Under the Australian Consumer Law (ACL), consumers can pursue an action against a manufacturer for product safety defects where they suffered an injury, loss and/or damage. Manufacturers and consumers alike are familiar with the consumer protections the ACL affords and the standard for product safety expected of manufacturers in Australia. Under sections 138 to 142 of the ACL, a consumer can bring the following actions against a manufacturer:

  1. Liability for defective goods causing loss to the injured individual (s 138);
  2. Liability for defective goods causing injury to a person other than the injured individual (s 139);
  3. Liability for the defective goods causing loss to other goods (s 140); and
  4. Liability for defective goods causing damage to land, buildings or fixtures (s 141).

We set out below what elements a manufacturer must first satisfy to be held legally responsible for product safety defects under the ACL. We will also cover the relevant defences a manufacturer can rely on when a consumer brings an action against them for a product safety defect.

Who is a Manufacturer?

Before exploring the defective goods action, it is important to understand who is considered a “manufacturer” under the ACL. If you think about the consumer goods that you have purchased recently, you will see that they are presented in various packaging and labels which indicate that multiple corporate entities are involved in the making of the product. For example, there are often different parties involved during branding, importation, packaging and distribution. This raises the important question of whether all parties that have dealt with a product with a safety defect will be regarded as the manufacturers. Under section 7 of the ACL, a person will be deemed a manufacturer in the following circumstances:  

  • The actual manufacturer of the goods;
  • A person who holds themselves out to the public as the manufacturer of the goods;
  • A person who allows another party to represent to the public that they are the manufacturers;
  • A person who causes or allows their business name, brand or mark to be applied to the goods; and
  • A person who imports goods to Australia where the manufacturer does not have a business in Australia.  

It is important to note that the above categories are not mutually exclusive, and there have been situations where more than one party has been deemed to be the manufacturer. The ACL also covers situations where a consumer does not know the manufacturer of the goods. In such circumstances, s 147 of the ACL allows a consumer to request the manufacturer’s name from the supplier, who is often the retailer. If the supplier is unable or unwilling to provide details of the manufacturer, after 30 days, they will be deemed the manufacturer for a defective goods action.

What Constitutes a Safety Defect?

The consumer must establish a safety defect for a defective goods action to succeed. Section 9 contains the meaning of a safety defect. As a general rule, goods will be regarded to have a safety defect if their safety is not at the standard that a consumer is generally entitled to expect (s 9(1) of the ACL). Section 9(2) of the ACL also provides useful criteria for evaluating the appropriate safety standard of the goods. In determining the safety standard, reference can be made to:

  • The way the product has been marketed;
  • Packaging;
  • Use of a mark in relation to the goods;
  • Any safety warnings or instructions in relation to the goods;
  • The reasonable use and purpose of the goods; and
  • The time in which the goods were supplied to the market.

It is important to bear in mind that when considering what constitutes a safety defect, the courts will take into account the community standard and expectations, rather than the subjective knowledge and expectations of the particular consumer.

The Four Defective Goods Actions

1. Liability for Defective Goods Causing Loss by the Injured Individual

Section 138 of the ACL provides that a manufacturer will be liable, if because of their defective goods, a person suffers injury or death. In this situation, the manufacturer is responsible for the actual loss the consumer suffered as a result of injuries sustained.

2. Liability for Defective Goods Causing Injury to a Person Other than the Injured Individual

According to s 139 of the ACL, a manufacturer will be liable if any person suffers injury as a result of a consumer suffering from an injury or death due to a product defect. This allows for persons who are dependent on the injured consumer to claim compensation if they suffer loss as a result of the injury or death of the consumer. However, this does not include commercial relationships or an employer-employee relationship (s 139(1)(e)).

3. Liability for Defective Goods Causing Loss to Other Goods

Section 140 of the ACL imposes liability on the manufacturer in circumstances where goods that are used for personal, household, domestic or consumption purposes are damaged as a result of a defective good.

4. Liability for Defective Goods Causing Damage to Land, Buildings or Fixtures

The final defective goods action covers damage to land, buildings and fixtures as a result of a defective good. However, s 141 of the ACL limits the application of this section to land, buildings and fixtures acquired for personal use only. As such, the manufacturer will not be liable in the event of damage which is caused to a commercial premises as a result of their defective good.

Defences to a Defective Goods Action

Section 142 of the ACL sets out four defences that a manufacturer of a defective good can rely on, namely: 

  • The defect did not exist at the time of supply (s 142(a));
  • The defect occurred as a result of compliance with a mandatory standard (s 142(b));
  • The defect could not have been uncovered due to the state of technical and scientific knowledge at the time. This is referred to as the “state of art” defence (s 142 (c)); and
  • The defect is contained in the finished good and is connected only with the design, markings or instructions of the goods (s 142(d)).

Key Takeaways

The ACL imposes strict obligations on manufacturers to supply goods which are safe to the community and do not cause injuries or loss to consumers. When a manufacturer has failed to comply with the standard of care stipulated in the ACL, a consumer may rely on a defective goods action. By taking measures to avoid a defective goods action, manufacturers not only reduce their legal liability but they also establish a relationship of trust with consumers. A defective goods action has the potential to damage a manufacturer’s brand and associated goodwill significantly. If you are conducting a business where you are providing goods to consumers, get in touch with our consumer lawyers on 1300 544 755 to better understand your responsibilities. 

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