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Published online by Cambridge University Press: 24 January 2025
The introduction of Division 2A into Part V of the Trade Practices Act has brought Australia firmly into line with current thinking in the Western world on the liability of manufacturers. The new Division has two aspects. First, it provides consumers, and in some cases their successors in title, with a statutory right to compensation from manufacturers and importers in specified circumstances. Secondly, it grants to sellers of goods a right to indemnity from a manufacturer (or importer) where the latter is liable to compensate the consumer under this Division.
This article examines the likely effect that the introduction of Division 2A will have on the liability of manufacturers and importers of goods. The article commences by outlining the liability of manufacturers in Australia prior to the recent amendments. The operation and scope of Division 2A are then described. The article concludes by focusing on certain practical difficulties and problems of interpretation inherent in the new Division.
1 Trade Practices Amendment Act 1978 (No. 206 of 1978).
2 For a brief international survey of products liability see the Report of the Royal Commission on Civil Liability and Compensation for Personal Injury Cmnd 7054 (1978) Vol. 3.
3 Prosser, The Law of Torts (4th ed. 1971) 641Google Scholar.
4 Coca-Cola Bottling Works v. Lyons (1927) 111 Southern Reporter 305.
5 Henningsen v. Bloomfield Motors Inc. (1960) 161 Atlantic Reporter 2d 69.
6 (1962) 377 Pacific Reporter 2d 897.
7 For a comprehensive treatment of the U.S. position see Frumer, Friedman, Products Liability (1978)Google Scholar. See also: Prosser, “The Assault upon the Citadel (Strict Liability to the Consumer)” (1960) 69 Yale Law Journal 1099CrossRefGoogle Scholar; Prosser, “The Fall of the Citadel (Strict Liability to the Consumer)” (1966) 50 Minnesota Law Review 791Google Scholar; Jolowicz, “The Protection of the Consumer and Purchaser of Goods under English Law” (1969) 32 Modem Law Review 1CrossRefGoogle Scholar; Leigh–Jones, “Products Liability: Consumer Protection in America” (1969) 27 Cambridge Law Journal 54CrossRefGoogle Scholar; Gibson, “Products Liability in the United States and England: the Difference and Why” (1975) 3 Anglo-American Law Review 493CrossRefGoogle Scholar; and Waddams, “The Strict Liability of Suppliers of Goods” (1974) 37 Modem Law Review 154CrossRefGoogle Scholar. For reform proposals see Gingerich, “The Interagency Task Force 'Blueprint' For Reforming Product Liability Tort Law in the United States” (1978) 8 Georgia Journal of International and Comparative Law 279Google Scholar.
8 The Convention is reproduced in the Royal Commission's Report, supra n. 2, Vol. 1, Annex 10.
9 The other member states are the United Kingdom, Eire, Federal Republic of Germany, Switzerland, Italy, Sweden, Denmark, Norway, Iceland, Cyprus, Malta and Turkey.
10 Reproduced in the Royal Commission's Report, supra n. 2, Vol. 1, Annex 11.
11 For a discussion of the European position see: Lorenz, “Some Comparative Aspects of the European Unification of the Law of Products Liability” (1975) 60 Cornell Law Review 1005Google Scholar; Harland, “Products Liability and International Trade Law” (1977) 8 Sydney Law Review 358Google Scholar; Goldring, “Liability of Manufacturers for Defective Goods: Some European Trends” (1977) 51 Law Institute Journal 240Google Scholar; Hanotiau, “The Council of Europe Convention on Products Liability” (1978) 8 Georgia Journal of International and Comparative Law 325Google Scholar. For a general survey see Association Europeene d'Etudes Juridiques et Fiscales, Product Liability in Europe (1975).
12 Law Commission Working Paper No. 64; the Scottish Law Commission Memorandum No. 20; Liability for Defective Products (1975).
13 Supra n. 2, Vol. 1 para. 1236.
14 For the current law in the United Kingdom, see Miller, Lovell, Product Liability (1977)Google Scholar.
15 For a summary of the law relating to the liability of manufacturers for defective products prior to the introduction of Division 2A, see Goldring, Maher Consumer Protection Law in Australia (1979) Ch. 3Google Scholar.
16 For the manufacturer's liability in tort see Fleming, The Law of Torts (5th ed. 1977) Ch. 23Google Scholar.
17 [1932] A.C. 562.
18 Id. 599.
19 The terms of such a contract consist of the manufacturer's representations in consideration of which the consumer contracted with the retailer to purchase the manufacturer's goods. For a discussion on the manufacturer's liability for breach of warranty of a collateral contract see Stoljar, “The International Harvester Case: A Manufacturer's Liability for Defective Chattels” (1959) 32 A.L.J. 307Google Scholar; Fricke, “Manufacturer's Liability for Breach of Warranty” (1959) 33 A.L.J. 35Google Scholar; Fricke, , “Consumers' Remedies” (1962) 36 A.L.J. 153Google Scholar.
20 Sale of Goods Act 1923 (N.S.W.), ss. 17-20; Goods Act 1958 (Vic.), ss. 16-19; Sale of Goods Act 1895-1952 (S.A.), ss. 12-15; Sale of Goods Act 1895 (W.A.), ss. 12-15; Sale of Goods Act 1896 (Qld), ss. 15-18; Sale of Goods Act 1896 (Tas.), ss. 17-20; Sale of Goods Ordinance 1954 (A.C.T.), ss.17-20; Sale of Goods Ordinance 1972 (N.T.), ss. 16″19.
21 E.g. Trade Practices Act 1974 (Cth), Div. 2; Sale of Goods Act 1923 (N.S.W.), ss. 62–64, introduced by the Commercial Transactions (Miscellaneous Provisions) Act 1974 (N.S.W.); Consumer Transactions Act 1972-1973 (S.A.), ss. 8–11.
22 “Manufacturer” is here used in its ordinary meaning and does not include an importer. The basis for the imposition of liability upon importers is considered infra p. 407.
23 See generally the N.S.W. Law Reform Commission, Working Paper on Sale of Goods (1975) Pt 6; Trade Practices Act Review Committee; Report to the Minister for Business and Consumer Affairs (1976) paras 9.120-9.127; Royal Commission on Civil Liability and Compensation for Personal Injury Cmnd 7054 (1978) Vol. 1 paras 1227-1235.
24 Trade Practices Act Review Committee: Report to the Minister for Business and Consumer Affairs (1976).
25 Id. para. 9.122.
26 Ibid.
27 A contrary argument is that a manufacturer will prefer to pay higher insurance premiums which may still fall short of the cost of higher standards of quality control.
28 However, insurers are likely to be faced, at least initially, with great difficulties in correctly underwriting product liability risks.
29 For a discussion of this area of the law see Donald, Heydon, Trade Practices Law (1978) Vol. 2, especially 509-613, 618-619, 676-697, 827-846Google Scholar; and Taperell, , Vermeesch, Harland, Trade Practices and Consumer Protection (1978), especially 80-83Google Scholar, 477-527, 533-536, 570-579, 616-644.
30 The words “or is likely to mislead or deceive” were added by the TradePractices Amendment Act 1977.
31 For a discussion of s. 87 see Donald, and Heydon, op. cit. 851-854Google Scholar; and Taperell, , Vermeesch, Harland, op. cit. 630-633Google Scholar.
32 For a discussion of the South Australian and Australian Capital Territory legislation see Senate Standing Committee on Constitutional and Legal Affairs, Report on Manufacturers Warranties Ordinance 1975 (1976) and Taperell, , Vermeesch, Harland, op. cit. 714-717Google Scholar.
33 The South Australian Act was itself based on the Ontario Law Reform Commission's Report on Consumer Warranties and Guarantees in the Sale of Goods (1972) Chs 1 and 9. For a discussion of the Canadian position see Waddams, Products Liability (1974)Google Scholar.
34 Note that since this article was submitted for publication, a booklet replacing Ch. 18 of Taperell, , Vermeesch, Harland, op. cit. has been published dealing with the Trade Practices Amendment Act 1978Google Scholar.
35 S. 4(1) defines “corporation” but must be read in conjunction with ss. 5 and 6 which extend the operation, inter alia, of Division 2A to persons not being corporations. See generally Donald, Heydon, op. cit. Vol. 1 Ch. 2Google Scholar; and Taperell, , Vermeesch, Harland, op. cit., especially 23-24, 28-30, 33-39, 122, 458Google Scholar.
36 Note however s. 74D discussed infra p. 410. The section gives a statutory right of action to any person who derives title to goods not of merchantable quality through or under a consumer.
37 S. 74A(2).
38 S. 74H discussed infra pp. 413-414.
39 See s. 74H(b)(ii).
40 S. 74A(l).
41 S. 74A(3)(a) and (c).
42 S. 74A(3)(b).
43 S. 74A(4).
44 Compare ss. 74B-74E with ss. 71(2), 70, 71(1) and 72 respectively. Note the similarity of the definition of “merchantable quality” in s. 740(3) to that in s.66(2).
45 This view appears to be favoured by the Trade Practices Commission in its Information Circular No. 26: Consumer Protection, Sellers' and Manufacturers' Obligations (1979) paras 2.3-2.12.
46 S. 74A(l).
47 “Consumer claim” here includes a claim by a person who acquires title to the goods through or under a consumer in the case of a claim under s. 74D.
48 Ss. 74B(2), 74C(2) and (3), 74D(2), 74E(2), 74F{2) and (3) and 74G(2).
49 Paras (a) and {b) of sub-s. (1) of ss. 74B-74G.
50 S. 74H(b )(ii).
51 S. 74L(3) sets out a number of factors for the courts to consider when deciding what is fair and reasonable.
52 Compare s. 74L withs. 68A(1 )(a)(i) and (ii).
53 Supra p. 401.
54 Cf. Council of Europe: Convention on Products Liability in Regard to Personal Injury and Death (1977), Art. 3 para. 5 and the Draft E.E.C. Directive on Products Liability, Art. 3 which expressly provide for this situation.
55 Supra n. 29, 751.
56 Ibid. The authors go on to assert that the rights of manufacturers inter se would be governed by the ordinary principles of contribution.
57 Cf. the approach taken by the Strasbourg Convention, op. cit., Art. 3 para. 3 which provides that where “the product does not indicate the identity of any of the persons liable ... each supplier shall be deemed to be a producer [manufacturer] ... and liable as such, unless he discloses, within a reasonable time, at the request of the claimant [consumer], the identity of the producer or of the person who supplied him with the product ... “.
58 Supra n. 29, 751.
59 Hocking v. Western Australian Bank (1909) 9 C.L.R. 738, 746 per Griffith C.J.
60 The seller's right to indemnity from the manufacturer is discussed infra
61 Tonking, “Manufacturers Warranties” in Recent Legal Developments in Trade Practices (The College of Law 1978) 8-9Google Scholar.
62 Ss. 74B-74G. However, it would be difficult for a claim based on this argument to succeed under ss. 74B-748.
63 Harland, “Product Liability: The Proposed Commonwealth Legislation” (1978) 52 Law Institute Journal 231, 240-241Google Scholar; Tonking, op. cit. 8Google Scholar.
64 Manufacturers Warranties Act 1974 (S.A.) s. 3 and Law Reform (Manufacturers Warranties) Ordinance 1977 (A.C.T.), s. 3(3)(b).
65 E.g. see such cases as Broughton v. Beard Watson & Co. Ltd (1944) 44 S.R.(N.S.W.) 62 and Re Cole (A Bankrupt) [1964] Ch. 175.
66 In contrast, in the United Kingdom the Pearson Commission has recommended a system of strict liability in tort. Hence anyone who suffers injury from a defective product has a cause of action. Further, neither the Strasbourg Convention (Art. 3 para. 1) nor the E.E.C. Draft Directive (Art. 1) limit the liability of producers of defective products to any particular class of persons.
67 Harland, supra n. 60, 245Google Scholar.
68 This obligation has no counterpart in the Pearson Commission Report, the Strasbourg Convention, or the E.E.C. Draft Directive.
69 S. 74F(4).
70 E.g. where there are a number of intermediaries in the chain of supply separating the manufacturer from the consumer.
71 Clearly, a manufacturer that gives notice that it cannot promise the availability of repair facilities and/or parts, is unlikely to achieve a successful level of sales of its product unless the potential purchaser is convinced that the product is highly unlikely to require repair, that alternative facilities will be reasonably available, or that the product is of the “throw-away” type.
72 S. 74F(l)(b).
73 Law Reform (Manufacturers Warranties) Ordinance 19'77, s. 6(b).
74 See Manufacturers Warranties Act 1974 (S.A.), s. 4(1)(a).
75 Supra p. 405.
76 See generally Donald, Heydon, op. cit., Chs 11 and 12Google Scholar; and Taperell, , Vermeesch, Harland, op. cit. Ch. 14Google Scholar.
77 Supra n. 19.
78 Supra p. 406.
79 Cf. Law Reform (Manufacturers Warranties) Ordinance 1977 (A.C.T.), s. 6(a) and Manufacturers Warranties Act 1974 (S.A.), s. 5 (1 )(a).
80 S. 74A(l).
81 Supra n. 29.
82 S. 74G(l). Similar provisions are found in ss. 74B-74H.
83 S. 86.
84 See Gummow, “Pendent Jurisdiction in Australia-Section 32 of the Federal Court of Australia Act 1976” p. 211CrossRefGoogle Scholar.
85 Supra p. 406.
86 Op. cit. Vol. 1 para. 1269.
87 Op. cit. Art. 7.
88 Op. cit. Art. 9.
89 S. 53(g) provides that it is a criminal offence to make a false or misleading statement concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy.
90 Trade Practices Commission Information Circular No. 26: Consumer Protection, Sellers' and Manufacturers' Obligations para. 4.8.
91 Donald, Heydon, op. cit. 720Google Scholar.
92 Supra p. 411.
93 A similar problem exists in respect of an action for damages under s. 82. There, it is thought that the measure of damages is probably the measure applicable to one in tort for deceit: see Harland, “The Application of Consumer Law to Commercial Transactions: Some Further Implications of the Trade Practices Act 1974” (1978) 8 Commercial Law Association Bulletin 23Google Scholar.
94 Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd [1949] 2 K.B. 528, 539 per Asquith L.J.
95 Blunt, “Product Liability Under the Trade Practices Act 1974” 13Google Scholar. A paper delivered at a Seminar on Product Liability held at Macquarie University, 15th March, 1979.
96 Byrom, “Do Damages Depend on the Same Principles Throughout the Law of Tort and Contract?” (1968) 6 University of Queensland Law Journal 118Google Scholar.
97 Manufacturers Warranties Act 1974 (S.A.), s. 5; and Law Reform (Manufacturers Warranties) Ordinance 1977 (A.C.T.), s. 5.
98 See also Tonking, supra n. 58, 5 who appears to favour this viewGoogle Scholar.