Over seventy-nine years ago, in the Scottish town of Paisley, a young woman was meeting with a friend at a local café when she decided to order a bottle of ginger beer. After drinking a glass of the refreshing beverage, she started to pour herself a refill from the opaque bottle, when out flew the decomposing body of a snail. The sight alone was enough to send her into hysterics; a doctor later diagnosing her as suffering from Gastroenteritis and nervous shock. Despite no previous claims being successfully made between a consumer and a manufacturer where there was no direct relationship, she decided to sue the manufacturer directly, claiming compensation for her illness caused by the consumption of the tainted soft-drink. In one of the most important legal decisions of the 20th century, the House of Lords accepted her arguments and for the very first time recognised that all manufacturers have a general duty of care to ensure his or her goods are free from defects that could cause injury to members of the public.
Seven years later and shifting our attention down to London, another young woman was walking along a footpath in the borough of Yiewsley when she was suddenly hit in the leg by a flying metal object. This object turned out to be a flange that had become detached from the wheel of a passing lorry and having suffered significant injury, the pedestrian decided to sue the owner of the vehicle for negligence. The case would have ended there, if it had not been for the fact that immediately prior to this incident, the lorry had been at a mechanic’s garage where they had undone the flange in question in order to take off a wheel and repair a puncture. In court, the owner unsurprisingly argued the metal component hadn’t been reattached properly by the mechanics, and claimed the injury was therefore not his fault. The court agreed and stated that he was entitled to assume the work had been done to a satisfactory standard. Like the manufacturers of ginger beer, the court found the repairers owed a duty of care for the work they completed and were therefore entirely liable for the injury, despite there being no direct contractual relationship between the repairer and the young woman.
Back To The Future
While at first glance, these two somewhat obscure UK cases may appear to have little consequence on the modern marine industry, the legal principles they championed have gone on to form the backbone of our system of commercial law and consumer protections. Common law (judge made law) actions such as those taken by these two women still exist and their principles have been enacted by parliament into legislation. This legislation not only forms the basis of some claims, it also sets down the legal standards taking up the slack when it comes to ensuring both the safety and quality of services and goods sold in the Australian marketplace.
In 2010, the Federal Government’s Australian Consumer Law (‘ACL’) replaced the aging Trade Practices Act (TPA) and unified several different state consumer protection systems. While this new legislation covers a wide range of commercial practices, the focus of this article is on understanding some key legal tests and definitions in relation to ‘consumer guarantees’ and ‘safety defects’. Much of this should be familiar to those who have worked in the manufacturing sector however a revision may be helpful as the ACL couches things in a slightly different language.
Does the ACL apply?
A ‘consumer’ is defined in the ACL as a person who has acquired goods either for a purchase price less than $40,000, or acquired goods that were of a kind ordinarily acquired for personal, domestic or household use or for consumption. However a person is not a consumer if they have purchased the goods for the purpose of re supply or to use the goods in any commercial venture. Therefore, if your client falls into the bracket of being a consumer the act and its definitions will assist you in understanding what standards are required in providing goods (and services).
Consumer Guarantees
Looking first to consumer guarantees the ACL states that an ‘affected person’ may pursue damages against a manufacturer of goods, if the manufacturer has, in trade or commerce, supplied goods to a consumer that are not of ‘acceptable quality’. Goods here aren’t just referring to the finished product, but also include any accessory or component parts. This means a consumer is able to sue a person who makes, assembles or simply applies their own name, brand or mark on goods or imports goods, where the quality is not acceptable.
Acceptable Quality
So what is ‘acceptable quality’ as with most things in law its not black and white. The question is would a reasonable consumer still have purchased the goods had they known about the flaw at the time of supply. In making this determination, the court will look at the nature and price of the goods, statements or representations made about the goods by the manufacturer, as well as any other relevant circumstances. These include whether the goods:
- were fit for all the purposes for which they are commonly supplied, free from defects
- are of acceptable appearance and finish
- are safe
- and finally are durable to the extent that a reasonable person would regard as acceptable.
Safety Defects
One significant difference between the old TPA and the new ACL is that the TPA was silent on the safety of services with legal action only available in regards to the safety of a product. The legal test in relation to safety defects is, ‘are the goods (products and services) not as safe as a person is generally entitled to expect?’ Again, there is no definitive answer as this is an objective standard of safety based on community knowledge and expectations. However, the assessment decision is not all lost in the wash at sea, there is some guidance in the act which states the court should consider;
- the circumstances including the manner and the purposes for which the goods have been marketed
- any instructions or warnings in relation to the goods issued a the time of purchase
- what use might reasonably be expected.
Reporting Serious Injury or Illness
Under the ACL a mandatory reporting obligation now exists for when a supplier of goods becomes aware that goods or services it supplied caused death, serious injury or illness. Serious injury is defined in the ACL when an injury requiring medical or surgical treatment by a medical practitioner or a nurse and where an illness is suffered being significant enough to warrant hospitalisation and ongoing treatment.
Penalties
Under the ACL the failure to notify the relevant government body of death, serious injury or illness caused by a product or service provided by your business carries significant penalties. A failure to report may result in penalties of $16,650 for companies and $3,300 for individuals.
In respect to serious breaches of product safety and services there are penalties of up to $1.1 million dollars for companies and $220,000 for individuals. At this stage your probably questioning whether you should have sold your business years ago when things seemed simpler, but the reality is even if you feel you are doing the right thing, your business should not rely on verbal agreements as evidence. Given the potential for these serious fines if your business is going to survive the new consumer laws and any potential claim apart from maintaining high standards of product and service your business should keep accurate written documents, for the best evidence is written evidence in any defence.
While there is no argument about the onerous expectations on business in today’s market place not all the blame can be sheeted back to the expectations required under consumer laws. The reality is that this type of law was created as a response to the industrial revolution, finding its modern roots over 79 years ago. And once the genie or should I say snail was let out of the bottle the idea of product liability and laws that developed have in many cases developed as a response to bad practices and rooted in the principle of protection of the consumer. The writer strongly suggests, as this article cannot cover all the new changes under the ACL that concerned business owners contact a lawyer with expertise in this area to do a thorough legal business check.