New Australian Liability Laws Reviewed

Even if the result of the amendments is not as dramatic as a move offshore by manufacturers, they will at least need to closely re-evaluate their product liability coverage. Moreover, although insurance premiums only represent a small proportion of cost for most goods, the impact of higher insurance premiums may be significant for aircraft manufacturers.

The increase in liability will probably lead to increases in the prices of products. There may also be an increase in the insolvency of businesses unable to meet damages awards. If a manufacturer cannot obtain an insurance policy without a defective design exclusion or a lrnown risk exclusion, that manufacturer will remain a self-insurer.

Of course the primary obligation to take appropriate insurance will be on the manufacturer or on a corporation deemed to be a manufacturer. However, retailers and others handling goods will now need to maintain product liability insurance to meet their obligations at common law, and to guard against the risk of being sued to contribute towards the manufacturer’s liability.

Manufacturers and importers will also need to take further steps aside from re-evaluating their product liability coverage. These steps include:

• making all products with serial numbers or other appropriate identifiers to establish where and when a product was made; • retaining records regarding a product for at least ten years;

• keeping up with worldwide technological advancement;

• documenting production processes and quality assurance systems, as well as retaining all designs (including prototypes), labels and delivery slips. The Trade Practices Amendment Bill 1992 differs in several respects from the contentious legislation initially introduced in December 1991 (refer p31 April 92 AA). These differences include:

• An action for personal injuries must be brought within 10 years from the manufacturer’s supply of the product. Under the initial legislation, an action for personal injuries had to be started within 20 years from the manufacturer’s supply date.

• The burden of proof (who has to prove what and with what degree of certainty), or so-called “Aussie battler” provision, has been removed. The initial legislation required a court to draw an inference that a defect in the product existed and caused the loss when it was reasonable for the court to do so. Because of this provision’s controversial nature it has been referred to the Senate Standing Committee on Legal and Constitutional Affairs. It is possible that it may be incorporated by future amendments to the Trade Practices Act. Under the new amendment, an injured person must prove on the balance of probabilities that a defect existed in the product causing the injury.

• The unidentified manufacturer provision has been amended. An injured person may make a written request to the actual supplier of goods to give particulars of the good’s manufacturer and additional suppliers. If the supplier fails to comply with this request within thirty days, the supplier is deemed to have manufactured the goods.

• The extraterritorial effect of the previous bill has been removed. This would have allowed overseas consumers to sue Australian manufacturers for defective products. Business groups opposed this provision on the ground that exports should be addressed by community standards applied by the importing country.

• The legislation recognises four types of loss caused by defective goods for which a manufacturer may be liable: (a) an individual’s personal ir\juries; (b) loss suffered by a person other than the individual because of the individual’s injuries or death (only if this is not a business relationship); (c) damage to goods ordinarily acquired for personal, domestic or household use; (d) damage to land, buildings or fixtures acquired for private use.

Certainly, these changes are designed to ensure a degree of safety for the community and that is important. However, they are potentially disastrous for Australian aviation manufacturing if the American experience is any guide.

Similar legislation crippled aircraft manufacturing in the US.

How to avoid that situation will be the key to the future viability of the aviation manufacturing industry in this country. Kim Todt is an aviation law specialist with Minter Ellison Morris Fletcher, Melbourne.