Background
Facts
Decision
Comment


Background

A recent decision of the Queensland Supreme Court has held the manufacturer of Winnebago motorhomes liable for the damage to property caused by a fire that originated from one of its motorhomes. The case confirms that liability under the consumer protection and product liability provisions of the legislation is strict and has significant implications for manufacturers. This particularly applies to those who purchase fully assembled parts, which may have hidden defects unknown to the manufacturer. Courts are prepared to hold manufacturers responsible even in the absence of negligence on the manufacturers' part, if their goods do not meet the particular standards required.

Facts

The case(1) involved a fire incident that originated from a newly purchased Winnebago motorhome and caused substantive damage to the property belonging to the plaintiff. It was alleged that the fire had been caused by a defect in the motorhome's air conditioning unit. The plaintiff commenced proceedings against the seller of the motorhome, the Winnebago manufacturer and the importer of the air conditioning unit, for negligence and breach of various consumer protection provisions under the Trade Practices Act 1974 (Cth) (now known as the Competition and Consumer Act 2010 (Cth)).

A substantive part of the decision was concerned with a fact-finding exercise to determine whether the Winnebago had a defect and whether that defect actually caused the fire. Justice Lyons found that the fire was caused by an electrical fault in the Winnebago's air conditioning unit. Despite not finding the manufacturer negligent, the judge went on to hold the manufacturer liable under the consumer protection provisions for supplying a product that was defective, not reasonably fit for purpose and not of merchantable quality.

Decision

No negligence
The judge dismissed the negligence claim against the manufacturer, as it had not been established that the electrical fault was one that could have been detected by exercising reasonable care. The judge noted that the manufacturer did not manufacture the defective air conditioning unit, but had acquired it fully assembled. The supplier was reputable and the air conditioning units had been used for many years without failure. Thus, the occurrence of a fire in a component of the motorhome did not establish negligence on the part of the manufacturer, as it was not shown that any precaution could have been taken to detect and rectify the defect or to prevent the fire.

The plaintiff also brought an action under Section 74G of the Trade Practices Act(2) for breach of an express warranty, relying on a representation in the Winnebago brochure that safety was a "top priority". The judge held that the warranty had not been breached. He found that to make safety a top priority did not mean that hidden defects in a component supplied by another manufacturer would always be detected. Evidence also showed that relevant safety checks had been carried out by the manufacturer.

However, despite finding that there was no negligence or breach of an express safety warranty, the judge held that the manufacturer was liable under the consumer protection provisions of the act.

Consumer protection provisions
The manufacturer was held liable under Sections 74B and 74D of the act(3) for losses arising from the Winnebago being not reasonably fit for its purpose and not of merchantable quality. Given the nature of the Winnebago and its ordinary use as a motorhome by the plaintiff, the presence of the electrical fault in the air conditioning unit meant that the Winnebago was not reasonably fit for use as a motorhome, nor was it of merchantable quality.

The seller of the Winnebago and the importer of the air conditioning unit were also held liable under identical or similar provisions.

The plaintiff also claimed against the manufacturer under Sections 75AF and 75AG of the act,(4) for damage to goods and buildings or fixtures as a result of a defect in the Winnebago. Under the legislation, goods are considered to have a defect if their safety is not at a level such as persons generally are entitled to expect.(5) Relevant circumstances to be considered include the manner in which the product has been marketed, the timing of supply and the use to which the product might reasonably be expected to be put.(6) The manufacturer argued that given the safety checks performed, the latent nature of the defect and the lack of previous failure, the air conditioning unit and the Winnebago were as safe as persons could generally be entitled to expect.

The judge rejected this argument and held that the Winnebago was defective and the manufacturer was liable. The test is objective and is concerned with what the public at large, rather than any particular individual, is entitled to expect. Importantly, the judge highlighted the proposition that the plaintiff need not establish negligence on the part of the manufacturer to establish that goods have a defect. However, goods need not be absolutely free from risk under the legislation and may carry some risk associated with safety without being "defective". The fact that a defect was latent and not detectable did not provide a defence to the defective goods claim.

In this case, the judge found that the Winnebago was defective, as persons generally are entitled to assume that the motorhome will not catch fire simply as a result of leaving the air conditioning unit on overnight. This conclusion was supported by the relatively short period between the time of purchase and the incident. Further, the Winnebago was marketed as a vehicle in respect to which safety was important and one which could be left connected to an electricity supply with the air conditioning unit in operation.

Comment

The statutory consumer protection and product liability laws are relatively stringent and manufacturers may incur liability if the goods they supply are defective, not reasonably fit for purpose or not of merchantable quality. Manufacturers may be found liable, even if:

  • there is an absence of negligence on the part of the manufacturer;
  • the manufacturer has taken reasonable precautions, such as carrying out safety checks;
  • the defect is hidden and undetectable;
  • the defect is in a separate component which the manufacturer acquired as a fully assembled unit; and
  • the supplier of the component is reputable and there has been no previous failure with the product.

For further information on this topic please contact Moira Saville at King & Wood Mallesons by telephone (+61 2 9296 2000), fax (+61 2 9296 3999) or email (moira.saville@au.kwm.com).

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.

Endnotes

(1) Fulcher v Knott Investments Pty Ltd, [2012] QSC 232.

(2) For the relevant provisions, now see Sections 59 and 271 of the Australian Consumer Law and Schedule 2 of the Competition and Consumer Act 2010 (Cth).

(3) Now see Sections 54, 55 and 271 of the Australian Consumer Law and Schedule 2 of the Competition and Consumer Act 2010 (Cth).

(4) Now see Sections 140 and 141 of the Australian Consumer Law and Schedule 2 of the Competition and Consumer Act 2010 (Cth).

(5) Section 75AC(1) of the Trade Practices Act 1974 (Cth), now see Section 9(1) of the Australian Consumer Law and Schedule 2 of the Competition and Consumer Act 2010 (Cth).

(6) Section 75AC(2) of the Trade Practices Act 1974 (Cth), now see Section 9(2) of the Australian Consumer Law.