Liability Law of Consequence to Aviation

The legislation directs a court to accept that if, on the evidence (whether direct or circumstantial), it is reasonable to infer that loss was caused by a defect in goods, then the court must draw the inference and allow the consumer’s case to proceed. Once a prima facie case has been established, the consumer must prove the goods caused the damage, the consumer did not misuse the goods and the defectiveness of the goods. After the inference has been drawn, the manufacturer must disprove (on the balance of probabilities) all three elements of the consumer’s action.

In preparing the legislation, the Government has not gone as far as adopting the approach recommended by the Australian Law Reform Commission in 1988. The commission concluded that manufacturers should be held liable whether or not products were defective. Aside from shifting the risk of loss resulting from defect-related injuries, the strict liability approach was justified on the grounds that it was an incentive for manufacturers to produce safer products. Under the new legislation, a corporation will face liability if it manufactures and supplies goods which: (a) have a defect including design, manufacturing, and instructional defects; and (b) cause the death of a person or injuries to a person, or cause damage to goods acquired for personal, domestic and household use.

The liability will no longer depend solely on a contract of sale or a duty of care owed at common law. And a manufacturer will be liable to any person who suffers damage as a result of a defect in its goods, regardless of their legal proximity to the manufacturer. Liability will also extend to any legal entity which suffers consequential loss resulting from injury to a person or damage to personal or domestic goods. If a product causes death, the bill allows a deceased’s personal representative to bring an action on behalf of the deceased’s estate.

A defect need not be a fault. The bill also provides that ‘goods have a defect if their safety is not such as persons generally are entitled to expect’. Whether a product is defective will require an examination of its presentation, for example warning labels, adequately explained instructions, and what might reasonably be expected to be its possible uses and applications. However, there is no guarantee that the expectations of persons generally will be reasonable expectations.

Under the bill the specific defences available to manufacturers are that:

• the product was defective only because it complied with a mandatory standard. This defence may enable the manufacturer to shift liability to the Commonwealth;

• in the case of a manufacturer of a component part, the defect is attributable to the design of the product in which that part was fitted, or to the instructions given by the manufacturer of the product itself;

• the state of scientific and technical knowledge at the time the product was put into circulation was not such as to allow the defect to be discovered;

• it is probable that the defect which caused the loss did not exist at the time the product was put into circulation.

A potential claimant may request any or all of the suppliers in the chain of supply to provide particulars of the corporation which manufactured the goods or the name of their supplier. If the supplier does not reply within a reasonable time or the potential claimant still cannot identify the manufacturer, each supplier which didnot respond will be deemed to have manufactured the goods for the purpose of the litigation. The phrase ‘reasonable time’ has not been defined. This section of the legislation will increase retailers’ legal costs if they are joined to an action when ignorant of the manufacturer’s identity. It may also have an impact on the insurance cover available to suppliers as the supplier’s risk of liability under this section may be difficult for insurers to quantify.

A contributory negligence approach istaken by the legislation where the damage suffered by the consumer is in part his own fault, or the fault of any person for whom the consumer is responsible. Any award of damages may be reduced according to the assessed contribution made to the loss or injury through the fault of the consumer. Actions will have to be brought within three years of the time the consumer either became aware, or should have become aware, of the damage and identity of the manufacturer. At the same time, rights to compensation for damage to property will lapse 10 years after the product was first placed on the market. Rights to compensation for personal injury are subject to a 20 year limit.

A problem with this section is that often the manufacturer will not have knowledge of when the consumer became aware, or ought reasonably to have become aware, of the alleged loss. Accordingly, a manufacturer will not necessarily know when a limitation of actions defence is available to it.

At this stage the new bill is not expected to become law before August this year giving all those likely to be affected plenty of time to prepare for what is the most significant change to the product liability laws of Australia for almost two decades.