Australia: Product Liability insurance - a manufacturer who assembles but does not ´supply´ goods is not covered by section 75AD Trade Practices Act

Case Note James Spittles v Michael´s Appliance Services Pty Limited & Ors [2008] NSWCA 76 14 April 2008

Bell JA, Handley AJA and Barr J

In Brief

• The Court of Appeal considered the liability of a manufacturer for the supply of defective goods under s 75AD of the Trade Practices Act.

• It was common ground that the respondent, Michael's Appliance Services Pty Limited was a manufacturer but the trial judge held that it had not supplied the goods. It was found that the respondent had worked on the goods as a licensee in the premises of another but had never had possession of the goods and had not delivered them to anyone.

Background Circumstances

• We note that s 75AD of the Trade Practices Act was enacted for the protection of consumers. Section 75AD relevantly provided:

• Section 75AA provides that "manufactured" includes "assembled".

• Furthermore s 4(1) of the Act defines "supply" as follows:

Facts

• The plaintiff was cleaning the stainless steel panels on the front of his new Maytag refrigerator when a finger of his right hand was cut on a razor like burr on the bottom of one of the panels.

• The two-door refrigerator was manufactured in the United Stated and imported by the first cross-defendant, Maytag Australia Pty Limited. It was delivered to a warehouse, operated by an organisation described as M3 Logistics, which was not otherwise identified.

• The refrigerators were black and, to improve their marketability in Australia the doors were covered in stainless steel cladding.

• The stainless steel panels were sold by the second cross-defendant to Maytag Australia and delivered to the warehouse.

• The respondent was engaged by Maytag Australia to fix the panels to the refrigerators which were then delivered by Maytag to retailers. The plaintiff purchased the refrigerator from Harvey Norman in 2003.

• The respondent fitted the panels to the refrigerator in the warehouse. In doing so it did not acquire title to the refrigerators or the stainless panels. Its contract was for work and labour as evidenced by purchase orders and invoices.

District Court Decision

• The trial judge, Balla DCJ was congratulated for her clear and concise findings of fact which are relevantly set out above. They were not challenged. Her Honour found for the defendant on the basis that it did not "supply" the refrigerator and thus s 75AD of the TPA did not apply.

Court of Appeal Decision

• It was found that the respondent never had possession of the Maytag refrigerator. The refrigerator at all times remained on premises belonging to a third party, on which employees of the respondent entered and remained as mere licensees. The respondent was not entitled to remove refrigerators or the panels from those premises and did not have dominion over them. The respondent never became a bailee of the refrigerator and it never had a lien on the refrigerator for its charges. Possession of the refrigerator was not given to the respondent.

• The position of the respondent was similar to that of a sub-contractor called in to do work on goods in a factory of the general manufacturer.

• The respondent was a manufacturer in that it "assembled" the refrigerator in its final form by fixing the stainless steel panels to it. " However s 75AD does not necessarily apply to every manufacturer. It only applies to a manufacturer who supplied the goods

• The respondent's contract with Maytag Australia was a bilateral business transaction in trade and commerce, it was not a sale, exchange, lease, hire or hire purchase or any analogist transaction which would fit within the definition of "supply".

• There was a supply of services by the respondent to Maytag Australia but there was no supply of goods. The refrigerator was never in the respondent's possession and when it finished the work it did not deliver or redeliver the refrigerator to Maytag Australia.

• Consequently the Court of Appeal affirmed the decision of her Honour Balla DCJ.

Implication

• Section 75AD will not apply to persons, such as the respondent, who work on goods under contract without ever acquiring title to, or possession of the goods.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.