Tranquility's alternative case for liability to customers under Division 2A, Pt V of the Trade Practices Act
511Tranquility submitted that if the Court rejected that some or all of the customers could sue it under the express warranty, or at all in contract, it would still be liable to such customers pursuant to certain sections of Division 2A, pt V of the Trade Practices Act .
512I have already found that:
(1)Tranquility will be liable to nearly all customers under the express warranty;
(2)In relation to the small group of other customers who cannot rely on the express warranty, Tranquility will be liable under implied contractual terms as to fitness for purpose and merchantability.
513Accordingly, in one sense I do not need to proceed into to this area. However, it appears that in relation to the group who cannot rely on the express warranty, if Tranquility can show it is liable under Division 2A, Pt V, in addition to under implied contractual terms, this may have some impact upon the applicable limitation periods and therefore upon the appropriate orders to be made. The parties agree that an action under a provision of Division 2A is subject to a absolute maximum limitation period of ten years from the time of the first supply to the consumer of the goods in question: s 74J(3).
514The essential point raised by Huntsman against the application of Division 2A, Pt, V was that the pools became fixtures once installed and hence were no longer "goods" to which that Part applied.
515I now turn to resolve the debate between the parties on this essential point raised by Huntsman.
516Huntsman relied upon the decision of Dowsett J in Theo Holdings Pty Ltd v Hockey (2000) 99 FCR 232. In that case, the Minister for Financial Services and Regulation had issued notices pursuant to section 65F(1) of the Trade Practices Act to the effect that certain fire doors ought be the subject of a product recall. It was contended by the applicants seeking to overturn these notices that these notices could not apply to doors that had been installed and become fixtures.
517Section 65F(1) provides:
Subject to section 65J, where:
(a) a corporation (in this section referred to as the "supplier"), in trade or commerce, supplies on or after 1 July 1986 goods that are intended to be used, or are of a kind likely to be used, by a consumer;
(b) one of the following subparagraphs applies:
(i) it appears to the Minister that the goods are goods of a kind which will or may cause injury to any person;
(ii) the goods are goods of a kind in respect of which there is a prescribed consumer product safety standard and the goods do not comply with that standard;
(iii) the goods are goods of a kind in relation to which there is in force a notice under subsection 65C(5) or (7); and
(c) it appears to the Minister that the supplier has not taken satisfactory action to prevent the goods causing injury to any person;
the Minister may, by notice in writing published in the "Gazette", require the supplier to do one or more of the following:
(d) take action within the period specified in the notice to recall the goods;
(e) disclose to the public, or to a class of person specified in the notice, in the manner and within the period specified in the notice, one or more of the following:
(i) the nature of a defect in, or a dangerous characteristic of, the goods identified in the notice;
(ii) the circumstances, being circumstances identified in the notice, in which the use of the goods is dangerous; or
(iii) procedures for disposing of the goods specified in the notice;
(f) inform the public, or a class of persons specified in the notice, in the manner and within the period specified in the notice, that the supplier undertakes to do whichever of the following the supplier thinks is appropriate:
(i) except where the notice identifies a dangerous characteristic of the goods - repair the goods;
(ii) replace the goods;
(iii) refund to a person to whom the goods were supplied (whether by the supplier or by another person) the price of the goods;
within the period specified in the notice.
518After referring to some texts which supported the view that the definition of "goods" in the Act appeared to preserve the common law distinction between goods and fixtures, Dowsett J held at [13]-[18]:
[13] To some extent, argument proceeded upon the basis that the doors were either goods for the purposes of s 65F(1) or they were not. However, the question may be rather more complex. Section 65F(1) prescribes three criteria which must be met in order that the minister be entitled to act. First, as already indicated, s 65F(1)(a) requires that there be a supply of goods by a corporation. It is common ground that such supply must be of goods as defined. Secondly, s 65F(1)(b) requires that the minister form a view as to the nature of the goods, presumably at some time after the supply contemplated by s 65F(1)(a). Probably, the relevant time is that at which the opinion is formed. In other words, it must appear to the minister that the goods are, at the time at which he forms the opinion, goods which satisfy one of the three alternative requirements of s 65F(1)(b). An opinion about part of a building would not be an opinion concerning goods, suggesting that the goods must still exist in that form at the time at which the minister forms the relevant opinion. Thus the subject matter of any proposed recall notices must be capable of description as "goods" at two potentially different times. Thirdly, s 65F(1)(c) requires that the minister form an opinion as to steps taken by the supplier to prevent the goods causing injury. Arguably, this provision also contemplates the continued existence of the "goods" in that form, although other interpretations are possible.
[14] If the various requirements of s 65F(1)(a), (b) and (c) are satisfied, the minister may make an appropriate publication in the Gazette, requiring the supplier of such goods to do one or more of the acts prescribed in s 65F(1)(d), (e) and (f). Each of those prescriptions also contemplates the continued existence of the goods as such. For example s 65F(1)(d) authorises the minister to require the supplier to take action to recall the goods. It is not clear what is meant by the expression "recall", but it probably includes the various specific steps identified in s 65F(1)(f), namely repair, replacement or refund of the purchase price. If the word "goods" has the meaning attributed to it by s 4, the paragraph would not authorise the minister to require a supplier to take such steps where the goods have become part of a building and therefore can no longer be so described. It may be possible to sever them from the building so that they are again goods, but this could only be done by, or with the consent of the owner. The Act does not bind such an owner, and obtaining consent to severance would pose a problem for a supplier seeking to comply with a recall notice. Whether or not goods have been incorporated into a building or remain as goods, compliance with a recall notice will usually require such consent. Nonetheless, if it was intended that the minister be empowered to require removal of part of a building, one would have expected an express conferment of such power.
[15] In the course of argument it was suggested that where "goods", although incorporated into a building, are capable of continued identification and capable of removal without substantial damage to the building (or presumably to the "goods"), they may be goods for the purposes of s 65F(1). Nothing in the Act suggests such an approach. Indeed, it might be thought that s 65F(6) suggests the contrary. That subsection provides:
Where the supplier, under sub-section (1), undertakes to repair goods or replace goods, the cost of the repair or replacement, including any necessary transportation costs, shall be borne by the supplier.
[16] The reference to a supplier undertaking to "replace goods" is obviously to replacement as an alternative to repair or refund as contemplated in s 65F(1)(f). The subsequent reference in s 65F(6) to the "cost of the repair or replacement" may be wide enough to include the cost of severing goods and reinstalling them after repair, or installing replacement goods, although a narrower meaning, limited to the cost of the actual repair or replacement goods is also possible. In any event, where the supplier chooses to refund the purchase price of the goods, s 65F(6) would not oblige it to pay the cost of removing the defective goods or installing replacements goods (presumably obtained from another supplier). If s 65F(1) were intended to authorise a recall notice for goods incorporated into a building, one would have expected provision in s 65F(6) for the payment of such costs.
[17] In the course of argument much was said about the need to give full effect to provisions which are designed to protect the public. It was said that accordingly, s 65F(1) should be broadly construed. In the present case, however, parliament has used a term ("goods") which has a commonly understood meaning and has defined that term in a way which seems to reinforce that common understanding, albeit with some express extensions. If the clear distinction between goods and fixtures on land is to be abandoned, then that common understanding would be seriously undermined. Such an outcome would be inconsistent with parliament's adoption and definition of the term in question.
[18] Although the matter is of some difficulty, I have come to the conclusion that the minister's power to issue a recall notice pursuant to s 65F(1) applies only to the extent to which the "goods" in question meet that description at the time at which the notice is given, as well as at the time of supply by the relevant corporation. It is not presently necessary to consider the position in the event that the goods have ceased to be goods between the time of such a notice and the time when the supplier might reasonably have been expected to comply with it.
519In the context of Division 2A of Part V of the Act, section 74A(8) provides that "[f]or the purposes of this Division, goods shall be taken to be supplied to a consumer notwithstanding that, at the time of the supply, they are affixed to land or premises".
520I accept the plaintiffs' submission that the decision of Theo Holdings is based upon the premise that whether or not the word "goods", wherever it appears in the Trade Practices Act is apt to embrace goods that have become fixtures, depends upon:
(1)the time at which the particular reference is to be applied;
(2)the legislative context of the provision; and
(3)whether the reference being construed, where it is found, is apt to be applicable to such goods.
521I further accept the plaintiffs' submission that it follows that the word "goods" could have a different meaning in different parts of the Act [see State of New South Wales v Ibbett (2005) 65 NSWLR 168 at [5] - [11] per Spigelman CJ and at [123] & [124] per Basten JA], or even different parts of the same provision [ Maddox v Storer [1963] 1 QB 451] , depending on their context.
522Section 74G is the provision in relation to which this debate took place. That section provides:
(1) Where:
(a) a corporation, in trade or commerce, supplies goods (otherwise than by way of sale by auction) manufactured by the corporation to a consumer; or
(b) a corporation, in trade or commerce, supplies goods manufactured by the corporation to another person who acquires the goods for re-supply and a person (whether or not the person who acquired the goods from the corporation) supplies the goods (otherwise than by way of sale by auction) to a consumer;
and:
(c) the corporation fails to comply with an express warranty given or made by the corporation in relation to the goods; and
(d) the consumer or a person who acquires the goods from, or derives title to the goods through or under, the consumer suffers loss or damage by reason of the failure;
the corporation is liable to compensate the consumer or that other person for the loss or damage and the consumer or that other person may recover the amount of the compensation by action against the corporation in a Court of competent jurisdiction.
(2) For the purposes of any action instituted by a person against a corporation under this section, where:
(a) an undertaking, assertion or representation was given or made in connection with the supply of goods or in connection with the promotion by any means of the supply or use of goods; and
(b) the undertaking, assertion or representation would, if it had been given or made by the corporation or a person acting on its behalf, have constituted an express warranty in relation to the goods;
it shall be presumed that the undertaking, assertion or representation was given or made by the corporation or a person acting on its behalf unless the corporation proves that it did not give or make, and did not cause or permit the giving or making of, the undertaking, assertion or representation.
523The pools - swimming pools - were supplied as goods. They were therefore "goods" at the time (1)(a) or (b) applied to them.
524Tranquility submits and the Court accepts that "the goods" in subsections (1)(c) and (d) are the "goods" referred to in subsections (1)(a) or (b). The question then, from Theo Holdings , is whether the "time" at which (c) and (d) apply, and the nature of those provisions, make it inapposite to apply to goods which have become fixtures.
525Tranquility submits and the Court accepts that in this section, as opposed to section 66F, it does not. The reasoning of Dowsett J in Theo Holdings was firmly based upon the fact that a recall would require the severance of the goods from the land to which they were affixed, which land might be owned by a person who would not consent to the severance.
526There is nothing in section 74G of that kind. It provides a cause of action for monetary compensation. There is nothing inherent in the section which would require severance.
527The purpose of the Division 2A is to extend the sorts of contractual liability that exist between vendor and purchaser to manufacturer and consumer [ Zaravinos v Dairy Farmers Co-op Ltd (1985) 7 FCR 195 at 198 per Lockhart J]. Huntsman does not suggest that the fact that the pools had become fixtures meant that customers who had contracts (collateral or otherwise) with Tranquility could not claim damages in compensation for the breach of contract - whether that be for breach of the Warranty or one of the implied terms of merchantability and fitness for purpose.
528If Huntsman's submission as to the proper approach to Division 2A were accepted, this would leave a very significant lacuna in the scope of those provisions such that that a person who acquires goods that become fixtures might have a contractual remedy against the manufacturer if they contracted with them directly, but not otherwise. As Lord Diplock stated, if " the Courts can identify the target of Parliamentary legislation their proper function is to see that it is hit: not merely to record that it has been missed" [ "The Courts As Legislators", The Lawyer and Justice (Sweet & Maxwell, 1978) at 274 extracted and approved by McHugh J in Kingston v Keprose Pty Ltd (No 3) (1987) 11 NSWLR 404 at 424].
529As Mason & Wilson JJ stated in Cooper Brookes (Wollongong) Pty Ltd v Cmr of Taxation (Cth) (1981) 147 CLR 297 at 305 at 320 - 321:
In some cases in the past these rules of construction have been applied too rigidly. The fundamental object of statutory construction in every case is to ascertain the legislative intention by reference to the language of the instrument viewed as a whole. But in performing that task the Courts look to the operation of the statute according to its terms and to legitimate aids to construction.
The rules, as D C Pearce says in Statutory Interpretation, p 14, are no more than rules of common sense, designed to achieve this object. They are not rules of law. If the judge applies the literal rule it is because it gives emphasis to the factor which in the particular case he thinks is decisive. When he [sic] considers that the statute admits of no reasonable alternative construction it is because (a) the language is intractable or (b) although the language is not intractable, the operation of the statute, read literally, is not such as to indicate that it could not have been intended by the legislature.
On the other hand, when the judge labels the operation of the statute as "absurd", "extraordinary", "capricious", "irrational" or "obscure" he assigns a ground for concluding that the legislature could not have intended such an operation and that an alternative interpretation must be preferred. But the propriety of departing from the literal interpretation is not confined to situations described by these labels. It extends to any situation in which for good reason the operation of the statute on a literal reading does not conform to the legislative intent as ascertained from the provisions of the statute, including the policy which may be discerned from those provisions.
Quite obviously questions of degree arise. If the choice is between two strongly competing interpretations, as we have said, the advantage may lie with that which produces the fairer and more convenient operation so long as it conforms to the legislative intention. If, however, one interpretation has a powerful advantage in ordinary meaning and grammatical sense, it will only be displaced if its operation is perceived to be unintended.
530Tranquility submits and the Court accepts that both a literal and purposive construction of section 74G favours the view that the cause of action under that section does not cease to apply if the goods supplied become fixtures. Subsections (1)(a) and (b) identify the "goods" the subject of the cause of action, the words "goods" having the extended definition for which section 74A(8) provides.
531The rest of that section attaches to "the goods" earlier identified. Unlike with section 66F, there is nothing in the context of those later provisions which suggests from the nature of those provisions that the legislature intended to deny compensation where goods had become fixtures.
532That being so, a literal as well as a purposive construction supports Tranquility's construction. The purpose of the Division was to extend sale of goods type remedies between manufacturer and ultimate consumer. Those remedies are available even if, at the time of loss, the goods are no longer in existence, let alone identifiable: see, for example, cases concerning animal feed such as Henry Kendall & Sons v William Lillico & Sons Ltd (Hardwicke Game Farm) [1969] 2 AC 31 and Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441.
533Tranquility submits and I accept that the language of the provisions would need to be "intractable" to displace this evident purpose. It is not. There is nothing in section 74G(1)(c) itself which indicates that that section is limited to goods which are "goods" at any particular time.
534For the above reasons I accept Tranquility's approach on the essential construction issue in relation to Division 2A debated between the parties.
535For the above reasons, in my view, in sections 74B, 74D, and 74G, later references to the "goods" which were initially supplied, refer back to the goods initially supplied and do not exclude goods that have become fixtures. There is no reason, on a purpose interpretation, that those three sections would not apply where goods that were initially supplied have since become fixtures.
536In relation to s 74F, I have some doubt as to whether the plaintiffs' essential construction argument can succeed. That section concerns a failure by a corporation to ensure facilities for the repair of the goods, or a part was, reasonably available to the consumer at the relevant time. It seems that this context may mean that that section does not apply to goods which, after their initial supply, become fixtures. However, this doubt makes no difference to my conclusions, since even if it be misplaced, and s 74F could have application in the present case, I would conclude, as outlined below, Tranquility has no liability under it.
537The significance of the way I have construed sections 74B, 74D and 74G is that the analysis will be the same for pool owners who are "consumers" and so-called subsequent purchasers who derive title from consumers.