Product Liability and Safety in Australia: Overview

A Q&A guide to product liability and safety in Australia.

The Q&A gives a high-level overview of the sources of product liability law, establishing liability, liable persons, defences, excluding/limiting liability, court proceedings, evidence, class actions, litigation funding, remedies, product safety, product recall and reporting requirements.

Sources of law

1. What are the main areas of law and regulation relating to product liability?

Australia’s product liability law arises from both common law and statute. The causes of action available to a person who claims to have been injured or otherwise suffered loss or damage are outlined below.

Common law actions

Common law actions are:

• Breach of contract: this arises from breach of the implied or express terms of a contract, usually between retailer and consumer.
• Tort of negligence: this is a fault-based cause of action and relates to the duty of care owed to the buyer and user to safeguard them against foreseeable risks of injury when using the product as intended.

Statutory actions

Statutory actions include breach of consumer guarantees and express warranties under certain provisions of the Australian Consumer Law (ACL), including provisions making suppliers liable for:

• Goods of unacceptable quality.
• Goods unfit for any disclosed purpose.
• Goods which do not correspond with their description.
• Goods which do not conform to sample or demonstration model.
• Non-compliance with express warranties.
• Injury to persons or property damage suffered due to a product with a safety defect.

Product liability proceedings not involving personal injury claims can also be based on a statutory claim for misleading or deceptive conduct under the ACL, which prohibits a person in trade or commerce from engaging in conduct that is misleading or deceptive (or that is likely to mislead or deceive).

Causes of action

2. What are the most common causes of action and what is required to establish liability under them? When is a product defective?

At common law, in contract actions and actions based on the ACL where strict liability does not apply, the claimant must establish the following elements:

• Loss or damage has been suffered.
• The relevant conduct is in breach of a common law duty, the contract or a provision of the ACL.
• The loss or damage was caused by the defendant’s conduct.

The statutory consumer guarantees and defective product causes of action under the ACL (see Question 1, Statutory actions) are often referred to as “strict liability” provisions.

To establish a breach of a consumer guarantee, a claimant must establish on balance that, for example, the goods are not of acceptable quality or fit for purpose.

For claims under the safety defect regime, the claimant must establish that the goods have a safety defect.

Each of these is a term of art, with a specific meaning defined in the ACL and interpreted in case law (see below). The claimant does not need to establish fault by the defendant.

Goods are considered defective if their safety is not of a standard that persons generally are entitled to expect. This involves two elements: an expectation and an entitlement to a certain level of safety. This is an objective test, based on community knowledge and expectations. Factors that may be taken into account in determining this include the (among others):

• Inherent nature of the product.
• Marketing of the product.
• Warnings on the product.
• Instructions for use.
• Expected use of the product.
• Time when the product was supplied.

Liable parties

3. Who is potentially liable for a defective product? What obligations or duties do they owe and to whom?

Under the ACL, manufacturers are strictly liable directly to consumers for personal injury or property damage suffered due to a defective product.

The definition of “manufacturer” under the ACL is very broad. It includes, for example, an importer of goods if the actual manufacturer is not present in Australia, and a person who allows his or her brand or mark to be affixed to, or used in relation to, the goods in question.

A claimant who wishes to institute a defective/unsafe goods action, but does not know who the manufacturer of the subject goods is, can make a written request to the supplier for information about the manufacturer. If the claimant still does not know the identity of the manufacturer after 30 days of making the request, the supplier is deemed to be the manufacturer for the purposes of the defective goods liability action.

Whether successor corporations can be liable for products manufactured or sold by the predecessor company depends on the particulars of the acquisition transaction. However, if the company’s brand is applied to a particular product, the successor company may find itself brought into litigation. It may then be in the successor company’s interest to seek to manage or defend the litigation, and cross-claim or seek to agree an indemnity or sharing of costs or damages).

Defences

4. What are the defences to a product liability claim?

Negligence

Defences to a claim in negligence include the following.

Voluntary assumption of risk (volenti non fit injuria). This is a deliberate decision by the claimant to assume the risk of injury, loss or damage. The defendant must establish that the claimant was not only aware of the existence of the danger, but also fully appreciated and voluntarily accepted the risk. This defence is difficult to establish, but is a complete defence to any claim.

Contributory negligence. This can be relied on where the claimant’s conduct fails to meet the standard of care required for his or her own protection and safety and is a contributing cause in bringing about his or her injury. Damages are apportioned by the court in accordance with each party’s degree of fault. In certain jurisdictions, contributory negligence can be a complete defence to an action if the court thinks it is just and equitable in the circumstances.

Statutory defences. There are also certain statutory defences to an action for negligence which differ between Australian states and territories. For example, the following have been introduced as complete defences in New South Wales:

• The harm was suffered due to the materialisation of an inherent risk, that is, one that cannot be avoided by the exercise of reasonable care and skill.
• The harm was suffered due to the materialisation of an obvious risk associated with a dangerous recreational activity (this is a risk that would have been obvious to a reasonable person in the claimant’s position, and may include risks that are patent or a matter of common knowledge).
• A defendant who provides professional services acted in a way that, at the time the relevant service was provided, was widely accepted in Australia as competent professional practice (unless the court considers such opinion to be irrational).
• The defendant is considered to be a “good Samaritan” or volunteer and has exercised reasonable skill and care under the circumstances.
• In certain cases where the defendant is a public or other authority.

Safety defect claims

There are a number of specific defences to an action based on a claim that goods have a safety defect, including the following.

No defect when the goods were supplied. The defect alleged did not exist when the goods were supplied by the manufacturer.

Compliance with a mandatory standard. The goods were only defective because of compliance with a mandatory standard. A mandatory standard, in relation to goods, means a standard for the goods or anything relating to the goods that, under a law of the Commonwealth, a state or a territory, must be complied with when the goods are supplied by their manufacturer. It is a law creating an offence or liability if there is such non-compliance. It does not include a standard which can be complied with by meeting a higher standard.

There are penalties for non-compliance with a mandatory standard. In both an action for negligence and under the statutory guarantee provisions of the Australian Consumer Law (ACL), compliance with regulations or standards is a relevant factor in determining whether goods are fit for the purpose for which they were intended.

“Development risk” or “state of the art” defence. The supplier must establish 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.

Similarly, in the case of the manufacturer of a component used in the product, the manufacturer must establish that the defect is attributable to the design of the finished product or to any markings, instructions or warnings given by the manufacturer of the finished product, as opposed to a defect in the component.

Under the statutory guarantee provisions of the ACL, the issue would be whether the product was fit for the purpose for which it was intended, considering any description applied to the goods by the supplier or manufacturer, the price received by the supplier or manufacturer for the goods, and other relevant circumstances.

In negligence, the claimant must establish that the manufacturer failed to exercise reasonable care. The state of scientific and technical knowledge is often relevant to this issue and forms the basis of the manufacturer’s defence.

Source – https://uk.practicallaw.thomsonreuters.com/w-013-1453