Last updated 7 December 2016 This chapter is currently under review.
A person might suffer personal injury or property damage as a result of a product being defective in the manufacture, design or formulation of a product or a defect in product information. For example, a bottle might explode and injure a person’s hand, or a replacement part in an engine might fail and damage the whole engine.
If the person who suffers the injury or damage has purchased the defective item, they will probably be able to sue the supplier of the goods in contract. Furthermore, if the item was acquired for private or domestic use and was either manufactured by a corporation in Australia or was imported into Australia by a corporation, there will probably be a statutory right to sue the manufacturer for breach of warranty under the Competition and Consumer Act 2010 (Cth) (Competition and Consumer Act) (see chapter on Consumers and Contracts). In addition to these contractual and statutory duties, the common law also imposes a liability on manufacturers of defective products to those who suffer injury or damage as a result of coming into contact with defective products.
Liability of manufacturers for negligence
A manufacturer of a defective product may be liable for negligence, breach of contract and/or for breach of the Competition and Consumer Act.
The normal elements of negligence must be established in order to establish liability.
The common law liability of manufacturers is wider than the liability that exists under contract or statute because it is not limited to the situation where the plaintiff has purchased the item from the defendant (this is liability in contract), nor is it limited to a matter between a corporation and person who actually owns the goods (this is liability under the Competition and Consumer Act).
Under common law, however, before a manufacturer can be sued it must be shown that the manufacturer was negligent in the design, manufacture or presentation of the product. This is not required before either of the other two remedies can be used.
The duty of care in negligence is not an absolute duty to prevent loss or damage. Accordingly, a defendant will not be liable in respect of obvious and unavoidable risk or in respect of unforeseeable risk.
To whom is the liability owed
The common law liability is owed to anyone the manufacturer should foresee as likely to suffer injury or damage if the product is defective. So, if a motor vehicle contains a serious manufacturing defect and as a result is involved in an accident, the manufacturer will be potentially liable to the owner of the vehicle for damage caused to the vehicle in the impact and to anyone who suffered personal injury, whether they were travelling in the vehicle or were standing on a footpath. All could be foreseen as likely to sustain injury or damage.
Proof of negligence
Proof will vary depending on the particular incidence of negligence being alleged. The main allegations of negligence in manufacturing liability cases include defect in the product itself, defect in the product design or failure to give appropriate instructions as to its proper use.
Establishing a defect in a product may require detailed expert examination of the product, such as by an engineer. It must also be shown that any defect has, on the balance of probabilities, resulted from matters within the control of the person being sued and has not resulted from any subsequent handling or use of the product. For example, a bottle might explode due to a defect in the bottle itself (responsibility of the bottle manufacturer), excessive carbonation in the bottle (responsibility of the drink manufacturer), mishandling in transit (responsibility of the transporter, wholesaler or retailer) or mishandling by the consumer.
When a product is involved in an accident and injury or damage results, and there is any suspicion that the product might have been defective, then that product (or what is left of it, including all pieces) should be kept until legal advice is obtained. It may be near impossible to prove that a product was defective if its remains are disposed of.
What products are covered
Products are usually defined in the broadest sense of the term. It extends to construction of houses, production of cars, household consumables, industrial equipment and the like. The fact that a product is second hand does not bar a claim.
Who is liable
Anyone who causes a product to be defective is potentially liable for any injuries or property damage resulting from the defect. Such persons or entities may include:
- producers or suppliers of raw material
- manufacturers of component parts
- manufacturers and designers of finished products
- assemblers and installers (e.g. a person who is injured by the negligent installation of a product may have a claim against the installer and, in the case of dangerous products, the standard may be higher)
- importers and distributors
- repairers and other service providers
- architects and engineers
- retailers and other suppliers.
What damages are recoverable
If personal injury or property damage results from the product being defective, compensation for such loss may be recoverable.
Less clear is whether damages are always recoverable for the defect in the product itself. Although the law is still far from settled on this point, a summary of the current position is useful:
- When the product itself is physically damaged, damages for the reasonable cost of repair or replacement are recoverable.
- When the product has not itself been damaged, but the type of defect makes it probable that damage might result to the product or persons or other property from its use, compensation for the cost of remedy or replacement of the product are recoverable. Some courts have been generous in their development of this area of law. Compensation has been ordered even where there was no threat of damage or injury, and the only result of a defective product has been that the product would deteriorate quicker than a non-defective product (see Junior Books Ltd v Veitchi Co Ltd  1 AC 520).
- When the product is simply defective without any risk of damage to the product or others from its use, then damages are not recoverable for remedy or replacement. Examples of this include a lawn mower that mows inadequately, a washing machine that is mechanically unreliable and a television set that does not work at all. In such circumstances, possible remedies are available in contract or under statute, but there is no common law remedy in negligence.
Does a defence exist?
In addition to some of the defences detailed above (see Defences to a negligence action), a defendant may be able to avoid liability for a defective product if:
- the product has been misused. This is an absolute defence to liability and may be available where a plaintiff has used a product in a way that can be characterised as unauthorised use, such as the use of a product without obvious minimum safety precautions, neglect of obvious product maintenance or abnormal use. What is appropriate use of a product is determined by the conduct and expectations of reasonable users of the product rather than by a defendant
- intermediate examination defence exists. This defence may be available where the defendant reasonably anticipated that another person, such as a distributor or supplier, would carry out an intermediate examination of a product that would reveal any defects. This defence is not generally available where loss or damage occurs prior to the anticipated inspection being carried out or where the intermediate inspection has been carried out negligently, especially if the objective in carrying out the inspection is unrelated to the defect
- developmental risks defence exists. This defence may be available where the defect that was present in a product at the time of its supply was neither known nor discoverable by the defendant given the state of scientific and technical knowledge at the time. The defence would not be available where the defendant would have known of the risk created by the defect if it had carried out appropriate research, testing or investigation prior to the time of supply
- learned intermediary defence exists. This defence may be available where products, such as vaccines, prescription-only pharmaceuticals or professional hair care products, are supplied through learned intermediaries such as medical practitioners or professional hairdressers. The defendant must establish that the information, if provided to learned intermediaries, was adequate in the circumstances to alert them to the potential risks associated with the product
- the product was supplied in bulk. This defence may be available where products, such as chemicals, are supplied in bulk and where there is a reasonable expectation that the person acquiring the product in bulk will package and label the product, and will provide appropriate warnings and instructions to persons who it can reasonably be foreseen may suffer loss or damage in using the product.