GLENDALE CHEMICAL PRODUCTS PTY LTD v AUSTRALIAN COMPETITION AND CONSUMER COMMISSION and MICHAEL JOHN BARNES

Federal Court of Australia|1998-12-10|Before: Emmett J, Mr J, Sackville JJ

THE COURT: During the week commencing 23 February 1998, Emmett J heard together two proceedings. The first proceeding, NG934 of 1996, was brought by Australian Competition and Consumer Commission (ÒACCCÓ) against Glendale Chemical Products Pty Limited (ÒGlendaleÓ), the distributor of a product marketed under the name ÒGlendale Caustic SodaÓ (Òthe ProductÓ). In that proceeding ACCC sought declaratory and injunctive relief and an order that Glendale pay compensation to Michael John Barnes, a person who had sustained injuries while using the Product. The second proceeding, NG121 of 1998, was an action for negligence brought by Mr Barnes against Glendale that had been initiated during 1997 in the District Court of New South Wales at Tamworth and transferred to this Court by order of Emmett J.

On 27 February 1998 Emmett J delivered ex tempore reasons for judgment, those reasons being generally favourable to the cases made by the applicants. He deferred making orders until counsel had an opportunity of addressing him in relation to relief. On 27 March 1998, his Honour made orders in both proceedings. He ordered that Glendale pay Mr Barnes, by way of compensation or damages, the sum of $106,000 (this being the agreed amount of Mr BarnesÕ loss). His Honour also made orders restraining Glendale, without leave of the Court, from supplying to any person Glendale Caustic Soda in containers of a size less than ten kilograms, unless each container bears a label containing certain instructions and warnings.

Glendale appealed against these orders. ACCC filed a Notice of Contention in relation to aspects of its case not accepted by Emmett J. The appeal came before us on 6 November 1998. All grounds of appeal were pressed by counsel for Glendale, Mr J D Hislop QC and Mr D Pritchard, but counsel for ACCC, Mr D Bennett QC and Mr D Staehli, pursued only one of the matters raised in the Notice of Contention. At the conclusion of argument, we dismissed the appeal with costs and said we would publish our reasons at a later date. We undertook to deal with ACCCÕs point of contention in those reasons. These are our reasons.

In his reasons for judgment Emmett J comprehensively stated the relevant facts. Before us there was no challenge to the accuracy or sufficiency of that statement. Having regard to those circumstances, and the fact that his HonourÕs reasons are now reported at (1998) 40 IPR 619, we will confine ourselves to a short summary of the more significant facts, which we take from his HonourÕs account.

The chemical name of the substance popularly known as caustic soda is sodium hydroxide. It is a strong alkali, extremely reactive and able to neutralise acid. Caustic soda can react with, and decompose, a wide range of organic materials such as fats, proteins and carbohydrates, all of which are important constituents of human tissue. Caustic soda is therefore a dangerous substance for human use, whether as a solid or in an aqueous solution. Caustic soda not only damages surface tissues; it reaches lower layers of tissues. Depending upon concentration and temperature, it can cause total tissue destruction of the part of the body with which it comes into contact; the more concentrated, and the hotter it is, the more damage it will do.

An important and well-known property of caustic soda is its evolution of heat when dissolved in water. Emmett J said at 625: ÒEach gram of caustic soda dissolving in water generates enough heat to bring to boiling point 3 millilitres of water initially at 20¡C. Thus, 170 grams of caustic soda when dissolving in water produces heat to boil about 510 millilitres of water initially at 20¡C. For water at 50¡C, each gram of caustic soda can raise 5 millilitres to the boil. That is to say, 170 grams would bring 850 millilitres of water to boiling point. It should be noted that approximately 170 grams of caustic soda was poured into the drainpipe into which two jugs of 1.8 litres each of boiling water had already been poured. The possibility of rapid boiling when a relatively large amount of caustic soda is dissolved in a limited amount of water, such as that found in a drain, is predictable from the properties of the chemicalÓ. The significance of Emmett JÕs references to a drainpipe and a drain is that Mr Barnes had a partially blocked drain in the bathroom shower recess at his home in Tamworth. On the recommendation of an acquaintance, Mr Reg Phillips, Mr Barnes purchased at his local supermarket a 500 gram container of the Product. Mr Phillips had advised him to pour hot water down the drain hole and tip into the drain hole the whole of the contents of the 500 gram container. Mr Barnes followed this advice. He poured about 1.8 litres of boiling water through a chrome cover over the shower recess drain pipe, then went to a backyard shed to obtain a screwdriver. On his return, he removed the chrome cover and noticed a brown scum lining the pipe. He poured a further quantity of about 1.8 litres of boiling water down the drain pipe. After waiting a few minutes, he knelt in the shower recess and sprinkled about one-third of the contents of the container down the drain pipe. Almost immediately a column of hot water emerged from the pipe and struck him, causing burns to his face and both eyes. A central issue in the case is the adequacy of the instructions and warnings printed on the label of the container. Mr Barnes gave evidence, which Emmett J accepted, that he read the label twice; first in the shop before purchasing the Product and, secondly, at home immediately before its use. Emmett J appended a copy of the label to his judgment. It appears at 40 IPR 638. The middle panel of the label bears the name ÒGlendaleÓ and a logo. It identifies the product and warns that it is a poison, is not to be taken and is to be kept out of reach of children. This panel also bears the words ÒRead Safety Directions Before OpeningÓ. The safety directions are set out in the left hand panel. They read ÒAvoid Contact with Eyes and SkinÓ. This panel also contains a prominent warning that the product is corrosive. First aid directions are given. There is this instruction for use: ÒAlways wear rubber gloves and safety glasses when handling caustic soda. Aluminium or zinc covered (galvanised) utensils must not be usedÓ. The right hand panel contains directions about particular uses of the product: to make hard soap, to make soft soap, Ògeneral cleaning (drains, floors etc)Óand to remove old paint. In relation to general cleaning, the label instructs: Ò110g dissolved in 2 litres of water makes a very effective cleaning liquid for the removal of grease from drain pipes, gully traps, concrete floors, barbeques, kitchen utensils and for cleaning toiletsÓ. Nothing is said here, or elsewhere on the label, about the danger of putting caustic soda into hot water. At the foot of this panel are the words: ÒPacked by Glendale Chemical Products Pty LtdÓ, with an address in Sydney.

The appeal issues Counsel for Glendale argued that Emmett J erred in five respects: (i) in finding the Product was ÒmanufacturedÓ by Glendale within the meaning of Part VA of the Trade Practices Act 1974; (ii) in finding the Product had a ÒdefectÓ, within the meaning of that Part; (iii) in finding a causal relationship between the defect found by him and Mr BarnesÕ injuries; (iv) in failing to find that acts or omissions of Mr Barnes contributed to his injuries; and (v) in finding negligence. We will deal with these points separately.

Manufacture Part VA (ss 75AA Ð 75AS) was introduced into the Trade Practices Act by the Trade Practices Amendment Act 1992 (Cth). It was based on a report ÒProduct LiabilityÓ prepared by the Australian Law Reform Commission and the Law Reform Commission of Victoria (ALRC 51, VLRC 27). That report recommended a new regime for product liability akin to that applied in the European Community, and elsewhere overseas, whereby ÒproducersÓ of goods are liable for personal and property damage caused by any ÒdefectÓ in the goods, irrespective of fault or the existence of any contractual relationship between the producer and the person suffering the loss: see paras 10.47 to 10.50 of the report. Part VA, as enacted, differed in some respects from the draft legislation contained in Appendix A to the report. However, it retained the CommissionsÕ fundamental approach. In particular, it retained the concept that persons suffering loss should ordinarily be entitled to obtain a remedy against Òpersons involved in manufacture and supply of goodsÓ or, where the goods were imported, their importer. In para 5.09 of the report, the Commission recommended inclusion in the expression Òpersons involved in manufacture and supply of goods" of Òthe widest class of persons who have an involvement with the goods, in terms of contributing to their manufacture or supplyÓ. They said: ÒIn particular, designers and assemblers should be included. Manufacturers, as defined in [the] Trade Practices Act, should also be included ÉÓ In enacting Part VA, Parliament adopted this recommendation. Section 75AB applies to Part VA the interpretation provisions contained in subsections (3) to (8) of s74A. Until that time those provisions related only to Division 2A of Part V of the Act, dealing with actions against manufacturers and importers in situations of re-supply by an intermediary. Section 74A(3) provides: Ò(3) If Ð (a) a corporation holds itself out to the public as the manufacturer of goods; (b) a corporation causes or permits the name of the corporation, a name by which the corporation carries on business or a brand or mark of the corporation to be applied to goods supplied by the corporation; or (c) a corporation causes or permits another person, in connexion with the supply or possible supply of goods by that other person, or in connexion with the promotion by that other person by any means of the supply or use of goods, to hold out the corporation to the public as the manufacturer of the goods, the corporation shall be deemed, for the purposes of this Division, to have manufactured the goods.Ó Subsections (5) and (6) are as follows : Ò(5) For the purposes of paragraph (3)(b) Ð (a) a name, brand or mark shall be deemed to be applied to goods if it - (i) is woven in, impressed on, worked into or annexed or affixed to the goods; or (ii) is applied to a covering, label, reel or thing in or with which the goods are supplied; and (b) if the name of a corporation, a name in which a corporation carries on business or a brand or mark of a corporation is applied to goods, it shall be presumed, unless the contrary is established, that the corporation caused or permitted the name, brand or mark to be applied to the goods. (6) The reference in sub-section (5) to a covering includes a reference to a stopper, glass, bottle, vessel, box, capsule, case, frame or wrapper and the reference in that sub-section to a label includes a reference to a band or ticket.Ó Liability is imposed by s75AD which relevantly reads as follows: ÒIf: (a) a corporation, in trade or commerce, supplies goods manufactured by it; and (b) they have a defect; and (c) because of the defect, an individual suffers injuries; then: (d) the corporation is liable to compensate the individual for the amount of the individualÕs loss suffered as a result of the injuries; and (e) the individual may recover that amount by action against the corporation; and if the individual dies because of the injuries ÉÓ Section 75AA of the Act defines the word ÒmanufacturedÓ, for the purposes of Part VA, as including Ògrown, extracted, produced, processed and assembledÓ. Counsel for Glendale contend that s74A(3)(b) was not intended to apply in a situation like the present case Òwhere there is a clear statement on the product to the effect that Glendale only packed [and, inferentially, did not manufacture] the productÓ. They point out Part VA makes provision for cases where the identity of a manufacturer is unknown: see s 75AJ which provides for a notice to be given to a supplier requiring that person to identify the manufacturer within 30 days, failing which the supplier is to be taken to be the manufacturer. Counsel argue this situation occurred in the present case; Mr Barnes should have given a notice to the owner of the supermarket where he purchased the caustic soda. In fact, as the evidence showed, Glendale was not the manufacturer of the Product. It purchased bulk caustic soda from Redox Chemicals and repackaged it in the container purchased by Mr Barnes. A similar argument was put to, and rejected by, Emmett J. After noting the factual position, including that the label stated ÒPacked by Glendale Chemicals Pty LtdÓ (our emphasis), his Honour observed (at 627): ÒHowever, the effect of section 74A(3) and section 75AB of the Act is that if a corporation causes or permits the name of the corporation or a brand or mark of the corporation to be applied to goods supplied by the corporation, the corporation is to be deemed for the purposes of Part VA to have manufactured the goods. It is not disputed that GlendaleÕs name was applied to the Product. Nevertheless, it was contended that sections 75AB and 74A(3) cannot have effect in circumstances where there is a clear statement to the effect that Glendale did not manufacture the Product but that the Product was merely packed by it. It was said that if the CommissionÕs contention as to the effect of those provisions were correct, a label on a product supplied by a corporation stating expressly that the product was not manufactured by the corporation would have no effect. Of course in the present case Glendale did not go as far as that. Nevertheless, I consider that that is just what the section is intended to do. A corporation which is not the manufacturer is deemed to be the manufacturer for the purposes of Part VA even if it is clearly not. One can understand the policy reasons for the Parliament imposing such an obligation. That is to say if a corporation is prepared to lend its name to a product by having its name or its logo affixed to the product, an individual injured by defect in that product need look no further than that corporation. The effect may well be to impose onerous obligations on any corporation which supplies a product with its name or logo applied to the product. Be that as it may, that appears to me to be the clear meaning and intent of the provision. Accordingly, I conclude that the Product is deemed to have been manufactured by Glendale." We agree with these observations. We add three additional comments. First, the approach of Emmett J is consistent with the philosophy underlying the report of the two Law Reform Commissions upon which Part VA is based; unless that approach is taken, it would be easy for a person putting a product onto the Australian market to frustrate the liability regime proposed by the Commissions. As counsel for ACCC observe, Part VA would not apply to a situation where one company manufactured goods and another affixed a label. Second, this approach is consistent with the wide definition of ÒmanufacturedÓ in s75AA. As we have noted, that definition includes ÒprocessedÓ and ÒassembledÓ. In repackaging and labelling the bulk caustic soda, Glendale (at least) ÒassembledÓ the composite product that Mr Barnes purchased. Third, it was put to us by counsel that para (b) of s74A(3) should be read as confined to cases where the corporationÕs name or logo was applied in such a way as to suggest it was the manufacturer of the goods. However, such an interpretation would render para (b) otiose; para (a) already covers a Òholding outÓ case.

Defect Section 75AC of the Act indicates what is meant by goods having a ÒdefectÓ. The section relevantly reads: Ò(1) For the purposes of this Part, goods have a defect if their safety is not such as persons generally are entitled to expect. (2) In determining the extent of the safety of goods, regard is to be given to all relevant circumstances including: (a) the manner in which, and the purposes for which, they have been marketed; and (b) their packaging; and (c) the use of any mark in relation to them; and (d) any instructions for, or warnings with respect to, doing, or refraining from doing, anything with or in relation to them; and (e) what might reasonably be expected to be done with or in relation to them; and (f) the time when they were supplied by their manufacturer. (3) É (4) ÉÓ In dealing with this issue, Emmett J noted it is not in dispute Òthat caustic soda is an extraordinarily volatile and dangerous substance when mixed with hot waterÓ. He said at 627: ÒThe essential question [in connection with the issue of defect] concerned the adequacy of the label É to warn consumers of the possible dangers attendant upon use of caustic soda. The essence of the complaint by the Commission is that the label on the container for the product contained no warning of the dangers involved in the use of caustic soda with hot water, particularly in a confined space such as a drain pipe. While consumers might generally be expected to know that caustic soda is corrosive and that contact with eyes and skin is potentially highly dangerous, all of which is stated explicitly on the label, ordinary consumers would not be expected to know of the dangers attendant upon the use of caustic soda with hot water in such a confined space. Accordingly, it was contended by the Commission that the goods, comprising caustic soda in the container which I have described, had a defect because the safety of such goods is not such as persons generally are entitled to expect. In particular, when regard is given to the absence of any instructions or warning concerning the use of the contents of the container with hot water, the goods are unsafe.Ó In the course of discussing some expert evidence regarding the label, Emmett J commented at 629 that Ò[i]t may not be sufficient for a supplier of goods to set out directions for use which, if followed, will cause no harmÓ; there might need to be a warning against a particular method of use, if that was within the capability of the goods and might cause harm. Emmett J went on to point out the standard adopted by s75AC(1) of the Act Òis an objective one based upon what the public at large, rather than any particular individual, is entitled to acceptÓ. He said it is not possible to foresee all possible uses of goods and s75AC(1) does not require goods to be absolutely free from risk; Ò[t]he level of safety required is what the community is entitled to expectÓ. Emmett J went on to refer to a contention by Glendale that, if the circumstances that occurred were not reasonably foreseeable, the safety of goods may be such as the community is entitled to expect. After referring to matters of evidence, his Honour concluded at 631: Òit was generally well known, or at least ought to have been well known, to a supplier of caustic soda that mixing of caustic soda with water produces heat and splashing and that such reactions would be exaggerated by an increase in the temperature of water. There is, of course, no suggestion that, as caustic soda, the Product as used by Mr Barnes was defective. However, s 75AC deals with a different question. Goods will not be safe even if, having regard to the goods, they operate as intended. Section 75AC(2) makes it clear that the section applies even if there is no inherent defect in the goods in question. Thus, it is clear that a substance which is, for example, marketed as being suitable for a particular purpose without warnings as to the particular way in which that purpose should be achieved may have a defect because use in some ways would not be safe.Ó Emmett J noted that the purposes for which the Product were marketed included cleaning, or removing grease from, household drains and drain pipes; therefore, Glendale marketed the Product for the purpose for which it was used by Mr Barnes. He said: ÒWhile there may be no prior evidence of an incident such as this, it is quite foreseeable that caustic soda may have been poured down a drain which had hot water in it. I consider that the possibility of reaction with hot water was one which was sufficiently well known for a conclusion to be drawn that it was not safe for caustic soda to be marketed in a package for the purposes of use such as that described without a warning against using it in hot water in a confined space.Ó Furthermore, his Honour said at 632, Òit is not unreasonable to expect that a householder could pour very hot, even boiling water down a drain in order to dislodge a blockageÓ. He concluded: ÒPersons generally are entitled to expect to be warned of a danger or lack of safety in respect of a use to which goods might reasonably be expected to be put. The description of the method for using caustic soda to make a cleaning liquid for the removal of grease from drain pipes and gully traps contains no hint of warning that caustic soda should only be used in that way for cleaning drains. While there is a warning that the contents of the container are corrosive and that contact with eyes and skin should be avoided, that is not adequate having regard to the nature of caustic soda and the purpose for which it was marketed.Ó Counsel for Glendale contend this conclusion failed to have regard to certain matters, first amongst them that Òthe label was in concise clear languageÓ, multi-coloured and Ògave adequate directions for useÓ. They argue that, if Mr Barnes had complied with the directions for use, the Product would have been safe. In particular, they say, if Mr Barnes had worn safety glasses when handling the Product, his eyes would have been saved from injury. We see the force of this submission but do not think it vitiates Emmett JÕs conclusion. Safety glasses may have reduced the extent of the injury sustained by Mr Barnes, but it is unlikely they would totally have saved him from harm. More fundamentally, the instruction about safety glasses was inadequate to bring home to an ordinary reader the risk of being injured in the way in which Mr Barnes was injured. The instruction said ÒAlways wear rubber gloves and safety glasses when handling caustic sodaÓ. We think the conjunction of rubber gloves and safety glasses, especially when limited by the words Òwhen handlingÓ, would cause the average reader to understand that the relevant risk was that of dry caustic soda coming into contact with the handlerÕs skin; the words would not alert a reader to the extreme inadvisability of allowing any part of the body to be in the vicinity of hot water to which caustic soda had been added. The lack of such a warning was a ÒdefectÓ in the Product, within the meaning of s75AC of the Act.

Causation Counsel for Glendale argue the Court should hold there was no causal relationship between any deficiency on the label and Mr BarnesÕ injuries; Mr Barnes admitted in cross examination that, in deciding to pour boiling water down the drain and then introduce caustic soda, he was acting on the advice of Mr Phillips rather than anything written on the label. However, Emmett J accepted Mr BarnesÕ evidence that, if the label had contained an instruction not to use hot water, or a warning about hot water, he would not have used the Product with hot water; at least without making further inquiries about the safety of doing this. It follows from this finding that his Honour was justified in finding a causal relationship between the defect in the Product and Mr BarnesÕ injuries.

Contributory acts Counsel for Glendale argue that Emmett J should have held that acts or omissions of Mr Barnes contributed to his injuries. Such a finding would be relevant in two ways: (i) as providing a basis, under s75AN(1) of the Trade Practices Act, for reducing the extent of GlendaleÕs liability under s75AD of the Act; and (ii) as contributory negligence, for reducing GlendaleÕs liability for common law damages for negligence. Section 75AN(1) of the Trade Practices Act provides: Ò(1) If the loss in a liability action under section 75AD or 75AE was caused by both: (a) an act or omission of the individual who suffers the injuries concerned; and (b) a defect of the action goods; the amount of the loss is to be reduced to such extent (which may be to nil) as the court thinks fit having regard to that individualÕs share in causing the loss.Ó Counsel for Glendale suggest that the law in relation to contributory negligence is not materially different to the principle enunciated in s75AN(1). Counsel for ACCC and Mr Barnes do not dispute this. We think the suggestion is correct; consequently, it is appropriate to deal together with both aspects of this issue, as did Emmett J. The arguments put to us in relation to this issue are substantially the same as those addressed to Emmett J. He outlined and discussed them, under the heading ÒContributory negligenceÓ at 634-635. We agree with his HonourÕs reasons for rejecting GlendaleÕs submissions on this matter.

Negligence Counsel agree that, if Glendale is liable under s75AD of the Trade Practices Act, it is immaterial whether it was also guilty of common law negligence. However, it is put to us that Emmett J erred in holding Glendale negligent. Once again, the submissions put to us are substantially those put to Emmett J. Once again, we are content to adopt his HonourÕs reasons (under the heading ÒNegligenceÓ at 633-634) for rejecting those submissions.

ACCCÕs Notice of Contention As we have indicated, counsel for ACCC pressed only one of the matters raised by their Notice of Contention. This is a challenge to Emmett JÕs ruling that ACCC had failed to establish a contravention of s52 or s53(c) of the Trade Practices Act. Emmett J dealt with this subject, under the heading ÒSections 53 and 53(c)Ó, at 632-633. He held that no representation of safety should be implied, so s52 was not enlivened. In relation to s53(c), his Honour ruled that, even if a representation could be implied to the effect that it was safe to use the Product in hot water, such a representation did not concern the ProductÕs performance and characteristics. Having regard to the conclusions we have reached on other aspects of the case, it is not necessary to express a final view on the application of s 52 or s 53(c). However, it is appropriate to record that we have reservations about the trial JudgeÕs ruling that a representation as to the safety of goods is not a representation that ÒgoodsÉhave performance characteristicsÓ, within s 53(c) of the Trade Practices Act. One definition of ÒperformanceÓ in the Macquarie Dictionary is Òthe way in which something reacts under certain conditions or fulfils the purpose for which it was intendedÓ. It is not a misuse of language to say that an express or implied representation that an article is safe to use in particular circumstances is a representation relating to that articleÕs performance characteristics. Moreover, in our view, there is no textual or policy reason to give a narrow construction to the expression Òperformance characteristicsÓ in s53(c).

Orders For the above reasons we concluded it was appropriate to dismiss GlendaleÕs appeal with costs.

I certify that this and the preceding twelve (12) pages are a true copy of the Reasons for Judgment herein of the Honourable Justices Wilcox, Tamberlin and Sackville

Counsel for the Applicant: J D Hislop QC and D R Pritchard

Solicitor for the Applicant: Dunhill Madden Butler

Counsel for the First Respondent: D Bennett QC and D Staehli

Solicitor for the First Respondent: Australian Government Solicitor

Counsel for the Second D Staehli Respondent:

Solicitor for the Second Locke OÕReilly McHugh Respondent:

Date of Hearing: 6 November 1998

Date of Judgment: 10 December 1998

Trade Practices Act 1974(Cth)ss 52, 53(c), 74A, 75AA, 75AB, 75AC, 75AD

Trade Practices Amendment Act 1992(Cth)

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