Dealing with Product Liability Down Under

Up to now, we have written about many different topics on this site that focus on how product liability issues are litigated in the United States. Through a collaborative effort with our friends at the Australia-based law firm DibbsBarker, we offer the first in a series of blog posts and articles about product liability and the management of litigation in Australia and how it differs from the way things are done in the United States.

A person who suffers injury or property damage from a product has the right to sue the manufacturer, designer or seller of that product, similar to the right of an injured party in the United States. While the Australian legal system shares many similarities with the U.S. legal system, the way in which product liability claims are resolved in Australia, in some respects, is very different from how product liability cases are handled in the U.S. courts.

The basic structure of the Australian Legal Courts System and the product liability laws in Australia are similar to the U.S. system, since product liability lawsuits are litigated in both the state and federal court systems.

Australia is a federation of state governments similar to the United States. In addition, Australia’s constitution establishes the federal system of government where powers are shared between the federal government (the Commonwealth) and the states and territories. The constitution provides the basis for law-making powers between the Commonwealth and states/territories. The head of state is the Governor General (the Queen’s representative in Australia) and parliament comprises two houses (the Senate and House of Representatives). Legislation relevant to product liability can be passed in both the federal and state jurisdictions, and the legal system is based on English Common Law. Australia has both a federal court system with each state and territory having its own, separate court hierarchy.

Product liability litigation is usually commenced in either the Federal Court of Australia or the District or Supreme Court in the relevant state. In the United States, a product liability lawsuit can only be commenced in a federal court if diversity of citizenship subject matter exists in the case – meaning the litigants are citizens of different states and the amount in controversy exceeds $75,000. In Australia, there is no such requirement for commencing the action in the federal court system. It is entirely up to the plaintiff where the action is filed – state or federal court. Also, product liability trials are generally heard only by a judge, although there are some circumstances in some state jurisdictions that allow some matters to be heard by a jury. If the matter is heard in the federal court, then it will be presided over by a judge only.

In Australia, the plaintiff’s theory of liability, or basis for the law suit, is referred to as a “cause of action,” as it is in the United States. A defendant’s liability for a product defect that causes an injury typically arises under one or more of the following theories of liability:

(a) Negligence
Common law negligence in Australia has been modified by tort reform by separate state legislation, which now provides that in order to establish negligence under a state’s civil liability legislation, a plaintiff in an action must prove that the defendant:

• Owed the plaintiff a duty of care
• Breached that duty of care
• Caused the damage alleged by the plaintiff.

The Australian court will look at various issues to determine whether a defendant owed a duty to a plaintiff to determine:

• Whether the risk was foreseeable
• Whether the risk was not insignificant
• If a reasonable person in the defendant’s position would have taken those precautions.

In a product liability context, this could involve a product manufacturer’s breach of a duty of care to consumers by failing to take appropriate steps to minimize the risk of personal injury or property damage caused by a defective or unsafe product.

There are a number of defenses to a common law negligence action, including:

• Contributory negligence
• Voluntary assumption of risk (for which definitions of obvious risk under the various pieces of legislation assist in proving that a defendant is not liable for harm suffered as a result of a plaintiff undertaking a dangerous recreational activity).

Damages that flow from a negligence action involve compensatory and non-compensatory damages. Personal injury damages have been modified by legislation in both the federal and state regimes. Such modifications include caps on past economic loss, injury scales for damages relating to pain and suffering, and thresholds for care. In the majority of Australian jurisdictions, punitive and exemplary damages are not available as a remedy in personal injury cases and are only rarely awarded in property damage cases.

(b) Breach of contract
Breach of contract could involve a contract for the supply of a particular product with conditions that the product meet certain standards, or make specific representations about the product, and provide for liability to be addressed in a specific way. Unlike in the United States, in Australia you can combine a cause of action seeking breach of contract and a breach of tortious duty in a personal injury action.

(c) Failure to comply with relevant sections of the Australian Consumer Law
The Australian Consumer Law (ACL) is found in the Competition and Consumer Act 2010 (Cth), which was previously the Trade Practices Act.

This legislation applies to all states and territories in Australia and establishes a “no fault regime” of strict liability for product liability. It provides a level of cohesion and consistency to both consumers and businesses/manufacturers regardless of where an action may arise within Australia.

The ACL has two main purposes:

• To outline the various obligations that manufacturers and suppliers of goods have in relation to marketing, advertising, product safety, quality guarantees and product liability
• To detail the causes of action that regulators, consumers and competitors have against manufacturers and suppliers when their conduct contravenes the legislation.

The ACL has a wider impact on manufacturers and suppliers in a number of areas, including:

• Unfair practices
• Misleading or deceptive conduct or conduct that is likely to mislead or deceive
• Unconscionable conduct
• Unfair contract terms
• Prohibiting false representations relating to the supply of goods
• Liability for implied statutory guarantees in the supply of goods
• Safety standards, bans, recalls, safety warning notices and notification obligations (including a notification period of just two days for a potential safety issue)
• Liability for defective goods
• Requirements for recall of products.

The last cause of action or theory of liability that can serve as a basis for a lawsuit against a seller or manufacturer of a product in Australia relates to a loss or damage suffered by a person as a result of a defective good. This includes actions against manufacturers where loss or damage was suffered as a result of:

• Injuries sustained because of defective goods
• Another individual sustaining injuries because of defective goods
• Another good being destroyed or damaged because of defective goods
• Land, a building or a fixture being destroyed or damaged because of defective goods.

Thus, defendants in Australian product liability litigation face a broader range of allegations than companies that are sued in the United States.

Our future posts will provide some insight into the different ways companies and their insurers can defend themselves in Australian product liability litigation. We invite our readers to submit their thoughts, questions or comments.

Contributing author Bettina Sorbello is an associate with the law firm DibbsBarker in Brisbane, Australia.

This blog post was published originally on June 19, 2015.