Manufacturer And Distributor

Question:

Discuss about the Commercial Law Assessment for Battery and Nuisance.

Can the manufacturer and distributor of Samsung Galaxy Note 7, be held liable as per the tort of negligence, towards the Australian consumers?

A tort depicts that something has been done wrong, which attracts civil liability, instead of a criminal liability. Under the common law of tort, are different liabilities, arising from defamation, battery, nuisance, negligence, etc (Statsky, 2011). The provisions regarding negligence are contained not only under the common law, but also under the statutory legislation, i.e., under the Wrongs Act, 1958 (Vic). As per section 18 of this act, in order to establish that an individual had been indulged in a negligent act, certain points have to be established. These include, the failure in adopting the precautions which were necessary to deal with the risk of harm, the risk to be foreseeable in a reasonable manner and the same not being insignificant, and lastly, that in similar situation, similar precautions would have been applied by a prudent person (Legislation, 2010).

Under the common law, negligence is considered as a failure of duty, which an individual owes to the other, due to the work being done by them, and which results in a loss or harm to the other person. In order to establish that an incident of negligence did take place, three basic elements have to be there, and these comprise of the duty of care, breach of this duty and the resultant injury, loss or harm (Gibson & Fraser, 2014). Apart from these three basic elements, there are some additional elements, which also need to be there, to establish a case of negligence in a successful manner. These include that there has to be a presence of direct causation. This causation has to be between the loss incurred by the other person, and the breach of duty on part of the negligent person (Legal Services Commission, 2016). Apart from this, the loss has to be substantial and cannot be too remote. And the last aspect is that the risk of injury, or the loss, was foreseeable or predictable in a reasonable manner. Once, all these elements are present in an incident, a successful claim for negligence can be made by the party who was injured (Bailey, 2016).

The first requirement is to show that a duty of care was indeed present. For the duty of care owed by the manufacturers to their consumers, was established in the issue of Donoghue v Stevenson [1932] UKHL 100. In this case, the plaintiff was Mrs. Donoghue, who drank the ginger beer bottle which was manufacturer by Stevenson, the manufacturer. In this bottle, a dead snail was found, due to which, when Donoghue consumed the bottle, she fell sick. The manufacturer in this case, claimed that he did not owe any duty to a consumer, when the same was being consumed whilst the consumer was in a café. However, the Court was of the view that there was a clear breach of duty on part of Stevenson, as he failed to ensure that the bottle was safe for the consumption of his consumer. And as a result of this, the negligence of the manufacturer attracted damages for him (Latimer, 2012).

Presence of Duty of Care

To further clarify on the presence of duty of care, the threefold test given in the case of Caparo Industries plc v Dickman [1990] 2 AC 605, 618, given by the Court of Appeal, is helpful. The judges held that the duty of care is present when there is proximity between the party who has been injured and the breach of duty by the individual who owed duty of care; the imposed penalty to be reasonable, just and fair; and lastly, the loss to be reasonably foreseeable (Lunney & Oliphant, 2013). In the issue of Bolton v. Stone [1951] AC 850, [1951] 1 All ER 1078 is one of such cases, where due to the absence of reasonable foreseeability in the defendant’s conduct,  the damages were not awarded by the court to the defendant, as he was not held to have committed the tort of negligence (Swarb, 2016).

Followed by an establishment of duty of care, the violation of the duty of care needs to be established. In Vaughan v Menlove (1837) 132 ER 490 (CP), the defendant was warned over and again regarding the poor ventilation in his building, which could result in a possible fire to the haystack. Due to the lack of the defendant in considering these warnings, he was held to have violated his duty of care and hence, negligent (Commonwealth Legal Information Institute, 2017).

In the case of Paris v Stepney Borough Council [1951] AC 367, the Council was aware of the fact that Paris had one bad eye. And even then they did not provide him with any sort of protective gear. So, when a rusted bolt flew and hit his working eye, Paris was completely blinded. This was held to be a breach on Council’s part and hence, they were held as negligent by the court (Martin & Lancer, 2013).

After establishing these two elements, the loss has to be shown, along with the other three elements highlighted above. So, the foreseeability, loss being not too remote and direct causation has to be present. In the Wagon Mound Case, which is otherwise known as the Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd [1961] UKPC 2, the relief in form of damages were not ordered, as the loss was held to be too remote (H2O, 2016). In Wyong Shire Council v. Shirt (1980) 146 CLR 4, the view of a reasonable individual, to judge the risk of injury taking place was taken and it was held that the particular risk was indeed reasonably foreseeable and hence, a claim for negligence was held to be successful (Jade, 2017a). 

The number of cases highlighted in the previous segment highlight certain elements for establishing a case of negligence. In the given case study, the manufacturer and distributor owed a duty of care towards the Australian Consumers, which was breached when the phone exploded and people were injured in a significant manner, due to the malfunctioning of the product. Hence, all the elements were present. Also, as per Donoghue v Stevenson, a claim of negligence is further strengthened. Overheating is a common problem in devices which makes the loss foreseeable.

Violation of Duty of Care

Conclusion

As all of the elements are present, for establishing the case of negligence, the manufacturer and distributor of Samsung Galaxy Note 7, can be held successfully liable under the tort of negligence, towards the Australian consumers.

Can the manufacturer and distributor of the product be held liable under the ACL, as per the rights which are available to the Australian Consumers?

The Competition and Consumer Act 2010 (CCA) is a key legislation in Australia for ensuring the fairness in competition. Schedule 2 of the CCA, contains the provisions regarding the Australian Consumer Law (ACL), which presents the need for carrying the business in a fair manner and making certain that the consumers are protected (Coorey, 2015). Due to the applicability of ACL, the consumers are protected from unfair contractual terms, false representations, misleading or deceptive conduct, unconscionable conduct, unfair contractual terms, and the like (Corones, 2012).

For establishing a claim against the manufacturer or distributor, the requirement of being a manufacturer as per section 7 of this act has to be fulfilled. As per this section a manufacturer includes a person who holds himself as being in this position, who extracts, grows, assembles, produces or processes the goods, along with certain other requirements. The requirement of being a supplied, as per section 2, also has to be fulfilled. However, it is not required that the individual is a consumer as per section 3 of ACL. The safety defect, which attracts the provisions under this act, has to be as per section 9 of the Australian Consumer Law (Australasian Legal Information Institute, 2017).

The provisions contained under the Part 3-5 of the ACL, make the manufacturer liable for the safety defect found in the products manufactured by such manufacturer. Under section 138 off ACL, the liability for the loss or harm which another person had to bear, has to be borne by the manufacturer, when the goods manufactured by the manufacturer, contains some kind of safety defect, and which led to the injury to the person. Under this section, the liability on the manufacturer is also imposed for the resulting death of such an injured person. Section 139 of ACL provides that the manufacturer is liable to such an individual for their loss, who incurs such loss, due to the injury of another person or such another person’s death, owing to the safety defect in the manufactured product of the manufacturer. Section 140 fixes the liability for the safety defect over the manufacturer due to the goods being destroyed, or them being damaged. And for the liability for the damages to building, land or fixtures, the liability arising due to safety defect is covered under section 141 of the Australian Consumer Law (Australasian Legal Information Institute, 2017).

The liability of the manufacturer can be established through the case of Glendale Chemical Products Pty Ltd v Australian Competition & Consumer Commission & Anor [1998] FCA 1571. Boiling water was put down the slower pipe by P and after this he put in the dry Glendale Caustic Soda through this very pipe. Consequently, P’ eyes and face was burnt. When the case was made under Part 3-5 of the ACL, P was held to be successful against D. The raison d'être behind holding D liable was his responsibility of labeling and repackaging the bulk caustic soda, as a result of which, he was considered as a manufacturer under the provisions of ACL (Jade, 2017b).

Establishing Loss and other Elements

The manufacturers also have been protected under this act, through the defenses available to them, under section 142 of the ACL. In case a manufacturer can show that the product did not have any defect when the same was supplied, than the section 142(a)(iii) protects them from any liability raised by the consumer. A defense can also be established by showing compliance with the applicable standards. Similarly, section 142(c) of the ACL protects the manufacturer when they can show that the defect could not be established as per the technical and scientific knowledge available to them. Under section 142(d), the defense of a defect or careless assembly, as a result of the omission or an act of the manufacturer of the finished goods, can also be made by the manufacturer of the product (Australasian Legal Information Institute, 2017).  

The present case study reveals different consumers who can initiate a claim against the manufacturer and distributor of the device. The manufacturer is liable as they created and formed the product and the distributor is liable in accordance with the case of Glendale Chemical Products Pty Ltd v Australian Competition & Consumer Commission & Anor. As, for different consumers, different sections highlighted above were breached, the claims made against the manufacturer and distributor of the device, would result in attraction of damages to be payable to the individuals making the claim. Even though the manufacturer and distributor can make defense under section 142, the same would not be much successful, due to the large-scale failure of the product.

Conclusion

So, manufacturer and distributor can be held liable under the ACL, as per the rights which are available to the Australian Consumers.

Are there any applicable caps over the personal injuries damages, in the present case, for the claims highlighted in the previous parts?

In 2015, the Wrongs Act, 1958 (Vic) was amended through the Wrongs Act, 2015, which resulted in changes to the provisions pertaining to the claims raised for personal injuries in the jurisdiction of Victoria. Through this amendment act, there has been a reduction in the threshold for the impairment for psychiatric and spinal injuries. Hence, an individual who suffers from is equal to or at 10% impairment for psychiatric injuries and at or equal to 5%, for the spinal injuries, can claim damages for non-economic losses, when the same were not available previously. Under section 28G of the Wrongs Act, 1958, the cap has been increased to a value of $577,050 (Thomas, 2015). Though, some restrictions have been placed for recovering non-economic losses, in terms of suffering or pain. Moreover, for a claim to be made under this act, it has to be shown that a significant injury did take place (Law Handbook, 2015).

The economic loss related provisions, as contained in section 28F(2) have also been modified. The maximum amount of damages, which can be awarded after the amendment, is the amount equal to three times the average minimum weekly earnings of the person. Before the cap is applied for the claims raised by dependent of a deceased person, a deduction for the personal living expenses of such a deceased person have to be made. Under section 28ID, the damages owing to the loss of capacity of some other person have now been allowed (Thomas, 2015).

The individual, who have been affected due to the explosion of device, along with the hotel, where the furniture was damaged, can make claim in this case (Griffith, 2016). Plus, they can seek both economic and non-economic damages, as per the limits prescribed above.

Conclusion

Hence, there are certain applicable caps over the personal injuries damages, in the present case, for the claims highlighted in the previous parts. 

References 

Australasian Legal Information Institute. (2017). Competition and Consumer Act 2010 - Schedule 2. Retrieved from: https://www.austlii.edu.au/au/legis/cth/consol_act/caca2010265/sch2.html

Bailey, J. (2016). Construction Law (2^nd ed.). Oxon: Routledge.

Commonwealth Legal Information Institute. (2017). Vaughan v Menlove. Retrieved from: https://www.commonlii.org/uk/cases/EngR/1837/424.pdf

Coorey, A. (2015). Australian Consumer Law. London, United Kingdom: LexisNexis Butterworths.

Corones, S.G. (2012). The Australian Consumer Law. New South Wales: Lawbook Company.

Gibson, A., & Fraser, D. (2014). Business Law 2014 (8^th ed.). Melbourne: Pearson Education Australia.

Griffith, C. (2016). Exploding Samsung Note7 ruins Australian hotel room. Retrieved from: https://www.theaustralian.com.au/business/technology/exploding-samsung-note7-ruins-australian-hotel-room/news-story/093d67da670f8c1ed20df88aafbb2f66

H2O. (2016). Wagon Mound (No. 1) -- "The Oil in the Wharf Case". [Online] Retrieved from: https://h2o.law.harvard.edu/collages/4919

Jade. (2017a). Wyong Shire Council v. Shirt. Retrieved from: https://jade.io/article/66842

Jade. (2017b). Glendale Chemical Products Pty Ltd v Australian Competition & Consumer Commission & Anor[1998] FCA 1571; 90 FCR 40. Retrieved from: https://jade.io/j/?a=outline&id=116054

Latimer, P. (2012). Australian Business Law 2012 (31^st ed.). Sydney, NSW: CCH Australia Limited.

Law Handbook. (2015). Key legislation: the Wrongs Act. Retrieved from: https://www.lawhandbook.org.au/10_01_02_key_legislation_the_wrongs_act/

Legal Services Commission. (2016). Negligence. Retrieved from: https://www.lawhandbook.sa.gov.au/ch01s05.php

Legislation. (2010). Wrongs Act 1958. Retrieved from: https://www.legislation.vic.gov.au/Domino/Web_Notes/LDMS/LTObject_Store/LTObjSt5.nsf/DDE300B846EED9C7CA257616000A3571/F1F5385B484503F3CA2577C1001B5BE4/$FILE/58-6420a103.pdf

Lunney, M., & Oliphant, K. (2013). Tort Law: Text and Materials (5^th ed.). Oxford: Oxford University Press.

Martin, J., & Lancer, D. (2013). AQA Law for AS Fifth Edition (5^th ed.). Oxon: Hachette UK.

Statsky, W.P. (2011). Essentials of Torts (3^rd ed.). New York: Cengage Learning.

Swarb. (2016). Bolton v Stone: HL 10 May 1951. Retrieved from: https://swarb.co.uk/bolton-v-stone-hl-10-may-1951/

Thomas, K. (2015). Significant changes to personal injuries legislation in Victoria. Retrieved from: https://www.sparke.com.au/insights/significant-changes-to-personal-injuries-legislation-in-victoria/