Leeks v FXC Corporation [2002] FCA 72 (8 February 2002)

Last Updated: 15 March 2002

FEDERAL COURT OF AUSTRALIA

Leeks v FXC Corporation [2002] FCA 72

TRADE PRACTICES - product liability - action against actual manufacturer of goods - action against deemed manufacturer under s 74A(4) of the Trade Practices Act 1974 - whether actions lie concurrently.

PRACTICE AND PROCEDURE - motion to strike out parts of statement of claim - whether reasonable cause of action disclosed.

Trade Practices Act 1974 ss 5, 6, 74A, 74B, 74D, 74E, 74G, 75AD

Trade Practices Amendment Bill 1992, Explanatory Memorandum

Trade Practices Amendment Bill 1978, Explanatory Memorandum

Gregg & Tsovaras, "The Liability of Manufacturers and Importers under the Trade Practices Amendment Act 1978" (1979) 10 Fed LR 398

Heydon, Trade Practices Law

Miller, Annotated Trade Practices Act (22^nd Ed)

Dutson, "International Product Liability Litigation" (1996) 22 Monash ULR 244

White v Eurocycle Pty Ltd (1994) 16 ATPR §41-330 referred to

Zaravinos v Dairy Farmers Co-operative Ltd (1985) 7 FCR 195 referred to

Electricity Trust of South Australia v Krone (Australia) Technique Pty Ltd (1994) 16 ATPR §41-337 referred to

FINN J

CANBERRA

8 FEBRUARY 2002

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY	A40 OF 2000

BETWEEN:	JUSTIN TODD LEEKS APPLICANT
AND:	FXC CORPORATION FIRST RESPONDENT AUSTRALIAN PARACHUTING SAFETY COUNCIL INC SECOND RESPONDENT JOHN CHAPMAN THIRD RESPONDENT AUSTRALIAN PARACHUTE FEDERATION INC FOURTH RESPONDENT AUSTRALIAN PARACHUTING SAFETY COUNCIL INC CROSS-CLAIMANT to the FIRST CROSS-CLAIM JUSTIN TODD LEEKS RESPONDENT to the FIRST CROSS-CLAIM
JUDGE:	FINN J
DATE OF ORDER:	8 FEBRUARY 2002
WHERE MADE:	CANBERRA

THE COURT ORDERS THAT:

1. The Notice of Motion dated 24 October 2001 be dismissed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY	A40 OF 2000

BETWEEN:	JUSTIN TODD LEEKS APPLICANT
AND:	FXC CORPORATION FIRST RESPONDENT AUSTRALIAN PARACHUTING SAFETY COUNCIL INC SECOND RESPONDENT JOHN CHAPMAN THIRD RESPONDENT AUSTRALIAN PARACHUTE FEDERATION INC FOURTH RESPONDENT AUSTRALIAN PARACHUTING SAFETY COUNCIL INC CROSS-CLAIMANT to the FIRST CROSS-CLAIM JUSTIN TODD LEEKS RESPONDENT to the FIRST CROSS-CLAIM

JUDGE:	FINN J
DATE:	8 FEBRUARY 2002
PLACE:	CANBERRA

REASONS FOR JUDGMENT

1 The first respondent in this proceeding, FXC Corporation ("FXC") has moved to have certain paragraphs of the Statement of Claim of the applicant Justin Todd Leeks, struck out insofar as they relate to it on the grounds that they disclose no reasonable cause of action against it.

2 The relevant factual allegations made in the pleading can be stated shortly.

3 FXC was incorporated in the United States of America and had its principal place of business there. It manufactured a device known as an `Astra Expert Automatic Activation Device' ("Astra") the function of which was to automatically deploy a parachutist's reserve canopy when the conditions for activation were met. Mr Leeks purchased an Astra, on 27 September 1996, from the second and/or third Respondent for use when parachuting.

4 When so doing on 28 June 1997, the Astra malfunctioned causing the reserve canopy to open when the conditions for activation had not been met. The effect of the malfunction was to compromise the efficacy of Mr Leeks main parachute and led him to sustain injury upon landing.

5 The applicant has made a number of claims against (inter alia) FXC in respect of injuries caused by (i) conduct in contravention of s 52 and s 53(c) of the Trade Practices Act 1974 (Cth) ("the TP Act") (the misrepresentation claims); (ii) contraventions as the manufacturer of s 74B ("unsuitable goods"), s 74D ("unmerchantable quality"), s 74E ("non-correspondence with samples"), and s 74G ("non compliance with warranties") of Div 2A of Part V of the TP Act; and (iii) contravention as manufacturer of s 75AD ("defective goods") of Part VA of the TP Act.

6 The pleading alleges in paras 6 and 7 that:

"6. At all times material to the importation of the goods referred to in paragraph 9 into Australia and their subsequent supply to the Applicant the Second and/or Third and/or Fourth Respondents:

(i) carried on business in Australia involving, inter alia:

(a) the purchase and importation into Australia of Astra Automatic Activation Devices manufactured by the First Respondent;

(b) the supply of the said Automatic Activation Devices to individuals throughout Australia for use by them in recreational parachuting activities;

(c) charging fees to the individuals referred to in 6(i)(b) for the supply of the said Automatic Activation Devices.

(ii) were thereby engaged in trade or commerce within the meaning of those words as they are used in the Trade Practices Act 1974.

7. At all material times to the importation of the goods into Australia by the Second and/or the Third and/or the Fourth Respondent the First Respondent had no `place of business in Australia' within the meaning of those words as they are used in section 74A(4) of the Trade Practices Act 1974."

7 FXC does not seek to strike out what I have described as the misrepresentation claims. It is seemingly accepted that conduct relied upon occurred in Australia so that any question of the extraterritorial operation of Part V by virtue of the provisions of s 5 of the TP Act does not arise.

8 The motion seeks only to strike out the s 74B, s 74D, s 74E, s 74G and s 75AD claims. As put ultimately in oral submissions the basis of attack on the claims is that, having invoked the provisions of s 74A(4) of the Act so as to render the second, and/or third and/or fourth respondents the deemed manufacturer of the goods for the purposes of all of the above claims, the applicant cannot as well make parallel claims against FXC as the actual manufacturer. No challenge is now otherwise made to the international character of the claims against FXC, it being accepted that a "corporation" for the Act's purposes includes a "foreign corporation": s 4(1); and that the reference in the above sections (ie s 74Bff) to the relevant supply of goods being "in trade or commerce" extends by virtue of s 6(2)(a)(i) and s 6(2)(c)(i) of the TP Act to "trade and commerce between Australia and places outside Australia" including the United States.

9 Before dealing shortly with the challenge made by FXC, it is appropriate to refer to the provisions of s 74A(3) and (4) of the TP Act. They provide:

"(3) If:

(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 connection with the supply or possible supply of goods by that other person, or in connection 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.

(4) If:

(a) goods are imported into Australia by a corporation that was not the manufacturer of the goods; and

(b) at the time of the importation the manufacturer of the goods does not have a place of business in Australia;

the corporation shall be deemed, for the purposes of this Division, to have manufactured the goods."

These provisions apply to all of the claims listed above including s 75AD (they being extended to encompass it by the provisions of s 75AB of the Act).

10 A common argument is advanced in respect of each of the impugned claims. It can be illustrated by reference to the s 74B claim. That section insofar as relevant provides:

"(1) Where:

(a) a corporation, in trade or commerce, supplies goods manufactured by the corporation to another person who acquires the goods for re-supply"

FXC's contention is that having invoked s 74A(4) against the second, third and fourth respondents so as to deem them to be manufacturers, it is not open as well to make a parallel claim under s 74B against FXC as the actual manufacturer.

11 Early commentators on the amendment that introduced Division 2A into the TP Act noted that s 74A was silent on the question whether, where there was a deemed manufacturer under the section, the consumers cause of action lay only against that deemed manufacturer or whether a concurrent right of action lay against the actual manufacturer of the goods in question: see eg Gregg & Tsovaras, "The Liability of Manufacturers and Importers under the Trade Practices Amendment Act 1978" (1979) 10 Fed LR 398 at 407.

12 The view taken in scholarly writings was that s 74A was not a code; that Division 2A applied to the actual manufacturer irrespective of the deeming provision; and that proceedings could be brought against both the actual manufacturer and a deemed manufacturer, or, for that matter, against distinct deemed manufacturers: see eg Heydon, Trade Practices Law, para 16.1160ff; Miller, Annotated Trade Practices Act, para 1.74A.15 (22^nd Ed); Dutson, "International Product Liability Litigation" (1996) 22 Monash ULR 244 at 271-272. Such issues of contribution as may have arisen between such "manufacturers" were left to be decided according to ordinary principles.

13 It has since been judicially accepted that, notwithstanding the deeming provisions, an actual foreign manufacturer can properly be a party as well to proceedings brought by a consumer against local deemed manufacturers. In White v Eurocycle Pty Ltd (1994) 16 ATPR §41-330, Boehm AJ observed:

"I have wondered ... whether subsection (4) of Section 74A can, or is intended to be construed so as to restrict the meaning on facts such as those before me to refer to the deemed manufacturer only. Clearly, Russell Miller, in his work Annotated Trade Practices Act (14^th Ed) would not think so (see at p 337) since he includes the actual manufacturer as a person to whom the section applies. I have adopted that approach."

14 His Honour, in my view, was clearly correct in so doing. The rationale behind Div 2A is that manufacturers rather than retailers should bear the liability for defects in goods: Zaravinos v Dairy Farmers Co-operative Ltd (1985) 7 FCR 195 at 198. A construction of s 74A that would relieve the actual manufacturer of liability under Div 2A because, in the circumstances there was as well a deemed manufacturer, is one not lightly to be arrived at in the absence of an express indication (which there is not) that such was the legislative intent. The deeming provisions are onerous in their extension of the manufacturer's liability to persons who may have no responsibility for any defect in the goods in question.

15 If the objection be that to allow proceedings as well against the actual manufacturer results in the curiosity of there being two "manufacturers" for the purposes of proceedings under the Division, that possibility is inherent within the deeming provisions themselves. An actual foreign manufacturer may satisfy the requirements of s 74A(3) - the "holding out" provision - and be a deemed manufacturer for its purposes, while an importer from that manufacturer may as well be a deemed manufacturer by virtue of s 74A(4): see also Heydon, paras 16.1180-16.1190. In the present proceedings, Mr Leeks contends that FXC in the circumstances is, as well, a deemed manufacturer under s 74A(3).

16 There is, in my view, no reason why the various provisions of s 74A(3) and s 74A(4) should be treated as mutually exclusive so that only one of the deemed manufacturers could be sued. To adopt the words of von Doussa J on an analogous statutory provision in Electricity Trust of South Australia v Krone (Australia) Technique Pty Ltd (1994) 16 ATPR §41-337 at 42,426:

"the Act gives no indication which of them would be the party liable. That would be an odd result, and one which would be avoided if ... the definition[s] were not read as being mutually exclusive."

17 It is clear that all of the various claims impugned were capable of being made directly against FXC as the actual manufacturer, the Legislature clearly having intended that the provisions of Div 2A and of Part VA apply to actual manufacturers: see eg Trade Practices Amendment Bill 1992, Explanatory Memorandum, paras 11-12. The frame of s 74A is not, as such, as to require a consumer to make a choice between the various "manufacturers" - actual and deemed - against which to proceed. And the legislation itself does not establish some principle of mutual exclusivity. It is consistent with there being a scheme of "concurrent liability": see Trade Practices Amendment Bill 1978, Explanatory Memorandum, paras 17ff.

18 Accordingly I am satisfied that Mr Leeks has arguable claims against FXC under the various provisions of Div 2A and Part VA on which he relies. I reject FXC's contentions.

19 I will dismiss the notice of motion.

I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.

Associate:

Dated: 8 February 2002

Counsel for the Applicant:	Mr D Baran
Solicitor for the Applicant:	John Nicholl & Co (as agents for Attwood Marshall)
Counsel for the Respondent:	Mr N Chen
Solicitor for the Respondent:	Sneddon Hall & Gallop (as agents for Holman Webb)
Date of Hearing:	6 February 2002
Date of Judgment:	8 February 2002