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Tuesday, 8 November 1977
Page: 3036


Mr LIONEL BOWEN (Kingsford) (Smith) - This amendment to the Trade Practices Act virtually covers three segments of that Act. The first part relates to the definition of price, and uses more exact terms. The second part relates to the question of the Minister having the ability to declare safety standards. The third part relates to the limitation of liability in respect of appliances or goods that have been sold. At the outset let me make it clear that the Opposition at this time will not be opposing the Bill but in fact will be opposing in principle clause 5 which relates to the ability of a supplier to mitigate liability for damages by having the opportunity, as a result of this clause, to exclude liability in a contract. The Opposition is saying that subject to that proviso we are not opposing the Bill but we have a very serious reservation about that clause. I think that on election to government we would restore that clause, in the interests of consumers.

The first clause to which I wish to refer is clause 3 which defines the question of what would be deemed to be the price. The House will recall a previous amendment to the Trade Practices Act by which section 4B gave a definition of a certain higher standard of warranty on goods supplied which cost less than $15,000. This method, which is contained in the earlier parts of the definition, is redefined to give a definition of prices. There is no objection to that.

Clause 4 is an interesting clause. The reason given for its insertion is that it is a much more efficient and expedient way for the Minister to notify standards than to have to do so by proclamation. One wants at all times to praise expediency and efficiency, particularly where one is dealing with business and consumer affairs. However, one must look at the matter from the point of view of what would be called parliamentary procedures. The normal method would be for regulations to be prescribed. They, of course, can be subject to the review of Parliament. Parliament does not exercise its review role simply because of some peculiar quirk of any member of the Government or the Opposition. It is usually as a result of representations made by people in the commercial and business life, or even in the ordinary consumer life, who are anxious to say that the standards which have been proclaimed are wrong. So we get that surveillance.

I think the Minister for Business and Consumer Affairs (Mr Fife) is now saying that the Government wants to do that by notice in the Gazette. The only qualification he has relates to the standards specified. The clause refers to standards prepared by the Standards Association of Australia or by a prescribed association or body. So the Minister is recognising the fact that there ought to be some other independent advice. The one qualification that the Opposition has in that respect is that consumers are not represented adequately or at all on the Standards Association or similar bodies. Consumers find it very difficult, because of a lack of funds, to participate in all discussions of bodies of this nature. They have no independent means of support. They have some limited government means of support which in no way enables them to be present or even members of various associations. So there is a weakness there.

If the Minister wants to satisfy public opinion in this area he would need to guarantee that the appropriate representations of consumers or, to put it m another fashion, the recognised organisations of consumers, are represented on all associations at all times in respect of all products. Then there would be some guarantee that the standard set was in accordance with a determination properly and fairly made at which the consumers were fairly represented. I understand that this is not the position at present.

We have some rather unhappy remarks to make about standards. I understand that there is a lot of discrepancy and disparity about standards which should have been applied in Australia and which are not being applied at present. I understand, for example, we have ailed to apply a national standard for children's clothing, particularly flammable clothing which could result in youngsters being burnt to death because of certain material used in the manufacture of their garments. I understand that such garments cannot be sold in New South Wales because, quite properly, the vigilant Government and Ministers in that State have taken action to see that those garments are not sold in New South Wales. They could be sold elsewhere in Australia. I understand that we have failed to set a safety standard in relation to safety helmets for motor cyclists. So people are suffering injury and are losing their lives, perhaps because of the lack of interest at the national level. Certain electronic slimming equipment is apparently a health hazard. There has been no proper national standard.

These things should have been done. The Government cannot let things run along on the basis that it cannot interfere with somebody's profit motive or on the basis of some doubt about whether interference would affect a person's business. The issue is the safety of the consumer and the welfare of the community. Not the least, and probably the most serious, aspect is the amount of eye injuries caused by certain toys. Some States have taken adequate action to protect the consumer. At the national level we have weakened rather badly in this area. I would like the Minister to look at that matter, even in the dying stages of this Parliament. He could authorise his Department to see why something has not been done to protect the consumers in those fields.

I turn to the most important aspect of the Bill, in the legal sense. It is clause S which states that there will be a limitation of liability in respect of goods supplied. We are really saying that the services relating to personal, domestic or household use will not be affected, but if there is any other use the question of damage or consequential damage which a person may suffer will have to be borne by that person. The clause flows no doubt from strong and violent representations by the multi-national computer company, IBM Australia Limited. It is not good enough for this country to have legislation that might suit some overseas combine which, having interpreted the new legislation, feels that it represents an openended commitment for it because it removes provisions which allow a consumer who buys one of its computers for less than $15,000 to recover a substantial amount of damages.

Let us look at the legal principles involved. It is quite clear that, under the Act as it is, the consumer would have to show that he indicated that he intended to use the appliance for a specified purpose. In other words, he would have to show that he did not just buy the computer off the shelf without saying anything about what he intended to use it for. If he had done that and then used the appliance wrongly, he would not be able to recover damages. He would have to provide evidence that at the time of purchase he specified the purpose for which he wanted the appliance

Plenty of English decisions made under the Supply of Goods Act clearly show that suppliers are not expected to know the idiosyncrasies of the people who buy from them. A person who buys an appliance and misuses it or does not use it properly may not recover damages as a matter of course. Far from it. Evidence as to the specified purpose has to be considered. The purpose could have been specified by the supplier and it would have had to be specified by the consumer. Damages are not given automatically to someone who has bought an appliance. The purchaser has to follow the normal procedures of law and show that he has suffered damage because of a breach of warranty- an imPlied warranty or a specific warranty- relating to the purpose for which the goods may be used.

IBM has ignored aU that. The British Government weakened its stand on what it thought was an appropriate Supply of Goods Act and eventually amended its legislation in 1973 to exclude liability in these cases. The British legislation set out the reasons for exclusion. The first referred to the strength of the bargaining position. An exact quotation from that provision is now proposed to be inserted in our legislation. The second concerns whether the buyer received an inducement. Again an exact quotation is proposed to be inserted in our legislation. The third consideration is whether the buyer knew or ought reasonably to have known. An exact quotation of that also is to be inserted in our legislation. What has happened is that, because an international combine has asked the Government to use the British Act as a model to protect it, the British Act is becoming the Australian law.

We were pioneering the law on trade practices. Our legislation protected the consumer by providing that appliances costing less than $15,000 ought to have an implied warranty that they would meet the test of a specified purpose. This is to be thrown overboard because the Minister has succumbed to the pressures of an international group. I do not think manufacturers in Australia were very worried about the existing provision, but IBM engaged in a strong campaign against it. In fact, it wrote to me about a speech I had made. I had said that IBM had gone on strike against supplying the normal consumer in Australia. It was determined to stand over consumers in Australia. It said that it was going to have its way and that the legislation should be framed in the way the British had framed their legislation. It said that without such legislation a consumer might be able to sustain a case against it.

Let us put the criteria in the right place. No consumer can recover anything unless he suffers damage. The result of the action of the Minister and the Government is that the consumer will suffer damage. He will have to bear the cost, and that is the end of the story. Is that fair and reasonable? All that the law normally asks is that a product which is bought should meet the purpose for which it is specified. That is the implied meaning of this division of the Trade Practices Act. It does not say that there is a complete and absolute liability in any sense of the word. It relates to the evidence about the nature of the transaction. Section 71 states:

Where a corporation supplies . . . and the consumer, expressly or by implication, makes known to the corporation . . . any particular purpose there is an implied condition that the goods are reasonably fit for that purpose . . .

Section 74 states:

Where a corporation supplies . . . and the consumer, expressly or by implication, makes known to the corporation any particular purpose . . .

That is the overriding test. We just cannot say that IBM is responsible for all its appliances if a consumer misuses them. It is not. The natural result of this amendment is that, if a consumer buys an appliance which he says he wants for a specified purpose and it fails to do the job and he suffers consequential damages, he may not be able to recover because conditions presently required by the Act may be excluded from the contract.

There was a stampede by a particular group to indicate to the Australian legislators that they had better not continue with what they had done. Because the Act was amended earlier this year to protect consumers, IBM decided to wage a campaign to get it altered. Unfortunately, and wrongly in my view, the Government has succumbed. Mr Moyes of IBM is no slouch at lobbying. He wrote to me about what he felt were unfair remarks I had made. I stand by those remarks. He wrote to me on 8 September, but I did not receive the letter until about 1 1 October. I do not know what happened to it. The background is that I understand that there was correspondence in the newspapers, particularly the Age in which Mr Moyes said that he really was not certain what the Government was going to do. I very much doubt that. It appeared very clearly from the word go that IBM was determined that the Government had better do something. It should be noticed that this amendment is before us on the last day of the Parliament.

We want the Government to look at the law on this point. When I replied to Mr Moyes I pointed out that the legislation did not mean that automatically IBM was responsible. The test of whether there had been a specified purpose had to be satisfied. It was known that the idosyncrasies of a consumer would be taken into account. There was much difficulty with the law concerning whether clauses of contracts were excludable. When the Suisse Atlantique case was discussed in the House of Lords, Lord Reid talked about this very problem. He said that we had to look at what was fair and reasonable and that we could not really expect the courts to do it. He said: . . . in the recent cases that the courts are to consider whether the exemption is fair in all the circumstances or is harsh and unconscionable or whether it was freely agreed by the customer. And it does not seem to me to be satisfactory that the decision must always go one way if, e.g., defects in a car or other goods are just sufficient to make the breach of contract a fundamental breach, but must always go the other way if the defects fall just short of that.

This is the particular point:

This is a complex problem which intimately affects millions of people and it appears to me that its solution should be left to Parliament. If your Lordships reject this new rule there will certainly be a need for urgent legislative action but that is not beyond reasonable expectation.

The British ran away from taking appropriate legislative action. The Australian Government has succumbed to international pressure to do just what the British have done. The point I am making is that damage will be sustained by people who purchase goods under a contract with a clause that states they will not be able to recover damages because such contracts are excluded from the Trade Practices Act by this Bill. Under the existing Act it is appropriate for a person to say that he bought the goods for a specified purpose, that the supplier knew the purpose and that therefore he is entitled to recover damages- not penalty damages but actual damages.

The Swanson Committee was very interested in this matter. It was a committee to which the Australian Labor Party did not give much praise in every respect. It recommended this protection for consumers and was strongly of the view that the definition of 'consumer' ought to be broadened to protect a number of business transactions, in particular those involving the small businessman. He is the man who will be most affected by this negation of liability. Is it not fair and reasonable that any small businessman who buys one of these appliances from IBM or the like should be entitled to recover damages, if he suffers damages, and should not have to face the issue, particularly in a monopoly field where, perhaps he needs this sort of hardware and has to buy it under a contract which says: 'If there is a problem in the sense that that machine does not stand up to what you will think it will do, it will not be our responsibility. You can take no action against us'.? He legally meets the defence that he had to sign a document which provided that he could not take action.

The parties are not on equal terms- far from it. We have a massive international group with a monopoly on appliances selling those appliances to a customer who has nothing but a small business and who is not able to say: 'Well, I am on equal terms'. It is a take it or leave it proposition. I notice this same international group was also encouraging people in the elevator business to do the same sort of thing. They were working a little club amongst themselves to indicate clearly to the poor unfortunate customer 'Well, you are not always going to recover damages because we have a sort of monopoly on appliances that you must have. We will now persuade this Government to alter the Act so that you will not recover damages in certain circumstances'.

It is not good enough just to talk about the question of replacing the machine or repairing le goods. What about the damage the person suffers as a consequence of the failure of the machine or the failure to maintain the warranty? A consequential damage is involved. That person could go broke because of this sort of liability We do not see that happening in the international sphere. These people are unlikely to go broke. They have a multi-million dollar asset backing. I do not know of any outrageous claims having been made against them in recent months because of the amendments we passed. We do not see small businessmen running off to court, issuing writs on the basis that they are going to recover damages. In every case they have to substantiate the claim.

It is quite wrong that the small business community in Australia has been so deprived of normal protection. The Swanson Committee was anxious to give them that protection. It was because of the Swanson Committee that this particular amendment was introduced. Now it is to be removed. Why? It is because of IBM and a few others who say that they do not like it; that they do not want Australia to be a pioneer in this field, that they had better sink back to where they are in Britain and other places. So the big man is always protected and the Utile man always suffers.

We would have no objection if this were an equal footing proposition, but this is in no way an equal footing proposition. We are concerned to think that the Government has caved in, particularly in the dying minutes of a parliament, and is passing a law that will affect a number of people.

For that reason we oppose clause S. It is too late to talk about a redefinition of it. I have clearly outlined to the Minister the concern of the small business community. I am not at aU impressed with the representations made by IBM or the way in which it made them. Nor am I impressed with the other people IBM tried to inveigle into putting pressure on this Government. The law can certainly stand a much better amendment than that proposed here. It could clearly say: 'You cannot exclude the provisions in the contracts where it is clearly spelt out that the customer indicated the specified purpose'. Yet we have this weakness now that if there is to be a contest about it, perhaps a court can determine what is fair and reasonable. As was said by Lord Reid in the Suisse Atlantique case: 'There can be no such thing. It cannot be done. It is a matter for Parliament: What about the Government looking at that situation? It is for those reasons that whilst we do not oppose the Bill in the overall context, for the reasons I have mentioned, we certainly object strongly to the provisions of clause 5.







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