Are your products safe from the Trade Practices Act?

Many product-related claims brought against manufacturers include an allegation that there has been a breach of the consumer protection provisions contained in Part V Division 2A of the Trade Practices Act 1974 (Cth) (TPA). Division 2A applies where a manufacturer supplies defective goods to another person, usually a distributor or retailer, for the purposes of re-supply to a consumer. However, in order for a claimant to succeed in an action for breach of the sections of Division 2A they have to prove, among other things, that the goods were ‘of a kind ordinarily acquired for personal, domestic or household use or consumption’ as distinct from goods ordinarily acquired for commercial or business purposes.

An argument available to some manufacturers sued under Division 2A of the TPA is that the goods are not those of a kind ‘ordinarily acquired for personal, domestic or household use or consumption’ and therefore claims made under Division 2A cannot be sustained.

This argument was run successfully by Multiquip Pty Ltd in the matter of Crago v Multiquip Pty Ltd (unreported, Lehane J, 10 September 1997). In that case, the applicants, Mr and Mrs Crago were involved in breeding ostriches. Multiquip manufactured and sold equipment for incubating and hatching eggs and this equipment was bought by Mr and Mrs Crago from a supplier. Mr and Mrs Crago alleged that there were deficiencies in the Multiquip equipment which resulted in loss of potential sales of ostriches amounting to more than $2 million. The court held that an ostrich egg incubator was not acquired for personal, household or domestic use and therefore the claims under Division 2A failed. It has also been run successfully by defendants in cases involving an airseeder, a large tractor, a reduction photocopier and a prime move.

It is therefore always worth thinking about whether a claim brought under Division 2A can be defeated by an argument that the goods are not of a kind ‘ordinarily acquired for personal use or consumption’. One interesting area that such an argument might be run is in the area of goods manufactured for use by doctors in medical procedures—for example, sutures or surgical clips. It is certainly arguable that such goods are not acquired for purposes of re-supply to consumers but are acquired by doctors and hospitals for commercial or business purposes—namely to be used by them to provide services to patients. It is also arguable that such goods do not fall within the definition of ‘ordinarily acquired for personal use’.

Such an argument was run by Femcare Limited in a strike-out motion in the case of Bright v Femcare [2000] FCA 742. Femcare manufactured a female sterilisation device which consisted of clips and an applicator designed to apply the clips to women’s fallopian tubes so as to occlude the tubes and thereby prevent conception. The clips and applicators were sold by a distributor to hospitals and doctors in Australia for use in female sterilisation operations.

Proceedings were commenced against Femcare and its distributor in the Federal Court and included an allegation that the clips and applicators supplied were defective goods. In the course of a strike-out application, Femcare submitted that those parts of the statement of claim which alleged a breach of section 74B should be struck out because the clips were not ‘goods of a kind ordinarily acquired for personal, domestic or household use or consumption’. Femcare argued that the clips were not an item of property which a patient acquires, unlike spectacles or a hearing aid. The clips were used by the doctor to provide the sterilisation service. As a result, they were unlikely to be seen by the patient let alone chosen by the patient; they may be absorbed by the body’s own process or naturally expelled without effecting their original efficacy and the patient would probably be aware of the number of clips which may have been used. Femcare also argued that the clips were not properly described as goods ordinarily acquired for personal use but rather were materials acquired by doctors and hospitals for the supply of a service.
 
Ultimately, Justice Lehane indicated that he was not inclined to make a finding as to whether a claim could be brought under Division 2A in a strike-out motion and so the question was not finally determined.¹ Accordingly, the question as to whether medical devices such as those identified above do fall within the definition of ‘goods of a kind ordinarily acquired for personal use’ remains open and is worth consideration by manufacturers of like goods.

Footnotes

1. The case ultimately concluded with an order being given for judgment in Femcare’s favour and the question as to whether the goods were ‘of a kind ordinarily acquired for personal use’ was never determined.

This article was written by Emma Maple-Brown, Senior Associate.