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Product liability

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Under the Australian Consumer Law, consumers who suffer loss or damage because of safety defects in a manufacturer's goods when supplied in trade or commerce can:

  • take the manufacturer to court (a court can award compensation to cover the loss or damage), or
  • make a complaint to a consumer protection agency, which may take action on the consumer's behalf.

When does a product have a safety defect?

A product has a safety defect if its safety is not what the community is generally entitled to expect. While the level of safety will vary from case to case, it is ultimately for the court to determine whether a product has a safety defect. There are various factors the court will take into account when making its determination, including:

  • how and for what purposes the product has been marketed
  • the product’s packaging
  • the use of any mark in relation to the product
  • instructions for, or warnings about, assembling and using the product
  • what might reasonably be expected to be done with the product
  • the time when it was supplied

A good will not necessarily be considered to be safe just because it complied with a Commonwealth mandatory standard.

Expected levels of safety differ for older products because they cannot be expected to be as safe as brand new products. Similarly, older models of products would not necessarily be considered defective simply because more recent models have improved safety features.

Who may be liable for supplying a product with a safety defect?

The product liability provisions of the Australian Consumer Law will generally apply to a manufacturer that supplies the goods in trade or commerce.  A manufacturer includes a company that: 

  • makes or puts together the product
  • imports the product, if the maker of the goods does not have an office in Australia
  • uses its own brand name in relation to the product
  • holds itself out to the public as the manufacturer of the product
  • permits another person to promote the product as having been manufactured by the company.

A retailer can also be a manufacturer of the product and therefore liable.

When can a consumer seek compensation?

A consumer can seek compensation from a manufacturer who has supplied goods with safety defects, if the goods caused loss or damage.

'Loss' and 'damage' can include:

  • injuries to the person making the claim, or injuries or death to another individual
  • economic loss caused by damage to, or destruction of another good, land, a building or a fixture.

If a person takes a manufacturer to court and wins, the court decides how much compensation is due.

Who can bring an action for compensation? What type of loss may be compensated?

The Australian Consumer Law allows anyone to claim for personal injury or damage to private property (including land or buildings) resulting from a safety defect in the product.

Dependants of a person injured or killed by a safety defect in goods can also claim for the losses they suffer as a result.

Damage to commercial property is not covered; nor is any loss arising from a business relationship, such as loss of profits.

The Act also excludes losses for claims made for workers' compensation and losses regulated by international agreements.

Time limits for bringing a product liability action

You have three years to bring an action from the time you become aware (or ought reasonably to have become aware) of the loss, the defect and the identity of the manufacturer.

Additionally, any action must commence within 10 years of the time the manufacturer supplied the goods with safety defects.

When is a manufacturer not liable for the defective product?

Several statutory defences are provided to a manufacturer against a product liability action. The defences are available when:

  • the safety defect did not exist at the time of supply by the manufacturer
  • the product was a component of a finished product and the safety defect is only attributable to the design of the finished goods or the packaging, instructions or warnings included in those finished goods—then, the manufacturer of the finished goods is liable and not the component maker
  • the safety defect could not have been discovered at the time the manufacturer supplied the goods because there was insufficient scientific or technical knowledge at that time
  • the safety defect only existed because a mandatory standard was complied with. In this case, the Commonwealth may have to pay any compensation.

It's important to also note that when the actions or omissions of an injured person contribute to the loss, the court can reduce the amount of compensation payable to the appropriate extent.

What can a manufacturer, retailer or importer do to reduce the risk of action?

Minimising the risk of action under the product liability provisions generally requires no more of manufacturers, importers and retailers than responsible business practice.

A culture of safety is an important attribute of any responsible organisation and should include being aware of what happens when the business's product is in the hands of the consumer.

A business’s quality assurance system, design, production, record keeping and marketing procedures as well as customer information material can promote the safety of its products with consumers.

What is the ACCC's product liability role under the Australian Consumer Law?

While the Australian Consumer Law provides consumers with rights to take action through the legal system themselves, the ACCC may sometimes take representative action on behalf of one or more consumers who have suffered harm from a product with a safety defect. This is intended to improve access to the law and to allow the ACCC to act when goods have caused, or may cause, widespread detriment.

The ACCC has an important role in informing businesses and consumers about all aspects of the Australian Consumer Law, including their rights and obligations under the product liability provisions.

Other liability avenues

Australia’s product liability laws are a mixture of common law and federal and state legislation. In addition to the product liability provisions in the Australian Consumer Law, people who have been injured or otherwise sustained loss or damage may take action under the common law tort of negligence.

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