- There is a real risk that the outcome will be an unworkable and ambiguous Act.
Clayton Utz partner and Adjunct Professor of Law, Jocelyn Kellam is opposing aspects of the Australian Governments Consumer Law Review contained in the discussion paper "An Australian Consumer Law: Fair Markets - Confident Consumers".
While consumer protection and harmonisation of laws across the various jurisdictions are both laudable goals, reform for reform's sake is not in anyone's interests. It is important that the reform process be conducted in a manner befitting such significant changes. Although one might applaud "consistent national approaches to consumer problems" and maximal harmonisation, it is not proposed that the Australian Consumer Law should embody only those provisions which are common between the Trade Practices Act and the State and Territory Fair Trading legislation.
The Discussion Paper was released on 17 February 2009 with one month being allowed for public consultation. It is proposed that the text of the legislation will be finalised by 30 June 2010 and be implemented by 31 December 2010. It is of serious concern that these proposed reforms are being fast-tracked. What is being undertaken is perhaps the most wide-ranging reform of consumer law since the introduction of the Trade Practices Act and State Fair Trading legislation.
An exposure draft of the legislation has not been released and much of the detail of the reforms is not known.
There is a real risk that the outcome will be an unworkable and ambiguous Act.
A further concern with having one round of consultation only is that submissions will undoubtedly raise issues and proposals that are not included in the Discussion Paper. For example, the Productivity Commission's Final Report proposed that Australian governments should:
- develop a hazard identification system for consumer product incidents
- introduce mandatory reporting requirements for voluntary product recalls; and
- require suppliers to report products associated with serious injury or death or products which have been the subject of a successful product liability claim or multiple out-of-court settlements.
However, this proposal is not raised in the Discussion Paper. Instead, the details of the product safety reforms are given scant attention. While the lack of specific mention presumably indicates that the proposal has been abandoned, if such a significant reform were to be implemented then this should only occur after an appropriate consultation process.
The proposed reforms could represent a significant opportunity for simplifying the multiplicity of remedies for product liability and removing the disjunct between State and Federal causes of action. At present, regrettably, there does not appear to be any intention to do so.
Disappointingly, the Discussion Paper does not contain any proposals in relation to Australia's product liability framework. At the present time, when a consumer is injured by a defect product they may (depending on all the circumstances) have a claim in contract, tort, and under Part V Divisions 2 and 2A and VA of the Trade Practices Act (and in some circumstances, Division 1A). A comprehensive re-evaluation of current Australian product liability law might well lead to a conclusion that Part V Div 2A should be abolished. On a theoretical level, it is difficult to justify having different definitions of "goods", standards of "defect", and defences for products causing injury under the TPA. Part V Div 2A is based on notions of merchantability and fitness for purpose, and one could argue that these concepts of sales law are increasingly out of place in an area now mainly understood as tort law (including community expectations of, and entitlement to, safety under Part VA).
While there are caps on damages at both the Federal and State level, these differ, so that a consumer making a claim under the Trade Practices Act may claim a maximum of two times the average weekly wage for loss of earning capacity, whereas the limits under State law is three times the average weekly wage. There are also differences in the defences to the various causes of action.
The Discussion Paper proposes that the name of the legislation should be changed. It is submitted that this will have two unintended consequences:
- Thirty-five years of judicial consideration of the provisions and legal commentary will be lost - or at best will be of secondary relevance as applying to "the old law". To the extent that the Discussion Paper proposes that many of the provisions of the Trade Practices and Fair Trading Acts should continue (albeit with harmonisation said to represent "best practice") this would be undesirable.
- More importantly, however, is the fact that many agreements expressly refer to the Trade Practices Act by name. If the name of the legislation is changed, industry will need to undertake a significant administrative task of reviewing and potentially updating a significant number of past agreements.
"New" Enforcement Powers
The Discussion Paper asserts that "new" enforcement powers will be included in the reforms. It is submitted that the use of the word "new" is a mischaracterisation. While it is correct that not all enforcement agencies have all of these powers currently, many regulators do have some or all of these powers already. For example, trade measurement officers can issue infringement notices in some States and the Fair Trading Act (NSW) includes a power for the Director-General to issue a substantiation notice.
Depending on the above matters the proposal has the potential to be extremely draconian. A disqualification order has serious consequences for individuals in that it severely curtails that person's employment prospects. Given that the consumer protection provisions in the Trade Practices Act 1974 are strict liability provisions, it seems possible that a disqualification order could be made where there is no allegation of wrongdoing or fault on the part of the corporation or individual. Also concerning is that a disqualification order will be able to be made where a civil pecuniary penalty is imposed - that is, where no criminal offence has been proven beyond reasonable doubt.
Very little information is provided in the Discussion Paper on the circumstances in which infringement notices might be issued. However the proposal smacks of revenue raising. While presumably the legislation will permit persons to whom an infringement notice is addressed to challenge the notice in Court the costs associated with doing so mean that this is generally not a practical option.
There needs to be some guidance given in the reforms as to how duplex infringement notices will be avoided. It is of concern that the potential imposition of individual infringement notices could result in the imposition of an aggregate penalty which would be disproportionate to the gravity of the conduct.
It would not be an adequate response to suggest that appropriate principles can be left to the courts to develop. The very nature of infringement notices means that only in exceptional cases will matters proceed to court. Caps on the number of infringement notices which can be issued in relation to any one product or alleged contravention should be included in the legislation.
It is not also clear from the report, whether it is also proposed that the regulator should be given the power to seek cy-près relief. This was proposed in the Victorian Law Reform Commission's "Civil Justice Review Report".
Cy-près means "as near as (possible)". It embodies the idea that where something cannot be carried out exactly, then it should nevertheless be carried out in substance, as close as possible to the desired result. In the context of class actions, for example, it allows a court to award "approximate justice" and to make orders, for example, price rollback relief or an award to a nominated organisation where all injured persons cannot be identified. In the US, application of the doctrine has been criticised; for example, Judge Richard Posner of the US Court of Appeals for the Seventh Circuit has described cy-près awards as having a punitive effect.
Reform for reform's sake is not in anyone's interests, and it is important that the reform process be conducted in a manner befitting such significant changes. Caution should be exercised before thirty-five years of judicial interpretation and academic commentary are relegated to history. It will be 2045 before a similar body of learning is replicated. It would be unfortunate if reforms were implemented if those reforms themselves required future reform.
Without seeing the detail of the reforms, industry cannot assess the likely administrative, compliance or legal cost which would result from implementation of the proposals.
In order to avoid unintended consequences a further round of consultation is needed.
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