businesses. It has been introduced in the context of the rise in Australia of the consumer movement, providing a comprehensive regulatory regime for consumer protection. This rise coincides with the rise of consumerism world wide. The significance of this is recognised by the fact that 15 March is celebrated each year as World Consumer Rights Day by Consumers International (CI) an independent global voice for consumers the regional office of which is situated in Kuala Lumpur, Malaysia 55

56 Reform Proposals: Consumer Remedies There are reform proposals that have been suggested for implementation by the Commonwealth Government. Some of these reform proposals if implemented would: enable regulators to use existing investigative powers to better assess whether or not a term is unfair; increase penalties for failure or refusal to notify a voluntary recall; increase the $40,000 threshold in the definition of consumer to $100,1000; increase maximum financial penalties available under the ACL by aligning them with the penalty regime under the competition provisions of the Competition and Consumer Act 2010 (Cth) (this amendment to take effect from 1 July 2018) : for companies a maximum penalty of $10 million, or for individuals, a maximum penalty of $500,000 Currently the maximum penalty for a body corporate under the ACL is $1.1 million. Currently the maximum penalty for a person other than a body corporate is $220,000. National Occupational Licensing System During the 36th meeting of the Council of Australian Governments (COAG) it was noted that the proposed National Occupational Licensing Scheme reform will not be pursued. Most jurisdictions identified a number of concerns with the proposed NOLS model and potential costs. Approaches will be investigated to increase labour mobility and deliver net benefits for businesses and governments. To this end, States agreed to work together via the Council for the Australian Federation (CAF) to develop alternative options for minimising licensing impediments to improving labour mobility and to manage the orderly disestablishment of the National Occupation Licensing Authority from early

57 Occupation licensing (1) One way in which state governments respond to calls for more effective consumer protection has been to legislate for licensing or registration systems covering suppliers of particular goods or services. By such schemes it is intended that, as far as practicable, only those suppliers who satisfy prescribed minimum standards of honesty and skill would be permitted to offer goods or services to consumers and that, by means of ongoing regulatory surveillance and consumer vigilance, dishonest or otherwise unfit traders would be promptly excluded from the market place.

58 Occupational Licensing (2) Many business undertakings including those of pawnbrokers, second hand dealers, hawkers, money-lenders, auctioneers, banks, life insurance companies, travel agents, motor car repairers, building societies, credit providers etc have been subject to varying forms of occupational licensing, registration or accreditation. The legislative provisions represented a decisive rejection of much of the philosophy underpinning of the 19 th century notion of unlimited freedom of contract. ***During the meeting of the Council of Australian Governments (COAG) in 2014, following the outcome of extensive State-based consultation, the majority of States decided not to pursue the proposed National Occupational Licensing Scheme (NOLS) reform. Most jurisdictions identified a number of concerns with the proposed NOLS model and potential costs. 58

59 The Role of Courts and Tribunals (1) Courts and tribunals The Australian legal system is made up of different courts and tribunals. These are: State c o u rts Federal courts High Court of Australia Tribunals All the above courts have jurisdiction to hear matters concerning consumer law. The same applies to Tribunals. Tribunals and Consumers Tribunals or commissions have the power to make decisions which are binding. Tribunals are less formal than courts and often provide a quicker and cheaper way of solving a legal dispute. 59

60 The Role of Courts and Tribunals (2) NSW has a number of specialist tribunals that hear specific types of cases, such as consumer claims. However, most tribunals in NSW have now been combined into one tribunal, the NSW Civil and Administrative Tribunal (NCAT). NCAT has 4 Divisions: Administrative and Equal Opportunity Consumer and Commercial Guardianship Occupational NCAT hears a range of matters including: fencing matters consumer claims guardianship issues strata and tenancy disputes home building disputes. 60